title-17•Title 17 — Corporations and Institutions for Finance and Insurance
Title 17 — Corporations and Institutions for Finance and Insurance
title-17N.J.S.A. tit. 17Code
# Title 17 — Corporations and Institutions for Finance and Insurance
## **Chapter 1** {#struct-chapter-1}
##### **§ 17:1-1** Department of Banking and Insurance reconstituted {#sec-17-1-1 omnilex-key=us-nj-statutes--title-17--17:1-1}
The Department of Banking and Insurance, hereinafter in Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes designated as the "department," created and established by an act entitled "An act to establish a Department of Banking and Insurance," approved February 10th, one thousand eight hundred and ninety-one (L.1891, c.6, p.17), and charged with the execution of all laws relative to insurance, banking, savings, trust, guarantee, safe deposit, indemnity, mortgage, investment and loan corporations, continued and constituted as a principal department in the executive branch of the State Government by the "Department of Banking and Insurance Act of 1948," P.L.1948, c.88 (C.17:1-1.1 et al.), is reconstituted as a principal department in the executive branch of State Government by this 1996 amendatory and supplementary act. The department, having been divided into two separate principal departments, the Department of Banking, pursuant to P.L.1970, c.11 (C.17:1B-1 et seq.), and the Department of Insurance, pursuant to P.L.1970, c.12 (C.17:1C-1 et seq.), is recombined and designated as the Department of Banking and Insurance by this 1996 amendatory and supplementary act. Such department shall be vested with all the powers and charged with all the duties and subject to all the obligations and penalties which, on February 10th, one thousand eight hundred and ninety-one, were vested in, conferred and imposed upon the Secretary of State, acting as commissioner of insurance, or upon the board of bank commissioners or any other officer or board charged with the execution of the laws relative to subjects hereinabove recited, as well as any additional duties, powers, and obligations prescribed in this 1996 amendatory and supplementary act or by any other law.
All the powers, functions and duties of the existing Department of Banking and Department of Insurance and the commissioners thereof are continued in the Department of Banking and Insurance, and in the office of the commissioner thereof.
##### **§ 17:1-1.1** Short title {#sec-17-1-1.1 omnilex-key=us-nj-statutes--title-17--17:1-1.1}
This act shall be known as, and may be cited as, the "Department of Banking and Insurance Act of 1948."
##### **§ 17:1-1.2** Effective date {#sec-17-1-1.2 omnilex-key=us-nj-statutes--title-17--17:1-1.2}
This act shall take effect on the first day of July, one thousand nine hundred and forty-eight, except that any appointment, and any confirmation of any appointment, permitted by this act may be made prior to such date.
##### **§ 17:1-2** Commissioner of Banking and Insurance, appointment, salary; interests prohibited to commissioner, officers, employees {#sec-17-1-2 omnilex-key=us-nj-statutes--title-17--17:1-2}
a. The head of the reconstituted department, to be denominated the Commissioner of Banking and Insurance and hereinafter in Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes, designated the "commissioner," shall be appointed by the Governor, with the advice and consent of the Senate, and shall serve at the pleasure of the Governor during the Governor's term of office and until the appointment and qualification of the commissioner's successor. The person in office as the Commissioner of Insurance on June 30, 1996, shall at the pleasure of the Governor hold the office of Commissioner of Banking and Insurance reestablished by this 1996 amendatory and supplementary act for the unexpired term for which the commissioner was appointed, and until a successor is appointed and qualified. No person shall be appointed commissioner who is in any way connected with the management or control of any corporation, firm, association, institution, or licensee affected by Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes, and the commissioner shall immediately be dismissed from office if at any time the commissioner becomes so interested.
The commissioner shall receive such salary as shall be provided by law.
The commissioner shall devote full time to the performance of the duties of commissioner.
b. Neither the commissioner nor any officer or employee of the department shall have any ownership of, interest in, or any dealings or transactions in any capacity with any financial institution, insurance company or other entity chartered, licensed or regulated by the department, except in the strict performance of the commissioner's, officer's or employee's duties. This prohibition shall not preclude the commissioner, or officers or employees of the department from continuing routine banking services with financial institutions, including but not limited to, mortgages, checking and savings accounts, and personal loans, entered into prior to their employment, or from establishing banking accounts and from obtaining loans and other services normally obtained by members of the general public, or from obtaining insurance or making claims involving their person, property or affairs, under the same terms and conditions as are available to members of the general public. This prohibition shall not apply to investments in mutual funds, deferred compensation plans, blind trusts, or similar investments, in which the commissioner, officer or employee does not make or influence the selection of individual investments.
No department examiner shall examine any entity with which the examiner conducts personal or family banking or insurance activities.
Any violation of this section shall be cause for dismissal of the violator by the appointing authority.
##### **§ 17:1-3.1** New Jersey Real Estate Commission {#sec-17-1-3.1 omnilex-key=us-nj-statutes--title-17--17:1-3.1}
3. There shall be within the Department of Banking and Insurance a division which shall be known as the division of the New Jersey Real Estate Commission. The terms of office of the members of the commission as of the effective date of this 1996 amendatory and supplementary act shall not be affected by this act. The commission shall continue to be constituted and the members thereof shall continue to be appointed as provided by law.
##### **§ 17:1-5** Seal of office; certificates under seal as evidence {#sec-17-1-5 omnilex-key=us-nj-statutes--title-17--17:1-5}
The seal of office of the commissioner, filed in the department of state, shall continue as the seal of such office.
Every certificate, assignment, conveyance or other official paper executed by the commissioner under authority of law and sealed with the seal, shall be received as evidence and may be recorded in proper recording offices in the same manner and with the same effect as a deed duly acknowledged or proved before an officer authorized by law to take proof or acknowledgment of deeds. All copies of papers in the office of the commissioner, certified by him and authenticated by the seal, shall be accepted as evidence equally and in like manner as the original. An impression of the seal directly on paper shall be as valid as if made on wax or wafer.
##### **§ 17:1-8** Fees; disposition {#sec-17-1-8 omnilex-key=us-nj-statutes--title-17--17:1-8}
The commissioner shall charge for a license and for all services performed by the department the fees provided in Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes, or in lieu thereof or where not so provided, such fees as the commissioner shall prescribe by rule or regulation, including but not limited to application fees, license fees, assessments, and charges for investigations and examinations. The commissioner shall make returns to the Director of the Division of Budget and Accounting of all fees and moneys collected by the department, and pay the sum so collected into the State Treasury.
##### **§ 17:1-8.1** Rules, regulations {#sec-17-1-8.1 omnilex-key=us-nj-statutes--title-17--17:1-8.1}
1. The commissioner may, in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate such rules and regulations as are necessary to effectuate the purposes of this 1996 amendatory and supplementary act.
##### **§ 17:1-13** Short title {#sec-17-1-13 omnilex-key=us-nj-statutes--title-17--17:1-13}
1. This act shall be known and may be cited as the "Department of Banking and Insurance Act of 1996."
##### **§ 17:1-14** Appointments of deputy, assistant commissioners, organization; divisions {#sec-17-1-14 omnilex-key=us-nj-statutes--title-17--17:1-14}
4. a. The commissioner may appoint such deputy commissioners and assistant commissioners as the commissioner shall deem necessary, to serve at the pleasure of the commissioner, subject to the provisions of Title 11A of the New Jersey Statutes. Each deputy or assistant commissioner shall exercise those powers and perform those duties of the commissioner as the commissioner may prescribe or delegate under the commissioner's direction and supervision. Subject to the provisions of paragraph (2) of subsection d. and paragraph (2) of subsection e. of this section, the commissioner shall designate one or more department officials to exercise the powers and perform the duties of the commissioner during the commissioner's absence, disability, or when otherwise specified by the commissioner.
b. Subject to applicable laws and the provisions of subsections d. and e. of this section, the commissioner shall have the authority to establish, engage, organize, and maintain in the department administrative personnel and structure as the commissioner deems necessary to perform all personnel, planning and budget and finance responsibilities, examinations, investigations, regulatory responsibilities or other duties or services as may be required for the efficient and effective operation of the department.
c. There is established within the Department of Banking and Insurance, a Division of Banking and a Division of Insurance. The Department of Banking and Insurance shall be organized so that, subject to the supervision of the commissioner, the Director of the Division of Banking shall be in charge of the functions and duties that relate to banking and supervise and regulate those entities previously supervised and regulated by the Department of Banking, and the Director of the Division of Insurance shall be in charge of the functions and duties that relate to insurance and supervise and regulate those entities previously supervised and regulated by the Department of Insurance.
d. The Director of the Division of Banking shall be appointed by the Governor, with the advice and consent of the Senate, and shall serve at the pleasure of the Governor, provided however, that the person in office as the Deputy and Acting Commissioner of Banking on June 30, 1996, shall, at the pleasure of the Governor, hold the office of Director of the Division of Banking. The director shall devote his entire time and attention to the duties of the office. The Director of the Division of Banking shall not, within the five years immediately preceding appointment as Director of the Division of Banking, have been employed by, acted as agent or contractor for, or managed or controlled any entity, other than an entity affiliated with a banking institution as defined pursuant to section 1 of P.L.1948, c.67 (C.17:9A-1), that was engaged in the insurance business pursuant to Subtitle 3 of Title 17 of the Revised Statutes, Title 17B of the New Jersey Statutes, or P.L.1973, c.337 (C.26:2J-1 et seq.), except that the provision shall not apply to any person appointed as Director of the Division of Banking on or before September 1, 1996. The duties and responsibilities of the Director of the Division of Banking shall include the following:
(1) to organize the work of the Division of Banking into the offices, bureaus and other organizational units as the director may determine, subject to the approval of the commissioner;
(2) in the absence of the commissioner, to be acting commissioner for all matters relating to banking;
(3) to review all banking institutions and other lenders and depository institutions, other than insurance entities, to ensure the safety and soundness of those institutions, and to make recommendations to the commissioner for appropriate action to ensure the safety and soundness of the institutions;
(4) to monitor the comparability of New Jersey laws and regulations with the laws and regulations governing federally chartered banks, savings banks and credit unions and to prepare for inclusion in the department's annual report required pursuant to subsection h. of section 6 of this 1996 amendatory and supplementary act, a report on the operation of the dual banking system in New Jersey;
(5) to exercise those powers and perform those duties as the commissioner may prescribe or delegate under the commissioner's direction and supervision.
e. The Director of the Division of Insurance shall be appointed by the Governor, with the advice and consent of the Senate, and shall serve at the pleasure of the Governor, provided however, that the person in office as the Deputy Commissioner of Insurance for Property and Casualty on June 30, 1996, shall, at the pleasure of the Governor, hold the office of Director of the Division of Insurance. The director shall devote his entire time and attention to the duties of the office. The Director of the Division of Insurance shall not, within the five years immediately preceding appointment as Director of the Division of Insurance, have been employed by, acted as agent or contractor for, or managed or controlled any entity that was engaged in the banking business pursuant to Subtitle 2 of Title 17 of the Revised Statutes, except that the provision shall not apply to any person appointed as Director of the Division of Insurance on or before September 1, 1996. The duties and responsibilities of the Director of the Division of Insurance shall include the following:
(1) to organize the work of the Division of Insurance into the offices, bureaus and other organizational units as the director may determine, subject to the approval of the commissioner;
(2) in the absence of the commissioner, to be acting commissioner for all matters relating to insurance;
(3) to exercise those powers and perform those duties as the commissioner may prescribe or delegate under the commissioner's direction and supervision.
##### **§ 17:1-15** Duties, authority of commissioner. {#sec-17-1-15 omnilex-key=us-nj-statutes--title-17--17:1-15}
6. The commissioner, as administrator and chief executive officer of the department, shall:
a. Administer the work of the department;
b. Appoint and remove officers and other personnel employed within the department, subject to the provisions of Title 11A of the New Jersey Statutes, and other applicable statutes, except as otherwise specifically provided;
c. Perform, exercise and discharge the functions, powers and duties of the department through those divisions established by law or as the commissioner deems necessary;
d. Organize the work of the department pursuant to the structure or organizational units the commissioner determines to be necessary for efficient and effective operation, and which are not inconsistent with the provisions of this 1996 amendatory and supplementary act;
e. Formulate, adopt, issue and promulgate, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), in the name of the department, rules and regulations authorized by law for the efficient conduct of the work and general administration of the department, and the appropriate regulation of the institutions, companies, agencies, boards, commissions, and other entities within its jurisdiction, including licensees, officers and employees as authorized by law;
f. Determine all matters of policy within the commissioner's jurisdiction;
g. Institute or cause to be instituted the legal proceedings or processes necessary to enforce properly and give effect to any of the commissioner's powers or duties;
h. Make a report each year to the Governor and to the Legislature of the department's operations for the preceding fiscal year, and render such other reports as the Governor shall from time to time request, or as may be required by law;
i. Appoint advisory committees which may be desirable to advise and assist the department or a division in carrying out its functions and duties;
j. Have the power, in addition to any powers prescribed by law, to order any person violating any provision of Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes to cease and desist from engaging in such conduct;
k. Perform such other functions as may be prescribed by law in this act or by any other law; and
l. Maintain suitable headquarters for the department and such other quarters as the commissioner shall deem necessary to the proper functioning of the department.
##### **§ 17:1-16** Examination of persons, subpoena of witnesses, documents {#sec-17-1-16 omnilex-key=us-nj-statutes--title-17--17:1-16}
7. For the purpose of effectuating the powers and duties of the department and the commissioner, the commissioner may cause to be examined under oath any and all persons whatsoever and compel by subpoena upon appropriate notice the attendance of witnesses and the production of such books, records, accounts, papers, and other documents as are appropriate. If any person shall refuse to obey a subpoena, or to produce evidence as required thereby, the commissioner may apply ex parte to any court having jurisdiction over that person for an order compelling the appearance of the witness to give testimony or to produce evidence as required thereby, or both. Any person failing to obey the court order may be punished by the court for contempt.
##### **§ 17:1-17** Transfer of appropriations, moneys {#sec-17-1-17 omnilex-key=us-nj-statutes--title-17--17:1-17}
9. All appropriations and other moneys available and to become available to any department, division, bureau, board, commission, or other entity or agency, the functions, powers and duties of which have been assigned or transferred to the Department of Banking or to the Department of Insurance are hereby transferred to the Department of Banking and Insurance reestablished by this 1996 amendatory and supplementary act, and shall be available for the objects and purposes for which appropriated, subject to any terms, restrictions, limitations, or other requirements imposed by State or federal law.
##### **§ 17:1-18** Assignment, transfer of employees {#sec-17-1-18 omnilex-key=us-nj-statutes--title-17--17:1-18}
10. Employees of any department, division, bureau, board, commission or other agency or entity, the functions, powers and duties of which have been assigned or transferred to the Department of Banking or to the Department of Insurance or to any agency continued or constituted therein, shall be assigned or transferred pursuant to Title 11A of the New Jersey Statutes to the reconstituted Department of Banking and Insurance as the commissioner may determine are needed for the proper performance of the duties of the department.
##### **§ 17:1-19** Tenure, rights preserved {#sec-17-1-19 omnilex-key=us-nj-statutes--title-17--17:1-19}
11. Nothing in this 1996 amendatory and supplementary act shall be construed to deprive any person of any tenure rights or of any right or protection provided him or her by Title 11A of the New Jersey Statutes, or under any pension law or retirement system.
##### **§ 17:1-20** Transfer of property {#sec-17-1-20 omnilex-key=us-nj-statutes--title-17--17:1-20}
12. All files, books, papers, records, information management systems, equipment and other property of any department, division, bureau, commission, board, or other agency or entity, the functions, powers and duties of which have been assigned or transferred to the Department of Banking or to the Department of Insurance, or to any agency designated, continued or constituted by this 1996 amendatory and supplementary act, shall upon the effective date of this act be assigned or transferred to the Department of Banking and Insurance as directed by the commissioner or the commissioner's designee.
##### **§ 17:1-21** References to department, commissioner {#sec-17-1-21 omnilex-key=us-nj-statutes--title-17--17:1-21}
13. With respect to the functions, powers and duties continued in the Department of Banking and Insurance by this 1996 amendatory and supplementary act, whenever in any law, rule, regulation, order, agreement, stipulation, judicial or administrative proceeding or otherwise, reference is made to the Department of Banking or to the Department of Insurance, or to the Commissioner of Banking or to the Commissioner of Insurance, the same shall mean and refer to the Department of Banking and Insurance, and the Commissioner of Banking and Insurance, respectively.
##### **§ 17:1-22** Existing orders, rules, regulations not affected {#sec-17-1-22 omnilex-key=us-nj-statutes--title-17--17:1-22}
14. This 1996 amendatory and supplementary act shall not affect the orders, rules, regulations, bulletins, plans of operation, contracts, settlement or consent agreements, or stipulations heretofore made, promulgated by, or approved by the Commissioners of Banking or Insurance, or any department, division, bureau, board or other agency, the functions powers and duties of which have been assigned or transferred to the reconstituted Department of Banking and Insurance by this act, or to any other agency designated, continued or constituted hereunder, but those orders, rules, regulations, bulletins, plans of operation, contracts, settlement or consent agreements, and stipulations shall continue with full force and effect until amended or repealed pursuant to law.
##### **§ 17:1-23** Actions, proceedings not affected {#sec-17-1-23 omnilex-key=us-nj-statutes--title-17--17:1-23}
15. This 1996 amendatory and supplementary act shall not affect actions or proceedings, civil or criminal, brought by or against the Commissioners of Banking and Insurance, or any department, division, bureau, board, commission, or other agency, the functions, powers and duties of which have been herein assigned or transferred to the reconstituted Department of Banking and Insurance, or to any agency designated, continued, or constituted hereunder, and pending on the effective date of this act.
##### **§ 17:1-25** Findings, declarations relative to enforcement powers of Department of Banking and Insurance. {#sec-17-1-25 omnilex-key=us-nj-statutes--title-17--17:1-25}
1. The Legislature finds and declares that:
a. Financial institutions increasingly influence and affect the lives and livelihood of consumers in this State to such a degree that the actions, and the potential adverse consequences of any possible abuse by those institutions, need to be diligently monitored and, when appropriate, adequately constrained.
b. Expanding and strengthening the enforcement powers of the Division of Banking within the Department of Banking and Insurance is needed in order to permit the division to maintain and fulfill its duty of responsible oversight of those financial institutions chartered or operating under New Jersey law.
c. Modeling these enhanced enforcement powers on those powers currently provided to and utilized by federal financial regulatory agencies will facilitate a uniform approach to regulatory oversight of all financial institutions and promote consistency in efficient and effective regulatory enforcement.
##### **§ 17:1-26** Definitions relative to enforcement powers of Department of Banking and Insurance. {#sec-17-1-26 omnilex-key=us-nj-statutes--title-17--17:1-26}
2. As used in this act, and except as otherwise expressly provided in this act:
"Bank" means a bank as defined in subsection (1) of section 1 of P.L.1948, c.67 (C.17:9A-1).
"Commissioner" means the Commissioner of Banking and Insurance.
"Control" means:
(1) (a) Owning, controlling or having power to vote 25% or more of the outstanding shares of any class of voting securities of a covered institution, directly or indirectly, or by acting through one or more persons;
(b) Controlling in any manner the election of a majority of the directors, trustees, general partners or individuals exercising similar functions of the covered institution; or
(c) Exercising or having the power to exercise directly or indirectly a controlling influence over the management or policies of a covered institution.
(2) A person that is a covered institution shall not be deemed to control voting securities or assets of a covered institution acquired:
(a) in good faith, in a fiduciary capacity, except where those voting securities are held in a trust that constitutes a person; or
(b) in the regular course of securing or collecting a debt previously contracted in good faith which securities are disposed of within a period of two years after the date on which they were acquired or after the enactment of this act, whichever is later.
(3) A person is deemed to control voting securities or assets owned, controlled or held directly or indirectly:
(a) by any subsidiary of the person;
(b) in a fiduciary capacity, including by pension and profit-sharing trusts, for the benefit of the shareholders, members, employees or individuals serving in similar capacities, of the person or of any of its subsidiaries; or
(c) in a fiduciary capacity for the benefit of the person or any of its subsidiaries.
"Covered institution" means a bank, savings bank or State association.
"Department" means the Department of Banking and Insurance.
"Director" means a director of a bank and a manager of a mutual savings bank or mutual State association.
"Major shareholder" means anyone who owns voting securities of a covered institution and exercises control as defined in this section, and shall mean a depositor of a mutual State association which exercises control as defined in this section.
"Savings bank" means a savings bank as defined in subsection (13) of section 1 of P.L.1948, c.67 (C.17:9A-1).
"State association" means a State association as defined in subsection (1) of section 5 of P.L.1963, c.144 (C.17:12B-5).
"Subsidiary" means (1) any entity, 25 percent or more of whose voting shares are directly or indirectly owned or controlled by a covered institution or are held by a covered institution with power to vote; (2) any entity, the election of a majority of whose directors, general partners of a partnership or limited partnership, or members of a limited liability company is controlled in any manner by a covered institution; or (3) any entity, with respect to the management of the policies of which a covered institution has the power, directly or indirectly, to exercise a controlling influence.
"Voting securities" means shares of common or preferred stock, general or limited partnership shares or interests or similar interests if the shares or interests, by statute, charter, or in any manner, entitle the holder:
(1) To vote for or to select directors, trustees, partners or persons exercising similar functions for the issuing person; or
(2) To vote on or to direct the conduct of the operations or other significant policies of the issuing person.
Preferred shares, limited partnership shares or interests or similar interests are not "voting securities" if:
(1) Any voting rights associated with the shares or interests, including the right to select or vote for the selection of directors, trustees or partners or persons exercising similar functions, are limited solely to the type customarily provided by statute with regard to matters that would significantly and adversely affect the rights or preference of the security or other interest, such as the issuance of additional amounts or classes of senior securities, the modification of the terms of the security or interest, the dissolution of the issuing person, or the payment of dividends by the issuing person when preferred dividends are in arrears, or, entitle the holder thereof to vote for the election of directors, trustees or partners or persons exercising similar functions only as the result of the failure to pay a dividend or to fulfill an obligation or satisfy a condition specified by the terms of the shares or interests; and
(2) The shares or interests represent an essentially passive investment or financing device and do not otherwise provide the holder with control over the issuing person.
##### **§ 17:1-27** Prohibited actions. {#sec-17-1-27 omnilex-key=us-nj-statutes--title-17--17:1-27}
3. No bank, savings bank, State association, or any officer, director, employee, or major shareholder thereof, shall:
a. Fail to comply with an order or other written instruction of the commissioner or any other financial regulatory agency;
b. Violate a State or federal law;
c. Take any action, or fail to take an action, with the result that a material interest of the covered institution is adversely affected;
d. Be convicted of a crime that would permit adverse action by a governmental agency pursuant to P.L.1968, c.282 (C. 2A:168A-1 et seq.);
e. Provide incorrect, misleading, incomplete or untrue material information about the covered institution to the commissioner or any federal financial regulatory agency;
f. Withhold material information from the commissioner or any federal financial regulatory authority about the covered institution; or
g. Take an action, or fail to take an action, the result of which poses a substantial risk to the safety and soundness of the covered institution or may cause substantial damage to its reputation.
##### **§ 17:1-28** Enforcement of, penalties for violations under C.17:1-27. {#sec-17-1-28 omnilex-key=us-nj-statutes--title-17--17:1-28}
4. a. In addition to any other penalty provided by law, if the commissioner determines that a bank, savings bank, State association, or any officer, director, employee or major shareholder thereof, has violated a provision of section 3 of this act, the commissioner may impose any one or more of the following penalties and sanctions as he deems appropriate. The commissioner may:
(1) Impose a civil penalty of up to $10,000 for each violation, or up to $50,000 for each willful violation;
(2) Suspend, revoke or refuse to renew a license issued by the department;
(3) Temporarily remove a person responsible for a violation of this act from working in that person's present capacity or in any capacity related to activities regulated by the department;
(4) Prohibit or bar a person responsible for a violation of this act from working in that person's present capacity or in any capacity related to activities regulated by the department;
(5) Order a person to cease and desist any violation of this act;
(6) Order a person to make restitution for actual damages;
(7) Enter an appropriate temporary order, to be effective immediately and until entry of a final order, pending completion of an investigation or any formal proceeding instituted pursuant to this act, if the commissioner finds that the interests of the public require immediate action to prevent undue harm to the covered institution, depositors or the public. Orders issued pursuant to this paragraph shall be subject to an application to vacate upon two days' notice, and a preliminary hearing on the temporary order shall be held, in any event, within five days after it is issued, in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.); and
(8) Impose other sanctions or conditions as the commissioner deems appropriate.
b. Penalties and other sanctions shall be reasonable, based on the nature, extent and frequency of the violation, and the risk to the covered institution, depositors and the public. In addition to these factors, the commissioner shall consider, when determining the amount of a monetary penalty against an institution pursuant to paragraph (1) of subsection a. of this section, the amount of other monetary penalties, if any, imposed, or to be imposed, by another regulatory agency or through other legal process, and the impact of the total penalties on the institution.
c. A decision of the commissioner shall be a final order of the department and shall be enforceable in a court of competent jurisdiction.
d. The department shall publish the final adjudication issued in accordance with this section, subject to redaction or modification to preserve confidentiality.
e. Orders may be appealed as a final administrative action pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
## **Chapter 1C** {#struct-chapter-1c}
##### **§ 17:1C-6.1** Training program for volunteers {#sec-17-1c-6.1 omnilex-key=us-nj-statutes--title-17--17:1C-6.1}
4. The Department of Insurance, in conjunction with the Division on Aging, shall develop a training program for volunteers in the Senior Health Insurance Counseling Program, established pursuant to P.L.1993, c.4 (C.52:27D-29.32 et al.), and conduct all training of volunteer counselors with regard to private health insurance coverage for senior citizens.
##### **§ 17:1C-19** Findings, declarations relative to the Department's expenses {#sec-17-1c-19 omnilex-key=us-nj-statutes--title-17--17:1C-19}
1. a. The Legislature finds and declares that:
(1) The Department of Insurance has a statutory obligation to protect the interests of New Jersey's insurance consumers and to regulate and oversee the operations of the insurance industry. The special needs of the department relative to the monitoring of the financial condition of insurers and health maintenance organizations is recognized by the Legislature as being unique from its other responsibilities.
(2) In order to maintain an adequate level of financial oversight and perform all lawful duties in this regard, it is necessary to establish a special purpose funding mechanism for the department's special needs.
(3) A special purpose funding source is a clear indication of the commitment that the State of New Jersey has made to the special needs of the department relative to its administrative activities related to the financial regulation, supervision and monitoring of insurers and health maintenance organizations. A special purpose funding source will assist in maintenance of New Jersey's accreditation by the National Association of Insurance Commissioners (NAIC). Accreditation under the NAIC Financial Regulation and Standards Program is an indication of the department's ability to implement and enforce strong financial solvency standards.
b. The Legislature therefore intends for the actual incurred expenses of the Department of Insurance for all services related to the department's financial regulation, supervision and monitoring of insurers and health maintenance organizations to be apportioned among insurers and health maintenance organizations doing business in our State.
c. The Legislature also finds that establishing a dedicated funding mechanism for the operations of the New Jersey Real Estate Commission is in the public's interest.
##### **§ 17:1C-20** Certification of expenses incurred, apportionment. {#sec-17-1c-20 omnilex-key=us-nj-statutes--title-17--17:1C-20}
2. a. The Director of the Division of Budget and Accounting in the Department of the Treasury shall, on or before August 15 in each year, ascertain and certify to the Commissioner of Banking and Insurance by category the total amount of expenses incurred by the State in connection with the administration of the special functions of the Division of Insurance in the Department of Banking and Insurance relative to the financial regulation, supervision and monitoring of insurers and health maintenance organizations during the preceding fiscal year. Those expenses shall include, in addition to the direct cost of personal service, the cost of maintenance and operation, the cost of employee benefits and the workers' compensation paid for and on account of personnel, rentals for space occupied in State-owned or State-leased buildings and all other direct and indirect costs of the administration of those functions of the department, as well as any amounts remaining uncollected from the special purpose apportionment of the previous fiscal year. Certification made pursuant to this subsection shall be made by the Director of the Division of Budget and Accounting in consideration of revenues paid by insurers and health maintenance organizations pursuant to all other special purpose assessments made pursuant to applicable law in effect on the effective date of this act.
b. (1) Upon receipt of the certification made by the Director of the Division of Budget and Accounting pursuant to subsection a. of this section, but no later than September 1 in each year following the close of the previous fiscal year, the commissioner shall issue, in accordance with the provisions of this section, a special purpose apportionment for the amount of the expenses incurred by, or on behalf of, the department for those special purposes recognized in this act.
(2) Special purpose apportionments made pursuant to this section shall be distributed among all of the companies engaged in business pursuant to subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.), and P.L.1973, c.337 (C.26:2J-1 et seq.), in this State in the proportion that the net written premiums received by each of them for such insurance written or renewed on risks, in this State during the calendar year immediately preceding, bears to the sum total of all such net written premiums received by all companies writing that insurance or coverage within the State during that calendar year, as reported.
"Net written premiums received" means gross direct premiums written, less return premiums thereon and dividends credited or paid to policyholders as reported on the company's annual financial statement. For the purpose of calculating the apportionment amount for companies engaged in business pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.), "net written premiums received" means direct premiums as reported on the annual financial statement submitted pursuant to section 9 of P.L.1973, c.337 (C.26:2J-9). In determining the apportionment amount pursuant to this section, the net written premiums received by a company, other than a domestic insurer as defined in subsection a. of N.J.S.17B:17-7 that sells life insurance as defined in N.J.S.17B:17-3, including annuities as defined in N.J.S.17B:17-5, shall not exceed $100,000,000 on any one contract of insurance.
For the purpose of calculating the special purpose apportionment, any such premium excluded from the reporting of "net written premiums received" by virtue of the preceding sentence shall be allocated among those domestic insurers as defined in subsection a. of N.J.S.17B:17-7 that sell life insurance as defined in N.J.S.17B:17-3 to be included with the "net written premiums received" reported by those companies. Such excluded premium shall be allocated among those domestic insurers as defined in subsection a. of N.J.S.17B:17-7 that sell life insurance as defined in N.J.S.17B:17-3, on a pro rata basis based on the proportion that the net written premiums received by each of them for insurance written or renewed on risks in this State during the calendar year immediately preceding bears to the sum total of all such net written premiums received by those domestic insurers as defined in subsection a. of N.J.S.17B:17-7 that sell life insurance as defined in N.J.S.17B:17-3, within the State during that calendar year.
c. For the purposes of this section, no company shall be required to pay a special purpose apportionment which exceeds .10 percent of its net written premiums received during the calendar year immediately preceding.
d. The commissioner shall certify the amount of the special purpose apportionment issued to each company. Each company shall remit the amount so certified and apportioned to it to the department in accordance with the procedures established in this act. Amounts collected by the department shall be used for reimbursement to the State for expenses incurred in connection with the special functions of the Division of Insurance relative to the financial regulation, supervision and monitoring of insurers and health maintenance organizations, provided that the amount collected for those expenses shall not exceed the amount appropriated by the Legislature for those expenses.
##### **§ 17:1C-20.1** Distribution of special purpose apportionment {#sec-17-1c-20.1 omnilex-key=us-nj-statutes--title-17--17:1C-20.1}
2. Notwithstanding the provisions of any law to the contrary, the Commissioner of Banking and Insurance shall take that action necessary to ensure that policyholders of the companies paying the special purpose apportionment pursuant to P.L.1995, c.156 (C.17:1C-19 et seq.) shall not pay for that portion of the special purpose apportionment attributable to the appointment of additional insurance fraud investigators as provided in section 13 of P.L.1995, c.156 (C.17:1C-31).
##### **§ 17:1C-21** Filing of objections to apportionment {#sec-17-1c-21 omnilex-key=us-nj-statutes--title-17--17:1C-21}
3. Within 15 days after the date of mailing a statement of special purpose apportionment as provided in this act, a company may file its objections to its apportionment with the commissioner. Upon receiving those objections, the commissioner shall either: amend the statement as warranted, consistent with sections 5 and 9 of this act; or schedule and send a notice of a hearing on the objections, which hearing shall be held not less than 30 nor more than 60 days after the date of the notice.
##### **§ 17:1C-22** Commissioner's findings, notice {#sec-17-1c-22 omnilex-key=us-nj-statutes--title-17--17:1C-22}
4. If upon receiving the objections, or after the hearing, the commissioner finds any part of the special purpose apportionment against the objecting company excessive, erroneous, unlawful or invalid, he shall transmit to the objector, by registered mail, his findings and an amended statement of special purpose apportionment in accordance with those findings, which shall have the same force and effect as an original statement of special purpose apportionment. If the commissioner finds the entire statement of special purpose apportionment unlawful or invalid, he shall notify the objector, by registered mail, of that determination, and the original statement of special purpose apportionment shall be null and void. If the commissioner finds that the statement as rendered is neither excessive, erroneous, unlawful or invalid, in whole or in part, he shall transmit notice thereof to the objector by registered mail.
##### **§ 17:1C-23** Notice of delinquency {#sec-17-1c-23 omnilex-key=us-nj-statutes--title-17--17:1C-23}
5. If a statement of special purpose apportionment against which objections are filed is not paid in full within 30 days after the date of mailing to the objector of notice of a finding that the objections have been disallowed; or if an amended statement of special purpose apportionment is not paid within 30 days of the date a copy thereof is mailed by registered mail to the objector, the commissioner shall give notice of the delinquency to the State Treasurer and to the objector, and the State Treasurer shall proceed to make the collection.
##### **§ 17:1C-24** Action for recovery {#sec-17-1c-24 omnilex-key=us-nj-statutes--title-17--17:1C-24}
6. No action for recovery of an amount paid under this act shall be maintained in any court unless objections have been filed with the commissioner. In an action for recovery of any payments, plaintiff may raise any relevant issue of law, but the commissioner's findings of fact shall be presumptive evidence of the facts therein stated.
##### **§ 17:1C-25** No action, proceeding maintained in court for delaying collection, payment {#sec-17-1c-25 omnilex-key=us-nj-statutes--title-17--17:1C-25}
7. No action or proceeding shall be maintained in any court for the purpose of restraining or delaying the collection or payment of a statement of special purpose apportionment rendered in accordance with the provisions of this act. A company against which a statement of special purpose apportionment is rendered shall pay the amount thereof, and after the payment may in the manner provided by this act at any time within two years from the date of the payment, bring an action at law against the State to recover the amount paid, with legal interest thereon from the date of payment, upon the ground that the special purpose apportionment was excessive, erroneous, unlawful or invalid, in whole or in part.
##### **§ 17:1C-26** Procedure exclusive {#sec-17-1c-26 omnilex-key=us-nj-statutes--title-17--17:1C-26}
8. The procedure provided in this act for determining the lawfulness of statements of special purpose apportionment and the recovery of payments made pursuant to those statements of special purpose apportionment shall be exclusive of all other remedies and procedures.
##### **§ 17:1C-27** Failure, refusal to pay, notice to Treasurer {#sec-17-1c-27 omnilex-key=us-nj-statutes--title-17--17:1C-27}
9. If any company to which a statement of special purpose apportionment as provided in this act has been mailed fails or refuses to pay the amount within 30 days, or fails to file with the commissioner objections to the statement of special purpose apportionment as provided in this act, the commissioner shall transmit to the State Treasurer a certified copy of both the statement of special purpose apportionment and the notice of the neglect or refusal of the company to pay the amount thereof, and at the same time shall mail by registered mail to the company a copy of the items transmitted to the State Treasurer.
##### **§ 17:1C-28** Collection of amount due {#sec-17-1c-28 omnilex-key=us-nj-statutes--title-17--17:1C-28}
10. Within 10 days after receipt of the notice and certified copy of the statement of special purpose apportionment, the State Treasurer shall proceed to collect the amount stated to be due, with legal interest, by seizure and sale of any goods or chattels, including stocks, securities, bank accounts, evidences of debt and accounts receivable belonging to the company anywhere within the State.
##### **§ 17:1C-29** Additional remedy {#sec-17-1c-29 omnilex-key=us-nj-statutes--title-17--17:1C-29}
11. As an additional remedy, the State Treasurer may issue a certificate to the Clerk of the Superior Court, that a company is indebted under this act in an amount stated in the certificate. The clerk shall immediately enter upon his record of docketed judgments the name of the company, and of the State, the amount of debt so certified, and the date of the entry. The entry shall have the same force and effect as the entry of a docketed judgment in the office of the clerk, and the State Treasurer shall have all the remedies and may take all of the proceedings for the collection thereof which may be had or taken upon the recovery of a judgment in an action, but without prejudice to the company's right of appeal.
##### **§ 17:1C-30** Exemption from fees, charges {#sec-17-1c-30 omnilex-key=us-nj-statutes--title-17--17:1C-30}
12. a. Notwithstanding any law or regulation to the contrary, a company paying the amounts apportioned to it in statements of special purpose apportionment made pursuant to section 2 of this act shall be exempt from all fees or charges imposed by the Department of Insurance pursuant to any other provision of law or regulation.
b. Nothing in this section shall be construed to exempt a company from paying any other special purpose assessment made pursuant to any applicable law in effect on the effective date of this act.
c. Notwithstanding the provisions of subsection a. of this section, any fee imposed by the Department of Insurance for the periodic examination of domestic insurers pursuant to section 3 of P.L.1993, c.236 (C.17:23-22) shall remain in effect.
d. Nothing in this section shall exempt a company from paying any fine or penalty imposed by the commissioner for a violation of a statute or regulation.
##### **§ 17:1C-31** Permitted increase in amount assessable. {#sec-17-1c-31 omnilex-key=us-nj-statutes--title-17--17:1C-31}
13. Commencing with fiscal year 1999 and in each fiscal year thereafter, the total amount assessable to companies in any fiscal year for all special purpose assessments made pursuant to applicable law as of the effective date of this act, including the special purpose apportionment established by this act, shall not exceed 0.25 percent of the combined net written premiums received, as defined in subsection b. of section 2 of this act, by all companies for the previous year.
##### **§ 17:1C-32** Rules, regulations {#sec-17-1c-32 omnilex-key=us-nj-statutes--title-17--17:1C-32}
14. The State Treasurer and the Commissioner of Insurance may adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.
##### **§ 17:1C-33** Findings, declarations relative to funding mechanism for Division of Banking. {#sec-17-1c-33 omnilex-key=us-nj-statutes--title-17--17:1C-33}
1. a. The Legislature finds and declares that:
(1) The Division of Banking has a statutory obligation to protect the interests of New Jersey's consumers and to regulate and oversee the operations of the financial industry it charters, licenses and registers.
(2) In order to maintain an adequate level of oversight and supervision, and to perform its regulatory responsibilities, it is necessary to establish an assessment funding mechanism for the division's special needs.
(3) A banking assessment funding source is a clear indication of the commitment that the State of New Jersey has made to the special needs of the Division of Banking relative to its administrative activities with regard to the financial regulation, supervision and monitoring of the depository institutions and other financial entities it charters, licenses and registers.
(4) A dedicated funding mechanism for the Division of Banking is in the public interest.
b. The Legislature therefore intends for the actual incurred expenses of the Division of Banking for all services related to the division's financial regulation, supervision and monitoring of depository institutions and other financial entities it charters, licenses and registers to be assessed among these depository institutions, licensees and registrants.
##### **§ 17:1C-34** Definitions relative to funding mechanism for Division of Banking. {#sec-17-1c-34 omnilex-key=us-nj-statutes--title-17--17:1C-34}
2. For the purposes of this act:
"Assessment" means the assessment imposed pursuant to section 3 of this act for the special functions of the division as provided in that section.
"Commissioner" means the Commissioner of Banking and Insurance.
"Department" means the Department of Banking and Insurance.
"Depository institution" means any entity holding a state charter for a bank, savings bank, savings and loan association or credit union, irrespective of whether the entity accepts deposits.
"Division" means the Division of Banking in the Department of Banking and Insurance.
"Nationwide Mortgage Licensing System and Registry" means the mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, or their successors, and utilized in this State pursuant to the provisions of the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.).
"Other financial entity" means a person who is licensed or registered pursuant to: the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.); the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.), other than a financial entity with respect to the payment of required fees to the Nationwide Mortgage Licensing System and Registry as set forth by that nationwide system and registry; "The Check Cashers Regulatory Act of 1993," P.L.1993, c.383 (C.17:15A-30 et seq.); the "New Jersey Money Transmitters Act," P.L.1998, c.14 (C.17:15C-1 et seq.); the "Insurance Premium Finance Company Act," P.L.1968, c.221 (C.17:16D-1 et seq.); the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.); the "Door-to-Door Retail Installment Sales Act of 1968," P.L.1968, c.223 (C.17:16C-61.1 et seq.); the "Home Repair Financing Act," P.L.1960, c.41 (C.17:16C-62 et seq.); the "Door-to-Door Home Repair Sales Act of 1968," P.L.1968, c.224 (C.17:16C-95 et seq.); P.L.1979, c.16 (C.17:16G-1 et seq.); the "Foreclosure Rescue Fraud Prevention Act," P.L.2011, c.146 (C.46:10B-53 et al.); the provisions of P.L.2019, c.200 (C.17:16ZZ-1 et al.); or the "pawnbroking law," R.S.45:22-1 et seq.
"Regulated entity" means a depository institution, other financial entity or person chartered, licensed or registered by the Division of Banking or who should be chartered, licensed or registered.
##### **§ 17:1C-35** Certification of expenses incurred for administration of special administration of functions of Division of Banking; assessments. {#sec-17-1c-35 omnilex-key=us-nj-statutes--title-17--17:1C-35}
3. a. The Director of the Division of Budget and Accounting in the Department of the Treasury shall, on or before August 15 in each year, ascertain and certify to the commissioner by category the total amount of expenses incurred by the State in connection with the administration of the special functions of the Division of Banking in the Department of Banking and Insurance relative to the financial regulation, supervision and monitoring of depository institutions and other financial entities it licenses during the preceding fiscal year. Those expenses shall include, in addition to the direct cost of personal service, the cost of maintenance and operation, the cost of employee benefits and the workers' compensation paid for and on account of personnel, rentals for space occupied in State-owned or State-leased buildings and all other direct and indirect costs of the administration of those functions of the department, as well as any amounts remaining uncollected from the assessment of the previous fiscal year. Certification made pursuant to this subsection shall be made by the Director of the Division of Budget and Accounting.
b. (1) Upon receipt of the certification made by the Director of the Division of Budget and Accounting pursuant to subsection a. of this section, but no later than September 1 in each year following the close of the previous fiscal year, the commissioner shall issue, in accordance with the provisions of this section, the assessment for the amount of the expenses incurred by, or on behalf of, the department for those special purposes recognized in this act.
(2) Assessments made pursuant to this section shall be distributed among all regulated entities in accordance with regulations promulgated by the commissioner pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
c. The commissioner shall certify the amount of the assessment issued to each regulated entity. Each regulated entity shall remit the amount so certified and assessed to it to the department in accordance with the procedures established in this act. Amounts collected by the department shall be used for reimbursement to the State for expenses incurred in connection with the special functions of the division relative to the financial regulation, supervision and monitoring of depository institutions and other financial entities it charters, licenses or registers, provided that the amount collected for those expenses shall not exceed the amount appropriated by the Legislature for those expenses.
##### **§ 17:1C-36** Objections to assessment, hearing. {#sec-17-1c-36 omnilex-key=us-nj-statutes--title-17--17:1C-36}
4. Within 15 days after the date of mailing a statement of the assessment as provided in this act, a regulated entity may file its objections to its assessment with the commissioner. The filing of an objection shall not relieve a regulated entity from its obligation to pay its assessment in full within 30 days after receipt of the original statement of the assessment. Upon receiving those objections, the commissioner shall either: amend the statement as warranted, consistent with sections 5 and 6 of this act; or schedule and send a notice of a hearing on the objections, which hearing shall be held not less than 30 nor more than 60 days after the date of the notice.
##### **§ 17:1C-37** Transmission of findings to objector. {#sec-17-1c-37 omnilex-key=us-nj-statutes--title-17--17:1C-37}
5. If upon receiving the objections, or after the hearing, the commissioner finds any part of the assessment against the objecting regulated entity excessive, erroneous, unlawful or invalid, he shall transmit to the objector, by registered mail, his findings and an amended statement of the assessment in accordance with those findings, which shall have the same force and effect as an original statement of the assessment. If the commissioner finds the entire statement of the assessment unlawful or invalid, he shall notify the objector, by registered mail, of that determination, and the original statement of the assessment shall be null and void. If the commissioner finds that the statement as rendered is neither excessive, erroneous, unlawful or invalid, in whole or in part, he shall transmit notice thereof to the objector by registered mail.
##### **§ 17:1C-38** Notice of delinquency, collection. {#sec-17-1c-38 omnilex-key=us-nj-statutes--title-17--17:1C-38}
6. If a statement of the assessment against which objections are filed is not paid in full within 30 days after the date of mailing of the original statement of the assessment; or if an amended statement of the assessment is not paid within 30 days of the date a copy thereof is mailed by registered mail to the objector, the commissioner shall give notice of the delinquency to the State Treasurer and to the objector, and the State Treasurer shall proceed to make the collection.
##### **§ 17:1C-39** Action for recovery. {#sec-17-1c-39 omnilex-key=us-nj-statutes--title-17--17:1C-39}
7. No action for recovery of an amount paid under this act shall be maintained in any court unless objections have been filed with the commissioner. In an action for recovery of any payments, plaintiff may raise any relevant issue of law, but the commissioner's findings of fact shall be presumptive evidence of the facts therein stated.
##### **§ 17:1C-40** Action, proceeding. {#sec-17-1c-40 omnilex-key=us-nj-statutes--title-17--17:1C-40}
8. No action or proceeding shall be maintained in any court for the purpose of restraining or delaying the collection or payment of a statement of the assessment rendered in accordance with the provisions of this act. A regulated entity against which a statement of the assessment is rendered shall pay the amount thereof, and after the payment may, in the manner provided by this act at any time within two years from the date of the payment, bring an action at law against the State to recover the amount paid, with legal interest thereon from the date of payment, upon the ground that the assessment was excessive, erroneous, unlawful or invalid, in whole or in part.
##### **§ 17:1C-41** Exclusive procedure under act. {#sec-17-1c-41 omnilex-key=us-nj-statutes--title-17--17:1C-41}
9. The procedure provided in this act for determining the lawfulness of statements of the assessment and the recovery of payments made pursuant to those statements of the assessment shall be exclusive of all other remedies and procedures.
##### **§ 17:1C-42** Failure, refusal to pay, notice to Treasurer. {#sec-17-1c-42 omnilex-key=us-nj-statutes--title-17--17:1C-42}
10. If any regulated entity to which a statement of the assessment as provided in this act has been mailed fails or refuses to pay the amount within 30 days, or fails to file with the commissioner objections to the statement of the assessment as provided in this act, the commissioner shall transmit to the State Treasurer a certified copy of both the statement of the assessment and the notice of the neglect or refusal of the regulated entity to pay the amount thereof, and at the same time shall mail by registered mail to the entity a copy of the items transmitted to the State Treasurer.
##### **§ 17:1C-43** Procedure for collection. {#sec-17-1c-43 omnilex-key=us-nj-statutes--title-17--17:1C-43}
11. Within 10 days after receipt of the notice and certified copy of the statement of the assessment, the State Treasurer shall proceed to collect the amount stated to be due, with legal interest, by seizure and sale of any goods or chattels, including stocks, securities, bank accounts, surety bonds, realty, evidences of debt and accounts receivable belonging to the regulated entity anywhere within the State. The State Treasurer shall not seize any goods or chattels held by the regulated entity on behalf of another.
##### **§ 17:1C-44** Additional remedies. {#sec-17-1c-44 omnilex-key=us-nj-statutes--title-17--17:1C-44}
12. As an additional remedy, the State Treasurer may issue a certificate to the Clerk of the Superior Court, that a regulated entity is indebted under this act in an amount stated in the certificate. The clerk shall immediately enter upon his record of docketed judgments the name of the regulated entity, and of the State, the amount of debt so certified, and the date of the entry. The entry shall have the same force and effect as the entry of a docketed judgment in the office of the clerk, and the State Treasurer shall have all the remedies and may take all of the proceedings for the collection thereof which may be had or taken upon the recovery of a judgment in an action, but without prejudice to the regulated entity's right of appeal.
##### **§ 17:1C-45** Exemption from certain fees and charges; remittance. {#sec-17-1c-45 omnilex-key=us-nj-statutes--title-17--17:1C-45}
13. a. Notwithstanding any law or regulation to the contrary, a regulated entity paying the amounts assessed to it in statements of the assessment made pursuant to section 3 of this act shall be exempt from all fees or charges imposed by the division pursuant to any other provision of law or regulation, except for:
(1) charter fees;
(2) application fees for licenses;
(3) (Deleted by amendment, P.L.2009, c.53)
(4) fees for entry by a foreign depository institution whether from another state of the United States or from another country into New Jersey for branch, trust or other activities;
(5) (Deleted by amendment, P.L.2009, c.326)
(6) fees charged any entity not chartered, licensed or registered by this State, including but not limited to activities conducted by foreign banks pursuant to section 316 of P.L.1948, c.67 (C.17:9A-316) or foreign associations pursuant to section 214 of P.L.1963, c.144 (C.17:12B-214);
(7) fees charged qualified corporations authorized pursuant to section 213 of P.L.1948, c.67 (C.17:9A-213) to perform either registrar and transfer agent activities or activities permitted for qualified educational institutions; and
(8) fees charged any exempt company pursuant to subsection d. of section 4 of P.L.2009, c.53 (C.17:11C-54).
b. Nothing in this section shall exempt a regulated entity from paying any fine or penalty imposed by the commissioner for a violation of a statute or regulation.
c. Except as provided in paragraph (1) of subsection d. of section 7 of the "New Jersey Home Ownership Security Act of 2002," P.L.2003, c.64 (C.46:10B-28), and subsection i. of section 3 of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-43), all fees, charges, fines and penalties as described in subsections a. and b. of this subsection shall be remitted to the State Treasurer for deposit into the General Fund, and those fees, charges, fines and penalties shall not be part of the assessment funding mechanism or considered in the calculation pursuant to section 15 of this act.
##### **§ 17:1C-46** Rules, regulations; contents. {#sec-17-1c-46 omnilex-key=us-nj-statutes--title-17--17:1C-46}
14. a. The State Treasurer and the commissioner may adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.
b. Any regulation promulgated by the commissioner shall describe the factors to be considered in computing the assessment. In the case of depository institutions, the assessment shall consider the following factors as appropriate: assets, deposits or shares, trust funds under management and the supervisory rating of the institution. In the case of licensees or registrants, the assessment shall consider the following factors as appropriate: loan volume, volume of money transmitted, number of transactions, volume of checks cashed, number of licensee branches, number of license types held under the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.) or the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.), and the supervisory rating of the entity. In computing the assessment for depository institutions, licensees or registrants, the commissioner may consider those additional factors the commissioner deems appropriate.
c. The general purpose of the computations to determine the assessment shall be to distribute the financial burden proportionally among the depository institutions and other financial entities it charters, licenses and registers consistent with the division's regulatory activities.
d. The commissioner shall provide for the orderly and fair transition to assessments on existing charters, licensees and registrants by promulgating rules and regulations and by establishing administrative procedures that are reasonable, necessary and consistent with this act.
e. The commissioner shall consider the impact of the assessment on check cashers licensed pursuant to P.L.1993, c.383 (C.17:15A-30 et seq.), and may take any appropriate action pursuant to the commissioner's authority to limit fees as provided in section 14 of P.L.1993, c.383 (C.17:15A-43).
##### **§ 17:1C-47** Total amount assessable. {#sec-17-1c-47 omnilex-key=us-nj-statutes--title-17--17:1C-47}
15. a. The total amount assessable to regulated entities in any fiscal year for the assessment established by this act shall not exceed the lesser of:
(1) the total amount of expenses incurred by the State in connection with the administration of the special functions of the division pursuant to section 3 of this act during the preceding fiscal year as ascertained by the Director of the Division of Budget and Accounting in the Department of the Treasury, on or before August 15 in each year, and certified to the commissioner by category; or
(2) .0001084 times the sum of (a) the average total assets for State-chartered banks, savings banks, and savings and loan associations for the preceding five calendar years' data, excluding the two most recent calendar years plus (b) the average total loan volume for residential mortgage loans closed by licensed residential mortgage lenders or residential mortgage brokers pursuant to the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.) for the preceding five calendar years' data, excluding the two most recent calendar years.
b. In calculating the assessments:
(1) Banks, savings banks and savings and loan associations shall be given prorated credit for unused portions of assessment periods; and
(2) Licensees shall be given prorated credit for unused portions of licensing periods.
c. The department shall not issue an examination bill for an examination that has not been completed by the date that the regulated entity becomes subject to the assessment pursuant to the provisions of this act. For the purposes of this act, the completion of the examination shall not include the time to process and review the examination report.
##### **§ 17:1C-48** Liability for errors, penalties; third degree crime. {#sec-17-1c-48 omnilex-key=us-nj-statutes--title-17--17:1C-48}
16. a. A depository institution that submits figures on assets, deposits or any other factor used by the department to compute the depository institution's assessment that are substantially or materially in error shall be liable for an administrative penalty not to exceed $10,000 for each submission that contains incorrect information.
b. A licensee that submits figures on loan volume, number of branches, or any other factor used by the department to compute the licensee's assessment that are substantially or materially in error shall be liable for an administrative penalty not to exceed $10,000 for each submission that contains incorrect information.
c. In addition to any monetary penalty that may be imposed against a licensee pursuant to subsection b. of this section, the commissioner may take action to revoke, suspend or refuse to renew the license of a licensee that submits substantially or materially erroneous figures in violation of the provisions of this act. The suspension, revocation or refusal to renew a license shall be in addition to any monetary penalty imposed pursuant to subsection b. of this section.
d. The administrative penalty authorized pursuant to this section may be recovered in a summary proceeding in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A willful violation of this section shall be considered a crime of the third degree.
## **Chapter 1D** {#struct-chapter-1d}
##### **§ 17:1D-1** Office for e-HIT. {#sec-17-1d-1 omnilex-key=us-nj-statutes--title-17--17:1D-1}
8. a. There is established in the Department of Banking and Insurance the Office for the Development, Implementation, and Deployment of Electronic Health Information Technology in New Jersey, to be known as the Office for e-HIT.
b. The Office for e-HIT, in collaboration with the Health Information Technology Commission, shall develop, implement, and oversee the operation of a Statewide health information technology plan. The plan shall provide for, but not be limited to, a mechanism designed to support the establishment of a secure, integrated, interoperative, and Statewide electronic health information infrastructure for the sharing of electronic health information and electronic health records among health care facilities, health care professionals, public and private payers, and patients, which complies with all State and federal privacy requirements and links all components of the health care delivery system through secure and appropriate exchanges of health information for the purpose of enhancing health care quality, patient safety, communication of patient information, disease management capabilities, patient and provider satisfaction, clinical and administrative cost reductions, fraud and abuse prevention and detection, and public health emergency preparedness. The plan shall also provide for the designation of a custodian for all protected health information that meets federal and State privacy and security laws and is accredited by a national standard setting organization recognized by the department.
c. The Office for e-HIT shall submit the plan to the Health Information Technology Commission for the commission's review and approval.
d. In collaboration with the commission, the Office for e-HIT shall, no later than 18 months after its initial meeting and annually thereafter, submit a joint report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), concerning its activities and the status, and actions taken regarding development, implementation, and oversight, of the Statewide health information technology plan. The office shall include in that report any findings and recommendations that it desires to make, along with any legislative bills that it desires to recommend for adoption by the Legislature.
##### **§ 17:1D-2** Funding of commission budget. {#sec-17-1d-2 omnilex-key=us-nj-statutes--title-17--17:1D-2}
9. The Department of Banking and Insurance shall fund the approved budget of the commission established pursuant to section 6 of P.L.2007, c.330 (C.26:1A-137) from fines, sanctions, and civil penalties assessed by the department on entities regulated by the department pursuant to subtitle 3 of Title 17 of the Revised Statutes, Title 17B of the New Jersey Statutes, and P.L.1973, c.337 (C.26:2J-1 et seq.).
##### **§ 17:1D-3** Rules, regulations. {#sec-17-1d-3 omnilex-key=us-nj-statutes--title-17--17:1D-3}
10. The Office for e-HIT in the Department of Banking and Insurance, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations necessary to effectuate the purposes of this act.2
## **Chapter 2** {#struct-chapter-2}
##### **§ 17:2-1** Bonds secured by mortgage on leaseholds of camp meeting associations--limitations {#sec-17-2-1 omnilex-key=us-nj-statutes--title-17--17:2-1}
All savings and loan associations, building and loan associations, title and mortgage guaranty companies and insurance companies may invest funds in bonds, secured by first mortgage, on leasehold estates of real estate in this State of camp meeting associations, to the giving of which bond and mortgage the camp meeting association has consented, subject to the conditions of the lease. The real estate, except as to the leasehold, shall be free and clear of all liens and encumbrances of every kind whatsoever, and the leasehold at the time of the giving of the bond and mortgage shall have an unexpired term of not less than 25 years, or shall be renewable to the lessee, his heirs and assigns, for a term of not less than 25 years, and be a lease of the entire interest in the real estate except the reversion. No investment shall be made in excess of 66 2/3 % of the appraised value of the leasehold estate and the improvements thereon; provided, however, that such limitation shall not apply to any loan which is wholly or partially guaranteed or insured by the United States of America, the State of New Jersey or any instrumentality or agency of either, but in case any such loan is only partially guaranteed or insured, then the unguaranteed or uninsured portion of the loan shall not exceed (60%) of the appraised value of the leasehold estate and improvements thereon. The appraisement may be made by a committee of the savings and loan association, building and loan association, title and mortgage guaranty company, insurance company, and, in the case of an individual, by 2 persons appointed by the individual for that purpose. No such investment shall be made until the camp meeting association shall first have been approved for the purpose by the commissioner. For the purposes of this section real estate upon which there is a building in process of construction, which when completed, will constitute a permanent improvement, shall be construed as improved and productive real estate.
##### **§ 17:2-2** Bonds issued by commission appointed by supreme court {#sec-17-2-2 omnilex-key=us-nj-statutes--title-17--17:2-2}
Any insurance company, surety, trust and safe deposit company, incorporated under any law of this State, may invest moneys belonging to or deposited with it, in any bonds authorized by the laws of this State to be issued pursuant to any law of this State by any commission appointed by the Supreme Court as the court was constituted prior to September fifteenth, one thousand nine hundred and forty-eight.
##### **§ 17:2-4** Bonds of home owners' loan corporation {#sec-17-2-4 omnilex-key=us-nj-statutes--title-17--17:2-4}
Any savings bank, banking institution, trust company, insurance company or building and loan association, organized under the laws of this state and mutual savings banks organized under any special charter or special law of this state, may invest in, hold for investment, and accept in lieu of cash, in reduction or in payment of indebtedness due any of the aforesaid, or in part payment or in full payment of the purchase price on the sale or transfer of any asset of any of the aforesaid, bonds issued or hereafter issued by the home owners' loan corporation, created under an act of congress entitled "An act to provide emergency relief with respect to home mortgage indebtedness, to refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to amortize their debt elsewhere, to amend the federal home loan bank act, to increase the market for obligations of the United States and for other purposes," approved June thirteenth, one thousand nine hundred and thirty-three.
##### **§ 17:2-5** Loans and advances eligible for insurance by federal housing administrator {#sec-17-2-5 omnilex-key=us-nj-statutes--title-17--17:2-5}
Savings banks, banks, banking institutions, trust companies, personal finance companies, mortgage companies, installment lending companies, and other such financial institutions organized under any general or special law of this state which are approved by the federal housing administrator as eligible for credit insurance, are authorized to make loans and advances of credit and purchase obligations representing loans and advances of credit as are eligible for insurance by the federal housing administrator and to obtain such insurance.
##### **§ 17:2-6** General powers {#sec-17-2-6 omnilex-key=us-nj-statutes--title-17--17:2-6}
Savings banks, banks, banking institutions, trust companies, building and loan associations, savings and loan associations, mortgage companies and insurance companies organized under any general or special law of this State, all boards, commissions and departments of the State Government and of the various counties and municipalities thereof, and executors, administrators, trustees, guardians and other fiduciaries are authorized:
a. To make such real estate mortgage loans as may be guaranteed or insured in whole or in part by the United States of America or the State of New Jersey, or by any officer, agency or instrumentality of either of them, or for which a commitment to so guarantee or insure has been made, and to invest in, purchase or otherwise acquire, own or hold, mortgage notes or bonds so guaranteed or insured;
b. To cause such mortgage securities to be and be kept so guaranteed or insured and to pay for and receive the benefits of such guarantees or insurance;
c. To invest in, purchase or otherwise acquire, own and hold notes, bonds, debentures, capital stock or other such obligations of any national mortgage association; provided, the issuance of such notes, bonds, debentures, capital stock or other such obligations has been approved by the Federal Housing Administrator. Nothing in sections 17:2-5 to 17:2-8 of this Title contained shall be construed to empower any fiduciary to make any investment or commitment in capital stock pursuant to paragraph "c" of this section;
d. To make loans for the purpose of financing the purchase of or refinancing an existing ownership interest in certificates of stock or other evidence of an ownership interest in, and a proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of real estate in this State.
Such institutions may, subject to such regulations as the commissioner finds necessary and proper, invest to an amount not exceeding 85% per annum of the purchase price or, in the case of a refinancing, the appraised value of certificates of stock or other evidence of an ownership interest in and a proprietary lease from, a corporation or partnership formed for the purpose of the cooperative ownership of real estate within the State, for the purpose of financing a purchase of or refinancing an existing ownership interest in such a corporation or partnership, provided (1) such investment is secured within 90 days from the making of the loan by an assignment or transfer of the stock or other evidence of an ownership interest of the borrower and a proprietary lease; and (2) repayment of principal and interest shall be effected within 30 years. Notwithstanding any other provision of law, the maximum rate of interest which may be charged, taken or received upon any loan or forbearance made pursuant to this subsection may exceed by no more than 1 1/2 % per annum the rate of interest prescribed by the commissioner which is applicable to mortgage loans on one-to-six family dwellings a portion of which may be used for commercial purposes, pursuant to the provisions of R.S. 31:1-1 et seq.
##### **§ 17:2-6.1** Insured mortgages and bonds and obligations of national mortgage associations {#sec-17-2-6.1 omnilex-key=us-nj-statutes--title-17--17:2-6.1}
Wherever, by statute of this State, collateral is required as security for the deposit of public or other funds; or deposits are required to be made with any public official or department; or an investment of capital or surplus, or a reserve or other fund, is required to be maintained consisting of designated securities, mortgage loans and bonds insured by the Federal Housing Administrator and obligations of national mortgage associations shall be eligible for such purposes.
##### **§ 17:2-7** Laws governing interest rates inapplicable {#sec-17-2-7 omnilex-key=us-nj-statutes--title-17--17:2-7}
No law of this state prescribing or limiting interest rates upon loans, discounts or advances of credit or upon obligations representing loans and advances of credit, shall be deemed to apply to loans, discounts, advances of credit or obligations representing loans and advances of credit made or purchased or discounted pursuant to section 17:2-5 of this title.
##### **§ 17:2-8** Other laws governing loans inapplicable; exceptions {#sec-17-2-8 omnilex-key=us-nj-statutes--title-17--17:2-8}
No law of this state prescribing the nature, amount or form of security or requiring security upon which loans or investments may be made or prescribing or limiting the period for which loans or investments may be made or prescribing or limiting interest rates upon loans or investments shall be deemed to apply to loans, investments, purchases, or other acquisitions made pursuant to section 17:2-6 of this title, but nothing in said section 17:2-6 contained shall be deemed to authorize any such savings bank not otherwise authorized by law to make any mortgage loan upon real property not situated in this state, nor shall anything contained in sections 17:2-5 to 17:2-8 of this title increase the aggregate amount which any corporation specified in section 17:2-6 of this title is authorized to invest or have invested in mortgages upon real property.
##### **§ 17:2-9** Bonds, debentures or other obligations of Federal Home Loan Bank {#sec-17-2-9 omnilex-key=us-nj-statutes--title-17--17:2-9}
Any savings bank, bank, trust company or insurance company, organized under the laws of this State, may invest in the bonds, debentures or other obligations issued by or in behalf of any Federal Home Loan Bank or in behalf of all the Federal Home Loan Banks created pursuant to an Act of Congress entitled "An Act to create Federal Home Loan Banks, to provide for the supervision thereof and for other purposes," approved July twenty-second, one thousand nine hundred and thirty-two, and the amendments thereof and supplements thereto, which act is known as the "Federal Home Loan Bank Act," including the consolidated Federal Home Loan Bank debentures under said act authorized to be issued by the Federal Home Loan Bank Board as the joint and several obligations of all Federal Home Loan Banks organized and existing under the said Federal Home Loan Bank Act.
##### **§ 17:2-9.2** Veterans, loans to {#sec-17-2-9.2 omnilex-key=us-nj-statutes--title-17--17:2-9.2}
Any savings bank, banking institution or trust company organized under the laws of this State, notwithstanding any law of this State prescribing the nature, amount or form of security or requiring security for its loans or investments, may legally invest its funds in bonds or notes evidencing loans to veterans if the full amount of any such loan is guaranteed by the Administrator of Veterans' Affairs, pursuant to the servicemen's readjustment act of one thousand nine hundred and forty-four, approved June twenty-second, one thousand nine hundred and forty-four; and in the case of loans guaranteed for less than the full amount thereof by the Administrator of Veterans' Affairs, the maximum amount which may be loaned or invested by it pursuant to the provisions of any law of this State shall be increased by the amount so guaranteed.
##### **§ 17:2-9.3** Legal investments in international banks {#sec-17-2-9.3 omnilex-key=us-nj-statutes--title-17--17:2-9.3}
1. The following may, in addition to other investments allowed by law, properly and legally invest any funds, including capital, belonging to them or within their control in obligations issued or guaranteed by the International Bank for Reconstruction and Development, or the International Finance Corporation, or by the Inter-American Development Bank or the Asian Development Bank or the African Development Bank; that is to say:
(a) Insurance companies, insurance associations, and all other persons carrying on an insurance business.
(b) Executors, administrators, guardians, committees, conservators, liquidators, rehabilitators, receivers, trustees, and all other persons occupying similar fiduciary positions.
(c) Banks, trust companies, bankers and savings banks.
(d) Savings and loan, and building and loan associations, investment companies, and other financial institutions.
(e) Credit unions, cemetery associations, mutual benevolent and benefit associations.
(f) Firemen's, police, and teachers' association pension and relief funds.
(g) Other pension, retirement, compensation, and sinking fund systems.
(h) The State and its counties, and municipalities and their subdivisions and agencies.
(i) All public officers, officials, boards, commissions, bodies and agencies of the State and its counties, and municipalities and their subdivisions and agencies.
(j) Any other individual, firm, group, corporation, association, institution, and fund of any nature whatsoever.
##### **§ 17:2-9.4** Trust fund, application to {#sec-17-2-9.4 omnilex-key=us-nj-statutes--title-17--17:2-9.4}
The provisions of this act shall not apply to any trust fund where the deed of trust, or will, or any court having jurisdiction of the same, specially directs that said trust fund shall be invested in other securities.
##### **§ 17:2-10** Development and other bonds of foreign governments or obligations of international development banks {#sec-17-2-10 omnilex-key=us-nj-statutes--title-17--17:2-10}
In addition to investments in obligations of foreign governments permitted by Title 17 of the Revised Statutes or by regulation of the Commissioner of Banking, any savings bank, savings and loan association or credit union organized under the laws of this State may invest in such development bonds issued by foreign governments or in such obligations of international development banks as are approved by the Comptroller of the Currency for investment by national banks; provided, however, that the principal and interest payable thereon shall be payable in United States dollars; and provided further that such investments are approved by the Commissioner of Banking. In addition, the commissioner may by regulation approve investment in other bond issues of foreign governments in which the principal and interest payable thereon are payable in United States dollars. Such investments may not exceed, in the case of development bonds in the aggregate 5% of the institution's capital deposits, surplus, and reserves, and in the case of other foreign bonds, 10% of an institution's capital deposits, surplus, and reserves.
## **Chapter 2A** {#struct-chapter-2a}
##### **§ 17:2A-1** Definitions {#sec-17-2a-1 omnilex-key=us-nj-statutes--title-17--17:2A-1}
For the purposes of this act:
(a) "Mortgage loan" means:
(1) A loan made by a financial institution, secured by a mortgage constituting a lien upon real property or upon a lease of the fee of real property; and,
(2) An existing mortgage or part interest thereof purchased by a financial institution and constituting a lien upon real property or upon a lease of the fee of real property.
(b) "Financial institution" means any bank, savings bank, savings and loan association, building and loan association or insurance company organized or doing business under the laws of this State and supervised by the Commissioner of Banking and Insurance.
(c) "Disaster area" means any area of this State which has been proclaimed by the President of the United States or the Governor of this State or any official lawfully succeeding to their respective duties to be a disaster area within the meaning of applicable Federal or State law.
(d) "Period of emergency" means a period terminating one year from the date an area was proclaimed to be a disaster area, unless extended as provided in section 5 of this act.
##### **§ 17:2A-2** Emergency rules and regulations; adopted by commissioner {#sec-17-2a-2 omnilex-key=us-nj-statutes--title-17--17:2A-2}
The Commissioner of Banking and Insurance may adopt rules and regulations affecting financial institutions which hold, make or purchase mortgage loans within a disaster area during a period of emergency.
Such rules and regulations may, to the extent deemed necessary by the commissioner, authorize financial institutions to refinance, compromise, adjust or otherwise relax provisions of mortgage loans held by them on property within a disaster area, or to make or purchase mortgage loans on such property notwithstanding any law of this State concerning ratio of mortgage loans to appraised value, rank of lien, minimum amortization, maximum maturity date, prior appraisals, or other limitations which the commissioner determines should be waived, modified or relaxed during a period of emergency.
##### **§ 17:2A-3** Basis for rules; rates and interest charges; property not affected by disaster {#sec-17-2a-3 omnilex-key=us-nj-statutes--title-17--17:2A-3}
In the adoption, implementation and administration of such emergency rules and regulations, the commissioner shall consider the interest of disaster victims, the welfare of the public generally and the safety of the financial institutions involved. The commissioner shall have no power to relax, waive or modify any statutory limitation upon permissible rates or lawful interest charges. He shall incorporate in such regulations precautions necessary to prevent the use of any broadened mortgage powers permitted by rule or regulation in connection with real property not destroyed, damaged or materially affected by the disaster.
##### **§ 17:2A-4** Exercise of emergency powers; declaration by commissioner; operative period of rules and regulations {#sec-17-2a-4 omnilex-key=us-nj-statutes--title-17--17:2A-4}
Whenever a disaster area is so proclaimed, the Commissioner of Banking and Insurance shall review promptly conditions in the area in order to determine the extent of destruction and damage to real property. If he shall determine, within the standards set forth in section 3 of this act, that exercise of the emergency powers herein delegated is warranted, he may declare operative for such disaster area all or any portion of the rules and regulations adopted pursuant to section 2 of this act. The declaration shall be publicly announced and circulated in newspapers and financial publications throughout the State. Unless the operative period is sooner terminated by the commissioner, such rules and regulations shall be applicable for mortgage loan transactions entered into with respect to property in the disaster area during the period of emergency.
##### **§ 17:2A-5** Extension of termination date {#sec-17-2a-5 omnilex-key=us-nj-statutes--title-17--17:2A-5}
The commissioner may, upon publication and filing of his finding that emergency conditions concerning mortgage loans still prevail in a disaster area, extend for not more than 6 months the termination date of any period of emergency as hereinabove defined.
## **Chapter 3** {#struct-chapter-3}
##### **§ 17:3-1** Extension of time of payment {#sec-17-3-1 omnilex-key=us-nj-statutes--title-17--17:3-1}
When there comes into the custody and control of a receiver appointed by a court of competent jurisdiction, or under authority of a statute of this State, or into the custody and control of an official of this State acting under authority of the order, decree or judgment of a court or by virtue of an existing statute, mortgages or mortgage securities constituting a part of the assets or liabilities of a corporation organized under the laws of this State and subject to the supervision and control of the department, or any superseding department or departments of the State Government; and the receiver or official is charged with the duty of collecting the mortgages or mortgage securities; and it is deemed by the receiver or official to be for the best interest of the creditors and stockholders of the corporation to extend the time for the payment of the mortgage or mortgage security, the receiver or official may extend the time for the payment of the mortgage or mortgage security upon such terms and for such period of time as will be a reasonable exercise of his discretion, or for such period of time as may be approved by a court of competent jurisdiction by a general order or by the commissioner where the corporation is not under control of a court.
This section shall be deemed to be remedial in its purpose and to have been enacted to enable a liquidating officer to use such discretion as will enable him to dispose of mortgages and mortgage securities to better advantage than they can be disposed of under existing conditions.
The words "receiver" and "official" as used in this section includes any person or group of persons, who under appointment, order, decree or judgment of a court of competent jurisdiction, or by virtue of a statute of this State, is or shall be authorized and empowered to take custody and control of the assets of a corporation organized as defined in this section, and to dispose of the same by sale or otherwise for the benefit of the creditors and stockholders of the corporation. The term "corporation" as used in this section shall not include a bank or savings bank as defined in section one of the Banking Act of 1948 (P.L.1948, c. 67, as amended by P.L.1949, c. 44, s. 1).
##### **§ 17:3-2** Home owners' loan corporation bonds; acceptance by receiver in payment of mortgages {#sec-17-3-2 omnilex-key=us-nj-statutes--title-17--17:3-2}
When there shall come into the custody and control of a receiver or liquidator appointed by a court of competent jurisdiction or under authority of any statute of this State, or into the custody and control of any official of this State acting under authority of the order, decree or judgment of a court or by virtue of any existing statute, mortgages or mortgage securities constituting a part of the assets of any corporation organized under the laws of this State and subject to the supervision and control of the Department of Banking and Insurance or any superseding department or departments of this State, and such receiver, liquidator or official is charged with the duty of collecting such mortgages or mortgage securities, and if it shall be deemed by such receiver, liquidator or official to be to the best interest of the creditors and stockholders of any such corporation to accept bonds issued by the Home Owners' Loan Corporation authorized pursuant to an Act of Congress, approved June thirteenth, one thousand nine hundred and thirty-three, entitled "An act to provide emergency relief with respect to home mortgage indebtedness, to refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to amortize their debt elsewhere, to amend the federal home loan bank act, to increase the market for obligations of the United States and for other purposes," in payment of such mortgages or mortgage securities, the receiver, liquidator or official may accept the bonds issued by the Home Owners' Loan Corporation in payment of the mortgage, mortgages or mortgage securities.
##### **§ 17:3-3** Definitions and construction {#sec-17-3-3 omnilex-key=us-nj-statutes--title-17--17:3-3}
The words "receiver," "liquidator" and "official," as used in this section and section 17:3-2 of this Title, include any person or group of persons, who under appointment, order, decree or judgment of a court of competent jurisdiction, or by virtue of any statute of this State, shall be authorized and empowered to take custody and control of the assets of any corporation organized under the laws of this State and subject to the supervision and control of the department of banking and insurance, and to dispose of the same by sale or otherwise for the benefit of creditors and stockholders of any such corporation. The term "corporation" as used in this section and section 17:3-2 of this Title shall not include a bank or savings bank as defined in section one of the Banking Act of 1948 (P.L.1948, c. 67, as amended by P.L.1949, c. 44, s. 1).
Section 17:3-2 of this Title shall be deemed to be remedial in its purpose and to be enacted to enable a liquidating officer to use such discretion as will enable him to dispose of mortgages and mortgage securities to better advantage than they can be disposed of under existing conditions.
## **Chapter 3A** {#struct-chapter-3a}
##### **§ 17:3A-1** Definitions {#sec-17-3a-1 omnilex-key=us-nj-statutes--title-17--17:3A-1}
As used in this act:
(a) "Corporation" shall mean a corporation organized pursuant to any law of this State, over which the Commissioner of Banking and Insurance or the Department of Banking and Insurance is required or authorized by law to exercise supervisory or regulatory powers;
(b) "Liquidator" means (1) the trustee or trustees in voluntary dissolution of a corporation; (2) the Commissioner of Banking and Insurance in the exercise of his statutory power to take possession of and to liquidate a corporation; (3) the receiver or receivers, or the trustee or trustees appointed by a court of competent jurisdiction to liquidate a corporation; and (4) every person or persons engaged in the liquidation of a corporation in dissolution pursuant to any statute of this State, or by virtue of any lawful order, decree, judgment or proclamation of any administrative, executive or judicial officer of this State.
##### **§ 17:3A-2** Application during liquidation for order to destroy records, etc.; notice of application; publication; order for destruction {#sec-17-3a-2 omnilex-key=us-nj-statutes--title-17--17:3A-2}
At any time during the liquidation of a corporation, the liquidator may apply to the Superior Court for an order authorizing the destruction of such of the records, documents and other papers of the corporation, excluding those relating to the liquidation, which, in the opinion of the liquidator, it is unnecessary further to preserve or retain. The court may, in its discretion, order that notice of the application be advertised not less than once a week for three successive weeks, in a newspaper published in the municipality in which the corporation maintained its principal office, or, if there be no such newspaper, then in one published in the county in which such principal office was maintained, or in an adjoining county, and which has a general circulation in such municipality. If the court is satisfied that no rights will be adversely affected by the destruction of such records, documents and other papers, and that their further preservation or retention is unnecessary, it may make an order authorizing the liquidator to destroy them.
##### **§ 17:3A-3a** Application after liquidation for order to destroy records, etc.; notice of application; publication; order for destruction {#sec-17-3a-3a omnilex-key=us-nj-statutes--title-17--17:3A-3a}
At any time after liquidation of the corporation has been completed and final distribution made, the liquidator may apply to the Superior Court for an order authorizing the destruction of all records, documents and other papers relating to the liquidation, and of all records, documents and other papers of the corporation not previously destroyed pursuant to section two. The court may, in its discretion, order that notice of the application be advertised in the manner provided by section two. If the court is satisfied that the liquidation has been completed and final distribution made, it may make an order authorizing the liquidator to destroy such records, documents and other papers on or after a date to be designated in such order, but in no case shall such destruction take place until after the expiration of one year from the completion of such liquidation and the making of the final distribution.
##### **§ 17:3A-3b** Destruction of records after five years from liquidation date without leave of court; notice {#sec-17-3a-3b omnilex-key=us-nj-statutes--title-17--17:3A-3b}
At any time after the expiration of five years from the date on which the liquidation of a corporation shall have been completed and final distribution made, the liquidator may, in his discretion, and without leave of court, destroy, or cause to be destroyed, any of the records, documents and other papers of the corporation, including those relating to the liquidation, which, in his opinion, it is unnecessary further to preserve or retain; provided, however, that the liquidator shall first give notice of his intention so to do by advertising such notice in the manner provided in section two.
##### **§ 17:3A-4** Liquidator not accountable for authorized destruction {#sec-17-3a-4 omnilex-key=us-nj-statutes--title-17--17:3A-4}
No liquidator shall be held accountable for any act of destruction authorized in the manner provided by this act.
##### **§ 17:3A-5** Corporations affected by act {#sec-17-3a-5 omnilex-key=us-nj-statutes--title-17--17:3A-5}
The provisions of this act shall apply to all corporations heretofore liquidated; to all corporations in process of liquidation on the effective date of this act; and to all corporations to be liquidated after the effective date of this act.
##### **§ 17:3A-6** Presumption as to prior law {#sec-17-3a-6 omnilex-key=us-nj-statutes--title-17--17:3A-6}
No presumption shall be drawn from the enactment of this act that, prior to its passage, liquidators were without power or authority to destroy the records, documents and other papers of a corporation or those relating to its liquidation.
##### **§ 17:3A-7** Effective date {#sec-17-3a-7 omnilex-key=us-nj-statutes--title-17--17:3A-7}
This act shall take effect September sixteenth, one thousand nine hundred and forty-eight.
## **Chapter 3B** {#struct-chapter-3b}
##### **§ 17:3B-1** Truth in lending; inconsistent state provisions {#sec-17-3b-1 omnilex-key=us-nj-statutes--title-17--17:3B-1}
To the extent that the provisions of any of the following cited New Jersey laws are inconsistent with respect to disclosure, advertising, terminology, type size, method of computation of finance charges, form, content, or time of delivery provisions and requirements of Title I, the Truth in Lending Act, of the Consumer Credit Protection Act (Public Law 90-321, 82 Stat. 146) and regulations issued pursuant thereto, compliance with said Federal law and regulations shall be deemed and construed to be compliance with the specifically related provisions of the following New Jersey laws:
The Banking Act of 1948, P.L.1948, chapter 67 (C. 17:9A-1 et seq.)
Advance Loan Law of 1968, P.L.1959, chapter 91 (C. 17:9A-59.1 to 17:9A-59.17)
Small Business Loan Act, P.L.1964, chapter 162 (C. 17:9A-59.25 to 17:9A-59.39)
Credit Life Insurance, P.L.1963, chapter 103 (C. 17:9A-70.1 to 17:9A-70.2)
Credit Life and Accident and Health Insurance, P.L.1958, chapter 169 (C. 17:38A-1 to 17:38A-15)
Small Loan Law (R.S. 17:10-1 et seq.)
The Secondary Mortgage Act of 1965, P.L.1965, chapter 91 (C. 17:11A-1 et seq.)
Savings and Loan Act (1963) P.L.1963, chapter 144 (C. 17:12B-1 et seq.)
Credit Union Law, P.L.1938, chapter 293 (C. 17:13-26 to 17:13-74)
Installment Loan Rate Advertising Act, P.L.1965, chapter 169 (C. 17:13A-1 et seq.)
Retail Installment Sales Act of 1960, P.L.1960, chapter 40 (C. 17:16C-1 to 17:16C-61)
Door-to-Door Installment Sales Act of 1968, P.L.1968, chapter 223 (C. 17:16C-61.1 to 17:16C-61.9)
Home Repair Financing Act, P.L.1960, chapter 41 (C. 17:16C-62 to 17:16C-94)
Door-to-Door Home Repair Sales Act of 1968, P.L.1968, chapter 224 (C. 17:16C-95 to 17:16C-103)
Insurance Premium Finance Company Act, P.L.1968, chapter 221 (C. 17:16D-1 et seq.)
Pawnbrokers (R.S. 45:22-1 et seq.)
##### **§ 17:3B-2** Violation of truth in lending act and state law; civil actions {#sec-17-3b-2 omnilex-key=us-nj-statutes--title-17--17:3B-2}
When under any law of this State, a civil action is expressly provided for any act or failure to act which constitutes a violation of any provision of such law, and such act or failure to act also constitutes a violation of the Truth in Lending Act, Title I of the Consumer Credit Protection Act (Public Law 90-321, 82 Stat. 146) for which a civil action may be brought under the provisions of the Truth in Lending Act, the provisions of the Truth in Lending Act shall supersede the provisions of State law when the penalty for violation of the Truth in Lending Act is more severe than the penalty for violation of the State law, to the end that only one recovery may be had for such act or failure to act.
##### **§ 17:3B-3** Rules and regulations {#sec-17-3b-3 omnilex-key=us-nj-statutes--title-17--17:3B-3}
The Commissioner of Banking and Insurance may promulgate appropriate rules and regulations to effectuate the purposes of this act.
##### **§ 17:3B-4** Short title {#sec-17-3b-4 omnilex-key=us-nj-statutes--title-17--17:3B-4}
This act shall be known and may be cited as the "Market Rate Consumer Loan Act."
##### **§ 17:3B-5** Definitions {#sec-17-3b-5 omnilex-key=us-nj-statutes--title-17--17:3B-5}
Definitions. As used in this act:
a. "Borrower" means a natural person or persons obtaining credit for personal, family or household purposes.
b. "Closed end credit" means the extension of credit by a lender to a borrower pursuant to a note or loan agreement which contains a term of payment and which is not a revolving credit plan.
c. "Credit device" means any card, check, identification code, or other means of identification contemplated by the agreement governing a revolving credit plan.
d. "Lender" means a banking institution as defined in section 1 of P.L. 1948, c. 67 (C. 17:9A-1), a federally chartered savings bank, and an association as defined in section 5 of P.L. 1963, c. 144 (C. 17:12B-5).
e. "Loan" means an advance or extension of credit to a borrower.
f. "Note" or "loan agreement" means a promissory note, bond or other written evidence of the extension by the lender of credit to a borrower.
g. "Outstanding unpaid indebtedness" means, on any day, the amount not in excess of the total amount of purchases and loans charged to the borrower's account under the plan, which is outstanding and unpaid at the end of such day, after adding the aggregate amount of any new purchases and loans charged to the account as of that day and deducting the aggregate amount of any payments and credits applied to that indebtedness as of that day.
h. "Purchases" means an agreement to make payment for property of whatever nature, real or personal, tangible or intangible, and an agreement to make payment for services, licenses, taxes, official fees, fines, private or governmental obligations, or any other thing of value.
i. "Revolving credit plan" or "plan" means a plan contemplating the extension of credit under an account governed by an agreement between a lender and a borrower pursuant to which:
(1) The lender permits the borrower and, if the agreement governing the plan so provides, persons acting on behalf of or with authorization from the borrower, from time to time to make purchases or to obtain loans by use of a credit device;
(2) The amounts of the purchases and loans are charged to the borrower's account under the revolving credit plan;
(3) The borrower is required to pay the lender the amounts of all purchases and loans charged to the borrower's account under the plan but has the privilege of paying those amounts outstanding from time to time in full or in installments; and
(4) Interest may be charged and collected by the lender from time to time on the outstanding unpaid indebtedness under that plan, except that interest shall be calculated on a simple interest basis.
j. "Periodic percentage rate" means a rate of interest on a revolving credit plan or under a closedend credit agreement for a daily, weekly, monthly, annual or other period.
##### **§ 17:3B-6** Extension of credit under revolving credit plan {#sec-17-3b-6 omnilex-key=us-nj-statutes--title-17--17:3B-6}
Extension of credit under revolving credit plan. Any lender offering and extending credit under a revolving credit plan to a borrower may charge and collect interest and charges and may take security as collateral in connection therewith as hereinafter provided. Credit may be extended under a revolving credit plan by a lender's acquisition of obligations arising out of the honoring by a merchant, a lender, whether chartered or organized under the laws of this or any other state, the District of Columbia, the United States or any district, territory or possession of the United States, or any foreign country, or a government or governmental subdivision or agency of a credit device made available to a borrower under a plan, whether directly or indirectly by means of telephone, point of sale terminal, automated teller machine or other electronic or similar device or through the mails.
##### **§ 17:3B-7** Interest {#sec-17-3b-7 omnilex-key=us-nj-statutes--title-17--17:3B-7}
Interest. Notwithstanding the provisions of R.S. 31:1-1, a lender may, subject to the criminal usury provisions of N.J.S. 2C:21-19, charge and collect interest under a revolving credit plan on outstanding unpaid indebtedness in the borrower's account under the plan at daily, weekly, monthly, annual or other periodic percentage rates as the agreement governing the plan provides or as established in the manner provided in the agreement governing the plan. If the applicable periodic percentage rate under the agreement governing the plan is other than daily, interest may be calculated on an amount not in excess of the average of outstanding unpaid indebtedness for the applicable billing period, determined by dividing the total of the amounts of outstanding unpaid indebtedness for each day in the applicable billing period by the number of days in the billing period. If the applicable periodic percentage rate under the agreement governing the plan is monthly, a billing period shall be deemed to be a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four days therefrom.
Nothing in this section shall be construed to authorize the charging of interest on the amount of any accrued interest remaining unpaid on the account.
##### **§ 17:3B-8** Periodic percentage rates {#sec-17-3b-8 omnilex-key=us-nj-statutes--title-17--17:3B-8}
5. Periodic percentage rates. If the agreement governing the revolving credit plan provides that the periodic percentage rates of interest under the plan may increase or decrease, the increase or decrease shall take place only in correspondence with the movement of the market interest rate index specified in the revolving credit plan agreement, which index shall be readily verifiable by the borrower and beyond the control of the lender. Periodic percentage rate increases, based on a rise in the interest rate index, may be made at the option of the lender. Periodic percentage rate decreases shall be made whenever there is a decrease in the interest rate index which results in an interest rate which is less than the interest rate then applicable to the note or loan, except that the revolving credit plan agreement may stipulate a percentage decrease in the interest rate index below which a corresponding decrease in the periodic percentage rate need not be made by the lender, provided that the index decrement shall be the same as the index increment used for interest rate increases. Interest rate increases may, and interest rate decreases shall, apply to all outstanding unpaid indebtedness under the plan on or after the effective date of the rate variation, as provided in the plan agreement.
##### **§ 17:3B-9** Purchases and loans--differing terms {#sec-17-3b-9 omnilex-key=us-nj-statutes--title-17--17:3B-9}
Purchases and loans--differing terms. A lender may, if the agreement governing a revolving credit plan so provides, impose different terms, including, without limitation, the terms governing the periodic percentage rate or rates used to calculate interest, the method of computing the outstanding unpaid indebtedness to which the rates are applied, and the terms of the installment repayment schedule, with respect to indebtedness arising out of purchases or loans made under the plan.
##### **§ 17:3B-10** Overdraft accounts {#sec-17-3b-10 omnilex-key=us-nj-statutes--title-17--17:3B-10}
Overdraft accounts. If credit under a revolving credit plan is offered and extended in connection with a demand deposit account or other account maintained by the borrower with the lender pursuant to an agreement or arrangement whereby the lender agrees to honor checks, drafts or other debits to the account, which if paid would create or increase a negative balance in the account, by making extensions of credit to the borrower under the revolving credit plan, any charges customarily imposed by the lender, under the terms governing the demand deposit or other transaction account in the absence of any associated revolving credit plan, may continue to be imposed on the account without specific reference thereto or incorporation thereof by reference in the agreement governing the revolving credit plan, and the amount of the charge, to the extent the balance in the demand deposit or other transaction account is insufficient to pay the charge, may be charged to the borrower's account under the plan as a loan thereunder and may be included in outstanding unpaid indebtedness in accordance with the terms of the agreement governing the revolving credit plan.
L. 1985, c. 81, s. 7, eff. March 14, 1985.
##### **§ 17:3B-11** Omitted installments {#sec-17-3b-11 omnilex-key=us-nj-statutes--title-17--17:3B-11}
Omitted installments. A lender may at any time extend to a borrower under a revolving credit plan the option of omitting monthly installments.
##### **§ 17:3B-12** Loans under a revolving credit plan {#sec-17-3b-12 omnilex-key=us-nj-statutes--title-17--17:3B-12}
9. Loans under a revolving credit plan. If the agreement governing the revolving credit plan so provides, a lender may:
a. Take personal or real property, or both, as security on a loan made under a revolving credit plan;
b. Require that any property securing the loan be insured for the benefit of the lender against loss or damage of the security, and retain out of the proceeds of the loan the premium for the insurance;
c. Require that all taxes, assessments and other governmental charges against property securing the loan be paid when due and that the security be maintained free of all executions, levies, encumbrances, and other charges which may adversely affect the value of the lender's interest in the security;
d. Charge and collect fees and charges, in addition to interest and fees and charges specifically permitted by P.L.1985, c.81 (C.17:3B-4 et seq.), in amounts as provided in the agreement or as established in the manner the agreement provides, such as, but not limited to, minimum charges, annual fees, check charges, maintenance charges, and late charges, except as may be specifically limited by P.L.1985, c.81 (C.17:3B-4 et seq.);
e. On a secured loan, charge and collect the actual costs of filing or recording the instrument of security, or notice or abstract thereof, if the filing or recording is authorized by law.
##### **§ 17:3B-13** Revolving credit plan prohibitions {#sec-17-3b-13 omnilex-key=us-nj-statutes--title-17--17:3B-13}
10. Revolving credit plan prohibitions. No revolving credit plan agreement shall contain:
a. An acceleration clause under which any part or all of the balance, not yet matured, may be declared immediately due and payable because the lender deems himself to be insecure, which provision shall be void and unenforceable;
b. A provision whereby the borrower waives any right of action or defense against the lender or other person acting on his behalf for any illegal act committed in the collection of the payments under the revolving credit plan, which provision shall be void and unenforceable; and
c. A power of attorney to confess judgment or any other power of attorney, which provision shall be void and unenforceable.
d. (Deleted by amendment, P.L.1997, c.12.)
##### **§ 17:3B-14** Collection costs {#sec-17-3b-14 omnilex-key=us-nj-statutes--title-17--17:3B-14}
Collection costs. Upon the filing of an action for the collection of an amount in default under the terms of the revolving credit plan, the lender, in addition to the recovery of all court costs, reasonable attorney's fees and expenses of repossessing and storing goods where so authorized by law, may charge and collect from the borrower other reasonable collection costs incurred, not to exceed 20% of the first $500.00 of the amount in default, 10% of the amount over $500.00 up to $2,000.00, and 5% of any amount in excess of $2,000.00.
##### **§ 17:3B-15** Changes in terms {#sec-17-3b-15 omnilex-key=us-nj-statutes--title-17--17:3B-15}
12. Changes in terms. a. A lender may, if the agreement governing a revolving credit plan so provides, at any time amend the terms of the agreement with respect to the periodic percentage rates used to calculate interest, the method of computing the outstanding unpaid indebtedness to which those rates are applied, and the terms of the installment repayment schedule, subject to the limitations of subsection b. of this section.
b. The lender shall notify each affected borrower of any amendment pursuant to subsection a. by mailing or delivering to the borrower, at least 30 days before the effective date of the amendment, a clear and conspicuous written notice which shall describe the amendment and the existing terms of the agreement affected by the amendment and shall also set forth the effective date of the amendment and the pertinent information contemplated by the following provisions of this section. If the amendment has the effect of increasing the interest or other charges to be paid by the borrower by changing the method of calculating interest or the index used to calculate the interest, the amendment shall become effective only if the borrower uses the plan after a date specified in the notice which is at least 30 days after the giving of the notice, but which need not be the date the amendment becomes effective, by making a purchase or obtaining a loan, or if the borrower indicates to the lender in writing the borrower's express agreement to the amendment, and the amendment may become effective as to a particular borrower as of the first day of the billing period during which the borrower so used the borrower's account or so indicated agreement to the amendment. Any borrower who fails to use the borrower's account or so to indicate agreement to an amendment shall be permitted to pay the outstanding unpaid indebtedness in the borrower's account under the plan in accordance with the terms of the agreement governing the plan without giving effect to the amendment.
For purposes of this section a variation in periodic percentage rates of interest in accordance with the terms of the index established in the revolving credit plan agreement shall not be considered to be an amendment.
##### **§ 17:3B-16** Extension of closed end credit {#sec-17-3b-16 omnilex-key=us-nj-statutes--title-17--17:3B-16}
Extension of closed end credit. A lender may, subject to the provisions of this act, offer and extend closed end credit in amounts, at rates of interest, and for a term of payment, and may take security, including personal property or real property, as collateral for the loan made in connection therewith, as may be agreed to by the lender and borrower, and as set forth in the note or loan agreement.
##### **§ 17:3B-17** Interest {#sec-17-3b-17 omnilex-key=us-nj-statutes--title-17--17:3B-17}
Interest. Notwithstanding the provisions of R.S. 31:1-1, a lender extending closed end credit may, subject to the criminal usury provisions of N.J.S. 2C:21-19, charge and collect interest with respect to a note or loan at daily, weekly, monthly, annual or other periodic percentage rates established in accordance with the terms of the loan agreement, except that the interest shall be calculated on a simple interest basis. In no instance shall the precomputed interest method be used. Nothing in this section shall be construed to authorize the charging of interest on any accrued interest remaining unpaid on the account.
For purposes of this section, a year may be, but need not be, a calendar year and shall be a period of 365 days. "Precomputed interest" means an amount equal to the whole amount of interest payable on a loan for the period from the making of the loan to the date scheduled by the terms of the loan for the repayment of the loan in full.
##### **§ 17:3B-18** Periodic percentage rates {#sec-17-3b-18 omnilex-key=us-nj-statutes--title-17--17:3B-18}
15. Periodic percentage rates. The periodic percentage rates of interest charged and collected with respect to a loan under a closed end credit agreement may, subject to any limitations set forth in the loan agreement, vary in accordance with the market interest rate index specified in the loan agreement, which index shall be readily verifiable by the borrower and beyond the control of the lender. Periodic percentage rate increases, based on a rise in the interest rate index, may be made at the option of the lender. Periodic percentage rate decreases shall be made whenever there is a decrease in the interest rate index which results in an interest rate which is less than the interest rate then applicable to the note or loan, except that the loan agreement may stipulate a percentage decrease below which a corresponding decrease in the periodic percentage rate need not be made by the lender, provided the index decrement shall be the same as the index increment used for interest rate increases. Interest rate increases may, and interest rate decreases shall, apply to any outstanding and unpaid loan balances on or after the effective date of the rate variation. Upon an increase in the rate of interest, the term of the note shall be extended as necessary to provide for payment of the balance due without any increase in the amount of each of the borrower's periodic payments, except that the periodic payments may be increased, if either a. the agreement so provides or the parties agree to the increase in writing, or b. if the periodic payment amounts would not be sufficient to reduce the principal amount due, the lender, no sooner than 30 days after notifying the borrower of that fact, may require that the periodic payments be increased, or that there be a combination of an extended term and increased periodic payments.
##### **§ 17:3B-19** Additional charges. {#sec-17-3b-19 omnilex-key=us-nj-statutes--title-17--17:3B-19}
16. Additional charges. If the closed end loan agreement so provides, a lender may:
a. Charge and collect the actual costs of filing or recording the instrument of security on a secured loan, or notice or abstract thereof, if the filing or recording is authorized by law.
b. Charge and collect fees and charges on secured and unsecured loans, in addition to interest and fees and charges specifically permitted by P.L.1985, c.81 (C.17:3B-4 et seq.), in amounts as provided in the agreement or as established in the manner the agreement provides, such as, but not limited to, minimum charges, check charges and maintenance charges, and late charges except as may be specifically limited by P.L.1985, c.81 (C.17:3B-4 et seq.).
##### **§ 17:3B-20** Deferred installments {#sec-17-3b-20 omnilex-key=us-nj-statutes--title-17--17:3B-20}
Deferred installments. A lender under a closed end credit agreement may, at any time, permit a borrower to defer installment payments on a loan and may, in connection with the deferral, charge and collect deferral charges in accordance with the loan agreement.
##### **§ 17:3B-21** Insurance {#sec-17-3b-21 omnilex-key=us-nj-statutes--title-17--17:3B-21}
18. Insurance. A lender under a closed or open end credit agreement may:
a. Subject to the terms of the loan agreement, require any property securing the loan to be insured for the benefit of the lender against loss or damage of the security;
b. Offer credit life insurance or credit accident and health insurance, or both, on the borrower in accordance with the provisions of chapter 29 of Title 17B of the New Jersey Statutes.
A lender may deduct and retain from the proceeds of the loan the amount of the premium for any insurance provided by the lender to the borrower pursuant to this section.
##### **§ 17:3B-22** Prepayment in a closed end credit arrangement {#sec-17-3b-22 omnilex-key=us-nj-statutes--title-17--17:3B-22}
Prepayment in a closed end credit arrangement a. An individual borrower may prepay a loan in full at any time without payment of any prepayment charge.
b. If a borrower wishes to prepay a loan, a lender shall not use the "rule of 78's" to calculate the amount of interest owed by the borrower. The lender shall use a simple interest basis to calculate the amount of interest owed by the borrower.
##### **§ 17:3B-23** Closed end loan prohibitions {#sec-17-3b-23 omnilex-key=us-nj-statutes--title-17--17:3B-23}
Closed end loan prohibitions. No closed end loan agreement shall contain:
a. An acceleration clause under which any part or all of the balance, not yet matured, may be declared immediately due and payable because the lender deems himself to be insecure, which provision shall be void and unenforceable;
b. A provision whereby the borrower waives any right of action or defense against the lender or other person acting on his behalf for any illegal act committed in the collection of the payments under the agreement, which provision shall be void and unenforceable; and
c. A power of attorney to confess judgment or any other power of attorney, which provision shall be void and unenforceable.
##### **§ 17:3B-24** Collection costs in a closed end credit arrangement {#sec-17-3b-24 omnilex-key=us-nj-statutes--title-17--17:3B-24}
Collection costs in a closed end credit arrangement. Upon the filing of an action for the collection of an amount in default under the terms of the loan agreement, the lender, in addition to the recovery of all court costs, reasonable attorney's fees and expenses of repossession and storing goods where so authorized by law, may charge and collect from the borrower other reasonable collection costs incurred, not to exceed 20% of the first $500.00 of the unpaid balance of the loan, 10% of the amount over $500.00 up to $2,000.00, and 5% of any amount in excess of $2,000.00.
##### **§ 17:3B-25** Applicable federal law {#sec-17-3b-25 omnilex-key=us-nj-statutes--title-17--17:3B-25}
Applicable federal law. Revolving credit plans or closed end credit agreements shall be subject to the federal truth in lending provisions of the "Consumer Credit Protection Act," Pub.L. 90-321 (15 U.S.C. s. 1601 et seq.) or other applicable provisions of federal law.
##### **§ 17:3B-26** Administrative regulations {#sec-17-3b-26 omnilex-key=us-nj-statutes--title-17--17:3B-26}
Administrative regulations. The Commissioner of Banking may promulgate regulations to implement the provisions of this act.
##### **§ 17:3B-27** Nonexclusivity {#sec-17-3b-27 omnilex-key=us-nj-statutes--title-17--17:3B-27}
Nonexclusivity. The provisions of this act are not exclusive and the lender may at its option elect to extend credit either pursuant to this act or as otherwise permitted by applicable law. The provisions of this act shall apply to all transactions made pursuant to this act, notwithstanding any limitation on interest rate, charges, costs, fees, term of loan or collateral in any other loan or credit laws of this State.
##### **§ 17:3B-29** Findings, declarations relative to bank revolving credit plans {#sec-17-3b-29 omnilex-key=us-nj-statutes--title-17--17:3B-29}
1. a. The Legislature finds and declares that:
(1) Interest that can be charged by issuers of bank credit cards may depend on the laws of the state under which a bank is chartered or in which a federally chartered bank has its principal office, or the laws of the state where such bank has a branch office;
(2) The United States Supreme Court has held, in accordance with the provisions of federal law, that a national bank issuer of a bank credit card can export the rate of interest allowed in its home state to other states, and this holding is now equally applicable to national and state banks;
(3) There has been significant and expensive litigation concerning the extent to which certain related charges constitute part of the exportable rate of interest, but federal and state courts and the Comptroller of the Currency have taken the expansive view that related charges constitute a part of the exportable rate of interest; and
(4) Consequently, issuers of bank credit cards have located and continue to locate in states which have the least restrictive laws regarding interest and related charges.
b. Therefore, the Legislature proposes to simplify State law with respect to interest on bank credit cards to make this State as equally attractive as other states for the location of bank credit card operations.
c. Moreover, since the rules applicable to revolving credit plans have been the subject of disputes by courts and regulators; since the New Jersey Department of Banking and Insurance has advised New Jersey-based banks that under State parity law there are no limits on late fees and related charges; and since any retroactive application of restrictions would impose upon New Jersey-based banks a competitive disadvantage, the Legislature proposes to "level the playing field" for New Jersey-based banks and to preclude potentially costly litigation by permitting this act to apply to all revolving credit plans entered into before and after the effective date of this act.
##### **§ 17:3B-30** Definitions relative to bank revolving credit plans {#sec-17-3b-30 omnilex-key=us-nj-statutes--title-17--17:3B-30}
2. As used in this act:
"Bank" means any state or federally charted bank, savings bank or savings and loan association.
"Borrower" means any corporation, partnership, association, government or governmental subdivision or agency, trust, individual or other entity.
"Individual borrower" means a borrower who is a natural person borrowing for personal, household or family purposes.
"Credit device" means any card, check, identification code or other means of identification contemplated by the agreement governing the plan.
"Loans" means cash advances or loans to be paid to or for the account of the borrower.
"Outstanding unpaid indebtedness" means, on any day, an amount not in excess of the total amount of purchases and loans charged to the borrower's account under the plan which is outstanding and unpaid at the end of the day, after adding the aggregate amount of any new purchases and loans charged to the account as of that day and deducting the aggregate amount of any payments and credits applied to that indebtedness as of that day and, if the agreement governing the plan so provides, may include the amount of any periodic interest, interest charges and other charges permitted by this act, including late or delinquency charges, which have accrued in the account and which are unpaid at the end of the day.
"Purchases" means payments for property of whatever nature, real or personal, tangible or intangible, and payments for services, licenses, taxes, official fees, fines, private or governmental obligations, or any other thing of value.
"Revolving credit plan" or "plan" means a plan contemplating the extension of credit under an account governed by an agreement between a bank and a borrower pursuant to which:
(1) the bank permits the borrower, and if the agreement governing the plan so provides, persons acting on behalf of or with authorization from the borrower, from time to time to make purchases or to obtain loans, or both, by use of a credit device;
(2) the amounts of purchases made and loans obtained are charged to the borrower's account under the plan;
(3) the borrower is required to pay the bank the amounts of all purchases and loans charged to the borrower's account under the plan, but has the privilege of paying the amounts outstanding from time to time in full or in installments; and
(4) interest may be charged and collected by the bank from time to time on the outstanding unpaid indebtedness under the plan.
##### **§ 17:3B-31** Bank permitted to offer credit under revolving credit plan {#sec-17-3b-31 omnilex-key=us-nj-statutes--title-17--17:3B-31}
3. A bank may, subject to any limitations on lending authority contained in its charter or otherwise imposed by law, and subject to other provisions of this act, offer and extend credit under a revolving credit plan to a borrower and in connection therewith may charge and collect periodic interest, interest charges and other charges permitted by this act and may take such security as collateral in connection therewith as may be acceptable to the bank. Without limitation of the foregoing, credit may be extended under a revolving credit plan by a bank's acquisition of obligations arising out of the honoring by a merchant, a bank or other financial institution, whether chartered or organized under the laws of this or any other state, the District of Columbia, the United States or any district, territory or possession of the United States, or any foreign country, or a government or governmental subdivision or agency, of a credit device made available to a borrower under a plan, whether directly or indirectly by means of telephone, point of sale terminal, automated teller machine or other electronic or similar device, or through the mails.
##### **§ 17:3B-32** Bank permitted to charge, collect periodic interest under revolving credit plan {#sec-17-3b-32 omnilex-key=us-nj-statutes--title-17--17:3B-32}
4. A bank may charge and collect periodic interest under a revolving credit plan on outstanding unpaid indebtedness in the borrower's account under the plan at such daily, weekly, monthly, annual or other periodic percentage rate or rates as the agreement governing the plan provides or as established in the manner provided in the agreement governing the plan. If the applicable periodic percentage rate under the agreement governing the plan is other than daily, periodic interest may be calculated on an amount not in excess of the average outstanding unpaid indebtedness for the applicable billing period, determined by dividing the total of the amounts of outstanding unpaid indebtedness for each day in the applicable billing period by the number of days in the billing period. If the applicable periodic percentage rate under the agreement governing the plan is monthly, a billing period shall be deemed to be a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four days therefrom.
##### **§ 17:3B-33** Periodic percentage rate, rates of interest may vary {#sec-17-3b-33 omnilex-key=us-nj-statutes--title-17--17:3B-33}
5. If the agreement governing the revolving credit plan so provides, the periodic percentage rate or rates of interest under the plan may vary in accordance with a schedule or formula. The periodic percentage rate or rates may vary from time to time as the rate determined in accordance with the schedule or formula varies and the periodic percentage rate or rates, as so varied, may be made applicable to all or any part of the outstanding unpaid indebtedness under the plan on or after the effective date of the variation, including any indebtedness arising out of purchases made or loans obtained prior to the variation in the periodic percentage rate or rates. Without limitation, a permissible schedule or formula hereunder may include provision in the agreement governing the plan for a change in the periodic percentage rate or rates of interest applicable to all or any part of outstanding unpaid indebtedness, whether by variation of the then applicable periodic percentage rate or rates of interest, variation of an index or margin or otherwise, or whether contingent upon the happening of any event or circumstance specified in the plan, which event or circumstance may include the failure of the borrower to perform in accordance with the terms of the plan.
##### **§ 17:3B-34** Additional interest, charges permitted {#sec-17-3b-34 omnilex-key=us-nj-statutes--title-17--17:3B-34}
6. In addition to or in lieu of interest at a periodic rate or rates as provided pursuant to sections 4 and 5 of this act, a bank may, if the agreement governing the revolving credit plan so provides, charge and collect as interest, in the manner or form as the plan may provide, one or more of the following:
a. A daily, weekly, monthly, annual or other periodic charge in the amount or amounts as the agreement may provide for the privileges made available to the borrower under the plan.
b. A transaction charge or charges in the amount or amounts as the agreement may provide for each separate purchase or loan under the act.
c. A minimum charge for each daily, weekly, monthly, annual or other scheduled billing period under the plan during any portion of which there is an outstanding unpaid indebtedness under the plan.
d. Reasonable fees for services rendered or for reimbursement of expenses incurred in good faith by the bank or its agents in connection with the plan, or other reasonable fees incident to the application for and the opening, administration, and termination of a plan, including, without limitation, commitment, application and processing fees, official fees and taxes, costs incurred by reason of examination of title, inspection, appraisal, recording, mortgage satisfaction or other formal acts necessary or appropriate to the security for the plan, and filing fees.
e. Returned payment charges.
f. Documentary evidence charges.
g. Stop payment fees.
h. Over limit charges.
i. Automated teller machine charges or similar electronic or interchange fees or charges.
j. Any other fee expressly disclosed to the borrower prior to the imposition of the fee.
##### **§ 17:3B-35** Imposition of different terms {#sec-17-3b-35 omnilex-key=us-nj-statutes--title-17--17:3B-35}
7. A bank may, if the agreement governing a revolving credit plan so provides, impose different terms, including without limitation, the terms governing the periodic percentage rate or rates used to calculate interest, the method of computing the outstanding unpaid indebtedness to which the rate or rates are applied, the amounts of other charges and the applicable installment repayment schedule, in respect of indebtedness arising out of purchases and loans made under the plan.
##### **§ 17:3B-36** Customary checking charges may be imposed {#sec-17-3b-36 omnilex-key=us-nj-statutes--title-17--17:3B-36}
8. If credit under a revolving credit plan is offered and extended in connection with a demand deposit account or other transaction account maintained by the borrower with the bank pursuant to an agreement or arrangement whereby the bank agrees to honor checks, drafts or other debits to the account, which if paid would create or increase a negative balance in the account, by making extensions of credit to the borrower under a revolving credit plan, any charges customarily imposed by the bank under the terms governing the demand deposit or other transaction account in the absence of any associated revolving credit plan, including, without limitation, check charges, monthly maintenance charges, checkbook charges, charges for a check drawn on funds in excess of an available line of credit and other similar charges, may continue to be imposed on the account without specific reference thereto or incorporation thereof by reference in the agreement governing the revolving credit plan and the amount of any charge, to the extent the balance in the demand deposit or other transaction account is insufficient to pay the charge, may be charged to the borrower's account under the plan as a loan thereunder and may be included in the outstanding unpaid indebtedness in accordance with the terms of the agreement governing the revolving credit plan.
##### **§ 17:3B-37** Omission of monthly installments {#sec-17-3b-37 omnilex-key=us-nj-statutes--title-17--17:3B-37}
9. A bank may at any time and from time to time unilaterally extend to a borrower under a revolving credit plan the option of omitting one or more monthly installments.
##### **§ 17:3B-38** Insurance for borrower requested, required {#sec-17-3b-38 omnilex-key=us-nj-statutes--title-17--17:3B-38}
10. a. A bank may request but not require an individual borrower to be insured with respect to a revolving credit plan under a life, health, accident, health and accident or other credit or other permissible insurance policy, whether group or individual. If an individual borrower's outstanding unpaid indebtedness under the plan is secured by an interest in real or personal property, a bank may require the borrower to obtain insurance, from an insurer acceptable to the bank, against loss of or damage to the property, or against liability arising out of the ownership or use of the property, and may finance the premiums for the insurance.
b. In the case of a borrower borrowing under a revolving credit plan for other than personal, household or family purposes, a bank may require the borrower to obtain insurance, from an insurer acceptable to the bank, under a life, health, accident, health and accident or other credit or other permissible insurance policy, whether group or individual. If the borrower's outstanding unpaid indebtedness under the plan is secured by an interest in real or personal property, the bank may require the borrower to obtain insurance, from an insurer acceptable to the bank, against loss of or damage to the property, or against liability arising out of the ownership or use of the property and may finance the premiums for the insurance.
c. The offer and placement of insurance under this section shall be subject in all respects to the applicable provisions of N.J.A.C.3:1-13.1 or 3:1-13.2, or both.
##### **§ 17:3B-39** Imposition of late, delinquency charge {#sec-17-3b-39 omnilex-key=us-nj-statutes--title-17--17:3B-39}
11. If the agreement governing a revolving credit plan so provides, a bank may impose, as interest, a late or delinquency charge upon any outstanding unpaid installment payments or portions thereof under the plan which are in default, except that: no more than one late or delinquency charge may be imposed with respect to any single installment payment or portion thereof regardless of the period during which it remains in default; and for the purpose only of the preceding proviso, all payments by the borrower shall be deemed to be applied to the satisfaction of installment payments in the order in which they become due. Nothing contained in this section shall limit, restrict or otherwise affect the right of the bank pursuant to section 5 of this act to change the periodic percentage rate or rates of interest applicable to the revolving credit plan between the bank and a borrower upon the occurrence of a delinquency or default or other failure of the borrower to perform in accordance with the terms of the plan.
##### **§ 17:3B-40** Default by borrower, attorney's, collection agency's fee {#sec-17-3b-40 omnilex-key=us-nj-statutes--title-17--17:3B-40}
12. If a borrower defaults under the terms of a plan and the bank refers the borrower's account for collection to an attorney or collection agency, not a regularly salaried employee of the bank, for collection, the bank may, if the agreement governing the revolving credit plan so provides, charge and collect from the borrower a reasonable attorney's or collection agency's fee and, in addition, if the agreement governing the plan so provides, the bank may recover from the borrower all court or other collection costs actually incurred by the bank.
##### **§ 17:3B-41** Terms of agreement, amendment {#sec-17-3b-41 omnilex-key=us-nj-statutes--title-17--17:3B-41}
13. a. A bank may, if the agreement governing a revolving credit plan so provides, at any time, or from time to time, amend the terms of the agreement, including without limitation, the terms governing the periodic percentage rate or rates used to calculate interest, the method of computing the outstanding unpaid indebtedness to which the rate or rates are applied, the amounts of other charges and the applicable installment repayment schedule, in accordance with the further provisions of this section.
b. (1) The bank shall notify each affected borrower of an amendment to the terms of the agreement in the manner set forth in the agreement governing the plan and in compliance with the requirements of the federal "Truth in Lending Act," 15 U.S.C. s.1601 et seq., and regulations promulgated thereunder, if applicable; except that if the amendment has the effect of increasing the periodic interest or interest charges to be paid by the borrower, the bank shall mail or deliver to the borrower, at least 30 days before the effective date of the amendment, a conspicuous written notice which shall clearly describe the amendment and shall also set forth the effective date of the amendment and the pertinent information contemplated by the following provisions of this section.
(2) If the amendment has the effect of increasing the periodic interest or interest charges to be paid by the borrower, the amendment shall, except as otherwise provided for in this section, become effective as to a particular borrower as of the first day of the billing cycle during which the effective date of the amendment occurs or as of any later date, in either case, in accordance with this section and as stipulated in the notice, so long as the borrower does not, within 30 days of the mailing or the delivery of the notice of the amendment, whichever is earlier, furnish written notice to the bank that the borrower does not agree to accept the amendment. The notice from the bank shall include: a statement that, absent the borrower's written notice to the bank, within 30 days of the earlier of the mailing or delivery of the notice of the amendment, that the borrower does not agree to accept the amendment, the proposed amendment will become effective and apply to the borrower and the borrower's account; and the address to which a borrower may send notice of the borrower's election not to accept the amendment. Any borrower who gives timely notice electing not to accept an amendment shall be permitted to pay the outstanding unpaid indebtedness in the borrower's account under the plan in accordance with the terms of the agreement governing the plan without giving effect to the amendment; except that if the borrower does not agree to accept the proposed amendment, the bank may convert the borrower's account to a closed-end credit account on credit terms substantially identical to or more favorable to the borrower than those set forth in the then existing agreement governing the borrower's account and the borrower will continue to be subject to the terms of the existing agreement or the more favorable terms until the borrower's account balance is paid in full. As a condition to the effectiveness of any notice that a borrower does not accept the amendment, the bank may require the borrower to return all credit devices. If after 30 days from mailing or delivery by the bank of a proposed amendment, a borrower uses a credit device to obtain credit under a plan, notwithstanding that the borrower has, prior to the use, given the bank notice that the borrower does not accept an amendment, the amendment shall be deemed to have been accepted and shall become effective as to the borrower and the borrower's account as of the date that the amendment would have become effective but for the giving of notice by the borrower.
(3) Notwithstanding paragraph (2) of this subsection b., the bank may also amend the agreement governing the plan to require that any amendment shall become effective only if the borrower uses the plan after a date specified in the notice of the proposed amendment which is at least 30 days after the giving of the notice, but which need not be the date the amendment becomes effective, by making a purchase or obtaining a loan or if the borrower indicates to the bank the borrower's express agreement to the amendment. Any such amendment may become effective as to a particular borrower as of the first day of the billing period during which the borrower used the borrower's account or indicated agreement to the amendment. Any borrower who fails to use the borrower's account or to indicate agreement to an amendment shall be permitted to pay the outstanding unpaid indebtedness in the borrower's account under the plan in accordance with the terms of the agreement governing the plan without giving effect to the amendment subject to the right of the bank to convert the borrower's account to a closed-end credit account as provided in paragraph (2) of this subsection b.
c. If the terms of the agreement governing the plan, as originally drawn or as amended pursuant to this section, so provide, any amendment may, on and after the date upon which it becomes effective as to a particular borrower, apply to all then outstanding unpaid indebtedness in the borrower's account under the plan, including any indebtedness which shall have arisen out of purchases made or loans obtained prior to the effective date of the amendment.
d. For purposes of this section, the following shall not be deemed an amendment which has the effect of increasing the interest to be paid by the borrower:
(1) A decrease in the required amount of a periodic installment payment.
(2) A change in the schedule or formula used under a variable rate plan under section 5 of this act so long as the initial interest rate resulting from the change is not an increase.
(3) A change from a daily periodic rate to a periodic rate other than daily or from a periodic rate other than daily to a daily periodic rate under section 4 of this act.
e. The procedure for amendment by a bank of the terms of a plan to which the borrower, other than an individual borrower, is a party may, in lieu of the foregoing provisions of this section, be as the agreement governing the plan may otherwise provide.
##### **§ 17:3B-42** Other laws not applicable; exceptions {#sec-17-3b-42 omnilex-key=us-nj-statutes--title-17--17:3B-42}
14. Any other law of this State limiting the rate or amount of interest, discount, points, finance charges, service charges or other charges which may be charged, taken, collected, received or reserved shall not apply to extensions of credit under a revolving credit plan operated in accordance with this act; except that the periodic percentage rate of interest which may be charged, taken, collected, received or reserved under a revolving credit plan operated in accordance with this act shall not exceed the percentage rate permitted pursuant to N.J.S.2C:21-19.
##### **§ 17:3B-43** Nonexclusivity of act {#sec-17-3b-43 omnilex-key=us-nj-statutes--title-17--17:3B-43}
15. The provisions of this act are not exclusive and a bank may extend credit either pursuant to this act or as otherwise provided by applicable law.
##### **§ 17:3B-44** Charges considered interest {#sec-17-3b-44 omnilex-key=us-nj-statutes--title-17--17:3B-44}
16. Notwithstanding the characterization of certain charges in the act as interest, all charges permitted by this act which may be deemed interest by any rules, regulations or interpretations of the Comptroller of the Currency for purposes of section 85 of "The National Bank Act," 12 U.S.C. s.85, shall be considered interest for purposes of this act.
##### **§ 17:3B-45** Laws of State govern revolving credit plan, conditions {#sec-17-3b-45 omnilex-key=us-nj-statutes--title-17--17:3B-45}
17. A revolving credit plan between a bank and an individual borrower shall be governed by the laws of this State if the plan so provides and the bank has its principal office in this State or makes its loans from a branch or other facility in this State.
##### **§ 17:3B-46** Provisions of act may apply to any revolving credit plans {#sec-17-3b-46 omnilex-key=us-nj-statutes--title-17--17:3B-46}
18. a. A bank may apply the provisions of this act to any of its revolving credit plans.
b. A bank may apply this act to a revolving credit plan entered into prior to the effective date of this act and the act shall govern any limitations on fees and charges assessed under that plan, both before and after the effective date of this act.
c. The Department of Banking and Insurance may request information from any bank which applies this act to a revolving credit plan on the bank's interest rates, fees and charges which are imposed by the bank with respect to its revolving credit plan. A bank shall provide the department with the information requested within 30 days of receipt of the request. The department shall make the information received pursuant to this subsection c. generally available to residents of the State and any newspapers of general circulation in this State.
d. (1) Any bank which is requested to provide the Department of Banking and Insurance with information pursuant to subsection c. of this section and fails to provide the information to the department within the time period required shall not be precluded from applying this act to its revolving credit plans, but shall be subject to a penalty of up to $25,000 for each revolving credit plan to which this act is applied, which shall be paid to the department within a month of verification by the department that the bank is subject to the provisions of subsection c. of this section.
(2) Any bank which knowingly and with reckless disregard for the truth misstates in the information provided the department, its interest rates, fees or charges shall be assessed by and pay to the department a penalty of not more than $25,000 for each misstatement.
## **Chapter 3C** {#struct-chapter-3c}
##### **§ 17:3C-1** Prohibition; exceptions {#sec-17-3c-1 omnilex-key=us-nj-statutes--title-17--17:3C-1}
No banking institution, as said term is defined in section 1 of the Banking Act of 1948 (C. 17:9A-1), bank holding company, savings and loan association, credit union or any other lending institution which regularly accepts deposits from New Jersey residents not regularly employed by said lending institution or its affiliates or any parent company, subsidiary, affiliate or member bank of any thereof, shall be licensed or admitted to transact in this State, directly or indirectly, any class of insurance except credit life insurance, credit accident and health insurance, group creditor insurance, group mortgage cancellation life insurance, or group mortgage accident and health insurance. L.1975, c. 346, s. 1, eff. March 3, 1976.
## **Chapter 4** {#struct-chapter-4}
##### **§ 17:4-9.1** "Successor company" includes "successor bank, savings bank"; "predecessor company" includes "liquidating company" or "predecessor savings bank." {#sec-17-4-9.1 omnilex-key=us-nj-statutes--title-17--17:4-9.1}
1. For purposes of this section, the term "successor company" includes "successor bank" or "successor savings bank"; and the term "predecessor company" includes "liquidating company" or "predecessor savings bank."
A successor company formed under R.S.17:4-9, repealed and replaced by section 16 of P.L.1948, c.67 (C.17:9A-16), and qualified to act as a fiduciary as provided for by R.S.17:4-41, repealed and replaced by section 30 of P.L.1948, c.67 (C.17:9A-30), in order to facilitate the orderly liquidation of the predecessor company, the successor company shall be permitted to be substituted as fiduciary in those matters in which the predecessor company has qualified.
If in the sound judgment of the predecessor company and the successor company such a substitution of fiduciary is deemed in the best interests of the trust or relation and in aid of the liquidation, the predecessor company may file its account to date with the court having jurisdiction, and upon approval thereof and discharge from the trust or relation the successor company shall succeed to the rights, relations, and trusts and associated duties, and shall execute and perform the trust or relation as if the successor company had originally assumed the trust or relation; provided, however, that the successor company shall not assume the liabilities incurred by the predecessor company incident to its administration of the trust or relation.
Subject to this section, the successor company shall succeed to the rights and duties of the predecessor company and to all fiduciary capacities in respect to any estate or trust or other matter being administered under the laws of New Jersey, or as transfer agent or registrar of stocks and bonds.
Subject to this section, all fiduciary rights, privileges, and duties shall remain unimpaired and shall continue in the successor company from the date of discharge by the court of the predecessor company from the trust or relation, regardless of: (i) the date the relationship was established; (ii) the trust agreement was created; or (iii) the trustor, the decedent, the person who is mentally incapacitated, or the minor died, without the need for the successor company to seek appointment in the person's estates; provided that where the instrument under which the predecessor company qualified to act did not require the furnishing of a bond, no bond shall be required.
## **Chapter 6** {#struct-chapter-6}
##### **§ 17:6-53.1** Veterans' loans as legal investments {#sec-17-6-53.1 omnilex-key=us-nj-statutes--title-17--17:6-53.1}
Every savings bank, including any savings bank organized under a special charter as a stock company previous to March eighth, one thousand eight hundred and seventy-seven, may invest moneys deposited with it in:
(a) Veterans' loans under the provisions of the Veterans' Business Loan Act (1944) (P.L.1944, c. 126), as amended and supplemented from time to time; and
(b) Loans made to veterans under the provisions of Title III of the Servicemen's Readjustment Act of 1944 (Public Law 346, 78th Congress, Chapter 268-2d Session), as amended or supplemented from time to time, in accordance with the rules and regulations made thereunder; provided, the Administrator of Veterans' Affairs shall guarantee or make a commitment to guarantee any such loan under said Act of Congress.
##### **§ 17:6-53.2** Mortgages securing veterans' loans not subject to s.s. 17:6-55, 17:6-59 {#sec-17-6-53.2 omnilex-key=us-nj-statutes--title-17--17:6-53.2}
In case a mortgage on real or personal property is taken as security for any such loan, it shall not be subject to the provisions of sections 17:6-55 or 17:6-59 of the Revised Statutes; provided, however, that in every such case such property shall be located within the State of New Jersey.
##### **§ 17:6-59.1** Legality of investments; sale of exchanged securities {#sec-17-6-59.1 omnilex-key=us-nj-statutes--title-17--17:6-59.1}
a. The board of managers, in determining whether any bond, debenture, other security or investment meets the requirements as to the legality of investment therein, may rely and be fully protected in relying upon statistical, financial, corporate or other information as to such bond, debenture, other security or investment, and upon ratings or other opinion as to the financial or other status thereof, or its legality for investment, contained in or offered by any financial, statistical, investment, rating or other publication or service published for the use of and accepted as reliable by the Commissioner of Banking and Insurance;
b. An investment made by a savings bank, legal under the laws of this State when made, shall continue to be legal, anything in this act to the contrary notwithstanding, but nothing herein contained shall relieve the board of managers from the duty to exercise reasonable discretion in deciding whether to retain or to dispose of such investment; provided, however, that any securities issued in exchange therefor under any reorganization or recapitalization, if not legal for investment under this act, shall be sold or disposed of within five years from the time of acquisition by the savings bank unless upon application by said bank to the commissioner he shall extend the time for the sale or disposition thereof.
## **Chapter 9** {#struct-chapter-9}
##### **§ 17:9-9** Depositories for public moneys; designation; effect upon officers liability {#sec-17-9-9 omnilex-key=us-nj-statutes--title-17--17:9-9}
Any administrative board, commission, department, public official, sinking fund commission, district or other public agency of the state or of any political subdivision thereof, charged with the custody or control of moneys, except such agencies as to which provision has otherwise, by law, been made with respect to the designation of depositories, shall designate a depository or depositories in this state wherein all such moneys shall be kept. The designation shall be by resolution, and thereafter any official charged with the custody of such moneys shall cause them to be kept and deposited only in the depository or depositories so named, and upon so depositing in good faith such moneys any such official shall be relieved of liability from any loss of such funds or moneys which may be due to the insolvency or closing of the depository or depositories.
##### **§ 17:9-41** Definitions. {#sec-17-9-41 omnilex-key=us-nj-statutes--title-17--17:9-41}
1. In this act, unless the context otherwise requires:
"Adequately capitalized" means, with respect to a public depository, "adequately capitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations;
"Association" means any State or federally chartered savings and loan association;
"Capital funds" means (a) in the case of a State bank or national bank or capital stock savings bank, the aggregate of the capital stock, surplus and undivided profits of the bank or savings bank; (b) in the case of a mutual savings bank, the aggregate of the capital deposits, if any, and the surplus of the savings bank; (c) in the case of an association, the aggregate of all reserves required by any law or regulation, and the undivided profits, if any, of the association; and (d) in the case of a credit union, the aggregate of all reserves required by any law or regulation, and the capital deposits of the credit union;
"Commissioner" means the Commissioner of Banking and Insurance;
"Credit union" means a credit union as defined by section 2 of P.L.1984, c.171 (C.17:13-80);
"Critically undercapitalized" means, with respect to a public depository, "critically undercapitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations;
"Defaulting depository" means a public depository as to which an event of default has occurred;
"Eligible collateral" means:
(a) Obligations of any of the following:
(1) The United States;
(2) Any agency or instrumentality of the United States, including, but not limited to, the Student Loan Marketing Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Housing Administration and the Small Business Administration;
(3) The State of New Jersey or any of its political subdivisions;
(4) Any other governmental unit; or
(b) Obligations guaranteed or insured by any of the following, to the extent of that insurance or guaranty:
(1) The United States;
(2) Any agency or instrumentality of the United States, including, but not limited to, the Student Loan Marketing Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Housing Administration and the Small Business Administration;
(3) The State of New Jersey or any of its political subdivisions; or
(c) Obligations now or hereafter authorized by law as security for public deposits;
(d) Obligations in which the State, political subdivisions of the State, their officers, boards, commissions, departments and agencies may invest pursuant to an express authorization under any law authorizing the issuance of those obligations;
(e) Obligations, letters of credit, or other securities or evidence of indebtedness constituting the direct and general obligation of a federal home loan bank or federal reserve bank; or
(f) Any other obligations as may be approved by the commissioner by regulation or by specific approval;
"Event of default" means issuance of an order of a supervisory authority or of a receiver restraining a public depository from making payments of deposit liabilities;
"Governmental unit" means any county, municipality, school district or any public body corporate and politic created or established under any law of this State by or on behalf of any one or more counties or municipalities, or any board, commission, department or agency of any of the foregoing having custody of funds or any charitable funds established pursuant to section 2 of P.L.2018, c.11 (C.54:4-66.7), or spillover funds established pursuant to subsection e. of section 2 of P.L.2018, c.11 (C.54:4-66.7);
"Maximum liability" of a public depository means, with respect to any event of default, a sum equal to 4% of the average daily balance of collected public funds held on deposit by the depository during the three-month period ending on the last day of the month immediately preceding the occurrence of the event of default that exceed the amount of such public fund deposits that are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or by any other agency of the United States which insures deposits made in public depositories;
"Net deposit liability" means the deposit liability of a defaulting depository to a governmental unit after deduction of any deposit insurance with respect thereto;
"Obligations" means any bonds, notes, capital notes, bond anticipation notes, tax anticipation notes, temporary notes, loan bonds, mortgage related securities, or mortgages;
"Public depository" means a State or federally chartered bank, savings bank, credit union, or an association located in this State or a state or federally chartered bank, savings bank, credit union, or an association located in another state with a branch office in this State, the deposits of which are insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund and which receives or holds public funds on deposit;
"Public funds" means the funds of any governmental unit, including but not limited to moneys possessed or held by charitable funds established pursuant to section 2 of P.L.2018, c.11 (C.54:4-66.7), spillover funds established pursuant to subsection e. of section 2 of P.L.2018, c.11 (C.54:4-66.7), or local charitable donations as defined in section 1 of P.L.2018, c.11 (C.54:4-66.6) or in escrow related thereto, but does not include deposits held by the State of New Jersey Cash Management Fund;
"Significantly undercapitalized" means, with respect to a public depository, "significantly undercapitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations;
"Undercapitalized" means, with respect to a public depository, "undercapitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations;
"Valuation date" means March 31, June 30, September 30, and December 31;
"Well capitalized" means, with respect to a public depository, "well capitalized" as the term is defined in subsection (b) of section 38 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1831o(b)), or subsection (c) of section 216 of title II of the "Federal Credit Union Act," Pub.L.73-467 (12 U.S.C. s.1790d(c)), as applicable, and their implementing regulations.
##### **§ 17:9-42** Security requirement for public depositories. {#sec-17-9-42 omnilex-key=us-nj-statutes--title-17--17:9-42}
2. The receipt and holding of public funds on deposit by a public depository is a voluntary activity undertaken by that depository. However, no governmental unit shall deposit public funds in a public depository unless such funds are secured by the depository, and the depository is otherwise in compliance, or acting in accordance with, this act.
##### **§ 17:9-43** Powers of commissioner. {#sec-17-9-43 omnilex-key=us-nj-statutes--title-17--17:9-43}
3. The commissioner shall have power:
a. To require any public depository to furnish financial information on a quarterly basis, due on the same day as the due date for filing a call report on a depository's overall condition under federal or state law with the appropriate federal banking agency or state bank supervisor, as defined by subsections (q) and (r) of section 3 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1813(q) and (r)); however, the commissioner shall prescribe filing dates on a quarterly basis, if the applicable federal or state law reporting requirements no longer require the filing of a call report on a quarterly basis. This information shall be furnished on a form and in a format as the commissioner shall prescribe by regulation. The information shall include, but not be limited to, public funds on deposit, eligible collateral pledged as security for public funds on deposit, measurements of capital adequacy or ratios, and liquidity, as well as such other information as the commissioner shall request. Any public depository which refuses or neglects to give any information so requested may be excluded by the commissioner from the right to receive public funds for deposit until such time as the commissioner shall acknowledge that such depository has furnished the information requested;
b. To take such action as the commissioner deems best for the protection, collection, compromise, or settlement of any claim arising in case of an event of default;
c. To fix the date on which an event of default shall be deemed to have occurred, taking into consideration the orders, rules and regulations of any supervisory authority as they affect the failure or inability of a public depository to repay public funds held on deposit;
d. Upon the happening of an event of default, to take possession of and liquidate the collateral of the defaulting depository maintained pursuant to section 4 of this act;
e. To do all acts required to carry out the purposes of this act and, to that end, to make, amend and repeal regulations consistent with this act;
f. To engage the services of one or more consultants, advisors, or other experts deemed necessary by the commissioner to assist in carrying out the administration and enforcement of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.);
g. To require any public depository with public funds on deposit: (1) to authorize the release of its most recent examination report, prepared by the depository's appropriate federal banking agency or state bank supervisor, as defined by subsections (q) and (r) of section 3 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1813(q) and (r)), to the commissioner, or otherwise furnish a certified copy thereof; or
(2) if the report or copy thereof described in paragraph (1) of this subsection is not available, to submit (a) an annual certification from the depository's outside auditor, stating that the depository is in compliance with the requirements of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.), including all collateral requirements, or (b) any other annual statement already required by federal or state law, deemed acceptable by the commissioner, stating the depository's compliance as required by this paragraph;
h. To designate any information obtained by, or disclosed to, the commissioner under the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.), as confidential and not a public record subject to public inspection, examination, or copying under the provisions of P.L.1963, c.73 (C.47:1A-1 et seq.);
i. To require any public depository, other than a public depository paying assessments pursuant to section 3 of P.L.2005, c.199 (C.17:1C-35), to pay to the commissioner, through electronic means, an annual fee to be dedicated to the operations of the department in connection with the administration and enforcement of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.). This fee shall be prescribed by the commissioner by regulation and based on the amount of public funds on deposit in the public depository, but shall not exceed $500 for any public depository with only public funds on deposit that are insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories, or $6,000 for any public depository with $1,000,000,000 or more in public funds on deposit.
##### **§ 17:9-43.1** Eligible collateral requirement for certain public funds. {#sec-17-9-43.1 omnilex-key=us-nj-statutes--title-17--17:9-43.1}
3. a. (1) Except as set forth in subsection b. of this section concerning extraordinary amounts of public funds on deposit, every public depository having public funds on deposit therein that are not insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories, shall maintain, as security for such deposits, eligible collateral having a market value:
(a) At least equal to 5% of the uninsured public funds on deposit, if the public depository is well capitalized;
(b) At least equal to 30% of the uninsured public funds on deposit, if the public depository is adequately capitalized;
(c) At least equal to 60% of the uninsured public funds on deposit, if the public depository is undercapitalized;
(d) At least equal to 90% of the uninsured public funds on deposit, if the public depository is significantly undercapitalized, or, in the alternative and at the election of the depository, a reduction in the amount of public funds held on deposit, so that the only remaining public funds on deposit after this reduction are insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories; or
(e) At least equal to 120% of the uninsured public funds on deposit, if the public depository is critically undercapitalized, or, in the alternative and at the election of the depository, a reduction in the amount of public funds held on deposit, so that the only remaining public funds on deposit after this reduction are insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories.
(2) The amount of eligible collateral in relation to the amount of public funds on deposit necessary for a public depository to meet the collateral requirements of paragraph (1) of this subsection shall be measured as: (a) the percentage, set forth under paragraph (1) of this subsection, of the average daily balance of collected, uninsured public funds on deposit during the three-month period ending on the immediately preceding valuation date; or (b), at the election of the depository, the percentage, set forth under paragraph (1) of this subsection, of the average balance of collected, uninsured public funds on deposit on the first, eighth, fifteenth and twenty-second days of each month in the three-month period ending on the immediately preceding valuation date.
b. (1) Every public depository having public funds on deposit therein in excess of $200,000,000 that are not insured by the Federal Deposit Insurance Corporation or by any other agency of the United States which insures deposits made in public depositories shall maintain, as security for such excess, uninsured deposits, eligible collateral having a market value at least equal to 100% of the average daily balance of those collected, uninsured public funds on deposit during the three-month period ending on the immediately preceding valuation date, or, at the election of the depository, at least equal to 100% of the average balance of those collected, uninsured public funds on deposit on the first, eighth, fifteenth and twenty-second days of each month in the three-month period ending on the immediately preceding valuation date.
(2) A public depository shall not at any time receive and hold on deposit for any period in excess of 15 days public funds of a governmental unit or governmental units which, in the aggregate, exceed 75% of the capital funds of the depository, unless such depository shall, in addition to the security required to be maintained under this section, secure such excess by eligible collateral with a market value at least equal to 100% of such excess.
##### **§ 17:9-43.2** Designation of nonprofit organization as recipient of funds. {#sec-17-9-43.2 omnilex-key=us-nj-statutes--title-17--17:9-43.2}
5. a. Within six months of the effective date of this section, the Department of Education, in consultation with the Department of Banking and Insurance, shall designate a nonprofit corporation, organized under the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., and with a history and experience in promoting financial education and financial literacy and delivering financial education and financial literacy services, to serve as the recipient of the funds due from credit unions pursuant to subsection b. of this section. The designation by the department:
(1) shall include any requirements determined by the Department of Education to be necessary to insure proper oversight of the expenditure of the funds by the nonprofit corporation for financial education and financial literacy purposes; and
(2) may include a requirement that the nonprofit corporation provide funding for the high school pilot program in personal financial literacy established pursuant to section 1 of P.L.2009, c.153 (C.18A:6-115) or any expansion of that program.
b. (1) The chief financial officer of a credit union that qualifies as a public depository pursuant to P.L.1970, c.236 (C.17:9-41 et seq.) shall transmit to the Department of Banking and Insurance with each fourth quarter report required annually pursuant to section 3 of P.L.1970, c.326 (C.17:9-43) a written certification that the credit union has forwarded to the nonprofit corporation designated pursuant to subsection a. of this section a sum equal to the average daily balance, if the average daily balance is in excess of $2 million, for the preceding year of the public funds on deposit at the credit union, multiplied by the appropriate factor, as determined in accordance with the following schedule:
(a) an average daily balance in excess of $2 million but less than $25 million: multiply by a factor of .0005.
(b) an average daily balance of $25 million or over but less than $50 million: multiply by a factor of .00075.
(c) an average daily balance of $50 million or over: multiply by a factor of .0010.
However, in no event, shall a credit union be required to forward a sum in excess of $100,000 in any one year.
(2) The certification shall comply with any requirements determined by the department to be necessary for the calculation and transmission of such funds.
c. The Department of Education may adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) any rules and regulations necessary to implement the provisions of subsection a. of this section. The Department of Banking and Insurance may adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) any rules and regulations necessary to implement the provisions of subsection b. of this section.
##### **§ 17:9-44** Amount of collateral required as security; exceptions. {#sec-17-9-44 omnilex-key=us-nj-statutes--title-17--17:9-44}
4. a. (1) No public depository, notwithstanding the collateral requirements set forth under section 3 of P.L.2009, c.326 (C.17:9-43.1), shall be required to maintain any eligible collateral pursuant to this act as security for any deposit or deposits of any governmental unit to the extent that such deposit or deposits are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or by any other agency of the United States which insures deposits made in public depositories.
(2) In the case of any public depository which has not held public funds on deposit for all of a three-month period as measured pursuant to the provisions of section 3 of P.L.2009, c.326 (C.17:9-43.1), the commissioner shall, notwithstanding the provisions of that section, prescribe the amount of eligible collateral required to be maintained.
(3) Depositories shall have the right to make substitutions of eligible collateral at any time. The income from eligible collateral shall belong to the public depository without restriction.
b. (Deleted by amendment, P.L.2009, c.326)
c. All collateral required to be maintained shall be deposited with any Federal Reserve Bank or Federal Home Loan Bank, or any other banking institution located in this State or a contiguous state as authorized by regulation of the commissioner, and which has capital funds of not less than $25,000,000.00. Notwithstanding the foregoing, the commissioner may authorize public depositories to hold and maintain the required collateral in such a manner as he deems consistent with the purposes of this act.
d. The market value of eligible collateral maintained pursuant to this section on any valuation date shall be presumed to be the market value of such collateral continuing until the next succeeding valuation date.
##### **§ 17:9-45** Proceedings after determination of default; pro rata distribution of collateral; assessment of other public depositories for deficiency. {#sec-17-9-45 omnilex-key=us-nj-statutes--title-17--17:9-45}
5. When the commissioner determines that an event of default has occurred, he shall proceed in the following manner:
a. Within 20 days after the occurrence of the event of default, he shall ascertain the amount of public funds on deposit in the defaulting depository as disclosed by its records and the amount thereof covered by federal deposit insurance and certify the amounts thereof to each affected governmental unit;
b. Within 10 days after receipt of such certification, each such governmental unit shall furnish to the commissioner verified statements of its public deposits in such defaulting depository as disclosed by its records;
c. Upon receipt of such certificate and statements, he shall ascertain and fix the amount of such public funds on deposit in such defaulting depository, net after deduction of any deposit insurance;
d. He shall ascertain the amount derived or to be derived from the liquidation of the collateral maintained by the defaulting depository pursuant to section 4 of this act, and shall distribute such proceeds pro rata among the governmental units affected to the extent necessary to satisfy the net deposit liabilities to such governmental units;
e. If the proceeds of the sale of the collateral of a defaulting depository which is a State bank, a national bank, a savings bank, or a credit union are insufficient to pay in full the net deposit liability of such depository to all affected governmental units, he shall assess the deficiency against all other such public depositories having public funds on deposit as of the occurrence of the event of default in the proportion that the maximum liability of each such other public depository bears to the aggregate of the maximum liabilities of all such other depositories, but no such assessment shall exceed the maximum liability of any such other depository;
f. If the proceeds of the sale of the collateral of a defaulting depository which is an association are insufficient to pay in full the net deposit liability of such depository to all affected governmental units, he shall assess the deficiency against all such other public depositories having public funds on deposit as of the occurrence of the event of default in the proportion that the maximum liability of each such other public depository bears to the aggregate of the maximum liabilities of all such other depositories, but no such assessment shall exceed the maximum liability of any such other depository;
g. Assessments so made by the commissioner shall be payable on the fifth day following the demand therefor by the commissioner. On default of such payment by any such other public depository, the commissioner shall take possession of and liquidate so much of the eligible collateral maintained by such depository as shall be necessary to satisfy the assessment so made. If the proceeds of the liquidation of the eligible security are insufficient to pay such assessment in full, the commissioner may sue to recover the amount of the deficiency within the limits of the depository's maximum liability.
h. All sums so collected by the commissioner shall be paid by him to the governmental units having deposits in the defaulting depository in the proportion that the net deposit liability to each such governmental unit bears to the aggregate of the net deposit liabilities to all such governmental units;
i. No State bank, national bank, savings bank, or credit union shall be liable with respect to the occurrence of an event of default of an association, and no association shall be liable with respect to the occurrence of an event of default of a State bank, a national bank, a savings bank, or a credit union.
##### **§ 17:9-46** Distribution of proceeds of liquidation of defaulting depository {#sec-17-9-46 omnilex-key=us-nj-statutes--title-17--17:9-46}
Upon payment to a governmental unit, the commissioner shall be subrogated to all of such governmental unit's right, title and interest against the defaulting depository. All sums received from any distribution of any liquidation of the defaulting depository shall be paid to the affected governmental units to the extent of any unpaid net deposit liability and the balance shall be paid to the public depositories against which assessments were made, in proportion to such assessments. If the commissioner incurs expense in enforcing any such claim, the amount thereof shall be paid as a liquidation expense of the defaulting depository.
##### **§ 17:9-47** Operative date. {#sec-17-9-47 omnilex-key=us-nj-statutes--title-17--17:9-47}
7. The provisions of this act shall become operative on December 1, 1970, but the commissioner may issue appropriate regulations in advance thereof. The provisions of P.L.2009, c.326 (C.17:9-43.1 et al.), amending and supplementing the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.), shall become operative on July 1, 2010, but the commissioner may issue appropriate regulations in advance thereof.
##### **§ 17:9-48** Short title {#sec-17-9-48 omnilex-key=us-nj-statutes--title-17--17:9-48}
This act shall be known and may be cited as the "Governmental Unit Deposit Protection Act."
## **Chapter 9A** {#struct-chapter-9a}
##### **§ 17:9A-1** Definitions {#sec-17-9a-1 omnilex-key=us-nj-statutes--title-17--17:9A-1}
1. As used in this act, and except as otherwise expressly provided in this act:
(1) "Bank" shall include the following:
(a) Every corporation heretofore organized pursuant to the act entitled "An act concerning banks and banking (Revision of 1899)," approved March 24, 1899;
(b) Every corporation heretofore organized pursuant to the act entitled "An act concerning trust companies (Revision of 1899)," approved March 24, 1899;
(c) Every corporation heretofore organized pursuant to chapter 4 of Title 17 of the Revised Statutes;
(d) Every corporation, other than a savings bank, heretofore authorized by any general or special law of this State to transact business as a bank or as a trust company, or as both;
(e) Every corporation hereafter organized pursuant to article 2 of this act;
(2) "Banking institution" shall mean a bank, an out-of-State bank having a branch office in this State, an out-of-country bank having a branch office in this State, savings bank, and a national banking association having its principal or a branch office in this State;
(3) "Board of managers" of a savings bank shall include the board of trustees of a savings bank;
(4) "Capital stock" shall include both common stock and preferred stock;
(5) "Certificate of incorporation," unless the context requires otherwise, shall mean:
(a) The certificate of incorporation, together with all amendments thereto, of every bank and savings bank organized pursuant to any general law of this State;
(b) The charter, together with all amendments thereto, of every bank and savings bank organized pursuant to any special law of this State;
(6) "Commissioner" shall mean the Commissioner of Banking and Insurance of New Jersey;
(7) "Department" shall mean the Department of Banking and Insurance of New Jersey;
(8) "Fiduciary" shall include trustee, executor, administrator, receiver, guardian, assignee, and every other person occupying any other lawful office or employment of trust;
(9) "Manager" of a savings bank shall include a trustee of a savings bank;
(10) "Municipality" shall mean a city, town, township, village, and borough of this State;
(11) "Population" shall mean the population as determined by the latest federal census or as determined by the commissioner from other information which he may deem reliable;
(12) "Qualified bank" shall mean:
(a) A bank or an out-of-State bank with a branch office in New Jersey which has heretofore been authorized or which shall hereafter be authorized to exercise any of the powers authorized by section 28 of P.L.1948, c.67 (C.17:9A-28);
(b) A savings bank which has heretofore been authorized or which shall hereafter be authorized to exercise any of the powers authorized by section 28 of P.L.1948, c.67 (C.17:9A-28); and
(c) A national banking association having its principal or a branch office in this State authorized to act as a fiduciary;
(13) "Savings bank" shall include the following:
(a) Every corporation heretofore organized pursuant to the act entitled "An act concerning savings banks," approved April 12, 1876;
(b) Every corporation heretofore organized pursuant to the act entitled "An act concerning savings banks," approved May 2, 1906;
(c) Every corporation heretofore organized pursuant to chapter 6 of Title 17 of the Revised Statutes;
(d) Every corporation, other than a bank, authorized by any general or special law of this State to carry on the business of a savings bank or institution or society for savings;
(e) Every corporation hereafter organized pursuant to article 3 of P.L.1948, c.67 (C.17:9A-7 and 17:9A-8) or P.L.1982, c.9 (C.17:9A-8.1 et seq.);
(14) "Branch office" of a bank or savings bank shall mean an office, unit, station, facility, terminal, space or receptacle at a fixed location other than a principal office and other than a trust office, however designated, at which any business that may be conducted in a principal office of a bank or savings bank may be transacted. "Branch office" includes a full branch office and a minibranch office, but does not include a trust office or a communication terminal facility;
(15) "Full branch office" means a branch office of a bank or savings bank not subject to the limitations or restrictions imposed upon minibranch offices or communication terminal facilities;
(16) "Minibranch office" means a branch office of a bank or savings bank which does not occupy more than 500 square feet of floor space and which does not contain more than four teller stations, manned by employees of the bank or savings bank;
(17) "Communication terminal facility" means a facility of a bank or savings bank which is unmanned and which consists of equipment, structures or systems, by means of which information relating to financial services rendered to the public is transmitted and through which transactions with banks and savings banks are consummated, either instantaneously or otherwise;
(18) "Secondary mortgage loan" means a loan made to an individual, association, joint venture, partnership, limited partnership association, or any other group of individuals however organized, except a corporation, which is secured in whole or in part by a lien upon any interest in real property, including, but not limited to, shares of stock in a cooperative corporation, created by a security agreement, including a mortgage indenture, or any other similar instrument or document, which real property is subject to one or more prior mortgage liens and which is used as a dwelling, including a dual purpose or combination type dwelling which is also used as a business or commercial establishment, and has accommodations for not more than six families, except that a loan which: (a) is to be repaid in 90 days or less; (b) is taken as security for a home repair contract executed in accordance with the provisions of P.L.1960, c.41 (C.17:16C-62 et seq.); or (c) is the result of the private sale of a dwelling, if title to the dwelling is in the name of the seller and the seller has resided in said dwelling for at least one year, if the buyer is purchasing said dwelling for his own residence and, as part of the purchase price, executes a secondary mortgage in favor of the seller, shall not be included within the definition of "secondary mortgage loan";
(19) With respect to savings banks, "director" and "board of directors" may be used to mean "manager" and "board of managers," respectively;
(20) "Foreign bank" means a company, other than a banking institution, organized under the laws of the United States, another state, or a foreign government, which is authorized by the laws under which it is organized to exercise some or all of the powers specified in paragraph (4) of section 24 of P.L.1948, c.67 (C.17:9A-24), paragraphs (4), (5) and (13) of section 25 of P.L.1948, c.67 (C.17:9A-25), and paragraphs (3) through (9), inclusive, of section 28 of P.L.1948, c.67 (C.17:9A-28);
(21) "Home state" means:
(a) with respect to a national bank, the state in which the main office is located; and
(b) with respect to a state bank, the state by which the bank is chartered;
(22) "Host state" means, with respect to a bank, a state, other than the home state of the bank, in which the bank maintains, or seeks to establish and maintain, a branch office.
For purposes of this subsection and subsection (21), "bank" means a State bank as defined in the Federal Deposit Insurance Act, 12 U.S.C. s.1813(a)(2);
(23) "Out-of-State bank" means a state bank, as defined in the Federal Deposit Insurance Act, 12 U.S.C. s.1813(a)(2), with a home state other than New Jersey;
(24) "Out-of-country bank" means a bank chartered under the laws of a country other than the United States;
(25) "Interstate merger transaction" means:
(1) The merger or consolidation of banks with different home states, and the conversion of branches of any bank involved in the merger or consolidation into branches of the resulting bank; or
(2) The purchase of all or substantially all of the assets, the assumption of all or substantially all of the liabilities, or both, including all or substantially all of the branches, of a bank whose home state is different from the home state of the acquiring bank;
(26) "State" means any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands;
(27) "Resulting bank" means a state or federally chartered bank or state chartered savings bank that has resulted from an interstate merger transaction pursuant to P.L.1948, c.67 (C.17:9A-1 et seq.);
(28) "Trust office" means an office, unit, station, facility, or space at a fixed location, other than a principal office, however designated, at which business that may be conducted at the principal office may be transacted and the primary activities conducted include the transaction of trust business as defined in paragraph (2) of subsection D of section 316 of P.L.1948, c.67 (C.17:9A-316), but at which no deposits may be taken other than assets to be held in trust.
##### **§ 17:9A-2** Application of act. {#sec-17-9a-2 omnilex-key=us-nj-statutes--title-17--17:9A-2}
2. Application of act.
A. No corporation, other than a national banking association, shall hereafter be organized to transact the business of a bank or savings bank in this State, except as provided in this act.
B. The provisions of this act, except as in this act otherwise expressly provided, shall apply to every bank and savings bank heretofore or hereafter organized.
C. The powers and privileges heretofore conferred upon banks and savings banks heretofore formed under any general or special law of this State shall, unless otherwise provided in this act, be abridged, repealed, modified, or enlarged to conform to the provisions of this act.
D. The provisions of this act all apply to national banking associations authorized to transact business in this State, to the extent that such provisions are not inconsistent with and do not infringe paramount federal laws governing national banking associations.
##### **§ 17:9A-2.1** Authority of commissioner relative to out-of-State supervisor {#sec-17-9a-2.1 omnilex-key=us-nj-statutes--title-17--17:9A-2.1}
27. The commissioner is authorized to enter into contracts with bank supervisors of other states for the purpose of establishing effective and efficient supervisory and regulatory structures and practices with respect to the provisions of sections 1 through 26 of this 1996 amendatory and supplementary act.
##### **§ 17:9A-3** Incorporation; certificate of incorporation; officers, directors and employees as incorporators {#sec-17-9a-3 omnilex-key=us-nj-statutes--title-17--17:9A-3}
Incorporation; certificate of incorporation; officers, directors and employees as incorporators.
A. Seven or more persons, of full age, may incorporate a bank on the terms and conditions prescribed by this act. Such persons shall execute and acknowledge a certificate of incorporation stating:
(1) The name by which the bank shall be known;
(2) The street, street number, if any, and municipality in which the principal office of the bank is to be located;
(3) The powers authorized by this act which the bank will have power to exercise;
(4) The amount of the capital stock, the number of shares into which it is divided, and the par value of each share;
(5) The amount of surplus with which the bank will commence business;
(6) The amount of the fund reserved for organization expense pursuant to section 5;
(7) The names and residences of the incorporators, and the number of shares subscribed for by each;
(8) The number of directors, or that the number of directors shall be not less than a stated minimum, or more than a stated maximum;
(9) The names of the persons who will serve as directors until the first annual meeting of stockholders; and
(10) Such other provisions, not inconsistent with this act, as the incorporators may choose to insert for the regulation of the business and affairs of the bank.
The certificate of incorporation may provide that a director or officer shall not be personally liable, or shall be liable only to the extent therein provided, to the bank or its stockholders for damages for breach of any duty owed to the bank or its stockholders, except that such provision shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (a) in breach of such person's duty of loyalty to the bank or its stockholders, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by such person of an improper personal benefit. If such a provision is not included in the original certificate of incorporation, it may be added by an amendment effected in accordance with section 117 of P.L. 1948, c. 67 (C. 17:9A-117). As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the bank or its stockholders in connection with a matter in which he has a material conflict of interest.
B. An officer, director or employee of any bank may be an incorporator of another bank when not inconsistent with such person's fiduciary duty or other applicable law.
##### **§ 17:9A-4** Capital stock and surplus {#sec-17-9a-4 omnilex-key=us-nj-statutes--title-17--17:9A-4}
A. The capital stock of every bank hereafter organized shall amount to not less than:
(1) $100,000.00, if the population of the municipality wherein the principal office of the bank is to be located does not exceed 10,000;
(2) $150,000.00, if the population of such municipality exceeds 10,000, but does not exceed 50,000;
(3) $200,000.00, if the population of such municipality exceeds 50,000, but does not exceed 100,000;
(4) $300,000.00, if the population of such municipality exceeds 100,000, but does not exceed 200,000;
(5) $500,000.00, if the population of such municipality exceeds 200,000; provided that, if the certificate of incorporation states that the bank shall be authorized to exercise all or any of the powers specified in section 28, its capital stock shall be not less than $500,000.00.
B. If the commissioner shall find that the principal office of a bank will be located in a municipality which serves as a business or as a banking center for outlying districts not otherwise adequately provided with banking facilities, so that such bank will transact business with a substantial number of persons who do not reside in the said municipality; or if the commissioner shall find that, because of its location, a bank will transact a substantial part of its business with persons from a neighboring municipality or municipalities, the commissioner may, in his discretion, require that the capital stock with which such bank shall commence business, shall equal the minimum capital stock which would be required of the bank if its principal office were to be located in a municipality having a population equal to that of the combined populations of the municipality in which it is to be located and of the area, outside such municipality, which it will serve.
C. Every bank hereafter organized shall commence business with a surplus at least equal to 20% of its capital stock.
##### **§ 17:9A-5** Reserve for organization expense {#sec-17-9a-5 omnilex-key=us-nj-statutes--title-17--17:9A-5}
Every bank shall, on its organization, establish a fund at least equal to 5% of its capital stock as a reserve fund for organization expense. Organization expense shall mean all lawful expense incurred preliminary to commencement of business. Any unexpended balance in the fund shall be credited to undivided profits.
##### **§ 17:9A-6** Capital stock; par value and classes {#sec-17-9a-6 omnilex-key=us-nj-statutes--title-17--17:9A-6}
A. Except as otherwise provided in this section the par value of the shares of the capital stock issued by any bank shall be not less than $2.00 per share.
B. A bank may create and issue common stock and preferred stock.
C. The minimum par value imposed by subsection A of this section shall not apply to stock issued before the effective date of this act. Notwithstanding any other provision of this act, any bank heretofore organized may, in increasing or decreasing its capital stock, or in converting its preferred stock into common stock, assign to its shares the same par value as that assigned to such stock issued and outstanding on the effective date of this act.
##### **§ 17:9A-6.1** Authorized but unissued stock provided for {#sec-17-9a-6.1 omnilex-key=us-nj-statutes--title-17--17:9A-6.1}
A bank may, in its original or amended certificate of incorporation make provision for authorized but unissued stock. Such stock may, with the approval of the Commissioner of Banking as hereinafter provided, be issued for such purposes, in addition to the purposes expressly authorized by law, and for such consideration as the board of directors may determine. So long as such stock remains unissued, it shall not constitute capital stock for the purposes of the act to which this act is a supplement.
##### **§ 17:9A-6.2** Certificate of amendment, procedure, filing {#sec-17-9a-6.2 omnilex-key=us-nj-statutes--title-17--17:9A-6.2}
2. Prior to the time when authorized or unissued shares are issued by a bank, a certificate of amendment made by two officers of the bank, one of whom shall be the president or a vice-president, shall be filed in the Department of Banking and Insurance. The certificate of amendment shall state (a) the amount of the authorized but unissued stock which will be issued; (b) the consideration which will be received by the bank on the issuance of such stock; (c) the date upon which the stock will be issued; and (d) the amount of the bank's capital stock which will be outstanding, and the amount of its surplus after giving effect to such issue. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or disapproved earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment. The commissioner may disapprove a filing if the commissioner finds that the issuance of the stock will be in violation of law or contrary to the public interest or that the bank's original or amended certificate of incorporation does not provide for authorized but unissued stock. A certificate filed in the department pursuant to this section shall be deemed for all purposes to be an amending of the bank's certificate of incorporation with the same effect as if it had been authorized, executed, approved and filed in such department pursuant to article 19 of P.L.1948, c.67 (C.17:9A-116 et seq.).
##### **§ 17:9A-6.3** Consideration for issue; preemptive rights {#sec-17-9a-6.3 omnilex-key=us-nj-statutes--title-17--17:9A-6.3}
Authorized but unissued stock may be issued pursuant to this act for cash or for consideration other than cash, and may be issued without first being offered to existing stockholders.
##### **§ 17:9A-7** Incorporation of savings bank {#sec-17-9a-7 omnilex-key=us-nj-statutes--title-17--17:9A-7}
Nine or more persons, of full age, may incorporate a savings bank on the terms and provisions prescribed by this act. Such persons shall execute and acknowledge a certificate of incorporation stating:
(1) the name by which the savings bank shall be known;
(2) the street, street number, if any, and municipality in which the principal office of the savings bank is to be located;
(3) the amount of the capital deposits with which the savings bank will commence business;
(4) the names and addresses of the incorporators;
(5) the number of managers, or that the number of managers shall be not less than a stated minimum or more than a stated maximum;
(6) the names of the persons who will serve as managers until their successors are elected and qualify;
(7) such fiduciary powers, if any, as the savings bank shall be authorized to exercise; and
(8) such other provisions, not inconsistent with this act, as the incorporators may choose to insert for the regulation of the business and affairs of the savings bank.
##### **§ 17:9A-8** Capital deposits; payment {#sec-17-9a-8 omnilex-key=us-nj-statutes--title-17--17:9A-8}
Capital deposits; payment.
A. The capital deposits in every savings bank hereafter organized shall amount to not less than:
(1) $100,000.00, if the population of the municipality wherein the principal office of the savings bank is to be located does not exceed 10,000;
(2) $150,000.00, if such population exceeds 10,000 but does not exceed 50,000;
(3) $200,000.00, if such population exceeds 50,000 but does not exceed 100,000;
(4) $300,000.00, if such population exceeds 100,000 but does not exceed 200,000;
(5) $500,000.00, if such population exceeds 200,000; provided, that if the certificate of incorporation states that the savings bank shall be authorized to exercise any of the powers specified in section 28, its capital deposits shall not be less than $500,000.00.
B. The savings bank shall be liable to the depositors or their legal representatives or assigns for the amount of the capital deposits respectively paid in by them, which shall be repaid to them subject to such regulations as are applicable to other deposits and which shall be entitled to interest and dividends at the same rate and under the same regulations as are applicable to other deposits; provided, that, until such time as the surplus of the savings bank shall amount to not less than the original capital deposits, or 5% of other regular deposits, whichever is greater, no part of the capital deposits, other than interest or dividends thereon, may be withdrawn, and until such time, the capital deposits shall be subordinate to all other deposits and liabilities of the savings bank. When the surplus shall equal the amount in this subsection specified, the capital deposits may be withdrawn or transferred to regular deposits accounts in such amounts from time to time as shall not reduce the surplus below the amount so specified.
##### **§ 17:9A-8.1** Definitions {#sec-17-9a-8.1 omnilex-key=us-nj-statutes--title-17--17:9A-8.1}
For the purposes of this act:
a. "Capital stock savings bank" means a savings bank organized or converted pursuant to this act;
b. "Commissioner" means the Commissioner of Banking;
c. "Department" means the Department of Banking.
##### **§ 17:9A-8.2** Capital stock savings bank incorporation {#sec-17-9a-8.2 omnilex-key=us-nj-statutes--title-17--17:9A-8.2}
Nine or more persons, over the age of 18 years, may incorporate a capital stock savings bank in this State on the terms and provisions prescribed by this act. They shall execute and acknowledge a certificate of incorporation stating:
a. The name by which the capital stock savings bank shall be known;
b. The street, street number, if any, and municipality in which the principal office of the capital stock savings bank is to be located;
c. The amount of the capital stock, the number of shares into which it is divided, and the par value of each share;
d. The amount of surplus with which the capital stock savings bank will commence business;
e. The names and addresses of the incorporators;
f. The number of directors, or that the number of directors shall be not less than a stated minimum or more than a stated maximum;
g. The names of the persons who will serve as directors until their successors are elected and qualify;
h. Any fiduciary powers that the capital stock savings bank shall be authorized to exercise; and
i. Any other provisions, not inconsistent with this act, which the incorporators choose to insert for the regulation of the business and affairs of the capital stock savings bank.
The certificate of incorporation may provide that a director or officer shall not be personally liable, or shall be liable only to the extent therein provided, to the capital stock savings bank or its stockholders for damages for breach of any duty owed to the capital stock savings bank or its stockholders, except that such provision shall not relieve a director or officer from liability for an act or omission (a) in breach of such person's duty of loyalty to the capital stock savings bank or its stockholders, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by such person of an improper personal benefit. If such a provision is not included in the original certificate of incorporation, it may be added by an amendment effected in accordance with section 117 of P.L. 1948, c. 67 (C. 17:9A-117). As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the capital stock savings bank or its stockholders in connection with a matter in which he has a material conflict of interest.
##### **§ 17:9A-8.3** Capital stock; reserve fund; surplus {#sec-17-9a-8.3 omnilex-key=us-nj-statutes--title-17--17:9A-8.3}
The capital stock for every capital stock savings bank hereafter organized shall be the amount required for banks pursuant to the provisions of section 4 of P.L.1948, c. 67 (C. 17:9A-4). Every capital stock savings bank shall, on its organization, establish a fund at least equal to 5% of its capital stock as a reserve fund for organization expense. Organization expense shall mean all lawful expense incurred prior to the commencement of business. Any unexpended balance in the fund shall be credited to undivided profits. The par value of the shares of the capital stock issued by any savings bank shall not be less than $2.00 per share. Every capital stock savings bank shall commence business with a surplus at least equal to 20% of its capital stock.
##### **§ 17:9A-8.4** Application for charter; provisions governing {#sec-17-9a-8.4 omnilex-key=us-nj-statutes--title-17--17:9A-8.4}
Application for a charter, a hearing thereon, and approval by the commissioner shall be governed by the provisions of Article 4 of P.L.1948, c. 67 (C. 17:9A-9 et seq.).
##### **§ 17:9A-8.5** Provision for authorized but unissued stock {#sec-17-9a-8.5 omnilex-key=us-nj-statutes--title-17--17:9A-8.5}
5. a. A capital stock savings bank may, in its original or amended certificate of incorporation, make provision for authorized but unissued stock. This stock may, with the approval of the commissioner, be issued for those purposes, in addition to the purposes expressly authorized by law, and for any consideration which the board of directors may determine. So long as this stock remains unissued, it shall not constitute capital stock for the purposes of the act to which this act is a supplement.
b. Prior to the time when authorized but unissued shares are issued by a capital stock savings bank, a certificate of amendment made by two officers of the savings bank, one of whom shall be the president or a vice-president, shall be filed with the department. The certificate of amendment shall state: (1) the amount of the authorized but unissued stock which will be issued; (2) the consideration which will be received by the capital stock savings bank on the issuance of the stock; (3) the date the stock will be issued; (4) the amount of the capital stock which will be outstanding; and (5) the amount of surplus after giving effect to the issue. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or disapproved earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment. The commissioner may disapprove a filing if the commissioner finds that the issuance of the stock will be in violation of law or contrary to the public interest or that the capital stock savings bank's original or amended certificate of incorporation does not provide for authorized but unissued stock. A certificate filed with the department pursuant to this section shall be deemed for all purposes to be an amendment of the certificate of incorporation.
c. A capital stock savings bank may issue preferred stock in accordance with the provisions of Article 20 of P.L.1948, c. 67 (C. 17:9A-124 to 17:9A-130).
##### **§ 17:9A-8.6** Certificate of incorporation; amendments; provisions governing {#sec-17-9a-8.6 omnilex-key=us-nj-statutes--title-17--17:9A-8.6}
Amendments to the certificate of incorporation of a capital stock savings bank shall be effected pursuant to the provisions of Article 19 of P.L.1948, c. 67 (C. 17:9A-116 to 17:9A-123).
##### **§ 17:9A-8.7** Bylaws; powers of stockholders; provisions governing {#sec-17-9a-8.7 omnilex-key=us-nj-statutes--title-17--17:9A-8.7}
The stockholders of a capital stock savings bank shall have the power to make, alter and repeal bylaws pursuant to the provisions of Article 16 of P.L.1948, c. 67 (C. 17:9A-76 to 17:9A-78).
##### **§ 17:9A-8.8** Annual meetings; voting rights and liability of stockholders; books and records; provisions governing {#sec-17-9a-8.8 omnilex-key=us-nj-statutes--title-17--17:9A-8.8}
The annual meetings, voting rights of stockholders, liability of stockholders, and the maintenance of a capital stock savings bank's books and records shall be governed by the provisions of Article 17 of P.L.1948, c. 67 (C. 17:9A-79 to 17:9A-100).
##### **§ 17:9A-8.9** Dividends; law applicable {#sec-17-9a-8.9 omnilex-key=us-nj-statutes--title-17--17:9A-8.9}
A capital stock savings bank may declare dividends on its capital stock pursuant to the provisions of section 52 of P.L.1948, c. 67 (C. 17:9A-52).
##### **§ 17:9A-8.10** Stock options; law applicable {#sec-17-9a-8.10 omnilex-key=us-nj-statutes--title-17--17:9A-8.10}
A capital stock savings bank shall have the authority to grant stock options to officers and employees pursuant to the provisions of P.L.1964, c. 202 (C. 17:9A-27.50 to 17:9A-27.54).
##### **§ 17:9A-8.11** Mergers with savings banks; provisions governing {#sec-17-9a-8.11 omnilex-key=us-nj-statutes--title-17--17:9A-8.11}
A capital stock savings bank may merge with another savings bank, whether mutual or capital stock, pursuant to the provisions of Article 21 of P.L.1948, c. 67 (C. 17:9A-132 to 17:9A-148).
##### **§ 17:9A-8.12** Savings bank laws control {#sec-17-9a-8.12 omnilex-key=us-nj-statutes--title-17--17:9A-8.12}
12. All other powers, rights, and privileges not expressly provided for in this act shall be governed by the laws of this State relating to savings banks. If a capital stock savings bank engages in an activity pursuant to the authority of this act, or any other act, which is governed by a statute originally applicable to mutual savings banks, "manager" shall mean "director." In any case where any power of investment of a mutual savings bank is limited to a percentage of its capital deposits or surplus, any limitation upon a stock savings bank shall be expressed in terms of total capital funds, as defined by the commissioner by regulation.
##### **§ 17:9A-8.13** Savings bank; conversion into capital stock savings bank {#sec-17-9a-8.13 omnilex-key=us-nj-statutes--title-17--17:9A-8.13}
a. A savings bank which is organized pursuant to the provisions of P.L.1948, c. 67 (C. 17:9A-1 et seq.) may convert itself into a capital stock savings bank with the same effect as though originally incorporated as a capital stock savings bank pursuant to the provisions of this act.
b. When, in the judgment of two-thirds of the members of the board of the savings bank, it is deemed advisable and in the best interests of its depositors that the savings bank shall be converted into a capital stock savings bank, the board shall adopt a resolution to that effect, and follow procedures prescribed by the commissioner. A copy of the minutes of the proceedings of the board shall be filed in the office of the commissioner within the time and in the form and manner prescribed by the commissioner.
c. The managers of the savings bank shall be deemed the incorporators of the capital stock savings bank and shall execute a certificate of incorporation as provided for in section 1 of this act, together with an application for conversion which shall contain the plan of conversion established pursuant to this act. Upon finding by the commissioner that:
(1) the plan of conversion has been adopted and approved by the board of managers as provided herein; and
(2) the plan of conversion is fair and equitable to all depositors; and
(3) sufficient provision has been made to protect the interests of the depositors of the prospective capital stock savings bank; he shall issue a certificate of approval of the conversion which shall be endorsed upon or annexed to the certificate of incorporation.
d. Upon the conversion of the savings bank, the legal existence of the savings bank shall not terminate but the capital stock savings bank shall be a continuation of the entity of the savings bank and all property of the savings bank, including its right, title and interest in and to all property of whatever kind and nature, whether real, personal, or mixed, and things, and choses in action, and every right, privilege, interest and asset of every conceivable value or benefit then existing or pertaining to it, or which would inure to it, immediately by operation of law and without the necessity of any conveyance or transfer and without any further act or deed shall vest in the capital stock savings bank into which the savings bank has converted itself. The capital stock savings bank shall have, hold, and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the savings bank. The capital stock savings bank at the time and the taking effect of the conversion shall continue to have and succeed to all the rights, obligations and relations of the savings bank. All pending actions and other judicial or administrative proceedings to which the savings bank was a party shall not be discontinued by reason of the conversion, but may be prosecuted to final judgment or order in the same manner as if the conversion had not been made and the capital stock savings bank resulting from the conversion may continue the actions in its corporate name notwithstanding the conversion. Any judgment or order may be rendered for or against it which might have been rendered for or against the savings bank involved in the judicial proceedings.
##### **§ 17:9A-8.14** Plan of conversion {#sec-17-9a-8.14 omnilex-key=us-nj-statutes--title-17--17:9A-8.14}
The conversion of a savings bank into a capital stock savings bank shall be effected in accordance with the plan of conversion adopted by two-thirds of the members of the board, and approved by the commissioner, pursuant to the provisions of this act. The plan shall provide:
a. That each depositor in the savings bank shall receive an equivalent type of account in the capital stock savings bank equal in amount to his account in the savings bank;
b. A record date for determining the respective interest of depositors in the savings bank, which date shall be established and published by the commissioner from time to time in his discretion;
c. That participation in the initial issuance of capital stock by officers, directors, and employees of the capital stock savings bank and their associates shall be in accordance with regulations promulgated by the commissioner. For the purposes of this subsection, the term "associate" of a person shall mean parents, spouse, sisters, brothers, children or anyone married to one of the foregoing persons; any corporation of which the person is an officer, director or owner of more than 10% of the outstanding voting stock; any trust of which the person is a trustee or substantial beneficiary; and any partnership in which the person is a general or limited partner;
d. That the interests of managers or directors, officers, employees and associates, as that word is defined in subsection c. of this section, shall be disclosed in the application for conversion filed with the commissioner;
e. That each depositor as of the record date shall receive any rights with respect to the capital stock of the capital stock savings bank as may be prescribed by the commissioner;
f. A date upon which the savings bank shall advise qualified depositors of their rights and elections with respect to conversion. The form and content of the notice shall be prescribed by the commissioner;
g. A provision for a liquidation account on terms established or approved by the commissioner.
##### **§ 17:9A-8.15** Capital structure; converted bank {#sec-17-9a-8.15 omnilex-key=us-nj-statutes--title-17--17:9A-8.15}
After conversion pursuant to the provisions of this act, each capital stock savings bank shall maintain an adequate capital structure appropriate for the conduct of its business and the protection of its depositors. The adequacy of the capital of a capital stock savings bank shall be determined by the commissioner after an evaluation of the character of management, the liquidity of assets, a history of earnings and the retention thereof, the potential volatility of the deposit structure and the capital stock savings bank's capacity to furnish the broadest services to the public.
##### **§ 17:9A-8.16** Federal savings bank; conversion {#sec-17-9a-8.16 omnilex-key=us-nj-statutes--title-17--17:9A-8.16}
No savings bank or capital stock savings bank shall convert to a federal savings bank without the approval of the commissioner. The commissioner shall approve the conversion if he finds it to be in the public interest.
##### **§ 17:9A-8.17** Rules and regulations {#sec-17-9a-8.17 omnilex-key=us-nj-statutes--title-17--17:9A-8.17}
The commissioner may promulgate rules and regulations necessary to effectuate the purposes of this act.
##### **§ 17:9A-9** Application for charter {#sec-17-9a-9 omnilex-key=us-nj-statutes--title-17--17:9A-9}
A. The certificate of incorporation of every bank and savings bank shall be submitted to the commissioner within 60 days after its execution, together with an affidavit made by each of the incorporators, setting forth:
(1) that no fee, commission or other compensation has been paid, directly or indirectly, by the bank or savings bank or by anyone in its behalf for securing subscriptions for or selling stock in the proposed bank or for procuring capital deposits for the proposed savings bank, and that no promotion fees or charges have been provided for or are in anywise contemplated;
(2) a complete disclosure of all fees paid or agreed to be paid in the matter of chartering and organizing the proposed bank or savings bank;
(3) that, except as otherwise stated in the affidavit, the incorporators are the true and only parties in interest; and
(4) that, in the case of a bank, the entire capital stock has been subscribed for, and that each subscriber has undertaken in writing to pay in cash, upon approval according to law of the certificate of incorporation, his proportionate share of the capital stock, surplus and reserve fund for organization expense, specified in the certificate of incorporation; or that, in case of a savings bank, the capital deposits have been subscribed in full, and each subscriber has undertaken in writing to pay in cash, upon approval according to law of the certificate of incorporation, his proportionate share of the capital deposits.
B. The submission of the certificate of incorporation and affidavit shall constitute the application for a charter under this act.
##### **§ 17:9A-10** Hearing on application for charter; notice and publication {#sec-17-9a-10 omnilex-key=us-nj-statutes--title-17--17:9A-10}
If the commissioner shall find that the certificate of incorporation and the affidavit specified in section 9 comply with the requirements of this act, he shall designate a time and a place for a hearing upon the application for charter, which shall be not less than six weeks and not more than eight weeks after the date of the submission of the application for the charter to the commissioner. Within ten days from the day upon which the commissioner makes such designation, the incorporators shall cause publication to be begun of a notice of the application for charter. Such publication shall be made once a week for four successive weeks in one newspaper to be designated by the commissioner, published and circulated in the municipality in which the bank or savings bank proposes to maintain its principal office, or, if there be no such newspaper, then in one published in the county in which the bank or savings bank proposes to maintain its principal office, or in an adjoining county, and which has a general circulation in such municipality. The notice shall specify the names of the proposed incorporators, the name of the proposed bank or savings bank, the location of its principal office, the amount of its capital stock and surplus or the amount of its capital deposits, as the case may be, and the time and place fixed for the hearing. At least three weeks before the date set for hearing, the incorporators shall cause a copy of the notice to be mailed to every banking institution which has its principal office or a branch office within five miles of the place where the principal office of the proposed bank or savings bank will be located, and to such other banking institutions as the commissioner may designate.
##### **§ 17:9A-11** Hearing on application for charter; approval {#sec-17-9a-11 omnilex-key=us-nj-statutes--title-17--17:9A-11}
A. At the time and place designated for the hearing, the incorporators shall file proof with the commissioner that the publication and mailing of the notice of application for charter have been made in the manner required by section 10. If the commissioner shall find that proper publication and mailing have been made, he shall proceed with the hearing on the application, and shall afford all those desirous thereof, an opportunity to be heard. In addition to the matters presented at the hearing, the commissioner shall consider such facts and circumstances as he may determine to be relevant as a result of an independent investigation made or caused to be made by him.
B. The commissioner shall, within 90 days after the hearing, approve or disapprove the application and shall file a written memorandum of his decision in the department in which he shall state the reasons for his decision.
C. If the certificate of incorporation states that the proposed bank or savings bank is to be authorized to exercise any of the powers specified in section 28 which are permitted to it under this act, the commissioner shall give special consideration to the following in determining whether to approve or disapprove the application for charter:
(1) The needs of the community for trust services, and the probable volume of trust business which will be available to the bank or savings bank;
(2) The nature of the supervision to be given to the proposed fiduciary activities;
(3) Whether the bank or savings bank has available competent legal counsel to advise and pass upon trust matters whenever necessary; and
(4) Any other matters which in the discretion of the commissioner are relevant.
D. If the commissioner shall determine, as a result of the hearing and of the independent investigation made or caused to be made by him
(1) That the interest of the public will be served to advantage by the establishment of the proposed bank or savings bank;
(2) That conditions in the locality in which the proposed bank or savings bank will transact business afford reasonable promise of successful operation;
(3) That the directors or managers designated in the certificate of incorporation possess the qualifications, experience and character required for the duties and responsibilities with which they will be charged;
(4) That no fees, commissions, or other compensation have been paid for the promotion of the bank or savings bank, or for the sale of the stock of the bank, or for obtaining subscriptions for the capital deposits of the savings bank; and
(5) That, in the case of a bank, the entire capital stock has been subscribed for, and that each subscriber has undertaken in writing to pay in cash, upon approval according to law of the certificate of incorporation, his proportionate share of the capital stock, surplus and reserve fund for organization expense, specified in the certificate of incorporation; or
(6) That, in the case of a savings bank, the capital deposits have been subscribed in full, and each subscriber has undertaken in writing to pay in cash, upon approval according to law of the certificate of incorporation, his proportionate share of the capital deposits;
and if the certificate of incorporation of the proposed bank or savings bank states that it is to be authorized to exercise any of the powers specified in section 28 which are permitted to it under this act,
(7) That, in the case of a bank, the capital stock is not less than $500,000.00; or that, in the case of a savings bank, the capital deposits are not less than $500,000.00; and
(8) That, having given consideration to the matters specified in subsection C of this section, the bank or savings bank should be authorized to exercise such stated powers;
he shall approve the application.
##### **§ 17:9A-12** Filing of certificate of incorporation; amendment prior to payment of capital stock or capital deposits {#sec-17-9a-12 omnilex-key=us-nj-statutes--title-17--17:9A-12}
A. If the application shall be approved by the commissioner, he shall endorse upon or annex to the certificate of incorporation a certificate of approval and the certificate of incorporation shall thereupon be filed in the department.
B. The incorporators may amend the certificate of incorporation after its filing pursuant to subsection A of this section, and before payment of all or any part of the capital stock, surplus and reserve for organization expense, in the case of a bank, and before payment of all or any part of the capital deposits, in the case of a savings bank, by submitting to the commissioner an amended certificate of incorporation, which shall conform to section 3 or section 7, as the case may be, together with the affidavit required by section 9. Thereafter, all proceedings thereon shall be the same as provided in the case of an application for charter made pursuant to section 9; provided, that the commissioner may approve the amended certificate and may file it in the department as provided by subsection A of this section, without the prior notice, publication and hearing required by sections 10 and 11; except that such notice, publication and hearing shall be required when the amendment is for the purpose of (1) effecting a change in the location of the principal office to a place which the commissioner finds, from such proof as he may require, or from such investigation as he may cause to be made, is so far removed from such location, that the area which would be served by such office if such change were made would be substantially different from the area which would be served by such office if no change were made; or (2) assuming the authority to exercise any of the powers specified in section 28. An amended certificate of incorporation filed in the department pursuant to this subsection shall, for all purposes, be deemed to have been filed on the date of the filing of the original certificate pursuant to subsection A of this section, and shall, for all purposes, constitute the certificate of incorporation of the bank or savings bank, as the case may be.
##### **§ 17:9A-13** Beginning of corporate existence; certificate of incorporation as evidence {#sec-17-9a-13 omnilex-key=us-nj-statutes--title-17--17:9A-13}
A. Upon the filing of the certificate of incorporation as specified in section 12, the subscribers to the certificate, their successors and assigns, shall be a corporation by the name stated in the certificate, subject to the provisions of this act, and subject to dissolution as in this act or otherwise by law provided; but no bank or savings bank shall transact any business whatsoever, except that relating to its organization, until it has received from the commissioner a certificate of authority to transact business, as hereinafter provided.
B. The certificate of incorporation, or a copy thereof certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:9A-14** Certificate of authority {#sec-17-9a-14 omnilex-key=us-nj-statutes--title-17--17:9A-14}
A. When the bank or savings bank shall have proved to the satisfaction of the commissioner, by affidavit of two of its officers, and when the commissioner shall have verified by examination that
(1) The certificate of incorporation has been filed as specified in section 12;
(2) In the case of a bank, the entire capital stock, surplus, and reserve fund for organization expense, stated in the certificate of incorporation, have been fully paid in cash, unconditionally and without reservation; or
(3) In the case of a savings bank, the entire capital deposits stated in the certificate of incorporation have been fully paid in cash, unconditionally and without reservation; and
(4) The cash paid in for the capital stock and surplus or capital deposits, as the case may be, is on deposit in a banking institution in this State, without offset, claim or demand whatsoever, and subject to withdrawal upon demand,
and when the bank or savings bank shall have proved to the satisfaction of the commissioner that the proposed officers who will have control or supervision of the bank's operations possess the qualifications, experience and character required for the duties and responsibilities with which they will be charged, the commissioner shall issue a certificate of authority to the bank or savings bank wherein it shall be stated that the bank or savings bank therein named has complied with the provisions of this act and is authorized to begin the transaction of the business specified in the certificate of incorporation. A copy of the certificate of authority shall be filed in the department.
B. Upon the issuance of the certificate of authority, the bank or savings bank shall be authorized to begin the transaction of business.
##### **§ 17:9A-15** Review of refusal to issue certificate of authority {#sec-17-9a-15 omnilex-key=us-nj-statutes--title-17--17:9A-15}
The commissioner shall, within 30 days after the filing of the affidavit specified in section 14, issue the said certificate of authority, or notify the bank or savings bank in writing of his reasons for refusing it. The issuance of the certificate of authority shall not be withheld by the commissioner, except when (1) the affidavit specified in section 14 is not in proper form, in which event an opportunity shall be afforded the bank or savings bank to file a proper affidavit, or (2) the commissioner determines that the facts set forth in the affidavit are not true. In addition, the commissioner shall, except as hereinafter provided, withhold the issuance of the certificate of authority until evidence is presented to him that the Federal Deposit Insurance Corporation, or any successor corporation having for its purpose the insurance of deposits, has agreed to accept the bank or savings bank as a member, effective upon the opening for business of the bank or savings bank; but the certificate of authority shall not be withheld because of failure of the bank or savings bank to be accepted for such membership, if the commissioner shall find that the capital stock and surplus of the bank, or the capital deposits of the savings bank, are reasonably adequate to safeguard the interests of depositors notwithstanding the absence of deposit insurance. The commissioner's failure to issue the certificate of authority, and to notify the bank or savings bank in writing of the reason therefor within the specified 30 day period, shall be subject to review, hearing and relief in the Superior Court, in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-16** Organization of a bank or savings bank at location occupied by a bank or savings bank in process of or in contemplation of liquidation {#sec-17-9a-16 omnilex-key=us-nj-statutes--title-17--17:9A-16}
A. As used in this section:
(1) "successor bank" means a bank organized to transact business at one or more of the locations occupied by a predecessor bank;
(2) "predecessor bank" means a bank in liquidation or in contemplation of liquidation;
(3) "successor savings bank" means a savings bank organized to transact business at one or more of the locations occupied by a predecessor savings bank;
(4) "predecessor savings bank" means a savings bank in liquidation or in contemplation of liquidation.
B. When the application for charter discloses that it is proposed to organize a successor bank or a successor savings bank, the commissioner may act immediately thereon, and if he shall be satisfied that the establishment of the successor bank or successor savings bank will tend to continue an established banking business, and that it is in the public interest that such established banking business be so continued, he may approve the application, without the prior notice, publication, and hearing required by sections 10 and 11.
C. Subject to the approval of the commissioner, a predecessor bank may be an incorporator of, and may subscribe for and purchase shares of the capital stock of its successor bank, and may pay for such stock in money or in assets owned by it other than money; in which event, the certificate of incorporation of the successor bank, and the affidavit filed pursuant to section 14, shall state the amount of the entire consideration received by the successor bank upon issuance of its shares, and what part thereof consists of money, and what part thereof consists of consideration other than money.
D. When a predecessor bank is an incorporator of its successor bank, any affidavit or oath required by the provisions of this act to be made by incorporators shall be made on behalf of the predecessor bank by any two of its officers designated by its board of directors.
E. A successor bank may contract with its predecessor bank to liquidate the assets of the predecessor bank upon such terms and conditions as the commissioner shall approve; but this subsection shall not limit the power of the predecessor bank to dissolve voluntarily as by law provided, nor shall it limit or restrict the power of the commissioner to liquidate banks as provided by law.
F. A successor bank may, on its organization, issue preferred stock in such amounts, and subject to such terms and conditions, not inconsistent with the provisions of this act, as the commissioner shall approve.
G. A successor savings bank may, with the approval of the commissioner, purchase and pay for the assets of its predecessor savings bank, and may borrow money for that purpose.
H. This section shall not exempt a successor bank or successor savings bank from any provisions of this act, except to the extent that such provisions are modified or are made inapplicable to successor banks or successor savings banks by the express provisions hereof.
I. A successor bank may be organized only to succeed a predecessor bank, and a successor savings bank may be organized only to succeed a predecessor savings bank.
##### **§ 17:9A-17** Dissolution of bank or savings bank on failure to obtain certificate of authority, or to commence business {#sec-17-9a-17 omnilex-key=us-nj-statutes--title-17--17:9A-17}
A. If a bank or savings bank shall (1) fail to obtain a certificate of authority within 6 months from the date of the commissioner's approval of its certificate of incorporation, or within the extended time hereinafter in this section provided for, or shall (2) fail to commence business within 6 months after the issuance of the certificate of authority, or within the extended time hereinafter in this section provided for, the commissioner may make an order, to be filed in the department, forfeiting the bank's or savings bank's rights, powers and privileges as a corporation, and upon such filing, the corporate rights, powers and privileges of the bank or savings bank shall cease, unless the time herein limited shall be extended by the commissioner upon satisfactory cause shown. Such extension or extensions shall be for such period or periods as the commissioner may specify, not exceeding 12 months in all, and shall be evidenced by a certificate or certificates of the commissioner filed in the department.
B. If proceedings are instituted in accordance with law to review the commissioner's approval of an application for charter pursuant to section 11, or to review the commissioner's failure to issue a certificate of authority pursuant to section 15, the period from the date of the commissioner's approval to the entry of final judgment in such proceedings shall not be considered in computing any 6 months' period limited by subsection A of this section.
##### **§ 17:9A-17.1** Definitions {#sec-17-9a-17.1 omnilex-key=us-nj-statutes--title-17--17:9A-17.1}
1. As used in this act:
"Corporation" means either a capital stock savings bank or a bank, as the case may be.
"Federal Deposit Insurance Corporation" means the corporation so named, organized pursuant to an Act of Congress, or any federal corporation, instrumentality or agency which succeeds to the powers and functions of the Federal Deposit Insurance Corporation or undertakes to discharge the purpose for which that corporation was created.
##### **§ 17:9A-17.2** Conversion of capital stock savings bank, bank; proceedings {#sec-17-9a-17.2 omnilex-key=us-nj-statutes--title-17--17:9A-17.2}
2. A capital stock savings bank may apply to the commissioner to convert itself to a bank by organizing and transferring its assets and liabilities to a newly-chartered bank, and a bank may apply to the commissioner to convert itself to a capital stock savings bank by organizing and transferring its assets and liabilities to a newly-chartered capital stock savings bank, and the proceedings to effect either application for conversion shall be as follows:
a. When, in the judgment of the board of directors of a State chartered capital stock savings bank or bank which intends to convert its charter, it shall be deemed advisable and in the best interests of its stockholders that the same shall be converted into a bank or capital stock savings bank of this State, as the case may be, the board of directors shall adopt a resolution to that effect.
b. After adoption of the resolution, a meeting of the stockholders of the State capital stock savings bank or bank, as the case may be, shall be held upon not less than 10 days' written notice to the stockholders by mail, postage prepaid, directed to the addresses appearing on the books of the corporation, which notice shall contain a statement of the time, place and purpose for which the meeting is called.
c. At the meeting, stockholders may by the affirmative vote of two-thirds of those present, or shares eligible to be voted which are represented at the meeting, either in person or by proxy, declare by resolution the determination to convert the State capital stock savings bank into a State chartered bank or to convert the State bank into a State chartered capital stock savings bank, as the case may be.
d. If the authority for the proposed conversion has been approved by the board of directors and by the stockholders as required by this section, the board of directors of the corporation may apply to the commissioner to convert the charter pursuant to this act.
##### **§ 17:9A-17.3** Contents of application {#sec-17-9a-17.3 omnilex-key=us-nj-statutes--title-17--17:9A-17.3}
3. An application by a State bank or capital stock savings bank to convert its charter pursuant to this act shall contain the following:
a. Duplicate copies of the minutes of the proceedings of the meeting of stockholders, verified by the affidavit of the president or vice-president, and the secretary of the meeting;
b. A certified copy of the resolution of the board of directors authorizing the conversion;
c. A certificate of incorporation meeting the requirements set forth in section 3 of P.L.1948, c.67 (C.17:9A-3), for conversion to a bank, or section 2 of P.L.1982, c.9 (C.17:9A-8.2) for conversion to a capital stock savings bank;
d. Copies of all applications and approvals required from federal regulators incident to the conversion; and
e. Such other information or materials as the commissioner may require by regulation.
##### **§ 17:9A-17.4** Requirements for conversion approval {#sec-17-9a-17.4 omnilex-key=us-nj-statutes--title-17--17:9A-17.4}
4. The commissioner shall not approve the application of a State bank or capital stock savings bank to convert pursuant to this act unless the commissioner finds, after appropriate investigation, and a public hearing if deemed necessary by the commissioner, that the following requirements have been met:
a. The application is complete;
b. The converting corporation is insured by the Federal Deposit Insurance Corporation, and the resulting corporation will also be insured by that agency;
c. The converting corporation satisfies all capital maintenance requirements for banks or capital stock savings banks, as the case may be, set forth by the Federal Deposit Insurance Corporation, by any other federal regulator and by the department;
d. The converting corporation is not subject to any outstanding supervisory order, agreement or memorandum of understanding of the Federal Deposit Insurance Corporation, any other federal regulator or the department;
e. The proposed conversion will result in a bank or capital stock savings bank, as the case may be, that will satisfy all capital maintenance requirements for savings banks or banks, as the case may be, set forth by the Federal Deposit Insurance Corporation, any other federal regulator and the department;
f. Directors designated in the certificate of incorporation possess the qualifications, experience and character required for the duties and responsibilities with which they will be charged; and
g. The interests of the converting corporation's depositors and creditors, and the public generally, will not be jeopardized by the proposed conversion.
##### **§ 17:9A-17.5** Other conditions for conversions under mergers {#sec-17-9a-17.5 omnilex-key=us-nj-statutes--title-17--17:9A-17.5}
5. The commissioner may approve the conversion of a corporation which does not satisfy the capital maintenance requirements set forth in subsection c. of section 4 of this act or which is subject to an outstanding supervisory order, agreement or memorandum of understanding, as provided by subsection d. of section 4 of this act, relating only to its capital condition, or which fails to meet both requirements, when the following requirements, in addition to the requirements set forth in section 4 of this act other than the requirements set forth in subsections c. and d. of section 4 relating to the capital condition of the converting corporation have been met:
a. Simultaneous with the conversion to a capital stock savings bank or bank the converting corporation shall merge with and into or be acquired by, a bank, if the conversion is to a bank; or shall merge with, into or be acquired by a capital stock savings bank if the conversion is to a capital stock savings bank; and
b. The resulting capital stock savings bank or bank immediately after the conversion and merger or acquisition will satisfy all capital maintenance requirements for capital stock savings banks or banks, as the case may be, set forth by the Federal Deposit Insurance Corporation, any other federal regulator and the department.
##### **§ 17:9A-17.6** Notification to applicant {#sec-17-9a-17.6 omnilex-key=us-nj-statutes--title-17--17:9A-17.6}
6. a. Within 60 days of receipt of the information and documents specified in section 3 of this act, the commissioner shall notify the applicant of his intent to approve or deny the application. Approval may be conditional, requiring the applicant to satisfy conditions set by the commissioner. If the commissioner denies the application, the commissioner shall notify the applicant in writing and shall state the basis for the denial.
b. Upon finding that the applicant has met all of the requirements of this act and all conditions imposed under a conditional approval granted by the commissioner pursuant to subsection a. of this section, the commissioner shall issue a certificate of approval of the conversion which shall be endorsed upon or annexed to the certificate of incorporation.
##### **§ 17:9A-17.7** Filing of certificate of incorporation {#sec-17-9a-17.7 omnilex-key=us-nj-statutes--title-17--17:9A-17.7}
7. The certificate of incorporation with the commissioner's approval endorsed thereon or annexed thereto shall be filed in the department, and shall be recorded within 30 days after such approval in the same manner and places as required by section 12 of P.L.1948, c.67 (C.17:9A-12). Upon the approval by the commissioner, the filing of the certificate of incorporation, and the transfer of assets and liabilities, the converting corporation shall cease to be a capital stock savings bank or bank, as the case may be, its legal existence as a corporate entity shall terminate and the bank or capital stock savings bank, as the case may be, shall succeed to all property of the converted corporation, including the right, title and interest in and to all property of whatsoever kind and nature, whether real, personal or mixed and things, and choses in action, and every right, privilege, interest and asset of every conceivable value or benefit then existing or pertaining to it, or which would inure to it, immediately by operation of law and without the necessity for any conveyance or transfer and without any further act or deed, shall vest in the bank or capital stock savings bank which is the resulting entity. The resulting bank or capital stock savings bank, as the case may be, shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the converted corporation. All pending actions and other judicial or administrative proceedings to which the converting corporation was a party shall not be discontinued by reason of the conversion, but may be prosecuted to final judgment or order in the same manner as if the conversion had not been made and the corporation resulting from the conversion may continue such actions in its name after conversion. Any judgment or order may be rendered for or against it which might have been rendered for or against the converting corporation theretofore involved in the judicial proceedings.
##### **§ 17:9A-18** Names of banks, savings banks; use, certain, waiver. {#sec-17-9a-18 omnilex-key=us-nj-statutes--title-17--17:9A-18}
18. A. The name of every bank shall contain the word "bank" or "banking" or "trust," or a combination of the words "bank" or "banking" and "trust," except that no bank which is not qualified to exercise any of the powers specified in section 28 shall use the word "trust" as part of its name. Any bank which, immediately prior to the effective date of this act, lawfully used the word "savings" as part of its name, may continue the use thereof, but no other bank shall hereafter use such word as part of its name.
B. The name of every savings bank shall contain the words "savings bank" or "savings fund society" or "savings institution" or "institution for savings" or "bank for savings " or "bank." Any savings bank which, immediately prior to the effective date of this act, lawfully used the word "trust" as part of its name, may continue the use thereof, but no other savings bank shall hereafter use such word as part of its name.
C. No bank or savings bank shall assume a name identical with that of an existing banking institution, or so similar thereto that confusion may result therefrom; except that, if a bank or savings bank is organized to succeed another bank or savings bank pursuant to section 16, it may adopt the name of the bank or savings bank which it succeeds.
D. No person, other than a banking institution or bank holding company, shall use the words "bank" or "banker" or "banking" or "trust" or "savings" or any of them, as part of his or its name, or in any representations describing his or its powers, services or functions, except as otherwise permitted by law, provided, however, that the commissioner may waive the provisions of this subsection if the commissioner upon application determines that: (1) the applicant has used the requested name in at least one other state for at least six years and use of that name has not resulted in a pattern of confusion to consumers in that or any other state; (2) there is no risk of confusion to consumers in this State; (3) the services provided by an applicant are not financial services; and (4) the applicant only does business with other commercial entities and not with consumers.
Upon receipt of an application for a waiver of the provisions of this subsection, the commissioner shall provide notice of that application to the New Jersey Bankers Association, the New Jersey League of Community Bankers, and any successor trade associations. Upon receipt of the notice from the commissioner, the trade associations or any member thereof shall have 30 days in which to provide written comments supporting or opposing the application to the commissioner. A violation of the provisions of this subsection shall be a misdemeanor, and the Superior Court shall have jurisdiction to enjoin such violation at the suit of the commissioner.
E. The provisions of subsection D of this section shall not apply to any corporation or association formed for the purpose of promoting the interests of banking institutions, the membership of which is comprised of banking institutions, their officers or other representatives; nor shall the said subsection apply to any partnership, association, or corporation, which, on the effective date of this act, lawfully used the words "bank," "banker," "banking," "trust," or "savings," or any of them, as part of its name.
F. The provisions of subsection D of this section shall not prevent the use of the word "savings" by a building and loan association or a savings and loan association, or by a corporation or association formed for the purpose of promoting the interests of building and loan associations or savings and loan associations, the membership of which is comprised of building and loan or savings and loan associations, their officers or other representatives.
G. The provisions of subsection D of this section shall not prevent the use of the word "trust" by a Real Estate Investment Trust as defined in 26 U.S.C. s.856.
##### **§ 17:9A-18.1** Persons ineligible to serve as officer, director, employee. {#sec-17-9a-18.1 omnilex-key=us-nj-statutes--title-17--17:9A-18.1}
1. Except with the written consent of the commissioner, no person shall serve as an officer, director or employee of a bank, savings bank or bank holding company if (a) that person is convicted of any crime involving dishonesty or breach of trust, or (b) that person is prohibited from serving or continuing to serve in such capacity pursuant to 12 U.S.C. s.1829.
Any person seeking employment as an officer, director, or employee of a bank, savings bank or bank holding company shall submit to the commissioner the person's name, address, fingerprints and written consent for a criminal history record background check to be performed; provided, however, that this requirement may be waived by the commissioner if the person provides satisfactory proof that such a criminal history record background check has been performed by a federal regulator. The commissioner is hereby authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the commissioner in the event a current holder of a license or prospective applicant, who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed.
##### **§ 17:9A-18.2** Penalty {#sec-17-9a-18.2 omnilex-key=us-nj-statutes--title-17--17:9A-18.2}
For each willful violation of this prohibition, the bank or savings bank shall be liable to a penalty of not more than $100.00 a day, for each day this prohibition is violated.
##### **§ 17:9A-19** Communication terminal facility; capital requirements {#sec-17-9a-19 omnilex-key=us-nj-statutes--title-17--17:9A-19}
19. A. Any bank or savings bank may, pursuant to a resolution of its board of directors or board of managers, establish and maintain branch offices, subject to the conditions and limitations of this article.
B. (Deleted by amendment, P.L.1996, c.17.)
(3) (Deleted by amendment.)
C. No bank shall hereafter establish a full branch office unless its capital shall equal or exceed the minimum capital established by the commissioner by regulation.
D. No savings bank shall hereafter establish a full branch office unless its capital shall equal or exceed the minimum capital established by the commissioner by regulation.
E. (Deleted by amendment.)
F. (Deleted by amendment.)
G. (Deleted by amendment.)
H. (Deleted by amendment.)
I. (Deleted by amendment.)
J. (Deleted by amendment.)
K. A bank or savings bank may establish a full branch office, a minibranch office, or communications terminal facility anywhere in this State.
L. Except as otherwise provided by law, no foreign bank shall establish, operate or maintain in this State any full branch office, minibranch office or communication terminal facility.
##### **§ 17:9A-19.1** Certain branch offices not affected by act {#sec-17-9a-19.1 omnilex-key=us-nj-statutes--title-17--17:9A-19.1}
Nothing in this act shall affect the continued maintenance of any branch office lawfully in operation on the effective date hereof, nor shall anything in this act affect any branch office heretofore or hereafter established pursuant to P.L.1971, c.26 (C.17:9A-23.14).
##### **§ 17:9A-19.2** Authority for insured depository institution to act as agent for affiliate; construction of "control"; authority of commissioner {#sec-17-9a-19.2 omnilex-key=us-nj-statutes--title-17--17:9A-19.2}
1. a. An insured depository institution located in this State may accept deposits and conduct other banking business as agent for any affiliate, without being required to obtain a license as a branch office of the affiliate or foreign bank; and may provide customer information to any affiliate solely for use in conducting business with the customer. For purposes of this section, "control" shall be construed consistently with the provisions of paragraph (2) of subsection (a) of section 2 of the "Bank Holding Company Act of 1956," 12 U.S.C. 1841(a)(2); "insured depository institution" shall have the same meaning as set forth in the "Federal Deposit Insurance Act," 12 U.S.C. 1813; "foreign bank," "agency," and "branch" shall have the same meaning as set forth in the "International Banking Act of 1978," 12 U.S.C. 3101 et seq.; and "affiliate" means a company which controls, is controlled by or under common control with another company, and includes a United States branch or agency of a foreign bank.
b. The commissioner shall have the authority to request from any insured depository institution information with respect to its activities as an agent, including a request for a copy of any agreement of an insured depository institution to act as an agent for an affiliate.
##### **§ 17:9A-20** Application for establishment of full branch office, minibranch office, communication terminal facility {#sec-17-9a-20 omnilex-key=us-nj-statutes--title-17--17:9A-20}
20. A. (1) Before any full branch office shall be established, the bank or savings bank shall file written application in the department for the commissioner's approval thereof. If, after such investigation or hearings, or both, as the commissioner may determine to be advisable, the commissioner shall find:
(a) That the bank or savings bank has complied with the requirements of section 19 of P.L.1948, c.67 (C.17:9A-19);
(b) That the interests of the public will be served to advantage by the establishment of such full branch office;
(c) That conditions in the locality in which the proposed full branch office is to be established afford reasonable promise of successful operation; and
(d) That the applicant has achieved sufficient compliance, as defined by the commissioner by regulation, with the "Community Reinvestment Act of 1977," 12 U.S.C. s.2901 et seq.; the commissioner shall, within 90 days after the filing of the application, approve such application.
(2) To determine if an applicant meets the requirements of subparagraph (c) of paragraph (1) of this subsection A., the commissioner shall consider only the costs of purchasing, constructing, leasing or otherwise establishing the proposed office including the costs for staffing, furniture and equipment needed therefor and the effect of these costs on the operations of the applicant as a whole.
(3) The applicant need not demonstrate an ability to operate the proposed office at a profit within a definable period of time based on the generation of new deposits from the market area to be entered except to the extent that losses suffered at the proposed office could affect the safety and soundness of the applicant's overall operations.
B. Before any minibranch office shall be established, the bank or savings bank shall file a written application on forms supplied by the commissioner. A duly adopted resolution of the board of directors or managers authorizing such application shall accompany the application. Notice of such application shall be published in accordance with procedural rules and regulations of the department. Within 20 days after said notice is published, any person or banking institution having objections to the application shall submit detailed written factual and legal grounds for the objection to the commissioner. There shall be no hearing required to be held by the commissioner in connection with such application. The commissioner, after considering the application and written objections and such investigation as the commissioner deems advisable, shall approve the application, if the commissioner shall find
(1) That the convenience and needs of the public will be served to advantage by the establishment of such minibranch office; and
(2) That the costs of establishing such minibranch office, including (a) construction and alteration costs; (b) the cost of real property to be acquired in connection therewith or rental to be paid for space to be occupied by such office; (c) the cost of purchasing or renting and installing the equipment to be used in the operation of such office; and (d) the cost of manning such office, shall not in the aggregate exceed such sum as the commissioner shall deem reasonable, taking into consideration the capital and surplus of the bank, or the surplus of the savings bank.
C. (Deleted by amendment, P.L.1999, c.252.)
D. (Deleted by amendment, P.L.1999, c.252.)
E. A bank or savings bank shall provide insurance protection under its bonding program for transactions involving a communication terminal facility.
F. (Deleted by amendment, P.L.1996, c.17.)
G. The commissioner shall have the power to make, amend and repeal rules and regulations concerning the establishment, maintenance and operation of full branch offices, minibranch offices and communication terminal facilities not inconsistent with the provisions of this act. The regulations so made shall also be directed toward the creation, operation and maintenance of a substantial competitive parity between banking institutions and other financial institutions in all matters relating to the establishment, operation, and maintenance of branch offices and communication terminal facilities.
H. (1) In lieu of the procedures set forth in subsection A or B of this section, or in section 22 or 23 of P.L.1948, c.67 (C.17:9A-22 or C.17:9A-23), a bank or savings bank which directly or through a predecessor bank or savings bank by merger or other reorganization has been in business for at least three years, and which is well capitalized, adequately managed, and, if applicable, has received in its most recent examination under the "Community Reinvestment Act of 1977," 12 U.S.C. s.2901 et seq., a rating of not less than "satisfactory record of meeting community credit needs," or its equivalent, may apply for expedited branch office approval pursuant to this subsection. The bank or savings bank shall file written application of the proposed establishment with the commissioner and with those other persons designated by the commissioner by rule or regulation. The application shall be accompanied by or be in the form of a certification that (a) all applicable provisions of this subsection have been met, (b) the applicant requests expedited processing under this subsection, and (c) contains that other information, if any, as the commissioner may require by rule or regulation to confirm that an establishment of the branch will not adversely affect the safety and soundness of the bank or savings bank or the public interest.
(2) An application shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing.
(3) For purposes of this subsection, "well capitalized" has the meaning given the term in 12 U.S.C. s.1831o and "well managed" means, unless otherwise determined in writing by the commissioner, (a) the achievement of a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System or an equivalent rating system, in connection with the most recent examination or subsequent review of the bank or savings bank, and (b) at least a rating of 2 for management, if such a rating is given. Nothing in this subsection shall be construed to affect the confidentiality of any rating under applicable law or regulation.
##### **§ 17:9A-20.1** Establishment, maintenance of out-of-State branch offices {#sec-17-9a-20.1 omnilex-key=us-nj-statutes--title-17--17:9A-20.1}
11. a. A bank or savings bank may, pursuant to a resolution of its board of directors, establish and maintain a branch office or branch offices outside this State, subject to the conditions and limitations of sections 19 and 20 of P.L.1948, c.67 (C.17:9A-19 and 17:9A-20).
b. No bank or savings bank shall establish a branch office outside this State unless the laws of the jurisdiction where the branch is to be established do not prohibit the establishment of the branch.
c. A bank or savings bank which establishes a branch office outside this State shall have such additional powers in that state as permitted to banks or savings banks, as applicable, in the state in which the branch is located.
##### **§ 17:9A-20.2** . Powers of out-of-State banks operating branch office in State {#sec-17-9a-20.2 omnilex-key=us-nj-statutes--title-17--17:9A-20.2}
12. An out-of-State bank that opens, occupies or maintains a branch office in this State shall have in this State only the powers a bank chartered in this State has.
##### **§ 17:9A-20.3** Out-of-State, national bank; establishment, maintenance of additional branch office {#sec-17-9a-20.3 omnilex-key=us-nj-statutes--title-17--17:9A-20.3}
13. a. An out-of-State bank with at least one branch office in this State, and a national bank with at least one branch office in this State, may establish and maintain additional branch offices in this State as long as the out-of-State bank or national bank is adequately capitalized as of the date of the application, will be adequately capitalized and managed after the branch is established, and has achieved sufficient compliance with the "Community Reinvestment Act of 1977," 12 U.S.C. 2901 et seq.
b. An out-of-State bank or national bank branching in New Jersey pursuant to this section, shall publish notice of the application in New Jersey in the appropriate trade journals.
##### **§ 17:9A-20.4** Short title {#sec-17-9a-20.4 omnilex-key=us-nj-statutes--title-17--17:9A-20.4}
1. This act shall be known as and may be cited as the "Trust Modernization Act of 1999."
##### **§ 17:9A-20.5** Establishment of trust office {#sec-17-9a-20.5 omnilex-key=us-nj-statutes--title-17--17:9A-20.5}
3. a. A qualified bank may establish a trust office anywhere in this State, or in any other state which permits the establishment of a trust office, if the qualified bank files a written notice with the commissioner setting forth the name of the qualified bank, the location of the proposed trust office, and furnishes a copy of the resolution adopted by its board authorizing the trust office.
b. A foreign bank, other than one excluded by subsection A of section 316 of P.L.1948, c.67 (C.17:9A-316), may establish a trust office in this State, if the foreign bank files with the commissioner an application to register the trust office. The application shall set forth the name of the foreign bank and the location of the proposed trust office, and the applicant shall furnish a copy of the resolution adopted by its board authorizing the establishment of the trust office. The commissioner shall register the trust office if:
(1) the foreign bank demonstrates that it is in good standing in its home state and submits satisfactory evidence that it has complied with any applicable requirements of its bank supervisory agency regarding the establishment and maintenance of a trust office;
(2) the commissioner determines that a State chartered qualified bank may establish a trust office in the home state of the foreign bank without unduly burdensome conditions or restrictions; and
(3) the foreign bank has obtained or obtains a certificate of authority to transact trust business in this State in accordance with the provisions of section 316 of P.L.1948, c.67 (C.17:9A-316).
##### **§ 17:9A-21** Termination of right to open, operate branch office; discontinuance {#sec-17-9a-21 omnilex-key=us-nj-statutes--title-17--17:9A-21}
21. A. The failure of a bank, out-of-State bank or savings bank to open and operate a branch office within one year after the commissioner approves the application therefor shall automatically terminate the right of the bank, out-of-State bank or savings bank to open the branch office, and it shall make no further application to establish a branch office at such location, or in the area which would be served by a bank, out-of-State bank or savings bank doing business at such location, until after the expiration of one year from the date of such approval; except that, for good cause shown, the commissioner may, in the commissioner's discretion, on application of the bank, out-of-State bank or savings bank made before the expiration of the one-year period, extend for additional periods, not in excess of six months each, the time within which such branch office may be opened.
B. A bank , out-of-State bank or savings bank may discontinue a branch office upon resolution of its board of directors or board of managers. Upon the adoption of such a resolution, the bank, out-of-State bank or savings bank shall file a certificate in the department specifying the location of the branch office to be discontinued, and the date upon which the discontinuance shall be effective.
C. Whenever the commissioner shall find that a branch office is not open for the transaction of business during such hours or days as the commissioner shall determine are reasonably necessary for the banking needs of the area served by such branch office, the commissioner may, by order, direct the bank , out-of-State bank or savings bank to keep such branch office open during such hours or days, and, upon the failure of the bank, out-of-State bank or savings bank to comply with such order, the commissioner may, after giving the bank, out-of-State bank or savings bank reasonable opportunity to be heard, make an order forfeiting the right of the bank, out-of-State bank or savings bank to maintain the branch office, and, upon the service of the order upon the bank , out-of-State bank or savings bank, it shall cease to maintain such branch office. An order of the commissioner made pursuant to this subsection shall be subject to review, hearing and relief in the Superior Court, in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-22** Changing location of office {#sec-17-9a-22 omnilex-key=us-nj-statutes--title-17--17:9A-22}
22. A. Upon filing an application therefor in the department, and upon obtaining the approval of the commissioner thereto a bank or savings bank may change the location of its principal office or of a branch office located in this State to another location in this State. Upon filing an application therefor in the department, and upon obtaining the approval of the commissioner thereto, an out-of-State bank with a branch office located in this State may change the location of a branch office in this State to another location in this State, and a bank or savings bank with a branch office located outside this State may change the location of a branch office to another location in that state.
B. If it shall appear from the application, or if the commissioner shall find from such proof as the commissioner may require, or from such investigation as the commissioner may cause to be made, that the area which would be served by such office after its change in location would not be substantially different from the area theretofore served by such office, the commissioner shall approve the application.
C. If it shall appear to the commissioner, from the application, or from such proof as the commissioner may require, or from such investigation as the commissioner may cause to be made, that the proposed location will be so far removed from the place then occupied by such principal office or by such branch office that the area which would be served by such office after its change in location would be substantially different from the area theretofore served by it, the commissioner shall not approve such application unless, after such investigation or hearing, or both, as the commissioner may determine to be advisable, the commissioner shall find that the interests of the public will be served to advantage by such change in location, and that conditions in the locality to which removal is proposed afford reasonable promise of successful operation.
D. No savings bank shall change the location of its principal office pursuant to subsection C. of this section unless, prior to making application to the commissioner for his approval, the change in location is approved by a vote of two-thirds of its board of managers then in office.
##### **§ 17:9A-23** Change of location from principal to branch office {#sec-17-9a-23 omnilex-key=us-nj-statutes--title-17--17:9A-23}
23. A bank or savings bank may, without satisfying the requirements of section 22 of P.L.1948, c.67 (C.17:9A-22), change the location of its principal office to a location in this State then occupied by a branch office maintained by it. After such a change, the bank or savings bank may maintain a branch office at the location formerly occupied by its principal office, or it may discontinue business at such location. Such bank or savings bank shall file a certificate of such change in the department within one week from the date such change is made. A change in location effected pursuant to this section shall not be subject to the limitations imposed by subsection C or D of section 19 of P.L.1968, c.67 (C.17:9A-19). No change in location shall be made under this section without prior written approval of the commissioner which the commissioner shall not withhold unless the commissioner shall find that such change will not be in the public interest.
##### **§ 17:9A-23.1** Auxiliary offices {#sec-17-9a-23.1 omnilex-key=us-nj-statutes--title-17--17:9A-23.1}
A bank or savings bank may, pursuant to resolution of its board of directors or board of managers, establish and maintain not more than one auxiliary office as an adjunct to its principal office, and not more than one auxiliary office as an adjunct to each branch office now maintained by it, or hereafter established and maintained by it.
##### **§ 17:9A-23.2** Auxiliary office, establishment, location {#sec-17-9a-23.2 omnilex-key=us-nj-statutes--title-17--17:9A-23.2}
2. No auxiliary office shall be established or maintained at a location which is outside this State or more than one mile from the office of the bank or savings bank to which such auxiliary office is an adjunct; nor shall any such auxiliary office be established within 1,000 feet of the principal office or a branch office of another banking institution without the written consent of such other banking institution. Such consent, once given, shall thereafter be irrevocable, regardless whether it was given gratuitously or for a valuable consideration. No bank or savings bank shall be required to discontinue an auxiliary office for the reason that, after its establishment pursuant to this act, another banking institution has established its main office or a branch office within 1,000 feet of such auxiliary office.
##### **§ 17:9A-23.3** Business which may be transacted at auxiliary office {#sec-17-9a-23.3 omnilex-key=us-nj-statutes--title-17--17:9A-23.3}
No business shall be transacted at an auxiliary office other than
(a) the receipt of deposits of currency, checks and other items;
(b) the payment of withdrawals;
(c) the cashing of checks, drafts and other items;
(d) the receipt of moneys due to the bank or savings bank; and
(e) the issuance of cashiers' checks, treasurers' checks, and money orders.
##### **§ 17:9A-23.4** Business to be transacted with persons outside the structure {#sec-17-9a-23.4 omnilex-key=us-nj-statutes--title-17--17:9A-23.4}
The business authorized by section 3 of this act shall be transacted only with persons who, while such business is being transacted, remain outside the structure which houses an auxiliary office.
##### **§ 17:9A-23.5** Property which may be used for auxiliary office; limitation on cost; parking facilities {#sec-17-9a-23.5 omnilex-key=us-nj-statutes--title-17--17:9A-23.5}
A bank or savings bank may, for the purposes of establishing an auxiliary office or offices, purchase or lease real property, or it may use real property heretofore purchased or leased by it; provided, that the cost of establishing an auxiliary office, including construction and alteration costs, and including the purchase price or the rental of the real property, shall not exceed such sum as the Commissioner of Banking and Insurance shall approve, taking into consideration the capital and surplus of the bank, and the surplus of the savings bank. As an incident to the conduct of its business at an auxiliary office, a bank or savings bank may provide motor vehicle parking facilities for its customers.
##### **§ 17:9A-23.6** Auxiliary office not deemed branch office {#sec-17-9a-23.6 omnilex-key=us-nj-statutes--title-17--17:9A-23.6}
An auxiliary office shall not be deemed a branch office within the meaning of sections 19 through 23 and section 233 of the act to which this act is a supplement. Each auxiliary office shall be deemed to be an integral part of the office to which it is an adjunct, and all business transacted at such auxiliary office shall be deemed to be transacted at the office to which it is an adjunct.
##### **§ 17:9A-23.7** Certain powers of banks not affected {#sec-17-9a-23.7 omnilex-key=us-nj-statutes--title-17--17:9A-23.7}
Nothing in this act shall impair the power of a bank or savings bank to purchase, hold, lease or convey real property or any interest therein pursuant to section 24(5) of the act to which this act is a supplement, nor shall anything in this act apply to or impair any other power which a bank or savings bank may exercise under the act to which this act is a supplement, including the power to provide facilities commonly known as drive-in or walk-up offices which are physically attached to the principal office or a branch office of a bank or savings bank, and which are accessible to such principal office or branch office by a means which is within the sole control of the bank or savings bank.
##### **§ 17:9A-23.8** Distances, measurement for purposes of act {#sec-17-9a-23.8 omnilex-key=us-nj-statutes--title-17--17:9A-23.8}
For the purposes of this act, distances shall be measured along a straight line drawn between the center point of the main entrance of the principal office or branch office of a bank, savings bank or banking institution and the center point of the main entrance of the auxiliary office.
##### **§ 17:9A-23.9** Establishment of branch offices on army, navy or air force installations {#sec-17-9a-23.9 omnilex-key=us-nj-statutes--title-17--17:9A-23.9}
A bank may, with the approval of the Commissioner of Banking and Insurance, establish and maintain a branch office on any United States Army, Navy, or Air Force installation in this State.
##### **§ 17:9A-23.10** Investigation and hearing; requirements and conditions to approval of application {#sec-17-9a-23.10 omnilex-key=us-nj-statutes--title-17--17:9A-23.10}
Before approving an application to establish a branch office at any Army, Navy, or Air Force installation in this State, the commissioner, after such investigation or hearing, or both, as he shall determine to be advisable, shall be satisfied (1) that the applying bank has complied with all requirements and conditions imposed by the Federal department, agency, or officer having power to authorize or to approve the establishment and maintenance of a branch office of a bank on such installation; and (2) that the conditions under which the bank will operate the branch office will not be inconsistent with the best interest of its depositors and stockholders.
##### **§ 17:9A-23.11** Branch offices, location, removal, interchange {#sec-17-9a-23.11 omnilex-key=us-nj-statutes--title-17--17:9A-23.11}
3. a. A branch office established pursuant to this act may be located anywhere in this State.
b. No branch office established pursuant to this act shall be removed to a location outside the installation on which it has been established.
c. The principal office of the bank may not be interchanged with any branch office established pursuant to this act.
d. (Deleted by amendment, P.L.1996, c.17.)
e. The right to maintain a branch office established pursuant to this act shall cease and the branch office shall be discontinued when the authority to maintain it under federal law or regulation ceases.
f. A branch office maintained pursuant to this act shall not be deemed to be a branch as an adjunct of which an auxiliary office may be established.
##### **§ 17:9A-23.12** Law applicable to branch offices on army, navy or air force installations {#sec-17-9a-23.12 omnilex-key=us-nj-statutes--title-17--17:9A-23.12}
Except as herein otherwise expressly provided, the establishment and maintenance of branch offices on Army, Navy, or Air Force installations shall be subject to all provisions of law otherwise applicable to the establishment and maintenance of branch offices by banks.
##### **§ 17:9A-23.13** Bank defined {#sec-17-9a-23.13 omnilex-key=us-nj-statutes--title-17--17:9A-23.13}
As used in this act, "bank" includes banks and savings banks as defined in section 1 of the act to which this act is a supplement.
##### **§ 17:9A-23.50** Definitions relative to emergency banking {#sec-17-9a-23.50 omnilex-key=us-nj-statutes--title-17--17:9A-23.50}
1. As used in this act unless the context requires otherwise,
(a) "Commissioner" means the Commissioner of Banking and any other person lawfully exercising the powers of such commissioner;
(b) "Bank" includes banks, out-of-State banks and savings banks, and, to the extent the provisions hereof are not inconsistent with and do not infringe upon paramount federal law governing national banks, "bank" also includes national banks;
(c) "Officers" means the person or persons designated by the board of directors of a bank or the board of managers or trustees of a savings bank or the board of directors or managers or trustees of an out-of-State bank, as appropriate, to act for the bank, out-of-State bank or savings bank in carrying out the provisions of this act;
(d) "Emergency" means any condition which interferes with the conduct of normal business operations at one or more or all offices of a bank or banks, or which poses an imminent or existing threat to the safety and security of persons or property, or both. Without limiting the generality of the foregoing, an emergency may arise as a result of any one or more of the following: fire; flood; wind, rain or snow storms; labor disputes; power failures; transportation failures; war; and riots, civil commotions, and other acts of lawlessness or violence;
(e) "Office" means any place at which a bank transacts business or conducts operations related to the transaction of business;
(f) "Person" includes natural persons, corporations, partnerships and associations.
##### **§ 17:9A-23.51** Proclamation of emergency {#sec-17-9a-23.51 omnilex-key=us-nj-statutes--title-17--17:9A-23.51}
Whenever the commissioner is of the opinion that an emergency exists in this State or in any part or parts of this State, he shall, by proclamation, authorize those banks which, in the opinion of their officers, are directly or indirectly affected by such emergency to close one or more or all their offices.
##### **§ 17:9A-23.52** Powers of officers {#sec-17-9a-23.52 omnilex-key=us-nj-statutes--title-17--17:9A-23.52}
Whenever the officers of a bank are of the opinion that an emergency exists which affects one or more or all the bank's offices, they shall have authority to close one or more or all such offices even though the commissioner has not issued and does not issue a proclamation of emergency, and they may, but need not, provide that the business normally transacted at a closed office will be transacted at another office designated by the bank until further notice. The office or offices so closed shall remain closed until the commissioner proclaims that the emergency has ended, or until such earlier time as the officers of the bank determine that one or more offices, theretofore closed because of the emergency, should reopen, or, if the commissioner has issued no proclamation of emergency, until the officers of the bank determine that such office or offices should reopen. The discretion of the officers in acting pursuant to this section, when exercised in good faith, shall not be questioned in any court or place.
##### **§ 17:9A-23.53** Notice to commissioner {#sec-17-9a-23.53 omnilex-key=us-nj-statutes--title-17--17:9A-23.53}
A bank closing an office or offices pursuant to this act shall give as prompt notice to the commissioner of its action as conditions will permit.
##### **§ 17:9A-23.54** Immunity from liability {#sec-17-9a-23.54 omnilex-key=us-nj-statutes--title-17--17:9A-23.54}
No bank and no director, officer or employee of a bank shall be liable to any person for any direct or indirect loss suffered by such person by reason of the bank's failure or inability to make access to the bank's premises and facilities available to such person or by reason of the bank's failure to perform, or its delay in performing, any contractual, statutory or other duty assumed by or imposed upon the bank in any capacity, when such failure, inability or delay is caused by an emergency as defined by this act. The immunity from liability provided for herein shall endure during the period of such emergency and for such time thereafter as may reasonably be necessary to afford such access or perform such duty.
##### **§ 17:9A-23.55** Construction of act {#sec-17-9a-23.55 omnilex-key=us-nj-statutes--title-17--17:9A-23.55}
The provisions of this act shall be construed and applied as being in addition to and not in substitution for any other law of this State or of the United States excusing delays by banks in the performance of duties or obligations, or authorizing the closing of banks because of emergencies or conditions beyond the bank's control, or otherwise.
##### **§ 17:9A-23.56** Regulations of commissioner {#sec-17-9a-23.56 omnilex-key=us-nj-statutes--title-17--17:9A-23.56}
The commissioner may make such orders and regulations, not inconsistent with this act, as he shall deem necessary during an emergency to provide for the uninterrupted continuance of business by banks to the extent consistent with the safety and security of persons and of property.
##### **§ 17:9A-23.57** Short title {#sec-17-9a-23.57 omnilex-key=us-nj-statutes--title-17--17:9A-23.57}
This act may be cited as the "Emergency Banking Act."
##### **§ 17:9A-24** Powers of banks and savings banks {#sec-17-9a-24 omnilex-key=us-nj-statutes--title-17--17:9A-24}
Powers of banks and savings banks. Every bank and savings bank shall, subject to the provisions of this act, have the following powers, whether or not such powers are specifically set forth in its certificate of incorporation:
(1) To adopt a corporate seal, and to sue and be sued;
(2) To issue cashier's checks, treasurer's checks, and money orders; to transmit funds; to guarantee signatures and endorsements;
(3) To borrow money, and to pledge, mortgage or hypothecate its real or personal property as security therefor, and to execute and deliver all such instruments as may be necessary to evidence such borrowing, pledge, mortgage, or hypothecation;
(4) To keep, maintain, and rent out for hire, at any location occupied by its principal office or any branch office, safe deposit boxes or other receptacles for the safekeeping of personal property. In exercising the powers authorized by this paragraph, the bank or savings bank shall have, but shall not be confined to, the same rights and remedies conferred upon safe deposit companies;
(5) To invest in real property as purchaser of the fee or as lessee, and to hold, lease and convey such real property, or any interest therein, for the following purposes and no others:
(a) Such as may be necessary or convenient for the use, operation, or housing of its principal office or any branch office, or an auxiliary office, or for the storage of records or other personal property, or for office space for use by its officers or employees, or which may be reasonably necessary for future expansion of its business, or which is otherwise reasonably incidental to the conduct of its business; and which may include, in addition to the space required for the transaction of its business, other space which may be let as a source of income. In exercising the powers conferred by this subparagraph, the bank or savings bank shall be subject to the limitations imposed by paragraph (13) of this section;
(b) Such as may be conveyed to it in whole or part satisfaction of debts previously contracted in the course of its dealings;
(c) Such as it shall purchase at sale under judgments and decrees in its favor, and on foreclosure of mortgages held by it;
(d) Such as it shall purchase or acquire to minimize or prevent the loss or destruction of any lien or interest therein; and
(e) Such as may be permitted for associations pursuant to subsections (4) and (21) of section 48 of the "Savings and Loan Act (1963)," P.L. 1963, c. 144 (C. 17:12B-48); provided that all real property not held for any purpose specified in subparagraph (a) of this paragraph, shall be sold within five years of its acquisition, or within five years after the time it ceases to be held for any purpose specified in subparagraph (a) of this paragraph, unless the commissioner shall extend the time within which such sale shall be made;
(6) To be a member of the Federal Reserve System; to subscribe for, purchase, hold, and surrender such amounts of the capital stock of the Federal Reserve Bank organized within the district in which such bank or savings bank is located as may be required or as may be deemed advisable by such bank or savings bank; and to have and exercise all powers, privileges and options which are conferred by law upon such members; to comply with all requirements of federal legislation and the rules and regulations lawfully promulgated thereunder governing such membership, as such legislation and such rules and regulations may provide at the time of inception of such membership, and as the same may from time to time thereafter be amended or supplemented; and to assume and discharge all liabilities and obligations which may be required by reason of such membership; (7) To be a member of the Federal Deposit Insurance Corporation, or of any successor corporation having for its purpose the insurance of deposits, and to do all things, and assume and discharge all liabilities and obligations imposed upon such members by federal legislation or by rules and regulations lawfully promulgated pursuant thereto, as the same may provide at the inception of such membership, or as the same may thereafter be amended or supplemented;
(8) To be a member of any federal agency hereafter created, membership in which is open to banking institutions, and the purpose of which is to afford advantages or safeguards to banking institutions, or to their depositors, and to comply with all the requirements and conditions imposed upon such members, except that the power by this paragraph conferred shall not be exercised unless the commissioner, with the concurrence of the banking advisory board, shall make a general order authorizing banks or savings banks, or both, to become and be such members, upon such terms and conditions as may in such order be prescribed;
(9) To subscribe for, purchase and hold stock of one or more safe deposit companies which have been or may be organized to do business on or adjacent to premises occupied by the principal office or a branch office of the bank or savings bank; provided that
(a) In the case of a savings bank, the amount so invested shall not exceed 5% of its surplus; and
(b) In the case of a bank, the amount so invested shall not exceed 10% of its capital stock and surplus; and
(c) Each purchase of such stock shall first have been authorized by a resolution, stating the number of shares to be purchased and the amount to be paid therefor, adopted by its board of directors or board of managers, and, in the case of a bank, approved by a majority in interest of its stockholders at any annual or special meeting; and
(d) Each purchase of such stock by a bank or savings bank shall have been approved in writing by the commissioner;
(10) To subscribe for, purchase and hold stock of not more than one fiduciary institution organized under any law of this State hereafter enacted; provided that
(a) In the case of a savings bank, the amount so invested shall not exceed 10% of its surplus; and
(b) In the case of a bank, the amount so invested shall not exceed 20% of its capital stock and surplus; and
(c) Each purchase of such stock shall first have been authorized by a resolution, stating the number of shares to be purchased and the amount to be paid therefor, adopted by its board of directors or board of managers, and, in the case of a bank, approved by a majority in interest of its stockholders at any annual or special meeting; and
(d) Each purchase of such stock by a bank or savings bank shall have been approved in writing by the commissioner;
(11) To contribute to community funds, or to charitable, philanthropic, or benevolent instrumentalities conducive to public welfare, or civic betterment, or the economic advantage of the community, and to instrumentalities for the protection or advancement of the interests of banking institutions, such sums as its board of directors or board of managers may deem expedient and in the interests of such bank or savings bank;
(12) To exercise all incidental powers, not specifically enumerated in this act, which shall be necessary or convenient to carry on the business of the bank or savings bank; (13) To invest in stock of a subsidiary of such bank or savings bank which holds title to real property of the kind in which such bank or savings bank could itself invest pursuant to subparagraph (a) of paragraph (5) of this section, and to make secured or unsecured loans to such subsidiary, without regard to the limitations imposed by Article 13; but no bank or savings bank shall, except with the prior approval of the commissioner (1) invest in real property including all capital leases, pursuant to subparagraph (a) of paragraph (5) of this section; or (2) invest in the stock or other securities of such subsidiary; or (3) make a loan to such subsidiary, if the aggregate of all such investments and loans, when added to any indebtedness otherwise owing by the subsidiary, will exceed the greater of (1) 50% of the capital funds of the bank or savings bank, or (2) the amount permitted to national banks for such investments. As used in this paragraph, "subsidiary" of a bank or savings bank means a corporation all of whose capital stock and other securities having voting rights are owned by such bank or savings bank, and whose powers are limited by its certificate of incorporation to the acquiring, holding, managing, selling, leasing, mortgaging, altering, improving and otherwise dealing in and with real property of the kind in which the bank or savings bank could itself invest pursuant to subparagraph (a) of paragraph (5) of this section; and "capital funds" means the aggregate of the capital stock, the principal amount owing on all capital notes, surplus and undivided profits of a bank, and the aggregate of the capital deposits, if any, and the surplus of a savings bank. Every subsidiary of a bank or savings bank shall be subject to examination by the commissioner as provided in the case of banks and savings banks pursuant to sections 260, 261, 262, 263, and 335, and the ultra vires or unlawful act of a subsidiary of a bank or savings bank shall be deemed to be the ultra vires or unlawful act of such bank or savings bank for the purposes of Article 42. In determining whether to give or withhold approval of an investment or loan in excess of the limitation imposed by this paragraph, the commissioner shall consider whether the making of such loan or investment is consistent with sound banking practice, having regard to (1) the ratio between the aggregate of such loans and investments and the capital funds of the bank or savings bank; (2) the benefits to the bank or savings bank reasonably to be anticipated from such investment or such loan; (3) the ratio between such aggregate capital funds and total deposits; and (4) such other factors as the commissioner shall consider germane to the protection of deposits. A violation of any provision of this paragraph by any bank, savings bank, or subsidiary of a bank or savings bank shall not impair the validity or sufficiency of any deed of conveyance, mortgage, or lease made by such bank, savings bank, or subsidiary, of real property owned by it; nor shall any other interest in such real property, acquired by or vested in any person claiming through or under such bank, savings bank, or subsidiary, or to which such person may be entitled, be impaired by reason of such violation;
(14) To make or invest in any secondary mortgage loan as defined in section 1 of P.L. 1948, c. 67 (C. 17:9A-1). Secondary mortgage loans shall be repayable in installments under the same terms and conditions as provided for secondary mortgage loan licensees under the "Secondary Mortgage Loan Act," P.L. 1970, c. 205 (C. 17:11A-34 et seq.), only with respect to maximum term, maximum loan amount and maximum annual percentage rate of interest. The Commissioner of Banking shall have the power, in relation to a "secondary mortgage loan," to adopt, amend, alter or rescind regulations, the requirements of which, in his judgment, are necessary for the implementation of this paragraph;
(15) To purchase, hold and invest in mortgages, obligations or other securities which are or have been sold by the Federal Home Loan Mortgage Corporation pursuant to section 305 or 306 of the "Federal Home Loan Mortgage Corporation Act," Pub.L. 91-351 (12 U.S.C. s. 1454 or 12 U.S.C. s. 1455), to the same extent that the bank or savings bank may purchase, hold or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.
##### **§ 17:9A-24b1** Exercise of powers, rights, benefits, privileges {#sec-17-9a-24b1 omnilex-key=us-nj-statutes--title-17--17:9A-24b1}
1. Notwithstanding the provisions of P.L.1948, c.67 (C.17:9A-1 et seq.) or any other law, banks and savings banks may exercise those powers, rights benefits or privileges now or hereafter authorized for national or out-of-State banks or for federal or out-of-State savings banks or savings associations either directly or through a financial subsidiary or other subsidiary, to the same extent and, subject to the same limitations as national or out-of-State banks or federal or out-of-State savings banks or savings associations, may exercise those powers, rights, benefits or privileges, provided that before exercising any power, right, benefit or privilege of an out-of-State bank or out-of-State savings bank or savings association, the commissioner has adopted a regulation approving an exercise of that power, right, benefit or privilege by banks and savings banks generally or the bank or savings bank provides notice to the commissioner and on a case-by-case basis the commissioner either approves the activity or does not provide notice before the expiration of 45 days that such power, right, benefit or privilege is not appropriate for the New Jersey bank or savings bank on the grounds of safety and soundness or on other grounds designated by the commissioner by regulation. The commissioner shall have the authority to adopt rules and regulations pursuant to this section, which rules and regulations shall have as their objective the placing of banks and savings banks on a substantially competitive parity with national and out-of-State banks and federal and out-of-State savings banks and savings associations.
##### **§ 17:9A-24.1** Definitions {#sec-17-9a-24.1 omnilex-key=us-nj-statutes--title-17--17:9A-24.1}
As used in this act,
(a) "bank services" means services such as check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, statements, notices, and similar items, or any other clerical, bookkeeping, accounting, statistical, or similar functions;
(b) "bank service corporation" means a corporation which is organized under Title 14 of the Revised Statutes, Corporations, General, to perform bank services, and all of whose capital stock is owned by one or more banking institutions;
(c) "banking institution" means a bank and a savings bank organized under the laws of this State, and a national bank organized under the laws of the United States;
(d) "invest" means an advance of funds to a bank service corporation, whether by the subscription to or its purchase of stock, the making of a loan, or otherwise, except a payment for rent earned, goods sold and delivered, or services rendered prior to the making of such payment;
(e) "Commissioner" means the Commissioner of Banking and Insurance of New Jersey.
##### **§ 17:9A-24.2** Investment in bank service corporations {#sec-17-9a-24.2 omnilex-key=us-nj-statutes--title-17--17:9A-24.2}
2. Banks and savings banks may avail themselves of the services of bank service corporations, and may invest in bank service corporations, but no such investment shall be made
(a) by a bank, at any time when the total of all the bank's investments in such corporation or corporations exceeds, or if the making of such an investment would cause such total to exceed, 10% of the bank's unimpaired capital stock and surplus; or
(b) by a savings bank, at any time when the total of all the savings bank's investments in such corporation or corporations exceeds, or if the making of such an investment would cause such total to exceed, 5% of the surplus of the savings bank.
##### **§ 17:9A-24.3** Performance of services rendered by bank service corporations {#sec-17-9a-24.3 omnilex-key=us-nj-statutes--title-17--17:9A-24.3}
Banks and savings banks may perform for other banking institutions and others than banking institutions any service or services which may be rendered by bank service corporations to banking institutions.
##### **§ 17:9A-24.4** Regulations by commissioner; powers {#sec-17-9a-24.4 omnilex-key=us-nj-statutes--title-17--17:9A-24.4}
The commissioner shall have power to make, amend and repeal regulations governing the exercise of the powers conferred upon banks and savings banks by sections 2 and 3 of this act, but, in exercising such power to make such regulations, the commissioner shall endeavor to create and maintain to the extent feasible a substantial parity between banks and savings banks on the one hand and national banks on the other hand, in their dealings with and investments in bank service corporations and in their performing the services of bank service corporations, and to create and maintain a similar parity between bank service corporations as defined in this act and as defined in Federal law. To that end the commissioner shall have the power to (a) broaden the scope of the definition of "bank services" as expressed in section 1 of the act to include others than banking institutions as the recipients of services rendered by bank service corporations; (b) increase by not more than 50% the percentages specified in section 2 of this act; (c) prescribe the minimum number of banking institutions which must be investors in any one bank service corporation; (d) require that banks invest in or transact business with only those bank service corporations which submit to periodic examinations and to regulation by the Department of Banking and Insurance of New Jersey; (e) prescribe the extent to which bank service corporations may perform services for others than banking institutions and the extent to which banks or savings banks may perform for other banking institutions and others than banking institutions any service or services which may be rendered by bank service corporations; and (f) prevent banks and savings banks from investing in or maintaining their investments in, and prevent banks and savings banks from transacting business with, any bank service corporation which conducts its activities in such fashion as would tend to create monopoly or foster unfair competition.
##### **§ 17:9A-24.5** Conduct of other business by bank service corporation prohibited {#sec-17-9a-24.5 omnilex-key=us-nj-statutes--title-17--17:9A-24.5}
No bank service corporation shall conduct any business other than the performing of bank services for banking institutions.
##### **§ 17:9A-24.6** Receiving of bank services from other banking institution or other person {#sec-17-9a-24.6 omnilex-key=us-nj-statutes--title-17--17:9A-24.6}
Nothing herein shall prevent a bank or savings bank from receiving bank services from another banking institution or from any other person. As used in this section, "person" includes individuals, partnerships, corporations and all other business entities, no matter how designated.
##### **§ 17:9A-24.7** Investments in stock of clearing corporations by qualified banks {#sec-17-9a-24.7 omnilex-key=us-nj-statutes--title-17--17:9A-24.7}
A qualified bank, as defined in section 1 of the act to which this act is a supplement (C. 17:9A-1), shall have power to subscribe for, purchase, and hold stock of one or more clearing corporations as defined in N.J.S. 12A:8-102 provided that
a. in the case of a qualified bank which is a savings bank, the amount invested in such stock shall not exceed 5% of its surplus;
b. in the case of a qualified bank which is not a savings bank, the amount invested in such stock shall not exceed 10% of its capital stock and surplus;
c. each investment in such stock shall first have been authorized by a resolution stating the number of shares to be acquired and the amount to be paid therefor, adopted by its board of directors or board of managers in the case of a qualified bank which is a savings bank, and, in the case of a qualified bank which is not a savings bank, approved by a majority in interest of its stockholders at an annual or special meeting; and
d. each investment in such stock shall have been approved in writing by the Commissioner of Banking.
##### **§ 17:9A-24.8** Powers conferred by act as in addition to other powers {#sec-17-9a-24.8 omnilex-key=us-nj-statutes--title-17--17:9A-24.8}
The power conferred by this act shall be in addition to and not in substitution for any powers otherwise conferred by law upon qualified banks.
##### **§ 17:9A-24.9** Additional powers of banks and savings banks {#sec-17-9a-24.9 omnilex-key=us-nj-statutes--title-17--17:9A-24.9}
8. Additional powers of banks and savings banks. In addition to the powers which banks and savings banks may otherwise exercise, every bank and savings bank, as defined in section 1 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-1), shall have power
(1) To subscribe for, purchase and hold stock of one or more insurance companies organized under the laws of this State which have been or may hereafter be limited to insure banks, savings banks and other depository institutions
(a) Against loss from the defaults of persons in positions of trust, public or private, or against loss or damage on account of neglect or breaches of duty or obligations guaranteed by the insurer; and against loss of any bills of exchange, notes, checks, drafts, acceptances of drafts, bonds, securities, evidences of debt, deeds, mortgages, documents, gold or silver, bullion, currency, money, platinum and other precious metals, refined or unrefined, and articles made therefrom, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, and also against loss resulting from damage, except by fire, to the insured's premises, furnishings, fixtures, equipment, safes and vaults therein, caused by burglary, robbery, holdup, theft or larceny, or attempt thereat. No such indemnity indemnifying against loss of any property as specified herein shall indemnify against the loss of any such property occurring while in the mail or in the custody or possession of a carrier for hire for the purpose of transportation, except for the purpose of transportation by an armored motor vehicle accompanied by one or more armed guards; and
(b) Against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism or malicious mischief, or any one or more of such hazards; and against any and all kinds of loss or destruction of or damage to moneys, securities, currencies, scrip, coins, bullion, bonds, notes, drafts, acceptances of drafts, bills of exchange and other valuable papers or documents, except while in the custody or possession of and being transported by a carrier for hire or in the mail.
(2) To make loans and investments as authorized for associations by section 155 of the "Savings and Loan Act (1963)," P.L.1963, c.144 (C.17:12B-155).
(3) To make loans and investments as authorized for associations by, and subject to the limitations of, sections 157 through 160 and 162 through 164 of the "Savings and Loan Act (1963)," P.L.1963, c.144 (C.17:12B-157 through C.17:12B-160 and C.17:12B-162 through C.17:12B-164).
(4) To extend credit through the use of credit cards issued by it through an arrangement with participating vendors, and without limitation of the generality of the foregoing, to exercise all the powers permitted to associations pursuant to subsection (18) of section 48 of the "Savings and Loan Act (1963)," P.L.1963, c.144 (C.17:12B-48).
(5) To make any investment authorized for associations by section 165 of the "Savings and Loan Act (1963)," P.L.1963, c.144 (C.17:12B-165), provided, however, that where reference is made to State associations or federal associations therein such reference for purposes of this act shall be deemed to refer to banking institutions as defined in section 1 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-1).
(6) To exercise any powers and activities that have been or are hereafter approved by regulation of the Board of Governors of the Federal Reserve System as being (i) financial in nature or incidental to such financial activity, (ii) complementary to a financial activity and not posing a substantial risk to the safety or soundness of depository institutions or the financial system generally, or (iii) so closely related to banking or managing or controlling banks as to be a proper activity for a bank holding company or financial holding company pursuant to the "Bank Holding Company Act of 1956," 70 Stat. 133 (12 U.S.C. s. 1841 et seq.) and regulations thereunder, to the extent that federal law does not prohibit banks or savings banks from exercising those powers or activities.
(7) To apply to the commissioner for authority, and if granted, to exercise any power or activity that has been or is hereafter deemed to be (i) financial in nature or incidental to such financial activity, (ii) complementary to a financial activity and not posing a substantial risk to the safety or soundness of depository institutions or the financial system generally, or (iii) closely related to banking under the "Bank Holding Company Act of 1956," 70 Stat. 133 (12 U.S.C. s. 1841 et seq.) and which has been permitted on an individual basis by order of the Board of Governors of the Federal Reserve System.
(8) To make loans, as defined in this subsection, pursuant to which the parties may contract for and the bank or savings bank may receive interest or other compensation at a rate or rates or in an amount that the bank or savings bank and the borrower may agree upon, notwithstanding the provisions of any other law of this State, except N.J.S.2C:21-19, which limits the interest rate or finance charge which would otherwise be applicable to the loan. A loan, for the purposes of this subsection, includes loans in the amount of $5,000.00 or more, payable on demand or in installments, and (a) which is for the purpose of acquiring or is secured by equipment used for business or commercial purposes or (b) is secured by (i) an interest in warehouse receipts, bills of lading, or other documents of title which are subject to chapter 7 of Title 12A of the New Jersey Statutes, or (ii) by an interest in negotiable instruments or commercial paper which are subject to chapter 3 of Title 12A of the New Jersey Statutes, or (iii) by an interest in stocks, bonds, certificates of deposit or other securities which are subject to chapter 8 of Title 12A of the New Jersey Statutes, or (iv) by an interest in any combination of the foregoing.
(9) To engage in the business of providing data processing and computer services.
(10) To acquire, by purchase or otherwise, and to sell warrants, options or other similar rights to any class or classes of equity securities issued or to be issued by a corporation, if, at the time the warrants, options or other similar rights are acquired, the issuer, or its parent company, affiliate or subsidiary, is a borrower of funds loaned by the bank or savings bank, and if the acquisition by purchase or otherwise, and the sale of the warrants, options or other similar rights neither adds to the bank's or saving bank's credit risk nor increases the bank's or savings bank's financial liabilities.
The commissioner may, by regulation, prescribe the manner in which and the extent to which the powers enumerated in this section may be exercised, including whether they are to be exercised through a subsidiary corporation and may, by regulation, prescribe other powers, not otherwise expressly authorized or prohibited by law, which banks and savings banks may exercise.
##### **§ 17:9A-24.10** "Loan" {#sec-17-9a-24.10 omnilex-key=us-nj-statutes--title-17--17:9A-24.10}
As used in this act, "loan" includes loans which are in amounts of $10,000.00 or more, and are payable on demand and are secured (a) by an interest in warehouse receipts, bills of lading, or other documents of title which are subject to chapter 7 of Title 12A of the New Jersey Statutes (the Uniform Commercial Code), or (b) by an interest in negotiable instruments or commercial paper which are subject to chapter 3 of Title 12A of the New Jersey Statutes, or (c) by an interest in stocks, bonds, certificates of deposit or other securities which are subject to chapter 8 of Title 12A of the New Jersey Statutes, or (d) by an interest in any combination of the foregoing.
##### **§ 17:9A-24.11** Interest rate or other compensation {#sec-17-9a-24.11 omnilex-key=us-nj-statutes--title-17--17:9A-24.11}
In making a loan, a banking institution, as defined in section 1 of "The Banking Act of 1948," P.L.1948, c. 67 (C. 17:9A-1), may, providing it is otherwise empowered to make such a loan, contract for and receive interest or other compensation on or for the loan at such rate or in such amount as the bank and the borrower may agree upon, notwithstanding the provisions of any other law of this State limiting the interest rate or finance charge which would otherwise be applicable to the loan.
##### **§ 17:9A-24.12** Additional investment authority of banks {#sec-17-9a-24.12 omnilex-key=us-nj-statutes--title-17--17:9A-24.12}
In addition to investments otherwise authorized by law, a bank or savings bank may invest in any kind or kinds of assets, wherever located, of any person, partnership, corporation, other business entity, association or body politic, in amounts not exceeding in the aggregate more than 3% of the bank's or savings bank's total assets, or 50% of its capital, surplus, reserves, undivided profits and capital notes, whichever is the lesser. The aggregate amount invested pursuant to this act in an asset or assets of any one person, partnership, corporation, other business entity, association or body politic shall not exceed 1% of the bank's or savings bank's total assets.
##### **§ 17:9A-24.13** Regulations {#sec-17-9a-24.13 omnilex-key=us-nj-statutes--title-17--17:9A-24.13}
The commissioner may make, amend and repeal regulations prescribing the amount, location, required collateral or purpose of any investment made in accordance with this act as the commissioner may from time to time deem advisable to foster safe and sound banking practices in this State and to promote the public interest. No regulations shall be deemed to expand the powers granted to banks or savings banks in this act.
##### **§ 17:9A-24.14** Bank loans authorized for business enterprises {#sec-17-9a-24.14 omnilex-key=us-nj-statutes--title-17--17:9A-24.14}
Any bank, bank holding company, or savings bank may establish a subsidiary for the purpose of originating loans or loans and technical assistance packages for purchase by the New Jersey Development Authority for Small Businesses, Minorities, and Women's Enterprises established pursuant to P.L. 1985, c. 386 (C. 34:1B-47 et seq.) or may originate those loans directly, if the loans and assistance packages meet the underwriting standards established by that act, and the businesses to which the loans are made and assistance is provided are eligible businesses as defined by that act.
##### **§ 17:9A-25** Additional powers of banks. {#sec-17-9a-25 omnilex-key=us-nj-statutes--title-17--17:9A-25}
25. Additional powers of banks.
In addition to the powers specified in section 24, every bank shall, subject to the provisions of this act, have the following powers, whether or not such powers are specifically set forth in its certificate of incorporation:
(1) To discount, buy, invest in, hold, assign, transfer, sell, and negotiate promissory notes, drafts, bills of exchange, mortgages, trade acceptances, bankers' acceptances, bonds, debentures, bonds or notes secured by mortgages, installment obligations, balances due on conditional sales, and other evidences of debt for its own account, or for the account of customers;
(2) To accept for payment at future dates drafts drawn upon it by its customers;
(3) To issue letters of credit to guarantee the payment by its customers of amounts due or to become due upon the purchase by such customers of real or personal property;
(4) To receive interest and noninterest bearing demand and time deposits, to be repaid on such terms as may be agreed upon between the depositors and the bank, and to furnish security for such deposits when required by the laws of this State or of the United States, or by rules or orders of any court of this State or of the United States or by the regulations of an officer or agency of this State or of the United States, made pursuant to such law; provided that no bank shall be required to give security for deposits made by this State, or any political subdivision thereof, or any other body politic existing under the laws of this State, to the extent that such deposits are insured under any federal legislation providing for the insurance of bank deposits;
(5) To maintain savings departments for the receipt of interest and noninterest bearing deposits, to be repaid on such terms as may be agreed upon between the depositors and the bank, and to commingle such deposits with deposits otherwise received;
(6) During hours other than the bank's usual hours for receipt of deposits, to provide the equipment for receiving, and to receive, containers purporting to contain moneys or instruments for the payment of money;
(7) To make loans, secured or unsecured, including loans to its stockholders;
(8) To extend credit by honoring overdrafts upon deposit accounts, but no credit shall be so extended except pursuant to written agreement made in advance;
(9) To buy and sell gold and silver bullion, foreign coin, and exchange;
(10) To purchase and sell debt and equity securities of other corporations, without recourse, solely upon order and for the account of customers. This paragraph shall not limit the power of a bank to take securities of other corporations as collateral security for loans, discounts, or other extensions of credit, or to acquire those securities when their acquisition is necessary to prevent or minimize loss upon debts previously contracted in good faith. Equity securities acquired pursuant to this paragraph shall be sold within five years after their acquisition, except that the commissioner may, by order, extend the time within which sales of equity securities described in such order shall be made; but this paragraph shall not invalidate the holding of any equity securities lawfully acquired on or before the effective date of this act. This paragraph shall not apply to any case in which, pursuant to any other provision of this act, or pursuant to any other act, a bank is expressly authorized to subscribe for, purchase or otherwise acquire or hold securities;
(11) To receive any tangible personal property for safekeeping and storage on the terms provided by chapter 7 of Title 12A of the New Jersey Statutes, and to keep, maintain, and rent out for hire, space for the storage and safekeeping of personal property of such kind and description, or represented by the depositor thereof to be of such kind and description, as the commissioner may by regulation from time to time prescribe; but nothing herein contained shall limit the power of a bank to let space for the storage and safekeeping of personal property to which the bank has security title or in which it has a lien interest;
(12) To avail itself of the provisions of any federal legislation providing for the extension of any lawful banking activity in the making of loans or the extension of credit to individuals, or for the financing of business enterprises, or in such other banking activity as may be specified in such legislation and made available for participation by banks; except that the power by this paragraph conferred shall not be exercised unless the commissioner shall make a general order authorizing such participation upon such terms and conditions as may in such order be prescribed;
(13) To act as the fiscal agent of the United States, and of any corporation, and of any State, county, municipality, board, commission or other body politic, and to perform all duties as such fiscal agent as may lawfully be required of it;
(14) To assist customers or act for customers in the preparation, handling and disbursement of payrolls and payroll deductions and in the preparation, maintenance and furnishing of records and statistical information in connection therewith.
##### **§ 17:9A-25.1** Banks; retirement benefits for officers and employees {#sec-17-9a-25.1 omnilex-key=us-nj-statutes--title-17--17:9A-25.1}
A bank may pay retirement and other benefits to its officers and employees in the manner provided by the Banks' and Savings Banks' Officers' and Employees' Retirement and Benefit Act.
##### **§ 17:9A-25.2** Regulations authorizing loans not authorized by L.1948, c. 67; power of commissioner {#sec-17-9a-25.2 omnilex-key=us-nj-statutes--title-17--17:9A-25.2}
The Commissioner of Banking and Insurance shall have power to make, amend and repeal regulations authorizing banks to make specified kinds of loans or investments not authorized by the act to which this act is a supplement, or not otherwise authorized; except that the commissioner shall not make or continue in force any regulation authorizing banks to make any kind of loan or investment which national banks are not authorized to make.
##### **§ 17:9A-25.3** Preservation of dual banking system {#sec-17-9a-25.3 omnilex-key=us-nj-statutes--title-17--17:9A-25.3}
In exercising the power conferred upon him by this act, the commissioner shall consider the statutes, regulations and rulings governing the lending and investing powers of national banks, and the regulations made by him shall have as their objective the placing of banks on a substantial competitive parity with national banks, in order that the dual banking system may be preserved.
##### **§ 17:9A-25.4** Banks defined {#sec-17-9a-25.4 omnilex-key=us-nj-statutes--title-17--17:9A-25.4}
As used in this act, "banks" means banks, other than savings banks, organized and operating under the laws of this State.
##### **§ 17:9A-25.5** Additional powers of banks {#sec-17-9a-25.5 omnilex-key=us-nj-statutes--title-17--17:9A-25.5}
A. In addition to the powers which banks may otherwise exercise, every bank, as defined in the act to which this act is a supplement, shall have the following powers, whether or not such powers are specifically set forth in its certificate of incorporation:
(1) To disburse to customers' employees, payroll funds deposited with it by such customers for such purpose, either by direct payment to such employees on or away from the banking premises, or by crediting an account standing in an employee's name in such bank;
(2) To provide and receive compensation for travel services rendered to its customers and others, including the sale of trip insurance and the rental of automobiles as agent for a local rental service;
(3) To provide customers with messenger service by means of armored car or otherwise. In such a case, the messenger shall be the agent of the customer, and any deposits collected by such agent shall be deemed not to be received by the bank until delivered at the bank to an employee authorized to receive deposits;
(4) To designate bonded agents to sell money orders of the bank away from the banking premises;
(5) To become the owner and lessor of personal property upon the request of and for the use of a customer, and to incur such obligations as may be incidental to such ownership;
(6) To purchase open accounts;
(7) To extend credit through the use of credit cards issued by it through an arrangement with participating vendors, and without limitation of the generality of the foregoing, to exercise all the powers permitted to associations pursuant to subsection 18 of section 48 of the "Savings and Loan Act (1963)," P.L.1963, c. 144 (C. 17:12B-48);
(8) To make any investment authorized for associations by Section 165 of the "Savings and Loan Act (1963)," P.L.1963, c. 144 (C. 17:12-165), provided, however, that where reference is made to State associations or Federal associations therein, such reference for purposes of this act shall be deemed to refer to banking institutions as defined in section 1 of "The Banking Act of 1948," P.L.1948, c. 67;
(9) To exercise all other powers, not herein specifically enumerated, which are reasonably related or incidental to the exercise of the foregoing powers.
B. The commissioner may, by regulation, prescribe the manner in which and the extent to which the foregoing powers may be exercised, and may, by regulation, prescribe other powers, not otherwise expressly authorized or prohibited, which banks may exercise. Regulations so made shall be directed toward creating or maintaining substantial equality between State-regulated and Federally-regulated banks, to the end that no class or group of banks shall have any substantial competitive advantage over another.
##### **§ 17:9A-26** Additional powers of savings banks {#sec-17-9a-26 omnilex-key=us-nj-statutes--title-17--17:9A-26}
Additional powers of saving banks.
In addition to the powers specified in section 24, every savings bank shall, subject to the provisions of this act, have the following powers, whether or not such powers are specifically set forth in its certificate of incorporation:
(1) To receive money on deposit, to be repaid, upon such terms, not inconsistent with this act, as may be agreed upon between the depositor and the savings bank, according to the usual custom of savings banks;
(2) To give security for deposits when required by the law of this State or of the United States, or by the rules or orders of any court of this State, or of the United States, or by regulations of any officer or agency of this State or of the United States made pursuant to such law; provided, that, no savings bank shall be required to give security for deposits made by this State, or any political subdivision thereof, or any other body politic existing under the laws of this State, to the extent that such deposits are insured under any Federal legislation providing for the insurance of bank deposits;
(3) To invest its deposits and its surplus in the manner provided by this act, or otherwise by law provided;
(4) To be a member of the Federal home loan bank organized in the district in which the savings bank is located, and to subscribe for, purchase, hold, and surrender from time to time such amounts of the stock of such Federal home loan bank as may be required or as may be deemed advisable by such savings bank; to have and exercise all powers, privileges and options which are by law conferred upon such members; to comply with all requirements of Federal legislation and the rules and regulations lawfully promulgated thereunder governing such membership as such legislation and such rules and regulations may provide at the inception of such membership, and as the same may from time to time thereafter be amended or supplemented; and to assume and discharge all liabilities and obligations which may be required by reason of such membership;
(5) To avail itself of the provisions of any Federal legislation providing for the extension of any lawful banking activity provided in such legislation and made available for participation by savings banks; except that the power by this paragraph conferred shall not be exercised unless the commissioner shall make a general order authorizing such participation by savings banks upon such terms and conditions as may in such order be prescribed;
(6) Upon application to and approval by the commissioner, to act as custodian or trustee within the contemplation of the Federal Self-Employed Individuals Tax Retirement Act of 1962, as amended and supplemented, and as custodian, trustee or manager of any such investment fund the authorized investments of which include, but need not be limited to savings accounts or real estate loans, and the beneficial interests in which may be represented by transferable shares or certificates. Savings banks exercising the powers authorized by this subsection shall segregate all funds held in such fiduciary capacities from the general assets of the savings bank and shall keep a separate set of books and records showing in detail all transactions made under authority of this subsection. If individual records are kept for each self-employed individual's retirement plan and each such investment fund, then all such funds held in such fiduciary capacities by a savings bank may be commingled for appropriate purposes of investment. No funds held in such fiduciary capacities shall be used by a savings bank in the conduct of its business; however, such funds may be invested in savings accounts of the savings bank in the event that the custodial, trust or other plan does not prohibit such investment. In granting or refusing the savings bank's application the commissioner shall take into consideration the investment policies, amount, type and adequacy of reserves, fidelity bonds and any legally required deposits of the applicant; and other pertinent facts and circumstances. Application to and approval by the commissioner for authority to exercise the powers provided in this subsection shall not be required as to a savings bank authorized to exercise agency or fiduciary powers as a qualified bank; and
(7) To make commercial loans to the same extent as a bank may make commercial loans, subject to all limitations imposed upon banks with respect to such liabilities by Article 13 of P.L. 1948, c. 67 (C. 17:9A-60 et seq.), except that the aggregate of all commercial loans outstanding may not exceed 10% of a savings bank's total assets without the commissioner's approval. The commissioner, upon application of a savings bank and approval thereof by the commissioner, may authorize a savings bank to make and have outstanding commercial loans in an unlimited amount, or in a limited amount, but in excess of 10% the savings bank's total assets. The commissioner shall issue regulations providing procedures for filing an application for the commissioner's approval and defining terms such as "total assets" and "commercial loans." The commissioner shall, within 30 days of receipt of a completed application, approve the application if he finds that the savings bank is being operated in a safe and sound manner, and: (a) has capital equal to that required from time to time by the Board of Governors of the Federal Reserve System for a bank chartered under the laws of a state of the United States which is a member of the Federal Reserve System and said capital shall be calculated in accordance with generally accepted accounting principles as applied to banks; (b) is competently managed; and (c) demonstrates satisfactory experience and sufficient expertise in making commercial loans. This power to make commercial loans shall apply only to savings banks and no other person or institution shall exercise any power under this subsection by virtue of any parity law or law authorizing such person or institution to make or invest in investments authorized by savings banks.
##### **§ 17:9A-27** Effect of exercise of certain powers; disclosure of information by commissioner {#sec-17-9a-27 omnilex-key=us-nj-statutes--title-17--17:9A-27}
A. The authority by this act granted to exercise the powers specified in paragraphs (6), (7) and (8) of section 24, paragraph (12) of section 25, and paragraphs (4) and (5) of section 26, shall not exempt a bank or savings bank from any of the provisions of this act, except when the application of any provision of this act would prevent the exercise of such powers, and then only to the extent necessary to enable such bank or savings bank to comply with the conditions imposed by federal legislation or rules and regulations lawfully promulgated thereunder for the exercise of such powers. If any benefit or privilege made available to a bank or savings bank by paragraphs (6), (7) and (8) of section 24, paragraph (12) of section 25, and paragraphs (4) and (5) of section 26 is restricted or prohibited because of one or more limitations contained in this act or in any law prescribing or limiting interest rates, or in any other law of this State, such limitations shall be inapplicable to the extent necessary to permit the full exercise of such benefit or privilege.
B. In order to facilitate the qualification of a bank or savings bank to exercise the powers specified in paragraphs (6), (7) and (8) of section 24, paragraph (12) of section 25, and paragraphs (4) and (5) of section 26, the commissioner may disclose to any federal corporation or authority charged with the duty of determining such qualifications, such information as he may have in reference to the business and affairs of such bank or savings bank.
##### **§ 17:9A-27.2** Title insurance; safe deposit boxes; banks engaged in business before September 16, 1948 {#sec-17-9a-27.2 omnilex-key=us-nj-statutes--title-17--17:9A-27.2}
Every bank, as defined in the act to which this act is a supplement, which had been engaged in business prior to September sixteenth, one thousand nine hundred and forty-eight, was authorized to, and did, examine and insure titles to real property and rent safe deposit boxes, and was so engaged on said date, shall be entitled to continue and is authorized to, examine and insure titles to real property, and rent safe deposit boxes, notwithstanding any provision or provisions to the contrary in the act to which this act is a supplement.
##### **§ 17:9A-27.3** Definitions {#sec-17-9a-27.3 omnilex-key=us-nj-statutes--title-17--17:9A-27.3}
As used in this act, unless the context otherwise requires,
(a) "commissioner" means the Commissioner of Banking and Insurance of New Jersey;
(b) "bank" includes banks and savings banks;
(c) "board of directors" includes the board of directors of a bank, and the board of managers, or the board of trustees, of a savings bank, but excludes the executive committee of a bank or savings bank:
(d) "predecessor bank" includes
(1) a predecessor bank and a predecessor savings bank as defined in section 16 of the act to which this act is a supplement; and
(2) a bank, savings bank and national bank which has been or shall be merged into or consolidated with a bank or savings bank, as the case may be; and
(3) a bank, savings bank and national bank all or a part of whose business has been or shall be taken over by a bank or savings bank, as the case may be;
(e) "successor bank" includes
(1) a successor bank and a successor savings bank as defined in section 16 of the act of which this act is a supplement; and
(2) a bank and a savings bank into which or with which a bank or banks, savings bank or savings banks, and national bank or national banks have merged or consolidated, or shall merge or consolidate; and
(3) a bank and a savings bank which has taken over or shall take over all or a part of the business of a bank or banks, savings bank or savings banks, or national bank or national banks;
(f) "plan" and "retirement plan" mean a plan which provides for the retirement of officers and employees of a bank or a savings bank, and for the payment to them for life, or for a stated time, of retirement benefits;
(g) "fund" and "retirement fund" mean,
(1) a fund accumulated or set aside pursuant to paragraphs (a) or (b) of section 8 of this act; and
(2) a fund to which contributions are made pursuant to paragraphs (d) and (e) of section 8 of this act; and
(3) group annuity or insurance contracts, or both, purchased pursuant to paragraphs (a), (b), (c) or (e) of section 8 of this act;
(h) "employee" means persons employed by a bank, and includes officers of a bank;
(i) "subsidiary" means a corporation at least two-thirds of whose outstanding capital stock or securities having voting rights are owned by a bank, and also means an association, trust or other entity in which a bank owns at least a two-thirds interest.
##### **§ 17:9A-27.4** Adoption of plan; scope of plan {#sec-17-9a-27.4 omnilex-key=us-nj-statutes--title-17--17:9A-27.4}
A. If the original or amended certificate of incorporation of a bank other than a savings bank so provides, a plan or plans may be adopted and maintained by such bank pursuant to resolution of its board of directors; otherwise, such bank may adopt and maintain a plan or plans only with the approval of a majority in interest of its stockholders.
B. A savings bank may adopt and maintain a plan or plans pursuant to a resolution of its board of managers.
C. The officers and employees of a subsidiary of a bank may be included in a retirement plan of a bank with the same effect as if such officers and employees were employed by the bank, or upon such other terms and provisions as the plan may provide; but, in such case, all employer contributions and other employer charges required to be made or paid to a fund by reason of the inclusion of the officers and employees of a subsidiary shall be made or paid by the subsidiary.
##### **§ 17:9A-27.5** Provisions of plans {#sec-17-9a-27.5 omnilex-key=us-nj-statutes--title-17--17:9A-27.5}
In addition to the objects stated in paragraph (f) of section 3 of this act, and in addition to those provisions which are elsewhere in this act required or permitted to be included in a plan, and without limitation as to the nature and scope of the provisions which a plan may contain, a plan may make provision for 1 or more of the following, to the extent that they are consistent one with the other:
(1) rights, privileges, options and benefits, to accrue or to be exercised by the employee, or by a beneficiary or beneficiaries designated by the employee, when employment terminates otherwise than by retirement, including provision for the payment of a death benefit if death occurs before retirement;
(2) the designation by the employee of a person as a joint annuitant, or as a joint and survivor annuitant;
(3) the designation by the employee of a person or persons as beneficiaries to receive payment of a sum or sums, or to exercise an option or options, after the happening, before or after retirement, of a contingency or contingencies specified in the retirement plan, including the death of the employee within a specified period after retirement begins, or the death of the employee after retirement begins but before the receipt by him of a stated or ascertainable sum in retirement benefits;
(4) the continued employment or re-employment by the bank of employees or former employees who are receiving retirement benefits under a plan maintained by the bank;
(5) any further provisions which the bank may choose to make, and which are not prohibited by law.
##### **§ 17:9A-27.6** Contributions {#sec-17-9a-27.6 omnilex-key=us-nj-statutes--title-17--17:9A-27.6}
A plan may provide that the contributions or other charges required to be made or paid to the fund out of which, or by means of which, retirement benefits are payable, shall be made or paid only by the bank, or in part by the bank and in part by the employees of the bank.
##### **§ 17:9A-27.7** Alteration and rescission of plan {#sec-17-9a-27.7 omnilex-key=us-nj-statutes--title-17--17:9A-27.7}
A. A plan maintained by a savings bank may, subject to the provisions of section 22 of this act, be rescinded, or may be altered from time to time in the manner provided by such plan, and in the absence of such provision, by resolution of the board of managers.
B. A plan maintained by a bank other than a savings bank may be rescinded, and may be altered in a manner which is not substantial, pursuant to resolution of the board of directors.
C. If the original or amended certificate of incorporation of a bank, other than a savings bank, so provides, a plan may be altered by resolution of the bank's board of directors, whether or not the alteration is substantial; otherwise, a bank may make a substantial alteration in a plan only with the approval of a majority in interest of its stockholders.
D. For the purposes of this act, an alteration in a plan is substantial when it provides for (1) the payment, in whole or in part at the cost of the bank, of benefits greater than those specified in the plan; or (2) the retirement of employees at an age earlier than that specified in the plan; or (3) a decrease in the period of employment specified in the plan to qualify an employee to receive retirement benefits.
##### **§ 17:9A-27.8** Methods of effecting plans {#sec-17-9a-27.8 omnilex-key=us-nj-statutes--title-17--17:9A-27.8}
A plan may be effected and maintained through
(a) a fund accumulated from the income of a bank, or set aside out of surplus, out of which retirement benefits may be paid directly, or which may be used, in whole or in part, for the purchase of annuity or insurance contracts, or both; or
(b) A trust fund or funds accumulated or set aside and administered for the purposes and in the manner provided by paragraph (a) of this section, to be held in trust by the bank or by a trustee or trustees designated by the bank, and which shall not be subject to any law against perpetuities, restraints on alienation, or perpetual accumulations; or
(c) the purchase of group annuity or insurance contracts, or both; or
(d) a fund accumulated by contributions made thereto by two or more corporations which are banks, savings banks or national banks of this State or of any other State, pursuant to a retirement system created under the laws of this State or of the State of New York, limited in membership to such corporations and providing for the retirement of officers and employees of such corporations; or
(e) a plan (1) which is administered by a corporation not for pecuniary profit organized under the laws of this State, (2) in which two or more banks, savings banks or national banks, participate or are members; and (3) which is underwritten by a group annuity contract issued by a life insurance company authorized to transact business in this State.
##### **§ 17:9A-27.9** Eligibility for retirement benefits {#sec-17-9a-27.9 omnilex-key=us-nj-statutes--title-17--17:9A-27.9}
An employee shall be eligible to begin receiving retirement benefits at such age as shall be specified in a retirement plan.
##### **§ 17:9A-27.10** Disposition of contributions of employee {#sec-17-9a-27.10 omnilex-key=us-nj-statutes--title-17--17:9A-27.10}
Every plan shall provide that, upon termination of employment of an employee for any cause other than retirement pursuant to such plan, or upon the death of such employee prior to such retirement, all contributions made by such employee pursuant to such plan shall be repaid to such employee, or to a beneficiary or beneficiaries designated by him. A plan may provide that such employee shall have the option of receiving the return of his contributions in cash, or in the form of an annuity payable in such manner and subject to such conditions as may be prescribed by such plan, and such provision shall constitute a compliance with this section.
##### **§ 17:9A-27.11** Disposition of contributions of employer {#sec-17-9a-27.11 omnilex-key=us-nj-statutes--title-17--17:9A-27.11}
A plan may, but need not, provide that, upon termination of employment of an employee for any cause specified in such plan, other than retirement pursuant to such plan, or upon the death of such employee prior to retirement, all or part of the contribution made by the bank on behalf of such employee, shall be paid, in the manner provided by such plan, to such employee, or to a beneficiary or beneficiaries designated by him.
##### **§ 17:9A-27.12** Rights of creditors of bank {#sec-17-9a-27.12 omnilex-key=us-nj-statutes--title-17--17:9A-27.12}
No depositor or other creditor of any bank shall have any right in or claim against any retirement fund authorized by this act.
##### **§ 17:9A-27.15** Determination of eligibility for retirement {#sec-17-9a-27.15 omnilex-key=us-nj-statutes--title-17--17:9A-27.15}
In determining the eligibility for retirement of an employee of a bank, a plan may provide that (a) the period or periods during which the employment of such employee by such bank shall, in time of war or emergency, be or have been interrupted by service in the military or naval service of the United States or of this State, or in the Coast Guard or Merchant Marine of the United States, or in any auxiliary or reserve corps serving therewith, or by engagement in any war work by enlistment or induction under any selective service or similar statute, or, with leave of such bank, by engagement in any war relief, social service or other activity related to war conditions, or in time of peace, by absence on leave and engagement in training or temporary service of a similar character, and (b) a period not exceeding 3 months after termination of such service or engagement, and (c) a period not exceeding 1 year of incapacity as a result of such service or engagement, shall be included in the period of such employee's employment in such bank.
##### **§ 17:9A-27.16** Eligibility for retirement; permissive provisions {#sec-17-9a-27.16 omnilex-key=us-nj-statutes--title-17--17:9A-27.16}
A. In determining the eligibility for retirement of an employee, a plan may provide that (a) the period during which such employee was employed by a predecessor bank, and by a bank, savings bank or national bank toward which such predecessor bank stands in the relation of a successor bank; and (b) the period during which such employee was employed by a subsidiary, shall be included in the period of such employee's employment in such bank.
B. In determining the eligibility for retirement of an employee, a plan may provide that a period during which such employee was employed by an employer other than the bank, a predecessor bank, or a subsidiary, shall be included in the period of such employee's employment in such bank.
##### **§ 17:9A-27.17** Disposition of plans of predecessor bank {#sec-17-9a-27.17 omnilex-key=us-nj-statutes--title-17--17:9A-27.17}
A. A successor bank may, with the approval of the commissioner,
(a) continue any existing plan or plans, or fund or funds maintained or participated in by a predecessor bank or banks, in the same manner that such plan or plans, or fund or funds were maintained or participated in by such predecessor bank or banks, or as altered by the successor bank;
(b) modify, alter or rescind any existing plan or plans or fund or funds maintained or participated in by any predecessor bank;
(c) adopt and maintain a new plan or plans, or fund or funds for those employees or any predecessor bank or banks, who continue as employees of the successor bank, or establish a separate plan or fund, or separate plans or funds for such employees within a plan or fund, if any, maintained by the successor bank;
(d) combine two or more plans or funds maintained or participated in by each of two or more predecessor banks, or combine one or more of such plans or funds, with a plan or fund, if any, maintained by it;
(e) do such other acts in respect to a plan or plans or fund or funds maintained or participated in by a predecessor bank or banks, as may be necessary or desirable.
B. For the purposes of this act, the employees of each predecessor bank, or of one or more predecessor banks, who become employees of the successor bank, may constitute an independent employee unit or units within the successor bank.
C. When, pursuant to this act, a bank maintains more than one plan or fund, it shall be optional with the bank to determine which of such plans or funds shall include particular groups or units of employees.
##### **§ 17:9A-27.18** Attachment and garnishment {#sec-17-9a-27.18 omnilex-key=us-nj-statutes--title-17--17:9A-27.18}
Any retirement benefit shall be subject to execution, attachment, garnishment or other legal process to the extent and by the same procedure as provided by law in respect to execution upon or garnishment of wages or other earnings. No such benefit shall be assignable or subject to advancement, but, in the discretion of the board of directors, all or a part thereof may be paid in accordance with the written order of a retired employee, or, in the case of his disability, may be applied by the bank for his use or benefit or for that of his dependents.
##### **§ 17:9A-27.19** Delegation of administration of plan {#sec-17-9a-27.19 omnilex-key=us-nj-statutes--title-17--17:9A-27.19}
The board of directors may delegate the administration of any plan or fund to its executive committee or to a pension committee appointed by it.
##### **§ 17:9A-27.20** Continuance of payments {#sec-17-9a-27.20 omnilex-key=us-nj-statutes--title-17--17:9A-27.20}
A bank which, on the effective date of this act, is paying an employee a retirement benefit, pension or disability benefit not contrary to law in effect at the time of his retirement or disability, is authorized to continue the payment thereof.
##### **§ 17:9A-27.21** Continuance of prior plans {#sec-17-9a-27.21 omnilex-key=us-nj-statutes--title-17--17:9A-27.21}
A bank which, on the effective date of this act, maintains or participates in a retirement plan or fund not contrary to law in effect at the time of the adoption of or any alteration of such plan or fund, is authorized to continue to maintain or participate in such plan or fund and it may alter such plan or fund from time to time in a manner not inconsistent with the provisions of this act.
##### **§ 17:9A-27.22** Approval of commissioner of adoption or alteration of plan {#sec-17-9a-27.22 omnilex-key=us-nj-statutes--title-17--17:9A-27.22}
A. Every plan hereafter adopted by a savings bank or hereafter substantially altered by a savings bank within the meaning of subsection D of section 7 of this act, shall, before it or such alteration is placed in operation, be submitted to the commissioner for his approval.
B. The commissioner may disapprove such plan or alteration thereof if he shall find (1) that it does not conform to law, or (2) that its adoption or alteration would be hazardous to the savings bank, or (3) that its provisions are unfair or inequitable, or (4) that the cost thereof to the savings bank is excessive or unreasonable, considering the current earnings of the savings bank, and the savings bank's current deposits, surplus, undivided profits and reserves.
C. The commissioner may, from time to time, make such orders in respect to the maintenance and administration of a plan as, in his judgment, the condition of the savings bank may require.
##### **§ 17:9A-27.23** Additional powers {#sec-17-9a-27.23 omnilex-key=us-nj-statutes--title-17--17:9A-27.23}
In addition to the powers conferred by the preceding sections of this act, a bank shall have power to do all, or some, or 1 of the following, whether or not such bank maintains a retirement plan or fund:
(1) pay premiums for insurance on the lives or health of its employees, under policies commonly known as group insurance policies;
(2) pay premiums on behalf of its employees and their dependents, for hospitalization or hospital service insurance and for surgical and medical service insurance;
(3) pay reasonable amounts to aid present or former employees who are disabled by accident, illness or otherwise;
(4) pay salaries or wages in whole or in part, to employees who are disabled by accident, illness or otherwise;
(5) pay the reasonable cost of educational and recreational facilities for employees, or for the promotion of their health and general welfare.
##### **§ 17:9A-27.24** Retirement benefits not paid pursuant to plan {#sec-17-9a-27.24 omnilex-key=us-nj-statutes--title-17--17:9A-27.24}
A. A bank which maintains a retirement plan may pay
(1) retirement benefits in reasonable amounts to employees whose employment has heretofore terminated or shall hereafter have terminated, and who are not entitled, for any reason, to receive payment of benefits under a retirement plan in operation; and
(2) reasonable amounts to employees whose employment has heretofore terminated or shall hereafter have terminated, and who are entitled to receive payment of retirement benefits under a retirement plan in operation, but whose benefits under such plan are, in the opinion of the board of directors, inadequate.
B. A bank which maintains no retirement plan, may pay retirement benefits in reasonable amounts to employees whose employment has heretofore terminated or shall hereafter have terminated. A bank may make any payment pursuant to this subsection which it could lawfully make if it maintained a plan under this act.
##### **§ 17:9A-27.25** Powers of commissioner {#sec-17-9a-27.25 omnilex-key=us-nj-statutes--title-17--17:9A-27.25}
If it shall appear to the commissioner that any payment made by any bank for any benefit provided for by sections 23 or 24 of this act is excessive as to any one or more or all employees of a bank, he shall have power to order that any payment thereafter made by such bank for such benefit or benefits shall be reduced to such amount as he shall deem reasonable. An order made pursuant to this section shall be subject to review in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-27.26** Approval by commissioner {#sec-17-9a-27.26 omnilex-key=us-nj-statutes--title-17--17:9A-27.26}
Whenever, under the provisions of this act, the approval of the commissioner is required, written application for such approval shall be made to the commissioner in such form as he may prescribe. The commissioner shall, within 60 days after the receipt by him of such application, approve or disapprove it, and shall notify the applying bank in writing of his determination, stating his reasons in any case where he disapproves. The disapproval of the commissioner of any application made pursuant to this section shall be subject to review in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-27.27** Short title {#sec-17-9a-27.27 omnilex-key=us-nj-statutes--title-17--17:9A-27.27}
This act may be cited as the Banks' and Savings Banks' Officers' and Employees' Retirement and Benefit Act.
##### **§ 17:9A-27.50** Stock option plan {#sec-17-9a-27.50 omnilex-key=us-nj-statutes--title-17--17:9A-27.50}
a. Subject to the limitations prescribed by this act, a bank may grant options to purchase shares of its capital stock to its officers and employees, and to the officers and employees of any subsidiary, without first offering the same to its stockholders, for a consideration in cash of not less than the higher of par value or 85% of the fair market value of the shares at the time the options are granted, pursuant to the terms of a stock option plan which has been previously adopted by its board of directors and approved by the holders of two-thirds of the capital stock of the bank entitled to vote. A stock option plan adopted and approved as provided herein may contain any provisions which the bank may choose to make and which are not prohibited by law. The number of shares which may be issued or purchased pursuant to any one stock option plan shall not exceed 5% of the amount of outstanding shares of the capital stock of the bank at the time of the adoption of the plan, but there may be more than one stock option plan in effect at the same time, provided that the total number of shares of stock subject to all existing stock option plans may not exceed 10% of the amount of the outstanding shares of the capital stock of the bank. In the absence of actual fraud in the transactions, and within the limits of the particular stock option plan under which a stock option is issued, the judgment of the board of directors as to the consideration for the issuance of such options and the sufficiency thereof, and as to the recipients of the options, shall be conclusive.
b. In addition to, or as an alternative to, adopting a stock option plan pursuant to paragraph a. of this section, a bank may adopt any form of stock option plan which is an Incentive Stock Option as defined in section 422A of the Internal Revenue Code or an Employee Stock Purchase Plan as defined in section 423 of the Internal Revenue Code, provided that the additional or alternative plan shall be adopted by the board of directors and approved by the holders of two-thirds of the capital stock of the bank entitled to vote.
##### **§ 17:9A-27.51** Filing copy of plan and certificate of adoption and approval {#sec-17-9a-27.51 omnilex-key=us-nj-statutes--title-17--17:9A-27.51}
Before any stock option plan shall be placed in operation, a copy thereof shall be filed in the Department of Banking and Insurance, together with a certificate made by 2 officers, one of whom shall be the president or a vice-president, stating that the plan has been adopted and approved in accordance with section 1.
##### **§ 17:9A-27.52** Provision in certificate of incorporation for authorized but unissued shares of capital stock {#sec-17-9a-27.52 omnilex-key=us-nj-statutes--title-17--17:9A-27.52}
In order to have shares of its capital stock available for the purposes of this act, a bank may provide in its certificate of incorporation, or an amendment thereof, for authorized but unissued shares of its capital stock. An amendment of the certificate of incorporation for such purpose shall be made in the manner provided by Article 19 of the act of which this act is a supplement. Such authorized but unissued shares of capital stock of the bank shall not become issued and fully paid shares of the capital stock of the bank until the option or options to which the shares of stock are subject have been exercised, and such shares of capital stock shall not become part of the capital stock of the bank except for the purposes hereof until such time as such shares of stock have been issued and paid for in cash.
##### **§ 17:9A-27.53** Certificate of bank; findings of commissioner; approval {#sec-17-9a-27.53 omnilex-key=us-nj-statutes--title-17--17:9A-27.53}
A. Prior to the date of the issuance of authorized and unissued shares of the capital stock of a bank for the purposes of this act, a certificate made by 2 officers of the bank, one of whom shall be the president or a vice-president, shall be filed in the Department of Banking and Insurance, stating:
(1) The date upon which the stock option plan was adopted by the board of directors and approved by the stockholders as hereinabove provided;
(2) The date upon which the option or options were granted pursuant to such stock option plan;
(3) The consideration paid for the purchase of the stock;
(4) The fair market value of the shares of capital stock subject to the option on the date the option was granted;
(5) The amount of the shares of the capital stock of the bank to be issued;
(6) The amount of the capital stock and surplus of the bank after the exercise of such option and the issuance of capital stock pursuant thereto.
B. If the Commissioner of Banking and Insurance finds that the certificate of incorporation of the bank, or an amendment thereof, provides for authorized but unissued shares of the capital stock of the bank for the purposes of this act, and if he finds from the certificate filed pursuant to subsection A of this section, that the issuance of such stock conforms to the provisions of this act, he shall endorse his approval upon the certificate and shall file it in the Department of Banking and Insurance. A certificate filed in the department pursuant to this subsection shall be deemed for all purposes to be an amendment of the certificate of incorporation of the bank to the same effect as if it had been authorized, executed, approved and filed in the department pursuant to Article 19 of the act of which this act is a supplement.
##### **§ 17:9A-27.54** Short title {#sec-17-9a-27.54 omnilex-key=us-nj-statutes--title-17--17:9A-27.54}
This act may be cited as the Bank Officers and Employees' Stock Option Plan Act.
##### **§ 17:9A-28** Agency and fiduciary powers {#sec-17-9a-28 omnilex-key=us-nj-statutes--title-17--17:9A-28}
Agency and fiduciary powers. A bank which is a qualified bank shall have the following agency and fiduciary powers in addition to the powers specified in sections 24 and 25, whether or not such agency and fiduciary powers are specifically set forth in its certificate of incorporation, and a savings bank which is a qualified bank shall have the following agency and fiduciary powers, in addition to the powers specified in sections 24 and 26, whether or not such agency and fiduciary powers are specifically set forth in its certificate of incorporation:
(1) To act as custodian or escrow agent of personal property for any person or corporation;
(2) as agent, to receive, hold, manage and dispose of by sale or otherwise personal and real property; to act as agent of any person or corporation for any other purpose not prohibited by law;
(3) to act as the transfer agent or registrar, or both, of any state, county, municipality, board, commission, or other body politic, or of any foreign or domestic corporation and, in such capacity to transfer, register, and countersign stock certificates and bonds or other evidences of indebtedness;
(4) to act as trustee of or with respect to any security or instruments of indebtedness or of security issued by any state, county, municipality, other body politic, or corporation, foreign or domestic, and to accept any other public or corporate trust not inconsistent with the laws of this State;
(5) to be appointed and to act under the order of appointment of any court of competent jurisdiction as guardian, custodian, trustee or administrator, or by whatever other title it may thereby be designated, or the person or estate, or both, of any person for whom or for whose estate such an appointment may be made;
(6) to be appointed and to act as executor, trustee, or guardian under any last will and testament, or as administrator with the will annexed, or as substituted administrator with the will annexed, or as administrator, or as substituted trustee or as substituted administrator of the estate of any deceased person;
(7) to be appointed and to act as assignee or trustee for the benefit of creditors under any statute providing for such assignment or otherwise;
(8) to be appointed and to act as receiver or trustee on appointment by any state or federal court of competent jurisdiction;
(9) to receive from any person and hold in trust and dispose of, by sale or otherwise, personal and real property, upon such terms as may be specified;
(10) to accept, administer, and execute all other trusts and to act in all other fiduciary capacities not herein specifically enumerated, not inconsistent with law;
(11) all fiduciary powers permitted to associations pursuant to subsection (19) of section 48 of the "Savings and Loan Act (1963)," P.L. 1963, c. 144 (C. 17:12B-48).
##### **§ 17:9A-28.1** Broker-dealer as custodian {#sec-17-9a-28.1 omnilex-key=us-nj-statutes--title-17--17:9A-28.1}
a. Notwithstanding any other provision of law to the contrary, a qualified bank may: (1) employ any broker-dealer which is registered with the federal Securities and Exchange Commission and with the Bureau of Securities in the Division of Consumer Affairs in the Department of Law and Public Safety as a custodian for the qualified bank for any securities held by the qualified bank in its fiduciary capacity; and (2) register the securities in the name of the broker-dealer so employed.
b. Any broker-dealer employed pursuant to subsection a. of this section shall have the same power and shall be subject to the same restrictions with respect to the treatment of securities which it holds as custodian as any bank acting as custodian for a qualified bank. Any securities held by a broker-dealer pursuant to this act in which the broker-dealer does not have a lien for indebtedness due to it from an estate or trust may not be pledged, lent, hypothecated, or disposed of except upon specific instruction of the qualified bank acting in its fiduciary capacity.
##### **§ 17:9A-28.2** Purchase for trust accounts of bonds, notes, or other obligations {#sec-17-9a-28.2 omnilex-key=us-nj-statutes--title-17--17:9A-28.2}
a. Subject to the provisions of this act, a qualified bank, as defined in section 1 of P.L. 1948, c. 67 (C. 17:9A-1) shall have power to retain and purchase or otherwise acquire for any trust account which it is administering or for any other account which it is administering in any fiduciary capacity, in the absence of any express prohibition to the contrary applicable to that account:
(1) Bonds, notes or other obligations of, or guaranteed by, this State or any agency, authority or instrumentality of this State; and
(2) Bonds, notes or other obligations of any county, municipality, or other governmental unit or subdivision of this State, or any agency, authority, instrumentality of any county, municipality or other governmental unit or subdivision of this State; which that qualified bank or an affiliate thereof holds or has acquired as the underwriter thereof or as a member of an underwriting syndicate thereof. For the purposes of this act, an "affiliate" means a corporation controlled by the qualified bank or by a bank holding company which controls the qualified bank.
b. Notwithstanding the provisions of subsection a. of this section, a qualified bank which is an issuer of bonds, notes or other obligations shall not retain or purchase a total of more than 50% of that issue.
c. The commissioner shall, by regulation, prescribe the manner in which and the extent to which the foregoing power may be exercised. No power shall be exercised until regulations on this subject have been adopted. Regulations shall be directed toward protecting the trust account beneficiaries of that qualified bank but nevertheless affording those beneficiaries the opportunity of sharing in the benefits of the investment in the bonds, notes and other obligations.
##### **§ 17:9A-29** Appointment by court or officer of qualified bank as fiduciary {#sec-17-9a-29 omnilex-key=us-nj-statutes--title-17--17:9A-29}
A. A court or officer with power to appoint a fiduciary, may appoint a qualified bank.
B. When a qualified bank, named in a fiduciary capacity in any instrument, shall, before its appointment and qualification as such fiduciary, have been succeeded by another qualified bank as a result of a merger, consolidation, conversion or other corporate reorganization, or when a successor fiduciary to such qualified bank has been appointed as provided in subsection F. of this section, the court or officer having jurisdiction shall, except for good cause shown, upon proper application therefor, appoint the successor bank or such successor fiduciary, as the case may be, to act in such fiduciary capacity.
C. A qualified bank may be appointed, upon the application of any party in interest or upon the application of any person or corporation acting or entitled to act in a fiduciary capacity, to act in the place and stead of such person or corporation so acting or entitled to act, or jointly with such person or corporation. Such appointment shall be made upon such notice as the court or officer shall direct.
D. Except as may in this act be otherwise expressly provided, a qualified bank acting in a fiduciary capacity shall have all powers, and shall be subject to all liabilities, duties, and obligations as if such bank were an individual.
E. Whenever, under any law of this State, or of the United States, any fiduciary is required to make oath, such oath may be made on behalf of a qualified bank by its president, vice president, cashier, assistant cashier, secretary, assistant secretary, treasurer, assistant treasurer, trust officer, or assistant trust officer.
F. A qualified bank which is a wholly-owned subsidiary of a bank holding company organized under the laws of New Jersey may apply ex parte to the Superior Court to be substituted in the place and stead of one or more qualified banks which are also wholly-owned subsidiaries of such bank holding company, and which are desirous of being discharged from acting further in certain fiduciary capacities and relationships. Upon such application, the court shall make an order appointing the applicant qualified bank as successor fiduciary in respect to the fiduciary capacities and relationships set forth in such application, with the same powers and duties in respect to such fiduciary capacities and relationships as those possessed by the qualified bank or banks for which the successor fiduciary is substituted. After such order of substitution has been entered every instrument executed or otherwise effected before or after such entry, which purports to appoint to any fiduciary capacity or relationship any qualified bank for which a successor fiduciary has been appointed pursuant to this subsection shall be deemed to constitute an appointment of such successor fiduciary. The qualified bank which has been succeeded by a successor fiduciary as provided in this section, may, but shall not be required to, present an accounting, in which the successor bank may join, of its administration of the fiduciary capacities or relationships to which the successor fiduciary has been appointed.
##### **§ 17:9A-30** Security prerequisite to action as fiduciary {#sec-17-9a-30 omnilex-key=us-nj-statutes--title-17--17:9A-30}
A. When a qualified bank is named as a fiduciary in any will or other instrument, it shall not be required to give any security for the performance of its duties as such fiduciary, unless the will or other fiduciary instrument expressly requires the giving of security.
B. In any case in which security may lawfully be required of a qualified bank for the performance of its duties in a fiduciary capacity, it may satisfy such requirement by giving the same security that would be required of an individual acting in a similar capacity.
C. Notwithstanding any other provision of law, a qualified bank which shall create and maintain a fund pursuant to section 31 shall not be required to give any other security upon its appointment as a fiduciary by any court or officer of this State, except in those cases in which a will or other fiduciary instrument specifies that other security be given.
##### **§ 17:9A-31** Security fund {#sec-17-9a-31 omnilex-key=us-nj-statutes--title-17--17:9A-31}
A. A qualified bank may create a fund to be held as security for the performance of its obligations in fiduciary capacities for which security shall be required, except those for which other security is given or for which a will or other fiduciary instrument specifies that other security be given. Such fund shall consist of investments in which a fiduciary, whose duty it may be to loan or invest money held in a fiduciary capacity, may, by law, without special order of any court, invest such money, or any part thereof. Such fund shall have a value at least equal to twenty per centum (20%) of the aggregate value on the books of the qualified bank of all the assets administered by such bank in all such fiduciary capacities, except that, when the value of such assets is in excess of one million dollars ($1,000,000.00) but not in excess of five million dollars ($5,000,000.00), the value of the fund need not exceed two hundred thousand dollars ($200,000.00) plus seven and one-half per centum (7 1/2 %) of the excess over one million dollars ($1,000,000.00); and, when the value of such assets exceeds five million dollars ($5,000,000.00), the value of the fund need not exceed five hundred thousand dollars ($500,000.00). For the purposes of this section, the investments included in the fund shall be valued at market value or at the value at which they are carried on the books of the qualified bank, whichever is lower. If an investment included in the fund shall have ceased to be an investment of the kind specified in this subsection, it shall be withdrawn from the fund by the qualified bank within sixty days from the date it ceased to be such an investment, unless the time for such withdrawal is extended by order of the Superior Court.
B. The investments comprising the fund created pursuant to this section shall be deposited by the qualified bank on order of the Superior Court with the Federal Reserve bank of the district in which the qualified bank is located, or with another qualified bank which the commissioner shall have approved as a depositary for the purposes of this section, and shall be held by the depositary thereof subject to the order of the Superior Court. Except as otherwise provided by subsection C of this section, withdrawals of and substitutions for the investments included in such fund may be made in accordance with an order of the Superior Court; provided, that the provisions of this section shall at all times be complied with. The fund may, on order of the Superior Court, be withdrawn in its entirety upon proof that all obligations secured thereby have been satisfied. Application for the withdrawal or substitution of investments may be made to the Superior Court without notice to the depositary of the fund, and the order or judgment of the Superior Court, certified by the Clerk of the Superior Court to be a true copy, shall be sufficient warrant to the depositary to permit such withdrawal or substitution.
C. The depositing bank may, from time to time, without application to or order of the Superior Court, substitute for United States Treasury bonds included in such fund, other United States Treasury bonds in like principal amount, and the depositary shall permit such substitution at the request of the depositing bank. Within five days after such substitution, the depositary bank shall file a verified report thereof in the office of the Clerk of the Superior Court, which shall list the United States Treasury bonds, and the amount thereof, withdrawn from such fund, and the United States Treasury bonds, and the amount thereof, substituted therefor.
D. Investments deposited as provided in this section, if not transferable by delivery, shall be assigned to "The Clerk of the Superior Court, State of New Jersey" by separate instruments of assignment which shall be deposited with the investments. Until recourse is had to the fund as specified in section thirty-two, the depositing bank shall be entitled to all income from the fund, and the Clerk of the Superior Court shall execute such instruments as shall be necessary for that purpose.
E. The commissioner shall report to the Superior Court any violations of this section which come to his notice as a result of the examination of a qualified bank or otherwise, and the Superior Court shall thereupon make such order as it shall deem necessary for the protection of those for whose benefit the fund has been deposited.
##### **§ 17:9A-32** Recourse to security fund {#sec-17-9a-32 omnilex-key=us-nj-statutes--title-17--17:9A-32}
Recourse may be had to the fund created pursuant to section thirty-one upon application to the Superior Court, upon such notice as it shall direct, which shall include notice to the depositing bank, following the entry of a judgment against the bank for a breach of any fiduciary obligation or obligations to one or more persons for whose benefit the fund was deposited. The Superior Court shall make such order on such application as it shall deem proper and necessary to preserve the rights of all those for whose benefit the fund was deposited.
##### **§ 17:9A-33** Transfer of investments heretofore deposited {#sec-17-9a-33 omnilex-key=us-nj-statutes--title-17--17:9A-33}
Upon petition by a qualified bank which has heretofore deposited investments with the Register of the Prerogative Court, as the said court was constituted prior to September 15, 1948, as a prerequisite to its appointment as fiduciary by any court or officer of this State and upon proof that a federal reserve bank or qualified bank, authorized under subsection B of section 31 to act as depositary pursuant to said section, has consented to receive and hold such investments as such depositary, the Superior Court shall order the transfer of such investments to such depositary and, upon such transfer, such investments shall constitute a fund to be held subject to section 31.
##### **§ 17:9A-34** Proof of qualification and security {#sec-17-9a-34 omnilex-key=us-nj-statutes--title-17--17:9A-34}
A. As a prerequisite to its appointment as a fiduciary by any court or officer of this State, a qualified bank shall present to the court or officer an affidavit made by its president or a vice-president and its trust officer or an assistant trust officer that the bank is a qualified bank authorized to exercise the powers specified in section 28, and that its authority so to act has not been revoked and that there is no action pending in any court or before any officer to revoke it.
B. In those cases in which a qualified bank shall be required to give security and a fund maintained pursuant to section 31 shall be offered by the bank as such security, the affidavit presented pursuant to subsection A of this section shall also set forth
(1) The value of the investments included in the fund created and deposited pursuant to section 31 as of a date not more than 30 days prior to the date of such affidavit;
(2) The maximum amount which the said fund so deposited will secure, as provided in subsection A of section 31; and
(3) That the aggregate value on the books of the qualified bank of all the assets administered by the bank in fiduciary capacities under appointment by a court or officer of this State with respect to which its fiduciary obligations are secured by said fund, including the value of the assets to be administered following the pending appointment, will not exceed the amount specified in the next preceding paragraph.
There shall be annexed to such affidavit a statement of the assets and liabilities of the bank, which shall be a copy of the last such statement published pursuant to law. In lieu of items (1), (2) and (3), such affidavit may state that the value of the investments included in the fund created and deposited pursuant to section 31 is $500,000.00 or more.
##### **§ 17:9A-35** Trust funds {#sec-17-9a-35 omnilex-key=us-nj-statutes--title-17--17:9A-35}
Trust funds. A. All moneys, securities and other property held by a qualified bank in fiduciary capacities, pursuant to paragraphs (5), (6), (7), (8), (9) and (10) of section 28, shall be kept separate and apart from the moneys, securities and other property belonging to such bank, and such moneys, securities and other property shall not be liable for the debts or obligations of the bank; except that moneys held by a qualified bank in one or more such fiduciary capacities, awaiting investment or disbursement, may be deposited in a single account or in separate accounts with itself or with any other banking institution or with any bank, trust company or national banking association having its principal office in any other state. Moneys so deposited with itself may be used by the bank in the conduct of its business. Securities held by a qualified bank in fiduciary capacities may also be deposited with any other banking institution, or with any bank, trust company or national banking association having its principal office in any other state. The duties of the depository in respect to securities so deposited with it shall be confined to the safekeeping thereof, the collection of interest thereon for the account of the depositing qualified bank, and the performance of such other clerical or ministerial acts as the depositing qualified bank may from time to time request. Nothing herein contained shall be construed as relieving the depositing qualified bank from the duty to account for all securities deposited as authorized by this subsection.
B. In the event of the insolvency of a qualified bank which has deposited such moneys with itself, such bank in such fiduciary capacities shall have claims against the assets of the bank for moneys so deposited, preferred over claims not otherwise entitled to preference, but subordinate to all other claims which shall be entitled to preference. In the event of the insolvency of any other banking institution or of any bank, trust company or national banking association having its principal office in any other state, in which such moneys shall have been deposited, a qualified bank which shall have made such deposits shall be liable for the amount of such deposits as if such deposits had been made with it, and shall be subrogated to its claims as fiduciary against the insolvent banking institution, bank, trust company or national banking association in which such deposits shall have been made.
C. Notwithstanding any other provisions of law, any qualified bank holding securities in a trust estate, or any banking institution holding securities as a custodian or managing agent, or as custodian for a fiduciary, is authorized to deposit or arrange for the deposit with the Federal Reserve bank in its district, any securities so held, the principal and interest of which the United States of America or any department, agency or instrumentality thereof has agreed to pay, or has guaranteed payment. Securities so deposited shall be credited to one or more accounts on the books of such Federal Reserve bank in the name of such qualified bank or such banking institution, to be designated fiduciary or safekeeping accounts, to which other similar securities may be deposited. The records of such qualified bank and the records of a banking institution acting as custodian, as managing agent or as custodian for a fiduciary, shall at all times show the name of the party for whose account the securities are so deposited. Ownership of, and other interests in, such securities may be transferred by bookkeeping entry on the books of such Federal Reserve bank without physical delivery of certificates representing such securities. A qualified bank or banking institution depositing securities pursuant to this section shall be subject to such rules and regulations as, in the case of State-chartered institutions, the commissioner, and in the case of national banks, the comptroller of the currency, may from time to time issue. A qualified bank or banking institution acting as custodian for a fiduciary shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by such qualified bank or banking institution with such Federal Reserve bank for the account of such fiduciary. A qualified bank shall, on demand by any party to a judicial proceeding for the settlement of such qualified bank's account as fiduciary, or on demand by the attorney for such party, certify in writing to such party the securities deposited by such qualified bank with such Federal Reserve bank for its account as fiduciary. This subsection shall apply to any qualified bank or banking institution holding securities in a fiduciary, custodial or management capacity, acting on the effective date of this act or who thereafter may act, regardless of the date of the agreement, instrument or court order pursuant to which such qualified bank or banking institution is acting. Nothing contained in this subsection shall be construed as relieving a qualified bank or banking institution depositing securities as authorized by this subsection from the duty to account for all securities so deposited.
D. (1) For each account held by a qualified bank in a fiduciary capacity, pursuant to paragraph (5), (6), (7), (8), (9), or (10) of section 28 of P.L. 1948, c. 67 (C. 17:9A-28), all moneys in excess of $100.00, whether income or principal, which are awaiting investment or disbursement, which are not otherwise subject to direction regarding investment and which are not held for distribution on a monthly basis, shall be invested by the qualified bank or deposited with the qualified bank or with another qualified bank, as set forth in this paragraph. The bank shall invest or deposit that portion of the moneys in excess of $100.00 within seven business days of the account receiving or accumulating the $100.00 or more. The investment or deposit shall be in accordance with the "Prudent Investment Law," N.J.S. 3B:20-12 et seq., and shall produce a rate of return commensurate with the short-term market rate of return then prevailing. If notice is given pursuant to paragraph (2) of this subsection, in addition to other compensation that the qualified bank is otherwise entitled to by law for services as a fiduciary, it shall be entitled to pay itself out of the income earned on the investment or deposit for its reasonable charges for the maintenance and administration of the services referred to in this subsection. A qualified bank shall not be required to perform these investment services if it is not permitted under the terms of the instrument governing the fiduciary capacity in which it serves, or by the person empowered to direct investments, to receive reasonable compensation for providing these services, unless the qualified bank expressly agrees to provide the investment services without compensation.
(2) The qualified bank shall notify its customers who are receiving or who will receive the investment services set forth in this subsection of the basis of the bank's charges for the services or any change in the basis of the bank's charges for the services. The notice shall be in writing and may be sent by regular mail and may be included with the periodic account statement. Notice given at any time prior to the institution of the services or within 30 days after the institution of the services, or any change in the basis of the bank's charges for the services, shall be in compliance with this paragraph. For the purposes of this paragraph, "customer" means the person or persons who receive the periodic account statements issued by the qualified bank.
E. A qualified bank acting in a fiduciary capacity is authorized, in the absence of an express provision to the contrary, whenever a law, regulation, governing instrument or order directs, requires, authorizes or permits investment in United States government obligations, to invest in those obligations, either directly or in the form of securities of, or other interests in, any open-end or closed-end management investment company or investment trust registered under the "Investment Company Act of 1940," 54 Stat. 847 (15 U.S.C. s. 80a-1 et seq.), if the portfolio of that investment company or investment trust is limited to United States government obligations and to repurchase agreements fully collateralized by United States government obligations, which collateral shall be delivered to or held by the investment company or investment trust, either directly or through an authorized custodian. Nothing in this subsection shall alter the power of a qualified bank to otherwise invest funds or assets which it may receive and hold in a fiduciary capacity, nor shall anything in this subsection affect the degree of prudence and judgment which is required of qualified banks generally.
##### **§ 17:9A-36** Definitions {#sec-17-9a-36 omnilex-key=us-nj-statutes--title-17--17:9A-36}
Definitions.
As used in this article, and except as the context otherwise requires,
(1) "Common trust fund" means a fund established and maintained by a bank or any of its affiliate banks exclusively for the collective investment and reinvestment of moneys contributed thereto by the bank or any of its affiliate banks in any fiduciary capacity specified in paragraphs (5), (6), (9) and (10) of section 28;
(2) "Bank" means a qualified bank which is empowered to invest moneys entrusted to it in any capacity specified in paragraphs (5), (6), (9) and (10) of section 28;
(3) "Cofiduciary" means one or more individuals or corporations, or both, lawfully acting or entitled to act jointly with a bank in the exercise of the powers referred to in the next preceding paragraph;
(4) "Trust instrument" means the will, deed, agreement, court order or other instrument pursuant to which money or other property is entrusted to a bank as sole fiduciary or jointly with a cofiduciary;
(5) "Trust estate" means money or other property entrusted to a bank solely or jointly with a cofiduciary pursuant to a trust instrument;
(6) "Participation" means the undivided share in a common trust fund which accrues to a trust estate as the result of a bank's investment of funds of such trust estate in such common trust fund;
(7) "Affiliate banks" means banks, including out-of-State banks, at least 90% of whose issued and outstanding stock is owned by the same in-State or out-of-State corporation;
(8) "Out-of-State bank" means a corporation organized as a bank under the laws of a state other than New Jersey or a national banking association having its principal office outside of New Jersey.
##### **§ 17:9A-37** Participation in common trust fund {#sec-17-9a-37 omnilex-key=us-nj-statutes--title-17--17:9A-37}
Participation in common trust fund. A. Subject to the limitations of this article, a bank may create and maintain one or more common trust funds, and may, without order or judgment of any court or officer, invest in cash all or any part of the funds of any one or more trust estates in any one or more common trust funds.
B. Where there is a cofiduciary, the bank shall acquire no participation in a common trust fund without the prior written consent of the cofiduciary, who is hereby authorized to give such consent. Such participation shall be withdrawn within three months after the written request of a cofiduciary for such withdrawal.
C. Investment of funds of a trust estate in a common trust fund or funds may be made as provided in this article, notwithstanding that the trust instrument became operative before the effective date of this act, and notwithstanding that the trust instrument, regardless of the date of its effectiveness, does not specifically authorize such an investment; but no investment shall be made in a common trust fund contrary to the express provisions of the trust instrument.
D. No bank shall invest any of its own funds in a common trust fund.
E. Each common trust fund shall be established and maintained in accordance with a written plan, so as to qualify as a common trust fund under federal revenue laws, and, to that end, each bank in establishing and maintaining a common trust fund shall conform with and be subject to the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System or the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks.
F. (Deleted by amendment.)
G. (Deleted by amendment, P.L. 1985, c. 528.)
##### **§ 17:9A-37.1** Single common trust fund {#sec-17-9a-37.1 omnilex-key=us-nj-statutes--title-17--17:9A-37.1}
a. A bank may, without order or judgment of a court or officer, merge or combine two or more of its own or its affiliate banks' common trust funds into a single common trust fund, which single common trust fund may be administered by the bank or by its affiliate bank; provided that:
(1) The combination or merger does not contravene the terms of the written plan for each of the funds to be merged or combined.
(2) There is a written plan governing the merger or combination of the funds which has been approved by the board of directors, or by a duly authorized committee of the bank or banks, which plan shall contain provisions, including, but not limited to, a designation of which of the merging or combining common trust funds shall be the surviving common trust fund, a specification of any amendments or changes in the plan of operation of the surviving common trust fund, and a provision governing the conversion of units of participation in the funds to be merged or combined into units of participation in the surviving common trust fund, including the payment of cash for fractional units.
(3) Each trust estate having a participation in the common trust funds to be merged or combined shall receive units in the surviving common trust fund based on its pro rata interest in the value of the assets of the merging or combining common trust funds as determined according to subsection b. of section 40 of P.L.1948, c.67 (C.17:9A-40).
b. As used in this section, "common trust fund," "bank," "participation," "trust estate," and "affiliate bank" shall have the same meaning as set forth in section 36 of P.L.1948, c.67 (C.17:9A-36).
##### **§ 17:9A-38** Effect of trust instruments {#sec-17-9a-38 omnilex-key=us-nj-statutes--title-17--17:9A-38}
38. Effect of trust instruments.
A. Except as otherwise provided by subsection B of this section, where the trust instrument defines, limits, or specifies the investments which may be made of a trust estate, any common trust fund in which all or any part of such trust estate is invested shall consist only of the investments defined, limited, or specified in such trust instrument.
B. Where the trust instrument makes no provision governing the investments which may be made of a trust estate, or where the trust instrument directs that an estate be invested in "legal investments" or in "investments in which a fiduciary may by law invest" or in "legal investments for trustees," or uses words of similar import, investment of such trust estate may be made, in whole or in part, in a common trust fund, consisting of property in which fiduciaries of trust estates in this State may invest pursuant to chapter 20 of Title 3B of the New Jersey Statutes.
C. (Deleted by amendment.)
D. In making investments as provided in this section a bank shall exercise the standard of care required of a fiduciary of trust assets in New Jersey pursuant to chapter 20 of Title 3B of the New Jersey Statutes.
##### **§ 17:9A-39** Cash balances {#sec-17-9a-39 omnilex-key=us-nj-statutes--title-17--17:9A-39}
A. (Deleted by amendment.)
B. (Deleted by amendment.)
C. Any common trust fund may consist in part of uninvested cash balances awaiting investment or held for the purpose of meeting cash requirements.
##### **§ 17:9A-40** Participations; valuation; general provisions {#sec-17-9a-40 omnilex-key=us-nj-statutes--title-17--17:9A-40}
A. If so provided in the plan pursuant to which a common trust fund is established and maintained, the bank may divide the common trust fund into as many units as it may deem advisable, and it may increase or decrease the number of such units from time to time. Each unit shall at all times have the same value as every other unit of the same common trust fund. Such plan may also provide that a participation shall consist of a whole unit or a number of whole units, and may provide that withdrawals be made only of a whole unit or a number of whole units.
B. In determining the value of the property and investments of a common trust fund,
(1) an investment which is listed upon a stock, securities or investment exchange, shall be valued at the last recorded sales price in the ten-day period next preceding the date as of which the valuation is made, unless, within the said ten-day period, and subsequent to the date of the last recorded sales price, there have been recorded bid and asked prices, in which case the mean of the latest of such bid and asked prices shall be taken to be the value of such investment. An investment which is not listed upon a stock, securities or investment exchange, but which has an over-the-counter market, shall be valued at the mean of the last recorded bid and asked prices in the ten-day period next preceding the date as of which such valuation is made. If within the said ten-day period, there have been no recorded sales and no recorded bid and asked prices, the investment shall be valued at the mean of the last bid and asked prices as of a date not earlier than thirty days prior to the date as of which such valuation is made, as supplied by two stock or securities brokers deemed by the bank to be reliable. For the purposes of this paragraph, recorded sales prices, and recorded bid and asked prices shall be those which appear in a newspaper of general circulation, or in a financial, statistical, investment, rating or other publication or service, published for the use of and accepted as reliable by investors in like investments, or in the records of a stock, securities, or investment exchange;
(2) obligations of the United States which are not transferable or negotiable shall be valued at the issue price thereof;
(3) an investment about to be made, and an investment made and awaiting delivery against payment, shall be valued at the cost of acquisition thereof, and the cash account of the common trust fund shall be adjusted to reflect such cost of acquisition;
(4) an investment sold but not delivered pending receipt of the proceeds of sale shall be valued at the net sale price thereof;
(5) uninvested funds of a common trust fund shall be included in the aggregate value of all the property of a common trust fund to the extent that such funds constitute principal.
C. No person having an interest in a trust estate which has been invested in whole or in part in a common trust fund shall have any ownership in any asset included in such common trust fund. The bank shall have exclusive control of every common trust fund established and maintained by it.
D. The bank shall not amortize premiums paid upon the purchase of an investment for a common trust fund, nor shall it accumulate discount in respect of investments purchased at less than face or par value, notwithstanding that the trust instrument may require amortization of premiums or accumulation of discount.
E. Money or other property paid by the bank as income from a common trust fund to itself in its capacity as the fiduciary administering and managing a trust estate shall, for the purpose of apportioning such income among the beneficiaries of the trust estate, be deemed to be income to the trust estate as of the date of such payment, regardless of the time when such income may have accrued, been earned, or accumulated.
F. For the purposes of this article, an investment made pursuant to a commitment therefor shall be deemed to be made on the date when the commitment was made.
##### **§ 17:9A-41** Powers and obligations of banks {#sec-17-9a-41 omnilex-key=us-nj-statutes--title-17--17:9A-41}
Except as by this article otherwise provided, a bank in investing, reinvesting, exchanging, retaining, selling, valuing or otherwise acting with respect to the property of a common trust fund and of a trust estate, shall be subject to and governed by the law of this State applicable to fiduciaries, and such bank shall have the same powers, privileges, rights, immunities, duties and obligations enjoyed by or imposed upon fiduciaries in the administration of trusts other than common trust funds.
##### **§ 17:9A-42** Compensation {#sec-17-9a-42 omnilex-key=us-nj-statutes--title-17--17:9A-42}
No bank shall charge or be entitled to any fee, commission, or other compensation by reason of its establishing and maintaining one or more common trust funds, in addition to the fees, commissions, or other compensation otherwise lawfully payable to such bank for its services in investing and managing the trust estate.
##### **§ 17:9A-43** Powers of commissioner {#sec-17-9a-43 omnilex-key=us-nj-statutes--title-17--17:9A-43}
The commissioner shall have power, from time to time, to make, amend, supplement, and repeal such rules and regulations, not inconsistent with the provisions of this article, governing common trust funds as he shall deem necessary to enable banks to establish and maintain common trust funds on an equal basis with common trust funds established and maintained by national banking associations.
##### **§ 17:9A-44** Taxability {#sec-17-9a-44 omnilex-key=us-nj-statutes--title-17--17:9A-44}
No tax shall be imposed upon or payable by a bank as trustee of a common trust fund, nor shall the assets of any common trust fund or any participation therein be subject to taxation, but each trust estate having a participation in a common trust fund shall be taxable as if there were included therein its proportionate share of the assets of the common trust fund.
##### **§ 17:9A-45** Creditors' claims {#sec-17-9a-45 omnilex-key=us-nj-statutes--title-17--17:9A-45}
Whenever a claim is asserted against a fiduciary or beneficiary of a trust estate which has a participation in a common trust fund, which claim would be enforceable by legal or equitable process against the assets of the trust estate, such claim may be enforced against the participation of the trust estate in the common trust fund only by application, on five days notice to the bank, to the court from which process would issue on the claim, and by order of that court directing the bank to withdraw the participation of the trust estate from the common trust fund within such period as the court shall determine as reasonable and as affording proper safeguard to the participation of other trust estates in the common trust fund. The making of such an order shall impress a lien upon the participation and upon the proceeds of the withdrawal of the participation from the common trust fund as of the time of the application for such order, in the same manner and to the same extent as if such process had issued and had been executed on the day of the making of such application.
##### **§ 17:9A-46** Accounting {#sec-17-9a-46 omnilex-key=us-nj-statutes--title-17--17:9A-46}
Unless ordered by a court of competent jurisdiction, a bank maintaining a common trust fund shall not be required to render a court accounting with regard to such fund. A bank may, at such times, if any, as may be provided in the plan pursuant to which a common trust fund is established and maintained by it, render a court accounting of its administration of such common trust fund in such court, and in such manner, and with such effect as shall be provided by law or by rules of court. For the purposes of such accounting, a bank maintaining a common trust fund shall be deemed to be a trustee of a nontestamentary trust.
##### **§ 17:9A-47** Members of Federal Reserve System {#sec-17-9a-47 omnilex-key=us-nj-statutes--title-17--17:9A-47}
A bank which is a member of the Federal Reserve System shall maintain the reserve balances required by or pursuant to the Federal Reserve Act, as amended or supplemented from time to time, and shall be exempt from the following sections of this article.
##### **§ 17:9A-48** Nonmembers of Federal Reserve System {#sec-17-9a-48 omnilex-key=us-nj-statutes--title-17--17:9A-48}
A. A bank which is not a member of the Federal Reserve System shall, subject to the provision of subsection B of this section, at all times have in available funds consisting of (1) lawful currency of the United States, or (2) balances due on demand from reserve depositaries, or (3) direct obligations of the United States which have a maturity of not more than 18 months, or (4) such other assets as the Commissioner of Banking may from time to time prescribe by regulation, reserve balances on deposits and such other liabilities in amounts as prescribed by the Federal Reserve Board pursuant to the "Depository Institutions Deregulation and Monetary Control Act of 1980," P.L. 96-221, and in such additional amounts as the Commissioner of Banking may prescribe by regulation, if he deems those additional amounts necessary for the safety and soundness of the institution. Any additional reserve amounts prescribed by the commissioner pursuant to this subsection shall not exceed the amount established for like institutions by the Federal Reserve Board. Not more than 50% of the additional reserve balances required by the commissioner under this subsection may be made up of obligations of the United States or of instrumentalities of the United States maturing within 1 year.
B. The Commissioner of Banking may by regulation prescribe the method to be used in computing the required reserve.
##### **§ 17:9A-49** Definitions {#sec-17-9a-49 omnilex-key=us-nj-statutes--title-17--17:9A-49}
For the purposes of this article.
"Reserve depositary" includes
(a) A Federal Reserve bank,
(b) A member of a Federal Reserve bank organized in a Federal Reserve district which includes all or any part of this State, which shall be approved by the commissioner as a reserve depositary,
(c) A bank which is not a member of the Federal Reserve System, but which shall be approved by the commissioner as a reserve depositary, and
(d) A member of a Federal Reserve bank organized in a Federal reserve district which does not include all or any part of this State; provided, such member is approved by the commissioner as a reserve depositary.
##### **§ 17:9A-50** Ascertainment of net profits {#sec-17-9a-50 omnilex-key=us-nj-statutes--title-17--17:9A-50}
A. Every bank shall at the close of each period for which a dividend is declared, and in any event at least semi-annually, determine its net profits for such dividend or semi-annual period by deducting from its gross income for such period
(1) all expenses paid or accrued;
(2) all interest paid or accrued;
(3) all taxes paid or accrued;
(4) amortization of premiums on securities which are carried on the books of the bank at more than the principal amounts payable thereon at maturity or at the then next earliest call date for redemption, under such regulations as the commissioner shall from time to time prescribe with the approval of the banking advisory board. In lieu of applying such deductions to amortization of premiums, the bank may credit such deductions to reserves against such premiums;
(5) all losses sustained, including reductions in and eliminations of the values of assets, authorized by the board of directors or directed by the commissioner; and
(6) all debts owing to the bank, other than investment securities, as defined in paragraph (2) of section 60, on which principal or interest shall be in default for more than six months, except to the extent that such debts and accrued interest thereon are secured or collectible.
B. The deductions from gross income required by subsection A of this section need not be made to the extent that they were previously deducted from gross income, or if reserves are adequate, or, if not, are made adequate by new or additional credits thereto; provided, that, in the amount only that such credits are made to eliminate deductions otherwise required by subsection A of this section, such credits shall be deducted from gross income.
C. "Gross income" as used in this section shall include
(1) all income received or accrued, provided that no interest shall be accrued upon an interest-bearing obligation in default unless the obligation is secured and the value of the security is at least equal to the amount at which the obligation plus all interest accrued thereon is carried on the books of the bank;
(2) amounts realized on the payment, collection, sale or other disposition of assets over and above their values on the books of the bank;
(3) increases in the book values of assets, authorized by the board of directors and approved by the commissioner, wholly or partly restoring values previously reduced or eliminated by the board of directors or by direction of the commissioner;
(4) amounts transferred from reserves, to the extent that such amounts were deducted from gross income pursuant to subsection A of this section; and
(5) such other items as the commissioner may from time to time permit to be included.
##### **§ 17:9A-51** Transfers to surplus {#sec-17-9a-51 omnilex-key=us-nj-statutes--title-17--17:9A-51}
Whenever a bank's surplus at the close of any period for which it shall have determined its net profits pursuant to section 50 is not equal to fifty per centum of its capital stock, the bank shall promptly thereafter transfer to surplus not less than ten per centum of its net profits for such period, determined as provided in section 50. Nothing in this section shall require a transfer to surplus in excess of an amount sufficient to increase the bank's surplus to fifty per centum of its capital stock.
##### **§ 17:9A-52** Dividends on capital stock {#sec-17-9a-52 omnilex-key=us-nj-statutes--title-17--17:9A-52}
52. A. Dividends on the capital stock of a bank may be paid from time to time wholly in cash, or wholly in stock of the bank, or partly in cash and partly in stock of the bank as the board of directors may in its discretion determine, subject to the limitations in this section contained.
B. No dividend shall be paid by a bank on its capital stock unless, following the payment of each such dividend, the capital stock of the bank will be unimpaired, and
(1) the bank will have a surplus of not less than 50% of its capital stock, or, if not,
(2) the payment of such dividend will not reduce the surplus of the bank.
C. The certificate of incorporation of a bank, or an amendment thereof, may provide that dividends may be paid in stock of the bank without an amendment of the bank's certificate of incorporation pursuant to article 19, notwithstanding the payment of such dividend effects an increase in the capital stock of the bank. In such a case, dividends may be paid from time to time in the stock of the bank, at the discretion of the board of directors, without compliance with article 19; provided that, prior to the date of the payment of any such dividend, a certificate made by two officers of the bank, one of whom shall be the president or a vice-president, shall be filed in the department for the approval of the commissioner, stating
(1) the date upon which the dividend is to be paid; and
(2) the amount of such dividend;
(3) the amount of the capital stock and the surplus of the bank after giving effect to the payment of such dividend;
(4) the payment of the dividend will not violate the provisions of subsection B of this section; and
(5) the certificate of incorporation of the bank, or an amendment thereof, authorizes the payment of dividends in stock of the bank without an amendment of the bank's certificate of incorporation pursuant to article 19.
A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate shall thereupon be amended as set forth in the certificate of amendment. A certificate filed in the department pursuant to this subsection shall be deemed for all purposes to be an amendment of the certificate of incorporation of the bank with the same effect as if it had been authorized, executed, approved and filed in the department pursuant to article 19.
D. When the certificate of incorporation of a bank, or an amendment thereof, does not provide that dividends may be paid in stock of the bank without an amendment of the bank's certificate of incorporation pursuant to article 19, no such dividend which results in an increase in the capital stock of the bank shall be paid unless the necessary increase in capital stock is authorized pursuant to article 19.
E. Subsections C and D of this section shall not apply to a stock dividend paid pursuant to section 212.
F. This section shall not limit the power of a bank to pay dividends on shares of preferred stock issued prior to the effective date of this act, as provided in its certificate of incorporation.
##### **§ 17:9A-53** Scope of article; definitions; interest {#sec-17-9a-53 omnilex-key=us-nj-statutes--title-17--17:9A-53}
A. In addition to such other loans which banks are authorized to make, a bank may make secured and unsecured installment loans upon the terms and conditions prescribed by this article, but this article shall not be construed as prescribing an exclusive method for the making of loans which are payable in installments.
B. As used in this article:
(1) "Bank" means a banking institution as defined in section 1 (C. 17:9A-1) of this act;
(2) "Installment loan" means a loan (1) which is required by its terms to be repaid in two or more installments; (2) upon which interest is contracted for at a rate in excess of that authorized pursuant to R.S. 31:1-1; (3) the amount of which does not exceed the amounts authorized by subsection D. of section 54 of this act (C. 17:9A-54D); and (4) the final installment of which is payable not more than 12 years and 3 months subsequent to the date upon which such loan is made. The terms "installment loan" and "installment loans" as used in this article include both precomputed and nonprecomputed installment loans unless otherwise expressly stated;
(3) (Deleted by amendment.)
(4) (Deleted by amendment.)
(5) "Person" means an individual, a partnership and an association;
(6) (Deleted by amendment.)
(7) (Deleted by amendment.)
(8) (Deleted by amendment.)
(9) "Actuarial method" means the method of applying payments made on a loan between principal and interest pursuant to which a payment is applied first to accumulated interest on the principal amount of the loan and the remainder is applied to the unpaid principal balance of the loan in reduction thereof;
(10) "Precomputed interest" means an amount equal to the whole amount of interest payable on an installment loan for the period from the making of the loan to the date scheduled by the terms of the loan for the payment of the final installment;
(11) "Precomputed loan" means an installment loan which is evidenced by a note the face amount of which consists of the aggregate of the principal amount of the loan so evidenced, and the precomputed interest thereon;
(12) "Nonprecomputed loan" means an installment loan which is evidenced by a note the face amount of which consists solely of the principal amount of the loan so evidenced;
(13) "Unpaid balance" of an installment loan means the aggregate of the following:
(i) The face amount of the note evidencing such loan;
(ii) All amounts paid by the bank and added to such loan as provided in paragraph (2) of subsection A of section 55;
(iii) All interest accrued and unpaid;
(iv) Such further charges as the bank may make pursuant to law in protecting or enforcing a security interest in any property securing the payment of such loan or otherwise;
(v) In the case of precomputed loans, the amount of all late charges imposed pursuant to section 55;
less the aggregate of the following:
(vi) All installment payments made in the case of a precomputed loan, or all payments made in reduction of principal in the case of a nonprecomputed loan;
(vii) All payments made on account of or in payment in full of any charges or amounts referred to in subparagraphs (ii), (iii), (iv) and (v) of this paragraph (13); and
(viii) In the case of a precomputed loan, the amount of the credit to which the borrower is entitled pursuant to section 56;
(14) "Class I installment loan" means an installment loan which is unsecured, and also means an installment loan which is secured by an interest in tangible or intangible personal property;
(15) "Class II installment loan" means an installment loan which is secured by an interest in real property.
C. Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, a bank may contract for and receive interest on installment loans calculated according to the actuarial method, at a rate or rates agreed to by the bank and the borrower. This subsection shall not limit or restrict the manner of contracting for the interest charge, whether by way of add-on, discount or otherwise, so long as the interest rate does not exceed that permitted by this subsection. In the case of a precomputed loan, the interest may be computed on the assumption that all scheduled payments will be made when due, and all scheduled installment payments made on a precomputed loan may be applied as if they were received on their scheduled due dates. In the case of nonprecomputed loans, all installment payments shall be applied no later than the next day, other than a public holiday, after the date of receipt, and a day shall be counted as one three-hundred-sixty-fifth of a year.
D. (Deleted by amendment.)
E. (Deleted by amendment.)
F. (Deleted by amendment.)
G. The commissioner may prepare and distribute to such banks as shall make a request therefor, a schedule or schedules to be used in ascertaining precomputed interest, or he may approve a subsisting schedule or schedules, and interest taken pursuant to such schedule or schedules shall constitute a complete compliance with this section. A copy of such schedule or schedules, certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:9A-53.2** Definitions {#sec-17-9a-53.2 omnilex-key=us-nj-statutes--title-17--17:9A-53.2}
As used in this act:
a. "Banking institution" includes State-chartered banks, Federally-chartered banks, and mutual savings banks;
b. "Educational loan" means a loan which is represented by the borrower to the banking institution to be made for either or both the following purposes: (1) defraying the cost of attendance at a college or university of one or more students; and (2) defraying the cost of attendance of one or more pupils at an elementary or secondary school. An educational loan may consist of a single advance or of two or more advances made pursuant to an agreement governing, or a commitment to make, such loan;
c. "College or university" includes, but is not limited to, any qualified institution of collegiate grade, located in this State or elsewhere which is approved by any regional accrediting association recognized by the National Commission on Accrediting, or approved by the Board of Higher Education of New Jersey; and also includes any "other eligible institution," and "any post-secondary nondegree institution of higher education" as defined in the "Higher Education Assistance Authority Law," chapter 72 of Title 18A of the New Jersey Statutes.
##### **§ 17:9A-53.3** Educational loans, authorization {#sec-17-9a-53.3 omnilex-key=us-nj-statutes--title-17--17:9A-53.3}
In addition to such other loans which banking institutions are authorized by law to make, such institutions may make educational loans upon the terms and conditions prescribed by this act.
##### **§ 17:9A-53.4** Interest {#sec-17-9a-53.4 omnilex-key=us-nj-statutes--title-17--17:9A-53.4}
Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, a banking institution may make educational loans and may charge and collect interest thereon at a rate or rates agreed to by the banking institution and the borrower. Interest shall be calculated according to the actuarial method, pursuant to which payments made on the loan are applied first to accumulated interest on the principal amount of the loan and the remainder applied to the unpaid principal balance of the loan in reduction thereof. All payments shall be applied no later than the next day, other than a Sunday or a public holiday, after the date of receipt, and a day shall be counted as one three-hundred-sixty-fifth of a year. The note or other evidence of the loan may provide for an increase, or may provide for a decrease, or both, in the rate of interest applicable to the loan. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period. The lender shall not be obligated to decrease the interest rate more than 6% over the term of the loan, nor more than 3% per annum during any 12-month period. If a rate increase is applied to the loan, the lender shall also be obligated to adopt and implement uniform standards for decreasing the rate. If the note provides for the possibility of an increase or decrease, or both, in the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the note. No rate increase shall take effect during the first 3 years of the term of the loan, or thereafter, (a) unless at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes such increase, and (b) unless at least 365 days have elapsed without any increase in the rate. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period.
##### **§ 17:9A-53.5** Limitations on amount of educational loan {#sec-17-9a-53.5 omnilex-key=us-nj-statutes--title-17--17:9A-53.5}
No banking institution shall make an educational loan or an advance on an educational loan for the payment of which any person shall be liable to the banking institution in any capacity, if the amount of such loan or advance, and the amounts owing on all other educational loans for the payment of which such person is so liable to such banking institution, will, in the aggregate exceed $20,000.00; provided that not more than $7,500.00 shall be advanced on any educational loan in any 12-month period.
##### **§ 17:9A-53.6** Limitation on duration of loan {#sec-17-9a-53.6 omnilex-key=us-nj-statutes--title-17--17:9A-53.6}
No banking institution shall make an educational loan, or an advance on an educational loan which is disbursed in more than one advance, which is repayable in more than 7 years. For the purposes of this section an educational loan shall be deemed to be made each time an advance is made thereon.
##### **§ 17:9A-53.7** Security; prohibition; endorsers or guarantors {#sec-17-9a-53.7 omnilex-key=us-nj-statutes--title-17--17:9A-53.7}
No security shall be taken for an educational loan, but this prohibition shall not preclude a banking institution from requiring one or more endorsers or guarantors of such loan.
##### **§ 17:9A-53.8** Disbursement in more than one advance; principal amount of loan {#sec-17-9a-53.8 omnilex-key=us-nj-statutes--title-17--17:9A-53.8}
When pursuant to an agreement between a banking institution and a borrower, an educational loan will be disbursed in more than one advance, the principal amount immediately following an advance shall be the amount owing on such loan immediately before such advance is made, plus the principal amount of the advance then being made.
##### **§ 17:9A-53.9** Repayment; terms and conditions {#sec-17-9a-53.9 omnilex-key=us-nj-statutes--title-17--17:9A-53.9}
Educational loans shall be repaid in such manner and shall be subject to such terms and conditions not inconsistent with this act as the parties thereto may agree upon; except that no banking institution shall make any further interest or charge or demand in connection with such loan, other than those expressly authorized by subsections A(3) and B(3) of section 55 of P.L.1948, c. 67 (C. 17:9A-55).
##### **§ 17:9A-53.10** Credit life and health insurance; authorization to provide {#sec-17-9a-53.10 omnilex-key=us-nj-statutes--title-17--17:9A-53.10}
When a person liable for the payment of an educational loan consents in writing thereto, the banking institution may obtain or provide either or both credit life insurance and credit health insurance on such person, pursuant to chapter 29 of subtitle 3 of Title 17B of the New Jersey Statutes, and may deduct and retain from the proceeds of such loan an amount equal to the premium lawfully charged by the insurer issuing such insurance. If there is more than one person who is liable for the payment of such loan, insurance may be obtained as herein authorized only upon one of such persons. Nothing in any law of this State shall prohibit a banking institution or an employee thereof from collecting the premium or identifiable charge for such insurance, or prevent a banking institution from receiving or retaining any dividend or other gain or advantage resulting from such insurance.
##### **§ 17:9A-53.11** Loans or extension of credit not subject to act {#sec-17-9a-53.11 omnilex-key=us-nj-statutes--title-17--17:9A-53.11}
Nothing in this act shall be construed to apply to any loan or extension of credit which a banking institution may make pursuant to any other law of this State or any regulation promulgated pursuant to such law, nor shall this act be construed as prescribing an exclusive method for the making of loans for educational purposes.
##### **§ 17:9A-54** Limitations and conditions {#sec-17-9a-54 omnilex-key=us-nj-statutes--title-17--17:9A-54}
A. Every installment loan shall be evidenced by a note the face value of which shall be in an amount determined pursuant to paragraph (11) or (12) of subsection B, of section 53, as the case may require, and which shall provide for payments to be made at monthly intervals on the corresponding date in each month. The note may provide for an increase, or may provide for a decrease, or both, in the rate of interest applicable to such installment loan. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12 month period. The lender shall not be obligated to decrease the interest rate more than 6% over the term of the loan, nor more than 3% per annum during any 12-month period. If a rate increase is applied to the loan, the lender shall also be obligated to adopt and implement uniform standards for decreasing the rate. If the note provides for the possibility of an increase or decrease, or both, in the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the note. No rate increase shall take effect during the first 3 years of the term of the loan, or thereafter, (a) unless at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes such increase, and (b) unless at least 365 days have elapsed without any increase in the rate. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period. If the note does provide that the interest rate may be increased then, notwithstanding the provisions of section 56 of P.L.1948, c. 67 (C. 17:9A-56), when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, a bank may charge a prepayment penalty of not more than (a) $20.00 on any loan up to and including $2,000.00; (b) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any loan exceeding $5,000.00.
Effective on the first day of the twelfth month following the effective date of this act, notwithstanding the provisions of section 56 of P.L.1948, c. 67 (C. 17:9A-56) on all loans, when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, a bank may charge a prepayment penalty of not more than (a) $20.00 on any loan up to and including $2,000.00; (b) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any loan exceeding $5,000.00. Such note may further provide that up to 3 months may elapse between the date of the loan and the date scheduled for the payment of the first installment, or between the dates scheduled for the payment of subsequent installments, provided that in any 12-month period there shall be not more than 3 months during which no installment is scheduled to be paid.
B. No installment loan shall be made the final installment of which is scheduled to be paid more than 12 years and 3 months subsequent to the date upon which such loan is made.
C. No bank shall make any further interest or other charge or demand in connection with such loan, other than those expressly authorized by this article.
D. No bank shall make a Class I installment loan for the payment of which any person shall be liable to the bank in any capacity, if the amount of such Class I installment loan, and the amounts of the unpaid balances owing to the bank on all other Class I installment loans for the payment of which such person is liable to the bank, will in the aggregate exceed $20,000.00 exclusive of interest and other charges, nor shall any bank make a Class II installment loan for the payment of which any person shall be liable to the bank in any capacity, if the amount of such Class II installment loan, and the amounts of the unpaid balances owing to the bank on all other Class II installment loans for the payment of which such person is liable to the bank, will in the aggregate exceed $25,000.00 exclusive of interest and other charges.
E. (Deleted by amendment; (P.L.1981), c. 103.)
F. Nothing in this section or elsewhere in this article contained shall prevent a bank from making an installment loan, the proceeds of which will be applied in whole or in part to the repayment at or before final maturity of a loan theretofore made under the provisions of this article or otherwise.
##### **§ 17:9A-55** Permissible provisions and actions {#sec-17-9a-55 omnilex-key=us-nj-statutes--title-17--17:9A-55}
A. A bank which makes an installment loan may
(1) require one or more comakers or endorsers of the note evidencing the loan, or one or more guarantors of payment of the loan, and, prior to default, take as security for any such loan an interest in either tangible personal property or real property. After default, an interest in personal property, tangible and intangible, and in real property may be taken as security for a Class I installment and a Class II loan. An interest in real property taken as security for an installment loan shall not be deemed a mortgage loan within the meaning of section 181 or article 14;
(2) when the payment of such loan is secured, require that any property constituting such security be insured for the benefit of the bank, against such loss or damage as the bank may require, and may retain out of the proceeds of such loan the premium for such insurance. The bank may further require that all taxes, assessments, water rents and other governmental charges against such property be paid when due and that the security be maintained free of all executions, levies, encumbrances and other charges which adversely affect the value of the bank's interest in such security. If such insurance expires, lapses, or is canceled, and other insurance by insurers and in amounts satisfactory to the bank is not furnished to the bank without lapse of coverage, or if such taxes, assessments, water rents or other governmental charges are not paid when due, or if any execution, levy, encumbrance or other charge which adversely affects the value of the bank's interest in such security is not paid or otherwise removed, the bank may, but shall be under no duty to, obtain such insurance upon such property, or pay the amount of any such tax, assessment, water rent or other governmental charge or pay the amount of such execution, levy, encumbrance or other charge. The amount paid by the bank for such insurance, less the amount of the return premium, if any, received by the bank on cancellation of prior insurance paid for by the borrower or the cost of which was retained out of the proceeds of the loan, together with the amount, if any, paid by the bank for such tax, assessment, water rent or other governmental charge, shall be added to and become part of such loan, payable upon demand with interest at the rate charged on the loan so secured; and, in default of such payment within 30 days after such demand, the entire unpaid balance of the loan shall, at the election of the bank, become immediately due and payable;
(3) upon institution of a suit for the collection of an installment loan in default, charge a collection fee, in addition to court costs allowable by law, equal to 10% of the unpaid balance of the loan, but not more than $100.00;
(4) when the payment of such loan is secured, and provision is made by law for the filing or recording of the instrument of security or notice or abstract thereof, require compliance with such provision and retain the cost of such recording or filing out of the proceeds of the loan;
(5) In connection with a precomputed installment loan, defer the scheduled due date or dates of any installment payment or payments, and, as a consideration therefor make an additional charge at a rate not exceeding 1% per month computed on the amount of the scheduled installment payment or payments deferred for the period or periods for which each such installment payment or part thereof is so deferred.
B. A note evidencing an installment loan, or an instrument providing for the securing of an installment loan, may provide that
(1) upon default in the payment of an installment on its due date, or upon default in any other term or provision contained in any note evidencing an installment loan, or in any security agreement given in connection with any installment loan, the entire unpaid balance of such loan shall, at the election of the bank, become immediately due and payable;
(2) when the maturity of the unpaid balance of an installment loan is accelerated as provided by this section, the bank may charge interest upon such unpaid balance from the date such acceleration takes place at a rate not exceeding the rate charged on the loan;
(3) on any installment of a precomputed installment loan in arrears for more than 15 days, the bank may make a late charge which shall not exceed 5% of such installment, or $5.00, whichever is the lesser; provided, that only one such late charge shall be made on any one installment, and that no such late charge shall be made upon any installment scheduled, by the terms of such note or instrument, to fall due upon a date subsequent to the date upon which the maturity of the unpaid balance of the loan is accelerated as provided by this section;
(4) no person who is a party to the note evidencing the loan or to any instrument securing such loan shall be released or discharged from liability to the bank by reason of the bank's extending the time for the payment of an installment or installments owing or due upon such loan, or by reason of the bank's waiver of any term or condition of such note or of the instrument securing the payment thereof;
(5) all parties to the note evidencing the loan shall waive presentation for payment, demand for payment, protest and notice of protest, nonpayment, dishonor, and the bank's election to accelerate the maturity of the unpaid balance of the loan.
C. (Deleted by amendment.)
##### **§ 17:9A-56** Rebates on prepayment {#sec-17-9a-56 omnilex-key=us-nj-statutes--title-17--17:9A-56}
A. When the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest, the amount of which shall not be less than the amount determined by the application of the formula C = AN / D ( "the rule of 78's" ) in which "C" represents the amount of the credit to be given; "A" represents the amount of the precomputed interest; "D" is determined by ascribing to each month included in the period for which interest was, precomputed reckoning from the day upon which the loan was made, the cardinal number descriptive of the number of months scheduled, by the terms of the loan, to elapse from the beginning of each such month to the date to which interest was precomputed, and the total of all the cardinal numbers so ascribed constitutes the quantity "D" ; and "N" represents the difference between the quantity "D" and the total of all the cardinal numbers ascribed to months which have elapsed, in whole or in part, from the date of the loan, to the day upon which such repayment is made, or to the day upon which the maturity of the unpaid balance of such loan is accelerated as the case may be.
B. The commissioner may prepare and distribute to such banks as shall make a request therefor, a schedule or schedules based upon the formula specified in subsection A. of this section, for use in determining the credit to be allowed pursuant to such subsection, and allowances of interest made as provided in such schedule shall constitute a complete compliance with such subsection. A copy of such schedule, duly certified by the commissioner, shall be evidence in all courts and places.
C. This section shall not apply where the amount of the credit to be allowed is less than $1.00.
D. The unpaid balance of a nonprecomputed loan may be paid in full at any time without penalty.
##### **§ 17:9A-57** Statement on instrument {#sec-17-9a-57 omnilex-key=us-nj-statutes--title-17--17:9A-57}
Every note evidencing an installment loan shall contain a statement that such loan was made pursuant to this article. If this article or any section hereof shall be amended, no reference to such amendment need be made in such statement.
##### **§ 17:9A-58** Exempt transactions {#sec-17-9a-58 omnilex-key=us-nj-statutes--title-17--17:9A-58}
Nothing in this article applies to
(1) any loan or extension of credit which a bank may make pursuant to any other law of this State or any regulation promulgated pursuant to such law, nor does this article apply to any loan or other extension of credit otherwise authorized or not prohibited by law, or otherwise enforceable at law;
(2) any loan which bears interest at a rate not in excess of a rate authorized pursuant to R.S. 31:1-1 computed upon its unpaid balances; or
(3) any instrument or obligation, lawful upon its face, which is purchased or discounted by a bank pursuant to paragraph (1) of section 25, and which represents, evidences, or secures an existing indebtedness having its inception in a transaction to which the bank is not a party; regardless whether such instrument or obligation is acquired by the bank with or without rights of recourse against the person from whom the bank obtains such instrument through such purchase or discount. A bank shall not be deemed to be a party to a transaction within the meaning of this paragraph, because prior to the inception of rights in any instrument, obligation or indebtedness purchased or discounted by it, the bank approves the credit of any person liable for the payment of such instrument, obligation or indebtedness at the request of the person who supplies the consideration which supports the liability of any person to pay such instrument, obligation or indebtedness.
##### **§ 17:9A-59** Penalty for violations {#sec-17-9a-59 omnilex-key=us-nj-statutes--title-17--17:9A-59}
If a bank knowingly violates any provision of this article in the making or collection of an installment loan, the bank shall forfeit the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon, and the borrower, or his legal representatives, may recover back, in an action against the bank, twice the amount of interest received by the bank on such loan; provided, such action is commenced within 2 years from the date such violation occurred. The amount of any interest credit allowed pursuant to section 56 shall not be deemed to be interest received by the bank for the purposes of this section.
##### **§ 17:9A-59.1** Advance loans {#sec-17-9a-59.1 omnilex-key=us-nj-statutes--title-17--17:9A-59.1}
A. Subject to the provisions of this act, a bank may lend money to a borrower by advancing funds to or for the account of the borrower pursuant to the borrower's written authorizations. Such authorizations may take the form of checks drawn on the bank by the borrower, notwithstanding that the borrower has no funds, or has insufficient funds on deposit in the bank out of which such checks may be paid, may take the form of credit card agreements or they may take such other form as the bank and the borrower agree upon. Loans made pursuant to this act are referred to in this act as "advance loans" and persons to whom advance loans are made are referred to as "advance loan borrowers." Accounting periods, referred to in this act as "billing cycles," shall not vary more than four days from one month in duration and the billing date shall not vary more than four days from the billing date of the immediately preceding billing cycle. The term "monthly" shall refer in this act to the billing cycle and need not refer to a calendar month.
B. Nothing in this act shall apply to loans otherwise authorized by law or enforceable at law, and except for the provisions of the criminal usury law, N.J.S. 2C:21-19, the provisions of any other loan or credit law of this State with respect to limitations on interest rate, charges, costs, fees, term of loan or collateral shall not apply to loans made hereunder.
C. A borrower may at any time prepay in part or in full the amount owing on advance loans, without penalty or prepayment charge.
##### **§ 17:9A-59.2** Written contract; necessity; effective date; contents {#sec-17-9a-59.2 omnilex-key=us-nj-statutes--title-17--17:9A-59.2}
A. No advance loan shall be made except pursuant to a written contract, referred to in this act as an "advance loan contract," between the bank and a borrower or borrowers. An advance loan contract shall become effective when an agreement is signed by the advance loan borrower or when the advance loan borrower or someone authorized by the advance loan borrower effects an advance loan in the manner provided by section 1 of this act. The advance loan contract may contain such provisions, not inconsistent with this act or otherwise prohibited by law, which the bank and the borrower may agree upon, but each such contract shall state:
(a) The amount, exclusive of interest, insurance premiums and other charges, in which the borrower may be indebted to the bank at any one time upon all advance loans made pursuant to one or more advance loan contracts entered into between the bank and such borrower or borrowers;
(b) The number of days or the period, if any, after the closing date of the billing cycle within which payments are required to be made on advance loans;
(c) The amount of each payment required to be made monthly on advance loans. Such amount may be stated in terms of dollars and cents, or in any other terms consistent with the limitations imposed by section 5 of this act;
(d) The rate of interest payable on such loans;
(e) If late charges are to be made on installments in arrears, the amount of the charge which will be imposed, subject to the limitations contained in section 7; and
(f) If service charges are to be made on advance loans, the amount of the charge which will be imposed, subject to the limitation contained in section 8.
B. When an advance loan contract provides that the bank will make advance loans to a depositor for the purpose of covering overdrafts in an account maintained in the bank by the depositor, the contract shall also provide how the amount of such loans shall be determined when overdrafts occur. The advance loan contract may provide that the amount of the advance loan shall equal the amount by which the account is overdrawn, or it may provide that, when the amount of the overdraft is not in a sum equal to an even multiple of $100.00, or an even multiple of such other sum, less than $100.00, as the contract may prescribe, the amount of the loan shall equal the nearest even multiple of $100.00, or the nearest even multiple of such other sum, less than $100.00, as the contract may prescribe, which is greater than the amount of such overdraft.
C. If the bank has adopted a program pursuant to which either or both credit life insurance and credit accident and health insurance may be applied for on behalf of advance loan borrowers, and, if an advance loan borrower requests in writing that either or both such insurances be obtained, the contract shall so indicate. If the contract provides that more than one person may borrow under its provisions, the contract shall state the name of the person to be covered by such insurance. Nothing herein shall be construed as requiring that a bank undertake to make such insurance available to advance loan borrowers.
D. No advance loan contract, and no instrument executed in connection therewith, shall contain any power to confess judgment or provide that payment of the advance loan shall be accelerated because the bank deems itself insecure.
##### **§ 17:9A-59.3** Authorization as evidence of loan {#sec-17-9a-59.3 omnilex-key=us-nj-statutes--title-17--17:9A-59.3}
Each authorization made by an advance loan borrower, evidenced in any manner provided in a contract between the bank and such borrower, and honored by the bank as provided in section 1 of this act shall be evidence of a loan made by the bank to the advance loan borrower in the amount advanced by the bank. Each authorization so honored shall constitute an advance loan, and the date on which the bank honors the authorization shall be the date of the advance loan.
##### **§ 17:9A-59.4** Statement to borrower; contents {#sec-17-9a-59.4 omnilex-key=us-nj-statutes--title-17--17:9A-59.4}
A. For each billing cycle at the end of which there is an outstanding balance on any advance loan made pursuant to a particular advance loan contract, the bank shall render a statement to the borrower which shall show, with respect to all advance loans made pursuant to such contract:
(a) The aggregate balance outstanding on all advance loans at the beginning of the billing cycle;
(b) The amount and date of each advance loan made during such cycle;
(c) The amount of the payments on such loan received by the bank during such cycle;
(d) The amount of all charges made by the bank during such cycle, specifying the nature of each charge; provided that, when there is more than one charge in any category of charges, an aggregate amount may be shown for each such category;
(e) The amount upon which the interest was computed for such cycle;
(f) The aggregate balance owing on all advance loans at the end of such cycle;
(g) The amount required to be paid to keep the borrower's account current; and
(h) The date by which or the period, if any, within which payment must be made.
Such statement shall contain a notice set in conspicuous type in form as follows: "This statement represents an accounting between the bank and you. If there is an error in it, call it to the bank's attention promptly in writing. Failure to do so within 3 months from the date of this statement may bar your right to have the error corrected." If the notice is placed on the reverse side of the statement, the face of the statement shall bear the following legend in conspicuous type: "See the reverse side of this statement for an important notice in respect to your rights." or "NOTICE: See reverse side for important information." "Conspicuous type" as used herein means type which affords notice in compliance with applicable Federal truth-in-lending statutes and regulations.
B. If, pursuant to an advance loan contract, more than one type of advance loan may be made to a borrower, separate statements may, in the bank's discretion, be rendered by the bank to the borrower in respect to all advance loans of the same type, or a single statement may be rendered in respect to all advance loans made pursuant to such contract regardless of type. The bank may, at its option, use different billing cycles for different types of advance loans made to a borrower. For the purposes of this act, advance loans made pursuant to a particular advance loan contract shall be treated as separate types from those made pursuant to another advance loan contract.
C. If two or more persons are authorized to borrow under the same advance loan contract, the contract may designate one of such persons as the one to whom statements shall be rendered. In the absence of such a designation, statements shall be rendered to each of such persons, except that a single statement may be rendered to all such persons who have the same address.
D. The rendering of a statement by a bank to an advance loan borrower pursuant to this section shall constitute an accounting by the bank to all borrowers under the same advance loan contract. Such accounting shall, after 3 months from its rendition, be conclusively presumed to be correct, and the borrower or borrowers and all those claiming through him or them shall thereafter be barred from questioning it for any cause, unless, before the expiration of the 3-month period, a borrower, or someone claiming through him gives notice by certified mail to the bank questioning the correctness of the accounting. When such notice is given, the accounting shall, after the lapse of 1 year from the date on which such notice is given, be conclusively presumed to be correct, and the borrower or borrowers and all those claiming under him or them shall thereafter be barred from questioning it for any cause, unless, within such 1-year period, an action is begun by a borrower or someone claiming through him in which the correctness of the account may be determined.
##### **§ 17:9A-59.5** Periodic payments; amount; application {#sec-17-9a-59.5 omnilex-key=us-nj-statutes--title-17--17:9A-59.5}
A. The amount of the payment required to be made on advance loans made to a particular borrower in reduction thereof shall at least equal 1/72 nd of the aggregate amount owing at the end of a billing cycle by such borrower on each advance loan contract between bank and borrower. No monthly payment shall be in an amount less than $10.00 on each advance loan contract between bank and borrower unless the amount owing at the end of a billing cycle is less than $10.00 with respect to the particular contract, in which case the amount of the payment shall be the amount owing. Nothing in this subsection shall be construed as preventing a bank from rendering separate statements using different billing cycles as provided in subsection B of section 4 of this act.
B. Unless the contract provides otherwise, monthly payments shall be applied in the following order: (1) to interest; (2) to premiums on credit life or credit accident and health insurance, or both; (3) to late charges imposed pursuant to section 7 of this act; (4) to service charges imposed pursuant to section 8 of this act; and (5) to principal.
##### **§ 17:9A-59.6** Interest rate; insurance premiums; credit cards; annual fee {#sec-17-9a-59.6 omnilex-key=us-nj-statutes--title-17--17:9A-59.6}
A. Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, the rate or rates on advance loans shall be as agreed to by the bank and the borrower. Interest may be reckoned according to any method authorized by R.S. 31:1-1.
The contract may provide that the interest rate may be increased, or may be decreased, or both, from time to time; provided, however, that no increase in interest shall be effective unless: (a) at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes such change and the indebtedness to which it applies and states that the incurrence by the borrower or another person authorized by him of any further indebtedness under the plan to which the agreement relates on or after the effective date of the increase specified in the notice shall constitute acceptance of the increase and (b) either the borrower agrees in writing to the increase or the borrower or another person authorized by him incurs such further indebtedness on or after the effective date of the increase stated in the notice. The provisions of this paragraph permitting an increase in a rate of interest shall not apply in the case of an agreement which expressly prohibits changing of interest rates or which provides limitations on changing of interest rates which are more restrictive than the requirements of this paragraph. If the contract provides for the possibility of an increase or decrease, or both, in the rate, that fact shall be clearly described in plain language, in at least 8-point boldface type on the face of the contract.
B. For the purposes of this section, charges for premiums advanced by the bank for credit life insurance, or credit accident and health insurance, or both, shall be treated as part of the principal balance owing on an advance loan, but no such charge shall be included in determining the maximum permissible indebtedness as limited by section 11 of this act.
C. Notwithstanding the provisions of any other law to the contrary, a bank which issues a credit card in connection with an advance loan contract in effect between the bank and the borrower as authorized by this act may charge the borrower a fee not exceeding $15.00 per annum on an annual or monthly basis; except that, if under the advance loan contract, the bank may lend the borrower an amount of $5,000.00 or more, the bank may charge the borrower a fee not exceeding $50.00 per annum on an annual or monthly basis. The charge so made (1) may be collected in advance, (2) shall be in addition to and not in substitution for any other fee or charge authorized by this act, and (3) shall not be deemed to be an interest charge.
##### **§ 17:9A-59.7** Late charges {#sec-17-9a-59.7 omnilex-key=us-nj-statutes--title-17--17:9A-59.7}
A. If any payment on an advance loan remains unpaid for a period of more than 15 days after such payment falls due pursuant to a contract between the bank and the borrower governing such loan, the bank may make and collect a late charge in such amount as may be provided for in such contract between the bank and the borrower, but no such late charge shall exceed 5% of the amount of the payment so in default, or $5.00, whichever is the lesser, and not more than one late charge shall be made on any one payment in arrears.
B. Upon institution of proceedings for the collection of an advance loan in default, a bank may charge a collection fee, in addition to court costs, according to the following schedule:
(a) on the first $750.00 of indebtedness, 15%;
(b) on the excess over $750.00, 10%, but in no case shall such collection fee exceed $500.00.
C. When there is in effect more than one advance loan contract between the bank and a particular borrower, the provisions of this section shall apply to each contract individually and not to all advance loan contracts collectively.
##### **§ 17:9A-59.8** Service charges {#sec-17-9a-59.8 omnilex-key=us-nj-statutes--title-17--17:9A-59.8}
In addition to the other charges which are authorized to be made by this act, a bank may collect a service charge from each advance loan borrower for each billing cycle in which any part of an advance loan remains unpaid. Such service charge shall not exceed a sum equal to (a) the number of advance loans to such borrower during such billing cycle multiplied by $0.25 or (b) the number of advance loan contracts between the bank and the borrower multiplied by $0.50, whichever is the greater.
##### **§ 17:9A-59.10** Security {#sec-17-9a-59.10 omnilex-key=us-nj-statutes--title-17--17:9A-59.10}
A. A bank which makes an advance loan shall not, prior to default in such loan, take any kind of security therefor except an interest in tangible personal property.
B. Nothing in this act shall be construed as prohibiting a bank from obtaining or providing credit life insurance or credit accident and health insurance, or both, for a borrower's benefit and at the borrower's written request.
##### **§ 17:9A-59.11** Limitation upon liability to bank on advance loans {#sec-17-9a-59.11 omnilex-key=us-nj-statutes--title-17--17:9A-59.11}
No bank shall make any advance loan for the payment of which any person shall be liable in any capacity to the bank if the making of such loan would cause the liability in any capacity of such person to the bank on all advance loans to exceed $25,000.00, exclusive of interest, insurance premiums and other charges.
##### **§ 17:9A-59.12** Violation of limitations upon liability; penalty {#sec-17-9a-59.12 omnilex-key=us-nj-statutes--title-17--17:9A-59.12}
For a violation of section 11 of this act, the bank shall forfeit all interest on so much of the aggregate of all advance loans made to any one person as exceeds the limitations imposed by the said sections.
##### **§ 17:9A-59.13** Collection of excess interest rates or unlawful taking of security; penalty {#sec-17-9a-59.13 omnilex-key=us-nj-statutes--title-17--17:9A-59.13}
If a bank knowingly collects interest on advance loans at a rate in excess of that authorized by section 6 of this act, or if a bank knowingly violates section 10 of this act, the bank shall forfeit the entire interest on such advance loans, and the borrower, or his legal representatives may recover back, in an action against the bank, twice the amount of interest paid to the bank on such loans; provided such action is commenced within 2 years from the date such excess interest was collected, or the date when security for such loan was taken, as the case may be.
##### **§ 17:9A-59.14** Bank defined {#sec-17-9a-59.14 omnilex-key=us-nj-statutes--title-17--17:9A-59.14}
As used in this act, "bank" includes banking institutions as defined in section 1 of P.L.1948, c. 67 (C. 17:9A-1).
##### **§ 17:9A-59.15** Effective date {#sec-17-9a-59.15 omnilex-key=us-nj-statutes--title-17--17:9A-59.15}
This act shall take effect immediately, but shall not be operative for 60 days thereafter.
##### **§ 17:9A-59.16** Guarantee of payment {#sec-17-9a-59.16 omnilex-key=us-nj-statutes--title-17--17:9A-59.16}
A bank which enters into a contract with a borrower to make advance loans pursuant to the act of which this act is amendatory and supplementary may contract with merchants to guarantee to them the payment of checks which are drawn on it by advance loan borrowers. A guarantee so made shall not be deemed to be a violation of section 213.1 of "An Act concerning banking and banking institutions" (Revision of 1948), approved April 29, 1948 (P.L.1948, c. 67).
##### **§ 17:9A-59.17** Short title {#sec-17-9a-59.17 omnilex-key=us-nj-statutes--title-17--17:9A-59.17}
The act of which this act is amendatory and supplementary shall be known and may be cited as "The Advance Loan Law of 1968."
##### **§ 17:9A-59.25** Definitions {#sec-17-9a-59.25 omnilex-key=us-nj-statutes--title-17--17:9A-59.25}
As used in this act, unless the context requires otherwise,
(a) "Concern" means any trade, business or professional entity conducted for profit, and includes, but is not limited to, individuals, partnerships, corporations, joint ventures, associations and cooperatives;
(b) "Bank" means a bank as defined in section 1 of the act of which this act is a supplement and also means a national bank having its principal office in this State; "bank" excludes savings banks;
(c) "Small business concern" means a concern whose gross income from operations during its most recently completed fiscal year, as represented in writing by the concern, totaled not more than $1,000,000.00, but nothing herein shall prevent a bank from making a small business loan to a small business concern at any time during the first year of its existence, and such loan shall be enforceable by the bank according to its terms notwithstanding that it subsequently develops that the small business concern's gross income from operations during its first fiscal year totals more than $1,000,000.00;
(d) "Small business loan" means a loan which is made to a small business concern pursuant to this act and the purpose of which, as represented to the bank in writing by the small business concern, is to furnish the concern with funds for use in the conduct of the concern's trade, business or profession;
(e) "Payment-period" means the period of time scheduled by the terms of the note evidencing a small business loan to elapse between the days upon which installment payments are required to be made on such loan; except that, in a case where installment payments are omitted pursuant to subsection b of section 4 of this act, "payment-period" means the period of time scheduled to elapse between the days upon which installment payments are required to be made during that portion of the term of such loan in which no installment payment may be omitted;
(f) "Actuarial method" means the method of applying payments made on a loan between principal and interest pursuant to which a payment is applied first to accumulated interest on the principal amount of the loan and the remainder is applied to the unpaid principal balance of the loan in reduction thereof;
(g) "Precomputed finance charge" means an amount equal to the whole amount of interest payable on a small business loan for the period from the making of the loan to the date scheduled by the terms of the loan for the payment of the final installment;
(h) "Precomputed loan" means a small business loan which is evidenced by a note the face amount of which consists of the aggregate of the principal amount of the loan so evidenced, and the precomputed interest thereon;
(i) "Nonprecomputed loan" means a small business loan which is evidenced by a note the face amount of which consists solely of the principal amount of the loan so evidenced;
(j) "Unpaid balance" of a small business loan means the aggregate of the following:
(1) The face amount of the note evidencing such loan; and
(2) All amounts paid by the bank and added to such loan as provided in paragraph (c) of section 6 of this act; and
(3) All interest charges accrued and unpaid; and
(4) Such further charges as the bank may make pursuant to law in protecting or enforcing a security interest in any property securing the payment of such loan or otherwise; and
(5) In the case of precomputed loans, the amount of all late charges imposed pursuant to section 8 of this act;
less the aggregate of the following:
(6) All installment payments made in the case of a precomputed loan, or all payments made in reduction of principal in the case of a nonprecomputed loan; and
(7) All payments made on account of or in payment in full of any charges or amounts referred to in subparagraphs (2), (3), (4) and (5) of this paragraph (j) and
(8) In the case of a precomputed loan, the amount of the credit to which the borrower is entitled pursuant to section 11 of this act.
(k) "Legal rate" means a rate of interest not in excess of the rate authorized by section 3 to be paid on small business loans.
##### **§ 17:9A-59.26** Authority to make small business loans; terms and conditions; reliance upon representations {#sec-17-9a-59.26 omnilex-key=us-nj-statutes--title-17--17:9A-59.26}
A bank may make small business loans upon the terms and conditions prescribed by this act. In making loans pursuant to this act, a bank may in good faith rely upon the written representations of the small business concern, or of its accountant, in respect to (a) the purpose of such loan, and (b) the amount of its gross income from operations during its most recently completed fiscal year.
##### **§ 17:9A-59.27** Interest rate {#sec-17-9a-59.27 omnilex-key=us-nj-statutes--title-17--17:9A-59.27}
(a) Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, a bank may contract for and receive interest on a small business loan calculated according to the actuarial method, at a rate or rates agreed on by the bank and the borrower. This subsection shall not limit or restrict the manner of contracting for the interest charge, whether by way of add-on, discount or otherwise, so long as such charge does not exceed the limitation imposed by this section. In the case of a precomputed loan, the interest charge may be computed on the assumption that all scheduled payments will be made when due, and all scheduled installment payments made on a precomputed loan may be applied as if they were received on their scheduled due dates. In the case of nonprecomputed loans, all installment payments shall be applied no later than the next day, other than a public holiday, after the date of receipt, and a day shall be counted as one three-hundred-sixty-fifth of a year.
(b) (Deleted by amendment.)
##### **§ 17:9A-59.28** Note; amount; installment payments; repayment in advance; refund {#sec-17-9a-59.28 omnilex-key=us-nj-statutes--title-17--17:9A-59.28}
(a) Every small business loan shall be evidenced by a note which shall be dated the day of the making of such loan, and the face amount of which shall be in an amount determined pursuant to paragraph (h) or (i) of section 1, of this act as the case may require.
(b) Each such note shall provide that the amount thereof shall be payable in installments on dates separated by payment-periods of equal duration measured in terms of months. Any such note may provide for the omission of installments, including the first installment, during any period not exceeding 93 days in any one 12-month period. Except as herein otherwise provided, no note shall provide for payment-periods shorter than 1 month or longer than 3 months. No such note shall provide that the final installment shall be payable more than 7 years and 3 months from the date of such note.
(c) Effective on the first day of the twelfth month following the effective date of this act, notwithstanding the provisions of section 11 of P.L.1964, c. 162 (C. 17:9A-59.35), when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, a bank may charge a prepayment penalty of not more than (1) $20.00 on any loan greater than $2,000.00; (2) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (3) $100.00 on any loan exceeding $5,000.00.
##### **§ 17:9A-59.29** Limitation on loans {#sec-17-9a-59.29 omnilex-key=us-nj-statutes--title-17--17:9A-59.29}
No bank shall make a small business loan in a sum in excess of $50,000.00, nor shall a bank make any such loan for the payment of which a small business concern will be liable to it in any capacity, if the amount of such loan, exclusive of the interest thereon, when added to the principal balances owing on all other small business loans made by such bank for the payment of which such small business concern is liable in any capacity, will, in the aggregate, exceed $50,000.00.
##### **§ 17:9A-59.30** Security for payment; costs and insurance {#sec-17-9a-59.30 omnilex-key=us-nj-statutes--title-17--17:9A-59.30}
A bank which makes a small business loan may
(a) require one or more comakers or endorsers of the note evidencing the loan, or one or more guarantors of payment of the note;
(b) take an interest in property, real or personal, or both, to secure payment of the loan. When an interest in real property is taken as such security, it shall not be subject to any provision of article 14, sections 64 through 70, of the act of which this act is a supplement;
(c) when the payment of the loan is secured, require that the property constituting the security by insured for the benefit of the bank, against such loss or damage as the bank may require, and may retain out of the proceeds of such loan the premium for such insurance. If such insurance expires, lapses, or is canceled, and other insurance by insurers and in amounts satisfactory to the bank is not furnished to the bank without lapse of coverage, the bank may obtain insurance upon such property, and the cost thereof, less the amount of the return premium, if any, received by the bank on cancellation of prior insurance paid for by the borrower or the cost of which was retained out of the proceeds of the loan, shall be added to and become part of such loan, payable upon demand with interest at the legal rate; and, in default of such payment after such demand, the entire unpaid balance of the loan shall, at the election of the bank, become immediately due and payable;
(d) when the payment of such loan is secured, and provision is made by law for the filing or recording of the instrument of security or notice or statement thereof, require compliance with such provision and retain the cost of such recording or filing out of the proceeds of the loan;
(e) when the payment of such loan is secured, and the property constituting such security is appraised by a person not an officer, director, employee or other agent of the bank, pay the cost of such appraisal and may retain such cost out of such loan, but in no event shall the amount so retained, or the amount charged the borrower for such appraisal, exceed the amount paid by the bank for such appraisal or 1% of the sum borrowed, whichever is less;
(f) at the written request of a borrower who is an individual, obtain or provide insurance on the life of the borrower pursuant to the provisions of "An act to provide for the regulation of credit life insurance and credit accident and health insurance, as defined, and supplementing Title 17 of the Revised Statutes" (P.L.1958, c. 169); and the bank may deduct and retain from the proceeds of the loan an amount equal to the premium lawfully charged by the insurer issuing such insurance. If insurance is obtained or provided as herein provided, the bank shall deliver or cause to be delivered to the insured borrower at the time when the loan is made, a copy of the insurance policy, or a certificate therefor, or a copy of the application for such policy, or a notice of proposed insurance as required by law. If there is more than one person liable for the payment of any such loan, whether as borrower or otherwise, insurance may be obtained or provided as authorized herein on the life of only one such person. Nothing in any other law of this State shall prohibit a bank, or any employee of a bank, from collecting the premium or identifiable charge for life insurance obtained or provided as authorized herein, or prevent a bank from receiving or retaining any dividend or other gain or advantage resulting from such insurance. Nothing herein shall be construed as prohibiting a bank from taking an assignment of any other type of life insurance policy as security for the payment of any such loan.
##### **§ 17:9A-59.31** Collection fee schedule {#sec-17-9a-59.31 omnilex-key=us-nj-statutes--title-17--17:9A-59.31}
Upon institution of proceedings for the collection of a small business loan in default, a bank may charge a collection fee, in addition to court costs, according to the following schedule:
(a) on the first $750 of indebtedness, 15%;
(b) on the excess over $750 of indebtedness, 10%, but in no case shall such collection fee exceed $500.00.
##### **§ 17:9A-59.32** Acceleration of maturity {#sec-17-9a-59.32 omnilex-key=us-nj-statutes--title-17--17:9A-59.32}
(a) The note evidencing a small business loan may provide that
(1) Upon default in the payment of any installment on its due date, the entire unpaid balance owing thereon shall, at the election of the bank, become immediately due and payable;
(2) When the maturity of the unpaid balance owing on a note is accelerated as provided by this section, the bank may charge interest at the legal rate, as defined in section 1 of this act from the date such acceleration takes place upon the unpaid principal balance thereof;
(3) On any installment of a precomputed loan in arrears for more than 10 days, the bank may make a late charge which shall not exceed 5% of such installment, or $5, whichever is the lesser; provided, (A) (deleted by amendment) (B) that only one such late charge shall be made on any one installment; and (C) that no such late charge shall be made upon any installment scheduled, by the terms of such note, to fall due upon a date subsequent to the date upon which the maturity of the unpaid balance of the loan is accelerated as provided by this section;
(4) No party to such note shall be released or discharged from liability to the bank by reason of the bank's extending the time for the payment of an installment or installments owing or due upon such note, or by reason of the bank's waiver of any term or condition of such note, or of the instrument intended to secure payment thereof;
(5) All parties to such note shall waive presentation for payment, demand for payment, protest and notice of protest, nonpayment, dishonor, and the bank's election to accelerate the maturity of the unpaid balance owing thereon.
(b) (Deleted by amendment.)
(c) In addition to the provisions expressly authorized by subsection (a) of this section, the note evidencing a small business loan, or the agreement pursuant to which such loan is made, may contain such provisions, not contrary to law or inconsistent with the provisions of this act, as the bank and the small business concern may agree upon, but no such note or agreement shall provide that payment of the note shall be accelerated because the bank, or other holder of the note, deems itself insecure. No bank shall take any power of attorney to confess judgment on any note evidencing a small business loan.
##### **§ 17:9A-59.33** Unauthorized charges prohibited {#sec-17-9a-59.33 omnilex-key=us-nj-statutes--title-17--17:9A-59.33}
A bank which makes a small business loan shall not make any further finance, interest or other charge in connection with such loan, other than those expressly authorized by this act.
##### **§ 17:9A-59.34** Use of proceeds for repayment of other loan {#sec-17-9a-59.34 omnilex-key=us-nj-statutes--title-17--17:9A-59.34}
Nothing in this act shall prevent a bank from making a small business loan, the proceeds of which will be applied in whole or in part to the repayment at or before final maturity of a loan theretofore made under the provisions of this act or otherwise.
##### **§ 17:9A-59.35** Credit on precomputed interest charges; prepayment or acceleration; formula; prepayment on non-precomputed small business loan without penalty {#sec-17-9a-59.35 omnilex-key=us-nj-statutes--title-17--17:9A-59.35}
(a) When the unpaid balance owing on a precomputed small business loan is repaid in full, or when the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest charge made on such loan, the amount of which shall not be less than the amount determined by the application of the formula C = AN / D ( "the rule of 78's" ) in which "C" represents the amount of the credit to be given; "A" represents the amount of the precomputed interest charge; and "D" is determined by ascribing to each month included in the period for which the precomputed interest charge was computed, reckoning from the day upon which the loan was made, the cardinal number descriptive of the number of months scheduled, by the terms of the loan, to elapse from the beginning of each such month, to the date to which the precomputed interest charge was computed, and the total of all the cardinal numbers so ascribed constitutes the quantity "D" ; and "N" represents the difference between the quantity "D" and the total of all the cardinal numbers ascribed to the months which have elapsed, in whole or in part, from the making of the loan, to the day upon which such repayment is made, or to the day upon which the maturity of the unpaid balance of such loan is accelerated, as the case may be.
(b) The Commissioner of Banking may prepare and distribute to such banks as shall make a request therefor, a schedule or schedules based upon the formula stated in subsection (a) of this section, and credits allowed as provided in such schedule shall constitute a complete compliance with such subsection. A copy of such schedule, duly certified by the commissioner, shall be evidence in all courts and places.
(c) This section shall not apply where the amount of the credit to be allowed is less than $5.00.
(d) The unpaid balance owing on a nonprecomputed small business loan may be repaid in full at any time without penalty.
##### **§ 17:9A-59.36** Statement that loan was made pursuant to small business loan act required {#sec-17-9a-59.36 omnilex-key=us-nj-statutes--title-17--17:9A-59.36}
Every note evidencing a small business loan shall contain a statement that such loan was made pursuant to this act. If this act or any section hereof shall be amended, no reference to such amendment need be made in such statement.
##### **§ 17:9A-59.37** Violation; penalty; civil action {#sec-17-9a-59.37 omnilex-key=us-nj-statutes--title-17--17:9A-59.37}
If a bank knowingly violates any provision of this act in the making or collection of a small business loan, the bank shall forfeit the entire finance charge made on such loan, and the borrower, or his legal representatives, successors or assigns, may recover back, in an action against the bank, twice the amount of the finance charge made by the bank on such loan; provided, such action is commenced within 2 years from the date such violation occurred. The amount of any credit allowed pursuant to section 11 of this act shall be credited against the finance charge made on such loan for the purposes of this section.
##### **§ 17:9A-59.38** Application of act {#sec-17-9a-59.38 omnilex-key=us-nj-statutes--title-17--17:9A-59.38}
Nothing in this act applies to any loan or extension of credit which a bank may make pursuant to any other law of this State or any regulation promulgated pursuant to such law, nor does this act apply to any loan or extension of credit otherwise authorized or not prohibited by law, or otherwise enforceable at law.
##### **§ 17:9A-59.39** Short title {#sec-17-9a-59.39 omnilex-key=us-nj-statutes--title-17--17:9A-59.39}
This act shall be known and may be cited as the "Small Business Loan Act."
##### **§ 17:9A-59.40** Loan to depositor in amount of and guaranteed by deposit {#sec-17-9a-59.40 omnilex-key=us-nj-statutes--title-17--17:9A-59.40}
Notwithstanding any other provision of law, a banking institution may contract with a depositor for the loan of money in an amount not to exceed such depositor's deposit and secured by a pledge of such deposit, upon such terms and conditions as may be mutually agreed upon between the banking institution and such depositor; provided, however, that the rate of interest charged with respect to any such loan shall not exceed the maximum permitted under the provisions of R.S. 31:1-1 or 2% in excess of the interest rate then paid with respect to the deposit which secures such loan whichever is greater.
##### **§ 17:9A-60** Definitions {#sec-17-9a-60 omnilex-key=us-nj-statutes--title-17--17:9A-60}
60. Definitions.
For the purposes of this article,
(1) "Person" means an individual, partnership, corporation, association or body politic, or any similar entity or organization;
(2) "Investment securities" means those marketable corporate obligations in the form of bonds, debentures or similar instruments as are commonly known as investment securities, under such further definition of investment securities as may by regulation be prescribed by the commissioner;
(3) (Deleted by amendment, P.L.1997, c.33.)
(4) (Deleted by amendment, P.L.1997, c.33.)
(5) (Deleted by amendment, P.L.1997, c.33.)
(6) (Deleted by amendment, P.L.1997, c.33.)
(7) (Deleted by amendment, P.L.1997, c.33.)
(8) (Deleted by amendment, P.L.1997, c.33.)
(9) "Capital funds" of a bank or savings bank means the aggregate of the unimpaired capital stock, surplus and undivided profits of the bank or savings bank plus all other funds which are authorized by law to be included in capital funds for the purposes of this article. The commissioner may, by regulation, provide that contingent reserves of a bank or savings bank, as defined in such regulation, may be included in the capital funds of a bank or savings bank for the purposes of this article;
(10) "Loans and extension of credit" means a bank's or savings bank's direct or indirect advance of funds to or on behalf of a borrower based on an obligation of the borrower to repay the funds or repayable from specific property pledged by or on behalf of the borrower;
(11) "Borrower" means a person who is named as a borrower or debtor in a loan or extension of credit. Loans or extensions of credit to one borrower shall be attributed to another person and each person shall be deemed a borrower: (a) when proceeds of a loan or extension of credit are to be used for the direct benefit of the other person, to the extent of the proceeds so used; or (b) when a common enterprise is deemed to exist between the persons.
##### **§ 17:9A-61** Unlimited liability {#sec-17-9a-61 omnilex-key=us-nj-statutes--title-17--17:9A-61}
This article shall not apply to:
(1) loans to or investments in obligations of the United States, this State or any county of this State, or investments in obligations unconditionally guaranteed both as to principal and interest by the United States or this State;
(2) obligations to the extent that they are secured or covered by guarantees or by commitments or agreements to take over or to purchase made by any Federal Reserve Bank or by the United States, or by any department, bureau, board, commission or establishment of the United States, including any corporation, wholly-owned directly or indirectly by the United States; provided, that such guarantees, agreements or commitments are unconditional and must be performed by payment of cash or its equivalent within 60 days after demand;
(3) obligations in the form of drafts or bills of exchange drawn in good faith against actually existing values, whether or not accepted by the drawee;
(4) obligations in the form of bankers' acceptances which are eligible for rediscount with a Federal Reserve bank;
(5) obligations arising out of the discount of negotiable or nonnegotiable commercial or business paper actually owned by the person negotiating the same;
(6) demand balances owing by a reserve depositary arising out of deposits made pursuant to article 10;
(7) obligations resulting from daily clearances through any clearing house association;
(8) demand balances owing by a bank, or by a national banking association having its principal office in this State, or by a bank or trust company incorporated under the laws of any other State or territory of the United States or the District of Columbia, or by a national banking association having its principal office in any other State or territory of the United States or the District of Columbia; and
(9) obligations of any diocese, synod, presbytery or other corporate governing body of any religious denomination organized as a corporation pursuant to the laws of the State of New Jersey as guarantor of or endorser of obligations of a church under its jurisdiction.
##### **§ 17:9A-62** Limitations on liability {#sec-17-9a-62 omnilex-key=us-nj-statutes--title-17--17:9A-62}
62. Limitations on Liability. A. The total loans and extensions of credit by a bank or savings bank outstanding to one borrower at one time and not fully secured by collateral having a market value at least equal to the amount of the loans and extensions of credit shall not exceed 15 percent of the capital funds of the bank or savings bank.
B. The total loans and extensions of credit by a bank or savings bank outstanding to one borrower at one time and fully secured by readily available marketable collateral having a market value, as determined by reliable and continuously available price quotations, at least equal to the amount of the funds outstanding shall not exceed 10 percent of the capital funds of the bank or savings bank. This limitation shall be separate from and in addition to the limitation contained in subsection A of this section. If a bank's or savings bank's lending limit calculated under this subsection and under subsection A of this section is less than $500,000, the bank or savings bank may nevertheless have total loans and extensions of credit outstanding to one borrower at one time not to exceed $500,000.
C. Except as the commissioner may otherwise prescribe from time to time by regulation promulgated pursuant to subsection H of this section, the total loans and extensions of credit to a person by a bank or savings bank shall not be subject to any limitations imposed by this article, to the extent that loans and extensions of credit are secured by direct or indirect obligations of the United States which have a face or par value at least equal to the amount of such loans and extensions of credit, and which are fully guaranteed as to principal and interest by the United States.
D. Except as the commissioner may otherwise prescribe from time to time by regulation promulgated pursuant to subsection H of this section, loans and extensions of credit to, and investments in the obligations of any municipality or school district of this State may equal but not exceed 100% of the capital funds of a bank.
E. The commissioner may, from time to time, approve the obligations of any other state of the United States, or of any political or municipal or county subdivision or instrumentality thereof, or of any political subdivision or instrumentality of a municipality or county of this State, other than a school district, or of the Port Authority of New York and New Jersey or other instrumentality of two or more states or of the United States, or loans to any such other state, or to such subdivision, or instrumentality, and, unless the commissioner, acting pursuant to subsection H of this section prescribed otherwise by regulation, loans and extensions of credit may be made to, and investments may be made in the obligations of any such other State, or of any such subdivision or instrumentality in excess of 15 % but not in excess of 25% of the capital funds of a bank or savings bank.
F. Except as the commissioner may otherwise prescribe from time to time by regulation promulgated pursuant to subsection H of this section, the total amount of investment securities of any one person held by a bank or savings bank for its own account, other than investments specified in paragraphs (1) and (2) of section 61 and subsections D and E of this section, shall not exceed 15 % of the capital funds of the bank or savings bank.
G. In determining whether the total loans and extensions of credit made to any person are within the limitations imposed by this article, a bank or savings bank and its directors, officers and employees may rely upon, and be protected in relying upon, the written statements or representations of such person, made to induce such bank or savings bank to permit such loans and extensions of credit to be made.
H. The commissioner may, from time to time, make, amend and repeal regulations (1) imposing a limitation, expressed in terms of a percentage of capital funds, upon loans and extensions of credit secured as specified in subsection C of this section, and (2) decreasing, increasing, or removing entirely the limitations on loans and extensions of credit imposed by this article upon the loans and extensions of credit, obligations and investments specified in subsections A, B, D, E and F of this section. Regulations made pursuant to this section shall be directed toward creating and maintaining substantial equality between State banks and savings banks and national banks, to the end that no class or group of banks or savings banks shall have any substantial competitive advantage over another. When not defined in this article or in regulations promulgated by the commissioner, terms used in this article shall be construed in a manner consistent with their definition by the Comptroller of the Currency, or any other appropriate federal regulatory agency.
##### **§ 17:9A-63** Exempt transactions {#sec-17-9a-63 omnilex-key=us-nj-statutes--title-17--17:9A-63}
63. Exempt transactions. A. A bank or savings bank shall not be in violation of this article if the loans and extensions of credit to a person incurred under any prior law repealed or superseded by this act exceed the limitations imposed by this article.
B. A bank or savings bank shall not be in violation of this article if, at any time when a bank or savings bank makes a loan or extension of credit to a person, the total loans and extensions of credit to such person, including the loan or extension of credit then made, do not or did not exceed the limitations imposed by this article, notwithstanding that, subsequent to the making of any such loan or extension of credit, circumstances other than the making of an additional loan or extension of credit, cause the total loans and extensions of credit to such person to exceed the limitations imposed by this article.
C. Notwithstanding any provision of this article, a bank or savings bank may, with the prior approval of the commissioner, do any act necessary to preserve or protect any loan or extension of credit, obligation or investment held by it, or any security for such loan or extension of credit or obligation, even though such act causes the total loans and extensions of credit to any person to exceed the limitations imposed by this article; provided, that in no case shall the commissioner approve any act pursuant to this subsection which would cause the total loans and extensions of credit to any person to exceed the limitations imposed by this article by more than fifty percent of such limitations.
##### **§ 17:9A-63.1** Excess charge {#sec-17-9a-63.1 omnilex-key=us-nj-statutes--title-17--17:9A-63.1}
Notwithstanding any other law of this State, a banking institution which makes a charge or imposes a fee in excess of that permitted by P.L. 1948, c. 67 (C. 17:9A-1 et seq.), R.S. 31:1-1 et seq. or any other applicable law, shall have no liability for that charge or imposition if, within 60 days after discovering the excess charge or imposition, either through its own procedures or through an examination, and prior to any action being commenced or written notice being received from the obligor, the banking institution notifies the person or entity concerned of the error and makes whatever adjustments are necessary to assure that the person or entity will not be required to pay any amount in excess of the amount permitted to be charged or imposed.
##### **§ 17:9A-64.1** Origination, acquisition of mortgage loans by bank, savings bank {#sec-17-9a-64.1 omnilex-key=us-nj-statutes--title-17--17:9A-64.1}
23. A bank or savings bank may originate or acquire mortgage loans secured by a mortgage constituting a lien upon real property or upon a lease of the fee of real property, so long as the bank observes prudent banking practices, including amortization of the loans. The value of any mortgage loan shall not exceed 90 per cent of the appraised value of the mortgaged property, except for a mortgage loan that is less than $100,000 or as permitted by the Commissioner of Banking and Insurance by regulation. A bank or savings bank shall obtain an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices.
##### **§ 17:9A-70.1** Definitions {#sec-17-9a-70.1 omnilex-key=us-nj-statutes--title-17--17:9A-70.1}
As used in this act:
"Banking institution" means a banking institution as defined in section 1 of P.L.1948, c.67 (C.17:9A-1);
"Credit insurance" means credit life insurance and credit health insurance issued pursuant to chapter 29 of Title 17B of the New Jersey Statutes, and credit involuntary unemployment insurance issued in accordance with forms and rates filed with and approved by the Commissioner of Insurance pursuant to applicable regulations.
##### **§ 17:9A-70.2** Credit insurance on borrower {#sec-17-9a-70.2 omnilex-key=us-nj-statutes--title-17--17:9A-70.2}
When a banking institution makes a loan pursuant to P.L.1948, c.67 (C.17:9A-1 et seq.), P.L.1985, c.81 (C.17:3B-4 et seq.), or any other law or regulation authorizing the loan, the banking institution may, subject to the provisions of this act, obtain or provide credit insurance on the borrower or borrowers and, if the borrower or borrowers consent in writing to the obtaining or providing of such insurance, the banking institution may deduct and retain from the proceeds of any such loan an amount equal to the premium lawfully charged by the insurer issuing such insurance. If such premium charge is so deducted and retained, (a) such deduction and retention shall not be deemed an interest or other charge or demand prohibited by the law authorizing the loan; and (b) the banking institution shall deliver or cause to be delivered to the insured borrower at the time when a loan is made a copy of the insurance policy, or certificate therefor, or a copy of the application for such policy, or a notice of proposed insurance, as required by law. Nothing in the act to which this act is a supplement or in any other law of this State shall prohibit a banking institution, or any employee of a banking institution, from collecting the premium or identifiable charge for insurance obtained or provided as authorized by this act, or prevent a banking institution from receiving or retaining any dividend or any other gain or advantage resulting from such insurance.
##### **§ 17:9A-71** Definitions {#sec-17-9a-71 omnilex-key=us-nj-statutes--title-17--17:9A-71}
Definitions. A. For the purposes of this article:
(1) "Controlling interest" means ownership or control of a majority of the issued and outstanding capital stock or securities of a corporation, having voting rights;
(2) "Corporation" means a corporation in which a director or an executive officer of a bank has a controlling interest or in which a director or an executive officer of a bank together with one or more other directors or executive officers of the bank has a controlling interest; "corporation" includes all subsidiaries of a corporation in which the corporation has a controlling interest;
(3) "Executive officer" means only those officers of a bank who participate in major policymaking functions of the bank otherwise than in the capacity of a director of the bank;
(4) "Partnership" means a partnership in which a director or an executive officer of a bank is a general or limited partner;
(5) "Liability" means indebtedness and liability to a bank of every kind and in every capacity, other than liability in a fiduciary capacity in which the fiduciary may lawfully incur such liability without personal responsibility therefor; "liable" means obligated for a liability;
(6) "Board of directors" means at least a majority of the members of the board of directors of a bank, and "executive committee" means at least a majority of the members of the executive committee of the board of directors;
(7) "Application" means a written, signed request by a director or an executive officer of a bank, or by a corporation or partnership, to be permitted to incur liability to the bank, and "applicant" means the signer of an application;
(8) Liability to a bank, payable on demand, shall be deemed to have a maturity six months from the date of incurring such liability;
(9) Any whole or part renewal or extension of any liability to a bank incurred pursuant to this article shall be deemed to be an initial incurring or liability to the bank.
(10) "Officer" means any officer other than an executive officer who participates in the operating management of a bank.
B. The commissioner may, from time to time, make, amend and repeal regulations, including (1) prescribing what constitutes "policymaking" within the meaning of paragraph (3) of subsection A of this section; and (2) increasing or decreasing the total amount in which a director or executive officer of a bank may become liable to the bank as prescribed by paragraph (5) of subsection B of section 72 (C. 17:9A-72); and (3) prescribing limitations on the liabilities to a bank which an officer who is not an executive officer of such bank may be permitted to incur to such bank. Regulations made pursuant to this article shall be directed toward creating and maintaining a substantial parity between banks and national banks in prescribing the amount in which a bank may permit an executive or other officer to become liable to it.
##### **§ 17:9A-71.1** Compliance of bank, savings bank with liability of directors, officers {#sec-17-9a-71.1 omnilex-key=us-nj-statutes--title-17--17:9A-71.1}
24. Any bank or savings bank that is in compliance with Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. s.215 et seq., is deemed to be in compliance with the provisions of sections 71 through 75 of P.L.1948, c.47 (C.17:9A-71 through 17:9A-75).
##### **§ 17:9A-72** Prerequisites to incurring liability; amounts {#sec-17-9a-72 omnilex-key=us-nj-statutes--title-17--17:9A-72}
Prerequisites to incurring liability; amounts. A. No bank shall permit a director or an executive officer of the bank or a corporation or partnership to become liable to the bank, and no such director, executive officer, corporation or partnership shall become liable to a bank, except as authorized by this article.
B. A bank may permit a director or an executive officer of the bank or a corporation or a partnership to become liable to the bank; provided that:
(1) An application for the incurring of the proposed liability, containing such information as the commissioner may by regulation require, shall first be approved by resolution of the board of directors or of the executive committee; such resolution and the vote of each person thereon shall be recorded in the minutes of the meeting;
(2) If the applicant is an executive officer, the proposed liability will not cause the total of all liabilities of such officer to the bank to exceed $10,000.00;
(3) If the applicant is a director, corporation or partnership, the bank shall be offered security having an ascertainable market value at least 20% greater than the amount of the proposed liability, or, if no such security or only partial security is offered, the proposed unsecured liability or the portion thereof for which no security is offered is, in the opinion of the board of directors or the executive committee, warranted by a written statement of the financial condition of the applicant;
(4) The proposed liability will not cause the total of
(a) The liabilities of a director or an executive officer, and
(b) The liabilities of each corporation in which such director or executive officer has a controlling interest, or in which such director or executive officer together with one or more other directors or executive officers has a controlling interest, and
(c) The liabilities of each partnership in which such director or executive officer is a partner, to exceed 10% of the amount of the capital funds of the bank, as defined in section 60 of P.L. 1948, c. 67 (C. 17:9A-60);
(5) Notwithstanding the limitations of paragraphs (2), (3) and (4) of this subsection, the proposed liability of the director or executive officer may be up to or equal to an amount that is permitted by the commissioner by regulation, or by separate regulations for directors and for executive officers, which regulations shall be directed toward creating and maintaining a substantial parity between banks and national banks.
C. When an application is made by a director of a bank or by a corporation or partnership, the applying director and any director who alone or with any one or more other directors or executive officers of the bank has a controlling interest in the corporation, and any director who is a general or limited partner in the partnership shall not vote to grant such application.
D. When an application is approved by the executive committee, the application shall be presented and the approving resolution of the executive committee shall be read at the next meeting of the board of directors, and such presentation and reading shall be noted in the minutes of such meeting.
##### **§ 17:9A-73** Overdrafts {#sec-17-9a-73 omnilex-key=us-nj-statutes--title-17--17:9A-73}
No bank shall permit a director, executive or other officer or employee of the bank or a corporation, or a partnership, to become liable to the bank by overdraft against a deposit account. This section shall not apply to extensions of credit made pursuant to "The Advance Loan Law of 1968," P.L.1968, c. 64.
##### **§ 17:9A-74** Exempt transactions {#sec-17-9a-74 omnilex-key=us-nj-statutes--title-17--17:9A-74}
74. Exempt transactions.
A. Any liability incurred prior to the effective date of this act, which would, if incurred after the effective date of this act, be subject to this article, may from time to time be wholly or partly renewed to the extent and in the manner authorized by the law in effect when such liability was initially incurred.
B. Nothing in this article shall apply to:
(1) a mortgage loan made by a bank to an executive officer of the bank or to him or her and his or her spouse, if:
(a) the mortgaged property has erected thereon a one- or two-family dwelling occupied or to be occupied wholly or partly by such officer; or
(b) the proceeds of the loan shall be used for the purpose of erecting upon the mortgaged property a one- or two-family dwelling to be so occupied; or
(c) the mortgaged property is a one- or two-family condominium unit occupied or to be occupied wholly or partly by such officer.
(2) a loan secured by a first lien on stock in a residential cooperative housing corporation, where the proceeds of the loan are used to finance the acquisition of such stock and the officer shall occupy an apartment or dwelling unit in premises owned by the residential cooperative housing corporation; or
(3) any loan or loans made to an executive officer of the bank to finance the education of a child of such officer; or
(4) any liability to a bank incurred by any officer who is not an executive officer of such bank.
##### **§ 17:9A-75** Violations; penalties; liability {#sec-17-9a-75 omnilex-key=us-nj-statutes--title-17--17:9A-75}
A. The following shall be guilty of misdemeanors:
(1) A director, or an executive officer of a bank who knowingly incurs liability to the bank in violation of subsections B and C of section 72;
(2) Any person who knowingly permits or aids a director, or an executive officer of a bank or a corporation or partnership to incur liability to a bank in violation of subsections B and C of section 72;
(3) A director of a bank who votes in favor of an application presented to the bank by such director or by a corporation in which such director alone, or with one or more directors or officers of the bank, has a controlling interest, or by a partnership of which such director is a general or limited partner, if, pursuant to such application, liability is incurred in violation of subsections B and C of section 72;
(4) A director or an executive officer of a bank who, alone, or with one or more directors or executive officers of the bank, has a controlling interest in a corporation or who is a general or limited partner of a partnership which presents an application to the bank pursuant to which liability is incurred in violation of subsections B and C of section 72 and who, having knowledge of such application prior to its acceptance, fails to disclose his interest to the executive committee or the board of directors prior to such acceptance.
B. Each person described in paragraphs (2), (3), and (4) of subsection A of this section shall be personally liable on demand to the bank for the liability incurred in violation of subsections B and C of section 72, with interest, and, upon payment thereof, shall be subrogated to the rights of the bank.
##### **§ 17:9A-76** By-laws; adoption {#sec-17-9a-76 omnilex-key=us-nj-statutes--title-17--17:9A-76}
The stockholders of a bank shall have the power to make, alter and repeal by-laws. If so provided in the certificate of incorporation, the power to make, alter and repeal by-laws may be conferred upon the board of directors, but any exercise of such power by the board of directors shall be subject to alteration or repeal by the stockholders at any meeting. The by-laws may include any provision not inconsistent with this act for the regulation of the affairs of the bank.
##### **§ 17:9A-77** By-laws; limitations on powers of directors {#sec-17-9a-77 omnilex-key=us-nj-statutes--title-17--17:9A-77}
A board of directors which shall be empowered to make, alter and repeal by-laws may not, however, exercise such power with respect to by-laws
(1) fixing the number of directors of the bank or the manner and time of determining such number;
(2) establishing the requirement for calling a special meeting of the stockholders; or
(3) setting forth the manner in which the by-laws may be made, altered or repealed.
##### **§ 17:9A-78** By-laws; amendments; repeal; notice {#sec-17-9a-78 omnilex-key=us-nj-statutes--title-17--17:9A-78}
By-laws shall not be made, altered or repealed by the stockholders except at an annual or special meeting of the stockholders by the affirmative vote of the holders of a majority of the capital stock of the bank entitled to vote at such meeting. By-laws shall not be made, altered or repealed by the board of directors except by the affirmative vote of a majority of the whole board at any regular or special meeting of the board of directors, and unless at least two days prior written notice of the intended action shall have been given to the directors. Such notice may be waived by a director at or prior to the meeting.
##### **§ 17:9A-79** Annual meetings; notice {#sec-17-9a-79 omnilex-key=us-nj-statutes--title-17--17:9A-79}
79. Annual meetings; notice.
A. The annual meeting of the stockholders of every bank shall be held on such day in January, February, March or April in each year as the bylaws shall provide; or, if there be no governing bylaw, then on the fourth Tuesday in March; or, in the case of a savings bank operating on a fiscal-year basis, the annual meeting shall be held no later than 120 days after the closing of the fiscal year. The commissioner may require that prior notice be given to him of a change in the date of an annual meeting, and may prescribe the form of such notice and the time when such notice shall be given.
B. Not less than 10 days prior to the date fixed for such meeting, notice of the annual meeting shall be published once in a newspaper published and circulated in the municipality in which the bank maintains its principal office, or, if there be no such newspaper, then in one published in the county in which the bank maintains its principal office or in an adjoining county, and which has general circulation in the municipality in which the bank maintains its principal office. In addition, notice of such meeting shall be given as provided in section 81. At such annual meeting, directors shall be elected and such other business may be transacted as may properly be brought before a meeting of stockholders, except that no business other than the election of directors shall be transacted at such meeting unless notice of such other business shall have been given in the manner provided by section 81. Notice of such other business need not be included in the publication of notice required by this section.
##### **§ 17:9A-79.1** Written consents {#sec-17-9a-79.1 omnilex-key=us-nj-statutes--title-17--17:9A-79.1}
Any action required or permitted to be taken at a meeting of stockholders by P.L. 1948, c. 67 (C. 17:9A-1 et seq.), or the certificate of incorporation or bylaws of a bank, may be taken without a meeting if all stockholders consent thereto in writing. Whenever action is taken pursuant to this section, the written consents of the stockholders consenting thereto shall be filed with the minutes of proceedings of stockholders. Any action taken pursuant to this section shall have the same effect for all purposes as if the action had been taken at a meeting of the stockholders. If any other provision of P.L. 1948, c. 67 (C. 17:9A-1 et seq.) requires the filing of a certificate upon the taking of an action by the stockholders, and the action is taken in the manner authorized by this section, the certificate shall state that the action was taken without a meeting pursuant to the written consents of all of the stockholders.
##### **§ 17:9A-80** Special meetings; call {#sec-17-9a-80 omnilex-key=us-nj-statutes--title-17--17:9A-80}
Special meetings of the stockholders of a bank may be called at any time by the president, the board of directors, the holders of not less than one-tenth of all shares outstanding with voting rights, or by such other officers or persons as may be so authorized in the certificate of incorporation or by-laws of the bank. At any time upon the written request of any person or persons entitled to call a special meeting, the secretary or cashier of the bank shall notify the stockholders of the call of a special meeting to be held at such time as the notice shall specify, but in no event shall such notice specify a time more than sixty days after the receipt of the request.
##### **§ 17:9A-81** Stockholders' meetings; notice. {#sec-17-9a-81 omnilex-key=us-nj-statutes--title-17--17:9A-81}
81. Stockholders' meetings; notice. Notice of all meetings of stockholders shall be given to the stockholders not less than 10 nor more than 60 days prior thereto, by mail, postage prepaid, addressed to each stockholder at his address as it appears on the books of the bank. The notice shall specify the place, day and hour of the meeting and the nature of the business to be transacted or if participation by stockholders by means of remote communication has been authorized pursuant to subsection b. of section 83 of P.L.1948, c.67 (C.17:9A-83).
Except as otherwise provided by section 79, no business may be transacted at any meeting except that specified in the notice of the meeting.
##### **§ 17:9A-82** Special meetings; failure to issue call; action by commissioner {#sec-17-9a-82 omnilex-key=us-nj-statutes--title-17--17:9A-82}
If the secretary or cashier neglects or refuses to issue a call for a special meeting as provided in section 80, the person or persons making the request may petition the commissioner to issue an order compelling the calling of such a meeting. The commissioner shall issue such an order upon such a petition if he finds that a request for a call for a special meeting has been made pursuant to section 80.
##### **§ 17:9A-83** Place and hour of meeting; adjournments. {#sec-17-9a-83 omnilex-key=us-nj-statutes--title-17--17:9A-83}
83. a. Subject to subsection b. of this section, any meeting of stockholders may be held at the principal office of the bank, or at any branch office, or at any place other than the principal office or a branch office, provided such other place is in a municipality in which the bank maintains its principal office or a branch office. Each meeting shall be convened at such hour as is fixed by the by-laws, or, if not so fixed, at such hour as shall be stated in the call for the meeting. Any meeting may be adjourned from time to time for any period of time and to any place where it is lawful to hold a meeting. When any meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting.
b. Any meeting of stockholders may be held solely or in part by means of remote communication to the extent the board authorizes and adopts guidelines and procedures governing such a meeting.
(1) One or more stockholders may participate in a meeting of stockholders by means of remote communication to the extent the board authorizes that participation, including the authorization of a meeting of stockholders held solely by means of remote participation. Stockholder meetings conducted in part or solely by means of remote communications and any stockholder's remote participation in those meetings shall be subject to those guidelines and procedures as the board adopts, and shall be in conformity with this subsection.
(2) A stockholder participating in a meeting of stockholders by means of remote communication in reliance upon paragraph (1) of this subsection shall be deemed present in person and shall be entitled to vote at the meeting. In any meeting conducted in part or solely by means of remote communication in reliance upon paragraph (1) of this subsection, the bank shall implement reasonable measures to:
(a) verify that each person participating remotely is a stockholder or a proxy of a stockholder;
(b) provide each stockholder participating remotely with a reasonable opportunity to participate in the meeting, including an opportunity to vote on matters submitted to the stockholders, and to read or hear the proceedings of the meeting substantially concurrently with those proceedings; and
(c) record and maintain a record of any votes or other actions taken by remote communication at the meeting.
##### **§ 17:9A-84** List of stockholders {#sec-17-9a-84 omnilex-key=us-nj-statutes--title-17--17:9A-84}
A. The officer having charge of the stock transfer books for shares of stock of a bank shall make, or cause to be made, and certify a complete list of the stockholders entitled to vote at a stockholder's meeting or any adjournment thereof. Such list shall
(1) Be arranged alphabetically, within each class and series, with the address of, and the number of shares held by, each stockholder;
(2) Be produced at the time and place of the meeting;
(3) Be subject to the inspection of any stockholder during the whole time of the meeting; and
(4) Be prima facie evidence as to who are the stockholders entitled to examine such list or to vote at any meeting.
B. If the requirements of this section have not been complied with, the meeting shall, on demand of any stockholder in person or by proxy, be adjourned until the requirements are complied with. Failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting prior to the making of any such demand.
##### **§ 17:9A-85** Voting of treasury stock {#sec-17-9a-85 omnilex-key=us-nj-statutes--title-17--17:9A-85}
Shares of its own capital stock belonging to a bank shall not be voted directly or indirectly. Any shares disqualified from voting solely because of such ownership shall not be counted in determining the proportion of or the number of shares or votes required to pass or to vote upon or to consent or assent to any matter or in determining the number of shares required to constitute a quorum at any meeting of the stockholders.
##### **§ 17:9A-86** Voting of stock subject to pledge {#sec-17-9a-86 omnilex-key=us-nj-statutes--title-17--17:9A-86}
A stockholder who shall pledge his stock may nevertheless represent and vote such stock in person or by proxy at all stockholders' meetings, unless such stock is transferred on the books of the bank, and in the instrument of transfer it is stated that the transferee is a pledgee or a nominee of a pledgee, and that the pledgee or the nominee of the pledgee is empowered to represent and vote such stock, in which case only the pledgee or the nominee of the pledgee, in person or by proxy, may represent the stock and vote thereon.
##### **§ 17:9A-87** Voting of stock held by a corporation {#sec-17-9a-87 omnilex-key=us-nj-statutes--title-17--17:9A-87}
If shares of the capital stock of a bank are registered in the name of a corporation, such corporation may vote such shares by a proxy signed by its president or by any vice-president, or signed in such other manner as shall be determined by its board of directors or other governing body.
##### **§ 17:9A-88** Voting of stock held by joint tenants or tenants in common {#sec-17-9a-88 omnilex-key=us-nj-statutes--title-17--17:9A-88}
Shares of the capital stock of a bank held jointly or as tenants in common by two or more persons may be represented and voted in person or by proxy at any meeting of the stockholders by any one of such persons, unless another joint tenant or tenant in common seeks to represent or vote any of such shares in person or by proxy. In the latter event, the written agreement, if any, which governs the manner in which such shares shall be represented or voted, shall control if presented at the meeting. If there be no such agreement presented at the meeting, the majority in number of such joint tenants or tenants in common present in person or by proxy shall control the manner of representation and voting. If there be no such majority, or if there be two such joint tenants or tenants in common, both of whom seek to represent and vote such shares, the shares shall, for the purposes of representation and voting, be divided equally among such joint tenants or tenants in common present in person or by proxy.
##### **§ 17:9A-89** Voting stock held by fiduciaries {#sec-17-9a-89 omnilex-key=us-nj-statutes--title-17--17:9A-89}
A. Shares of the capital stock of a bank held in a fiduciary capacity may be voted in person or by proxy by the fiduciary holding such shares. If a bank holds shares of its own capital stock in a fiduciary capacity, such shares may be voted and shall be counted in determining the total number of outstanding shares at any given time.
B. If shares of the capital stock of a bank are held in a fiduciary capacity by two or more fiduciaries, such shares may be represented and voted at any meeting of the stockholders by any one of such fiduciaries, unless either (1) such fiduciary shall be acting under an instrument or judgment of court which otherwise directs, or (2) two or more fiduciaries seek to represent or vote such shares in person or by proxy in a conflicting manner. If the instrument or judgment of court under which the fiduciaries are acting does not provide the manner in which such shares shall be represented or voted, and the cofiduciaries are in disagreement as to such representation or voting, such shares shall be represented and voted in the manner determined by a majority of the cofiduciaries and, if they be equally divided, such shares shall not be represented or voted except pursuant to an order or judgment of a court of competent jurisdiction.
##### **§ 17:9A-90** Voting in person or by proxy {#sec-17-9a-90 omnilex-key=us-nj-statutes--title-17--17:9A-90}
A. Stockholders of a bank may vote at all meetings either in person or by proxy. Every proxy shall be executed in writing by the stockholder or his agent and shall be filed with the secretary or cashier of the bank. When a proxy is executed by an agent of a stockholder, the instrument authorizing the agent to execute the proxy, or a photostatic copy thereof, shall also be filed with the secretary or cashier of the bank.
B. No proxy shall be valid after eleven months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy be valid after three years from the date of its execution. If a proxy is undated, it shall be presumed to be dated as of the date on which it is filed pursuant to this section.
C. A proxy shall be revocable at will, but its revocation shall not be effective until written notice of such revocation is filed with the secretary or cashier of the bank. A proxy shall not be revoked by the death or incapacity of the stockholder until written notice of such death or incapacity shall be filed with the secretary or cashier of the bank. Unless the by-laws otherwise provide, the presence at any meeting of any stockholder who has given a proxy shall not revoke such proxy unless the stockholder shall file written notice of such revocation with the secretary of the meeting.
D. Nothing in this section shall limit the period of validity of a proxy or permit its revocation contrary to its terms, if such proxy is coupled with an interest.
E. While a meeting of the stockholders is in progress, the filing with the secretary or cashier of the bank required by subsections A and C of this section shall be made with the secretary of the meeting.
##### **§ 17:9A-90.1** Voting trusts {#sec-17-9a-90.1 omnilex-key=us-nj-statutes--title-17--17:9A-90.1}
Agreements hereafter made between two or more of the stockholders of a bank pursuant to which stock of the bank held by them is transferred to or deposited with a trustee or agent for the purpose of vesting in such trustee or agent the right to vote thereon, shall be invalid; provided, that nothing herein contained shall prohibit a stockholder of a bank from depositing stock of a bank with a trustee or agent under the terms of a voting trust agreement presently lawfully in effect.
##### **§ 17:9A-91** Quorum {#sec-17-9a-91 omnilex-key=us-nj-statutes--title-17--17:9A-91}
At all meetings of stockholders of a bank, the presence in person or by proxy of the holders of a majority of the outstanding shares entitled to vote shall constitute a quorum for the transaction of business. Unless otherwise provided by law, the acts of the holders of a majority of the shares represented at any meeting at which a quorum is present shall be the acts of the stockholders. If a quorum is not present at a meeting, a majority in interest of the stockholders present in person or by proxy may adjourn the meeting to a fixed time.
##### **§ 17:9A-92** Judges of election {#sec-17-9a-92 omnilex-key=us-nj-statutes--title-17--17:9A-92}
A. In advance of each meeting of the stockholders of a bank, the board of directors shall appoint one judge or three judges who may be stockholders, and who shall perform the duties hereinafter in this section set forth. If a judge or judges be not so appointed, or, if appointed, shall fail or refuse to serve at such meeting or at an adjournment thereof, the chairman of the meeting shall make the appointment or fill any vacancy. If no judge shall have been appointed in advance of a meeting, the stockholders shall determine whether one or three judges shall be appointed.
B. Before entering upon his duties, each judge shall take and subscribe an oath to perform the duties of his office impartially and in good faith.
C. The judge or judges shall determine
(1) the number of shares outstanding;
(2) the number of shares represented at the meeting;
(3) the voting rights of each share;
(4) the existence of a quorum; and
(5) the authenticity, validity and effect of proxies.
They shall also
(6) hear and determine all challenges and questions arising in connection with the right to ballot;
(7) receive, count and tabulate all ballots;
(8) determine the results of balloting; and
(9) do such other acts as may be proper with respect to balloting.
If there be three judges, the decision, act or certificate of two shall be effective as the decision, act or certificate of all.
D. At the request of the chairman of the meeting, or of any stockholder or his proxy, the judge or judges shall make a report in writing of any matter determined by him or them and execute a certificate of any fact found. The judge or judges shall execute a certificate of the result of any balloting and shall deliver such certificate to the chairman of the meeting, and such certificate shall be recorded in the minutes of the meeting and filed with the bank.
E. If any person shall be elected a director at any meeting at which he served as a judge, his election shall be void and the directors shall not appoint him a director within twelve months next succeeding.
##### **§ 17:9A-93** Presiding officer and secretary of meeting {#sec-17-9a-93 omnilex-key=us-nj-statutes--title-17--17:9A-93}
Unless the by-laws otherwise provide, the president shall preside at, and the secretary or cashier shall take the minutes at all meetings of the stockholders. If either such officer is not present at any meeting of stockholders, the stockholders may elect a person to preside at such meeting, or to act as secretary of the meeting, and the secretary so chosen shall record the minutes in the minute book of the bank.
##### **§ 17:9A-94** Capital stock; voting rights {#sec-17-9a-94 omnilex-key=us-nj-statutes--title-17--17:9A-94}
A. Except as a bank's certificate of incorporation may otherwise lawfully provide with respect to preferred stock, each share of stock shall entitle the registered holder thereof to (1) one vote with respect to each matter presented at a stockholders' meeting, and (2) one vote for each director to be elected.
B. The shares of the capital stock of a bank shall not be voted cumulatively.
##### **§ 17:9A-95** Summary review of elections by Superior Court {#sec-17-9a-95 omnilex-key=us-nj-statutes--title-17--17:9A-95}
Upon application of any stockholder who questions an election of directors of a bank, the Superior Court, if such application be made in an action brought within twenty days after the election and if reasonable notice of the intended application shall have been given to the bank and to those whose election is questioned, shall have jurisdiction to confirm the questioned election, or order a new election, or make such other order and give such relief as justice may require. The court may proceed in the action in a summary manner or otherwise.
##### **§ 17:9A-96** Record date {#sec-17-9a-96 omnilex-key=us-nj-statutes--title-17--17:9A-96}
Record date.
A. The board of directors may fix a date, which shall precede by not more than 60 days:
(1) the date of any meeting of stockholders, or
(2) the date upon which a dividend is to be paid, or
(3) the date upon which rights are to be allotted, or
(4) the date upon which any change or conversion or exchange of capital stock is to take effect, as a record date for the determination of the stockholders who are entitled
(5) to notice of and to vote at any such meeting, and at any adjournment thereof, or
(6) to receive payment of any such dividend, or
(7) to receive any such allotment of rights, or
(8) to participate in any such change, conversion or exchange of capital stock, and in any such case only stockholders of record at the close of business on the date so fixed shall be entitled to notice of and to vote at such meeting and at any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to participate in such change, conversion or exchange, as the case may be, notwithstanding any transfer of stock on the books of the bank after the record date so fixed.
B. If no such record date is fixed, only stockholders of record at the close of business on the sixty-fifth day prior to (1) the date of such meeting, or (2) the date upon which such dividend is to be paid, or (3) the date upon which such rights are to be allotted, or (4) the date upon which such change, conversion or exchange of capital stock is to take effect, shall be entitled to notice of and to vote at such meeting and at any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or participate in such change, conversion or exchange, as the case may be, notwithstanding any transfer of stock on the books of the bank subsequent to such sixty-fifth day.
##### **§ 17:9A-97** Inspection of books and records {#sec-17-9a-97 omnilex-key=us-nj-statutes--title-17--17:9A-97}
A. Every bank shall keep books and records of account and minutes of the proceedings of its stockholders, board of directors, and executive committee if any. The bank shall keep at its principal office, or at the office of its transfer agent in this State, a record or records containing the names and addresses of all stockholders, the number class and series of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. A bank shall convert into written form without charge any such records not in such form at the written request of any person entitled to inspect them. Any person who has been a stockholder of record of a bank for at least 6 months immediately preceding his demand, or any person holding, or so authorized in writing by the holders of, at least 5% of the outstanding stock of a bank, upon at least 5 days' written demand shall have the right for any proper purpose to examine in person or by agent or attorney, during usual business hours, its minutes of the proceedings of its stockholders and record of stockholders and to make extracts therefrom at the place where such minutes and record are kept.
B. A stockholder whose demand has been refused by a bank may apply to the commissioner for an order directing the bank to permit such an examination or the making of such an extract. The application to the commissioner shall be in duplicate, shall be verified, and shall state the stockholder's name and address; the number of shares held by him; the name and address of counsel representing him, if any; the name and address of the principal office of the bank; and the reason for the demand for such examination or for the making of such extract. If, upon reading the application, the commissioner shall be satisfied that the purpose for which it is made is a proper one and is made in good faith, he shall, within 5 days after the receipt of the demand, mail a copy thereof to the bank, together with an order directing the bank to show cause why the demand should not be allowed. The commissioner shall, within the same period, mail a copy of the order to show cause to the demanding stockholder.
C. The order to show cause shall be returnable before the commissioner not less than 5 and not more than 10 days after its date, and, upon the return day, the commissioner shall hear such evidence and consider such arguments of the parties or their counsel as he shall deem necessary to a fair and equitable determination. The commissioner shall, within 5 days from the return day of the order to show cause, make an order allowing or denying the demand, as the case may be, and he shall, within the same period, mail a copy of his order to the stockholder and to the bank. If, from an inspection of the demand, the commissioner shall be satisfied that it is not made for a proper purpose or is not made in good faith, he shall forthwith make and mail to the stockholder an order denying the demand, stating his reasons for such denial.
D. The commissioner may, in his discretion, in lieu of ordering the bank to permit such examination or the making of such extract, require the bank to prepare envelopes addressed to the stockholders, to be mailed by the bank after the insertion therein of such matters as the stockholder shall furnish the bank after first having obtained approval by the commissioner of the sending of such matter. The cost of the preparation of such matter and the expense of mailing shall be borne by the stockholder unless the commissioner shall, in his discretion, and upon good cause shown, direct that the expense be borne by the bank.
E. Any order of the commissioner other than an order to show cause, made pursuant to this section, shall be subject to review, hearing and relief in the Superior Court in a proceeding in lieu of prerogative writ. The commissioner's failure to act within the periods limited by this section shall be deemed to be a final order denying the application.
F. Nothing herein contained shall impair the power of any court, upon proof by a stockholder of proper purpose, irrespective of the period of time during which said stockholder shall have been a stockholder of record, and irrespective of the number of shares held by him, to compel the production for examination by such stockholder of the books and records of account, minutes and record of stockholders of a bank.
##### **§ 17:9A-98** Stock certificates; transfers of stock; facsimile signatures {#sec-17-9a-98 omnilex-key=us-nj-statutes--title-17--17:9A-98}
A. Every bank shall issue to each of its stockholders a certificate or certificates signed by, or in the name of the bank by, the chairman or vice-chairman of the board, or the president or a vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary, or by the cashier or an assistant cashier, and may be sealed with the seal of the bank or a facsimile thereof. If the certificate is countersigned by a transfer agent or registrar, who is not an officer or employee of the bank, any and all other signatures may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the bank with the same effect as if he were such officer, transfer agent or registrar at the date of its issue.
B. Shares of the capital stock of a bank shall be personal property and shall be held and transferred as provided in chapter 8 of Title 12A of the New Jersey Statutes.
##### **§ 17:9A-99** Preemptive rights of stockholders to purchase new stock {#sec-17-9a-99 omnilex-key=us-nj-statutes--title-17--17:9A-99}
A. Except as otherwise provided by law, upon an increase of the capital stock of a bank by an issue of additional shares, every stockholder shall have a right to purchase that proportion of the shares to be issued which the par value of the stock held by him bears to the aggregate par value of the capital stock of the bank before such increase, at such price, which may be in excess of par value, and within such time as shall be fixed by the resolution of the board adopted pursuant to section 117 providing for the issue of such stock, unless (1) such right is waived by him, or (2) the certificate of incorporation otherwise provided at the time of the issue of the shares held by him. For the purposes of this subsection, aggregate par value of the capital stock of a bank shall mean the aggregate par value of all shares the holders of which are entitled under this section to preemptive rights.
B. Unless the certificate of incorporation otherwise provided at the time when the preferred stock held by him was issued, or unless the right is waived by him, the holder of shares of preferred stock shall have the preemptive right specified in subsection A. of this section only in case of the issue of (1) preferred stock of the same class held by him, or (2) preferred stock which has preference or priority, in the payment of dividends or upon liquidation, over the class of preferred stock held by him.
C. Shares of the capital stock not purchased by stockholders in the exercise of the rights provided by subsections A. or B. of this section, shall be sold to such persons as shall be determined by the board of directors, at a price not less than that specified in the resolution of the board adopted pursuant to section 117 providing for the issue of such stock.
##### **§ 17:9A-100** Liability of stockholders {#sec-17-9a-100 omnilex-key=us-nj-statutes--title-17--17:9A-100}
Except as otherwise provided by any law heretofore enacted or by the certificate of incorporation of a bank heretofore organized, the holders of the shares of the capital stock of a bank shall not be liable, by reason of their holding such stock, for any debts, contracts, or obligations of the bank, or for assessments to restore impairments of the capital stock of the bank. In those cases in which any such liability has been imposed upon stockholders by any law heretofore enacted or by any certificate of incorporation heretofore filed, such liability shall terminate one year from the effective date of this act.
##### **§ 17:9A-101** Directors; number; method of determination {#sec-17-9a-101 omnilex-key=us-nj-statutes--title-17--17:9A-101}
A. Every bank shall be managed by a board of not less than five and not more than twenty-five directors.
B. If the certificate of incorporation does not fix the number of directors, and does not provide for the fixing of such number by either the board of directors or the stockholders, the by-laws may fix such number or provide that either the stockholders or the board of directors may fix such number; and, in the absence of any such provision in the by-laws, the stockholders shall, at any meeting at which directors are to be elected, determine the number of directors to be elected at such meeting.
##### **§ 17:9A-102** Directors; classification; election; vacancies; tenure. {#sec-17-9a-102 omnilex-key=us-nj-statutes--title-17--17:9A-102}
102. Directors; classification; election; vacancies; tenure.
A. A bank may provide in its certificate of incorporation for the classification of its directors in respect to the time for which they shall severally hold office, but no class of directors shall hold office for a term shorter than one year or longer than five years, and the term of office of at least one class shall expire in each year. No classification of directors shall be effective prior to the first annual meeting of stockholders.
B. The directors named in the certificate of incorporation shall hold office until the first annual meeting of stockholders, and until their successors shall have been elected and qualified. At the first annual meeting of stockholders, and at each annual meeting thereafter, the stockholders shall elect directors to hold office until the next succeeding annual meeting of stockholders, except in the case of the classification of directors pursuant to subsection A. of this section.
C. Directors elected at each annual meeting of stockholders shall be elected by ballot of the stockholders. The persons nominated for election as a director at each annual meeting of stockholders who receive the greatest number of votes shall be elected as directors at that annual meeting.
D. When an increase in the number of directors is authorized, other than an increase authorized pursuant to subsection F. of this section, the newly created directorships shall be filled by the stockholders. The board of directors may, at its option, fill any other vacancy in the board. If, following a vacancy, less than 5 directors or less than a quorum remain, the directors in attendance at the next regular or special meeting of the board shall fill the vacancy.
E. A director elected at an annual meeting of the stockholders shall hold office for the term for which he is elected from the time when a majority of all directors elected at such meeting shall have qualified, and until his successor shall have been elected and qualified. A director otherwise elected or appointed, including a director appointed pursuant to subsection F. of this section, shall hold office from the time when he shall have qualified until the time when a majority of the directors elected at the next annual meeting shall have qualified.
F. If the original or amended certificate of incorporation of a bank so provides, the directors may, between annual meetings, increase the number of directors by not more than 2, and may, subject to the limitation imposed by subsection A. of section 101 of P.L.1948, c.67 (C.17:9A-101), appoint persons to fill the vacancies so created.
##### **§ 17:9A-103** Directors; stock ownership, oath {#sec-17-9a-103 omnilex-key=us-nj-statutes--title-17--17:9A-103}
103. A. Each director shall own in good faith and hold in the director's own name unpledged shares of the capital stock of the bank, or of a company as such term is defined in section 2 of the federal "Bank Holding Company Act of 1956," 12U.S.C. s.1841 owning more than 80% of the capital stock of such bank, which shares shall comply with at least one of the following conditions:
(1) the aggregate par value of the shares is at least $500, or
(2) the shares have an aggregate book value of at least $500, or
(3) the shares have an aggregate fair market value of at least $500 as determined by the Commissioner of Banking and Insurance.
B. Each director shall, following his election or appointment and before assumption of any duties as a director, take an oath that he will, so far as the duty devolves upon him, diligently and honestly administer the affairs of the bank, and that he will not knowingly violate, or knowingly permit to be violated, any provision of this act, and that he owns in good faith and holds in his own name, capital stock as required by this section. Such oath, subscribed by the director and certified by the officer before whom it is taken, shall be transmitted to the commissioner and filed in the department.
##### **§ 17:9A-104** Directors; disqualification {#sec-17-9a-104 omnilex-key=us-nj-statutes--title-17--17:9A-104}
A director who ceases to be the owner of shares as specified in section 103, or who, within thirty days after his election or appointment, or, in case of his disability, within such further time as the commissioner shall fix, fails to subscribe the oath specified in section 103, or who defaults for thirty days in payment of an undisputed obligation to the bank, shall cease to be a director.
##### **§ 17:9A-105** Directors; quorum; actions {#sec-17-9a-105 omnilex-key=us-nj-statutes--title-17--17:9A-105}
Directors; quorum; actions. a. A majority of the members of the board of directors shall constitute a quorum for the transaction of business. Except as otherwise provided by this act, action taken by a majority of a quorum shall be the action of the board.
b. Unless otherwise provided by the certificate of incorporation or bylaws, any action required or permitted to be taken pursuant to authorization voted at a meeting of the board or any committee thereof may be taken without a meeting if, prior or subsequent to that action, all members of the board or of the committee, as the case may be, consent thereto in writing and those written consents are filed with the minutes of the proceedings of the board or committee. The consent shall have the same effect as a unanimous vote of the board or committee for all purposes, and may be stated as a unanimous vote of the board or committee in any certificate or other document filed with the commissioner.
c. Any or all directors may participate in a meeting of the board or a committee of the board by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other, unless otherwise provided in the certificate of incorporation or the bylaws.
##### **§ 17:9A-106** Directors; compensation {#sec-17-9a-106 omnilex-key=us-nj-statutes--title-17--17:9A-106}
Directors shall receive such reasonable compensation as the board of directors may from time to time by resolution provide.
##### **§ 17:9A-107** Chairman of board of directors {#sec-17-9a-107 omnilex-key=us-nj-statutes--title-17--17:9A-107}
A bank may, in its by-laws or by resolution of its board of directors, create the office of chairman of the board of directors and define his powers and duties.
##### **§ 17:9A-108** Directors; executive committee {#sec-17-9a-108 omnilex-key=us-nj-statutes--title-17--17:9A-108}
A. If the number of directors of a bank equals or exceeds nine, the certificate of incorporation or by-laws of the bank may provide for an executive committee of the board of directors to be appointed from time to time by the board of directors from among the directors. The executive committee shall have not less than five members. A majority of the executive committee shall constitute a quorum. Vacancies in the executive committee shall be filled by the board of directors. The board of directors may appoint one or more directors as alternate members of the executive committee to act in the absence or disability of members of the committee, and while so acting such alternate members shall have all the powers of members of the committee. Subject to the provisions of this act and of the certificate of incorporation and the by-laws of the bank, the executive committee may exercise all of the powers of the board of directors with respect to the affairs of the bank, except that the executive committee may not
(1) exercise such powers while a quorum of the board of directors is actually convened for the conduct of business;
(2) declare a dividend or approve any other distribution to stockholders;
(3) make, alter or repeal the by-laws of the bank;
(4) elect or appoint any officer or director; or
(5) exercise any other power which this act specifically provides shall be exercised by at least a majority of all the directors.
B. The minutes of each meeting of the executive committee shall be presented to the board of directors at its next meeting following such meeting of the executive committee; except that, when such meeting of the board of directors occurs within two days following the day of such meeting of the executive committee, such minutes shall, if not presented at such first meeting, be presented to the board of directors at its second meeting following such meeting of the executive committee.
##### **§ 17:9A-109** Directors; qualified bank; trust committee {#sec-17-9a-109 omnilex-key=us-nj-statutes--title-17--17:9A-109}
A. If the number of directors of a bank which is a qualified bank equals or exceeds nine, the certificate of incorporation or by-laws of the bank may provide for a trust committee to be appointed from time to time by the board of directors. The trust committee shall have not less than five members. Not less than a majority of the members of the trust committee shall be directors. Any or all of the remaining members of the trust committee may be directors or may be officers of the bank who are not directors. A majority of the members of the trust committee shall constitute a quorum. Vacancies in the trust committee shall be filled by the board of directors. The board of directors may, from time to time, appoint one or more directors as alternate director members of the trust committee to act in the absence or disability of director members of the committee, and may, from time to time, appoint one or more officers of the bank as alternate officer members of the trust committee to act in the absence or disability of officer members of the committee, and while so acting such alternate members shall have all the powers of members of the committee. Subject to the provisions of this act and of the certificate of incorporation or by-laws of the bank, the trust committee may exercise all the powers of the board of directors with respect to
(1) acceptance or rejection of appointment in any fiduciary or agency capacity;
(2) retention, sale or other disposition of real or personal property held in any fiduciary or agency capacity;
(3) investment and disbursement of funds held in any fiduciary or agency capacity;
(4) exercise of voting and all other rights arising out of or incidental to any property, real or personal, held in any fiduciary or agency capacity;
(5) reviews of administration, and of assets held in any fiduciary or agency capacity;
(6) resignation as fiduciary or agent or other actions terminating service as fiduciary or agent;
(7) authorizing the execution, sealing with the bank's seal and delivery of, any instrument necessary or appropriate to effectuate or evidence any of the powers of the trust committee; and
(8) all other duties and powers of the bank in the administration of its fiduciary and agency functions.
B. The minutes of each meeting of the trust committee as to sales and purchases of real and personal property shall be presented to the board of directors at its next meeting following such meeting of the trust committee; except that, when such meeting of the board of directors occurs within two days following the day of such meeting of the trust committee, such minutes shall, if not presented at such first meeting, be presented to the board of directors at its second meeting following such meeting of the trust committee.
##### **§ 17:9A-110** Directors; other committees {#sec-17-9a-110 omnilex-key=us-nj-statutes--title-17--17:9A-110}
110. Directors; other committees. The bylaws of a bank may provide for other committees of the board of directors in addition to the committees elsewhere in this act authorized. Not less than a majority of the members of any such other committee shall be directors. Any or all of the remaining members of any such other committee may be directors or may be officers of the bank who are not directors. Each committee shall have the authority to take any action on behalf of the board that may be delegated to the committee in the bylaws or by resolution of the board. The minutes of each committee authorized to take action on behalf of the board of directors pursuant to this section shall be presented to the board at its next meeting following the meeting of the committee, or at a meeting following the fifth business day after the committee meeting at which such action was taken.
##### **§ 17:9A-111** Officers; election; appointment; limitation {#sec-17-9a-111 omnilex-key=us-nj-statutes--title-17--17:9A-111}
111. Officers; election; appointment; limitation.
A. At the first meeting of the board of directors following each annual meeting of the stockholders of a bank, the directors shall elect a chairman of the board of directors, if the office of chairman of the board of directors has been created pursuant to section 107 of P.L.1948, c.67 (C.17:9A-107), and a president, from their own number. They shall also elect at such meeting either a cashier or a secretary and a treasurer, none of whom need be a director. Other officers, including one or more vice-presidents, who need not be directors, may from time to time be elected or appointed by the board of directors, or by the president if the authority to appoint officers other than president or chairman has been delegated to the president by the bylaws or by resolution of the board of directors.
B. Any person who holds more than one office in a bank shall not sign in more than one official capacity any writing requiring the signatures of more than one officer of the bank.
##### **§ 17:9A-112** Officers; tenure; removal {#sec-17-9a-112 omnilex-key=us-nj-statutes--title-17--17:9A-112}
Subject to removal by the board of directors at its pleasure, or by the commissioner pursuant to section 249, each officer shall hold office from the time of his election or appointment until the first meeting of the board of directors, following the next annual meeting of stockholders, at which officers are elected or appointed.
##### **§ 17:9A-113** Officers; vacancies {#sec-17-9a-113 omnilex-key=us-nj-statutes--title-17--17:9A-113}
Any vacancy in any office may be filled by the board of directors.
##### **§ 17:9A-115** Bonding of directors, officers, employees; temporary waiver {#sec-17-9a-115 omnilex-key=us-nj-statutes--title-17--17:9A-115}
a. Every bank shall, at its own expense, cause to be bonded for the honest performance and discharge of his duties (1) each director who handles or has charge or custody of money, securities or other valuable property of the bank or of its customers and (2) all officers and employees of the bank, in such amount and with such surety as shall be approved by the board of directors. The bonds may be individual bonds or may be one or more blanket bonds issued by a surety company or companies or one or more underwriters. The board of directors shall annually examine all such bonds, shall pass upon their sufficiency and may require a new bond or bonds or increases in the amounts thereof. The commissioner may from time to time order an increase in the amount of any such bonds. No bond shall be deemed to comply with the requirements of this section unless such bond contains a provision that it shall not be cancellable for any cause unless notice of intention to cancel is filed in the department at least 5 days before the day upon which cancellation shall take effect.
b. In the event a bank is unable to obtain the bond or bonds required by subsection a., the commissioner may, at his discretion, waive the requirements of subsection a. for a period not to exceed 1 year, upon such terms as he deems appropriate, if he is satisfied that such bank is adequately capitalized and that such a waiver will not otherwise endanger the financial condition of such bank.
##### **§ 17:9A-116** Nature of amendments {#sec-17-9a-116 omnilex-key=us-nj-statutes--title-17--17:9A-116}
A bank may, by amending its certificate of incorporation in the manner provided by this article,
(1) change its corporate name;
(2) increase its capital stock; except that no amendment of the certificate of incorporation pursuant to this article shall be required when an increase in capital stock results from a stock dividend paid as authorized by subsection C of section 52;
(3) decrease its capital stock;
(4) change the par value of its shares;
(5) assume the authority to exercise any or all of the powers specified in section 28;
(6) relinquish the authority to exercise any or all of the powers specified in section 28;
(7) effect any other object, which, pursuant to any other provision of this act, is required or permitted to be effected by amendment of the certificate of incorporation.
##### **§ 17:9A-117** Procedure for amending certificate of incorporation {#sec-17-9a-117 omnilex-key=us-nj-statutes--title-17--17:9A-117}
117. Whenever the board of directors shall deem it advisable to amend the certificate of incorporation, it shall adopt a resolution setting forth the proposed amendment and fixing a date for a meeting of stockholders to take action thereon, upon notice given pursuant to section 81. If, at such meeting or at any adjournment thereof, the holders of at least two-thirds of the capital stock entitled to vote shall vote in favor of the proposed amendment or any modification thereof, a certificate thereof, setting forth the amendment in full and certifying that the amendment was made for a purpose authorized by law in the manner required by this article, shall be made and acknowledged by two officers of the bank, one of whom shall be the president or vice-president, and shall be submitted to the commissioner for approval. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment.
##### **§ 17:9A-117.1** Restated certificates {#sec-17-9a-117.1 omnilex-key=us-nj-statutes--title-17--17:9A-117.1}
a. A bank may restate and integrate in a single certificate the provisions of its certificate of incorporation, as defined in section 1 of P.L. 1948, c. 67 (C. 17:9A-1), including any provision effected by a merger or consolidation and any further amendments as may be adopted concurrently with the restated certificate.
b. The restated certificate shall recite that it is a restated certificate and shall contain all provisions as are required in an original certificate of incorporation filed at the time the restated certificate is filed, except that:
(1) It shall state the address of the bank's then current principal office and it shall also state the number, names and addresses of the directors constituting its then current board;
(2) It need not include statements as to the incorporator or incorporators or as to the first directors or the first principal office; and
(3) It need not include provisions relating to securities previously issued by the bank if none of the securities remain outstanding.
c. If the proposed restated certificate merely restates and integrates, but does not amend the certificate of incorporation other than as permitted by subsection b. of this section, it may be adopted by the board of directors.
d. If the proposed restated certificate restates and integrates and also amends the certificate of incorporation, other than as permitted by subsection b. of this section, the restated certificate shall be adopted in the manner provided in section 117of P.L. 1948, c. 67 (C. 17:9A-117), and all of the provisions of Article 19 of the Banking Act of 1948 applicable to amendments effected pursuant to section 117 of P.L. 1948, c. 67 (C. 17:9A-117) shall be applicable to the restated certificate of incorporation.
e. A restated certificate adopted in the manner prescribed in this section shall supersede for all purposes the original certificate of incorporation and any amendments made prior to the adoption of the restated certificate, and the restated certificate may be separately certified as the certificate of incorporation.
##### **§ 17:9A-118** Consolidation of amendments {#sec-17-9a-118 omnilex-key=us-nj-statutes--title-17--17:9A-118}
A. The board of directors may, from time to time, submit to the stockholders, and the stockholders may approve an amended certificate of incorporation, which shall integrate and consolidate in a single instrument all the provisions, then in effect, which constitute the bank's certificate of incorporation, as defined in section 1, including an amendment or amendments, if any, to the certificate of incorporation made concurrently with the adoption of the amended certificate of incorporation, and including, further, such provisions, if any, then in effect, as may be evidenced by an agreement of merger or consolidation pursuant to which the bank is operating.
B. All the provisions of this article applicable to amendments effected pursuant to section 117 shall be applicable to amended certificates of incorporation effected pursuant to this section.
##### **§ 17:9A-119** Increase in capital stock {#sec-17-9a-119 omnilex-key=us-nj-statutes--title-17--17:9A-119}
When the amendment effects an increase in the capital stock, and the amendment has been approved by the commissioner, the certificate of amendment shall not be filed in the department until proof is submitted to the commissioner, by the affidavit of 2 of the bank's officers, one of whom shall be the president or a vice-president, that the amount of the increase in capital stock has been paid to the bank in cash; except that to the extent that such increase is effected by a transfer or transfers from undivided profits or surplus to capital stock, no such proof shall be required. When shares issued pursuant to an increase in capital stock are sold by the bank at a price in excess of the par value, the affidavit filed pursuant to this section shall also present proof that the excess of issue price over par value has been paid to the bank in cash.
##### **§ 17:9A-120** Assumption of fiduciary powers {#sec-17-9a-120 omnilex-key=us-nj-statutes--title-17--17:9A-120}
When the amendment is for the purpose of authorizing a bank, not a qualified bank, to become a qualified bank, the commissioner, in determining whether he shall give his approval thereto, shall give special consideration to the following:
(1) The needs of the community for trust services, and the probable volume of trust business which will be available to the bank;
(2) the condition of the bank, particularly the adequacy of its capital and surplus in relation to the character and condition of its assets and to its deposit liabilities and other corporate responsibilities, including the proposed exercise of fiduciary powers; but no bank shall be authorized to become a qualified bank unless its capital stock amounts to at least $500,000.00;
(3) the general character and ability of the management of the bank;
(4) the nature of the supervision to be given to the proposed fiduciary activities;
(5) the qualifications, experience and character of the proposed officer or officers who will have control or supervision of the proposed fiduciary activities;
(6) whether the bank has available competent legal counsel to advise and pass upon trust matters whenever necessary; and
(7) any other matters which in the discretion of the commissioner are relevant.
##### **§ 17:9A-121** Decrease of capital stock {#sec-17-9a-121 omnilex-key=us-nj-statutes--title-17--17:9A-121}
The commissioner shall not approve an amendment effecting a decrease in the capital stock if the decrease will cause the capital stock to be less than the minimum capital stock required of banks on their organization under this act as specified in section 4; except that, in the case of banks organized prior to the effective date of this act, the commissioner may approve decreases in capital stock if he shall determine that such decreases are necessary for the continuance of an established banking business, and that the continuance of such business is in the public interest, and that,
(1) if the bank is a qualified bank, the decrease will not reduce the capital stock to an amount less than $500,000.00; or
(2) if the bank is not a qualified bank, the decrease will not reduce the capital stock to an amount less than $100,000.00; but nothing in this section shall prevent a reduction in capital stock on retirement of preferred stock pursuant to any law in effect when the preferred stock was issued.
##### **§ 17:9A-122** Limitations {#sec-17-9a-122 omnilex-key=us-nj-statutes--title-17--17:9A-122}
An amendment, to the extent that it alters an existing provision of the certificate of incorporation or adds a provision not theretofore included in the certificate of incorporation, shall contain only such provision as it would be lawful and proper to insert in an original certificate of incorporation made at the time of the filing of such amendment; except that, when the amendment is made to increase the capital stock of a bank created prior to the effective date of this act, such amendment may be made notwithstanding that the amount of such capital stock as increased will be less than the amount required on original incorporation of a bank as specified in section 4.
##### **§ 17:9A-123** Certificate as evidence {#sec-17-9a-123 omnilex-key=us-nj-statutes--title-17--17:9A-123}
The certificate of amendment and the amended certificate or a copy thereof duly certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:9A-124** Issuance {#sec-17-9a-124 omnilex-key=us-nj-statutes--title-17--17:9A-124}
A bank may issue preferred stock
(1) Upon its organization as a successor bank pursuant to section 16; or
(2) Upon its reorganization pursuant to Article 24; or
(3) Upon amending its certificate of incorporation as provided by Article 19, upon the vote of the holders of at least two-thirds of the shares of each class of stock issued by the bank; or
(4) As an incident of a merger when it is a receiving bank as defined in section 132 (C. 17:9A-132).
##### **§ 17:9A-125** Certificates of incorporation and of amendment and merger agreements; provisions {#sec-17-9a-125 omnilex-key=us-nj-statutes--title-17--17:9A-125}
A. The certificate of incorporation of every bank hereafter authorized to issue preferred stock upon its organization pursuant to section 16, and the certificate of amendment to the certificate of incorporation of every other bank hereafter issuing preferred stock, and every merger agreement hereafter effected which provides for the issuance of preferred stock shall state:
(1) The number of classes of preferred stock to be issued, and the number of shares in each class;
(2) The par value of the shares of each class of preferred stock;
(3) The issue price of each share of preferred stock, except that, when preferred stock is issued in exchange for the capital stock of a merging bank pursuant to Article 21, the issue price shall be the par value of such preferred stock;
(4) When the issue price exceeds the par value, the use to which the excess over the par value is to be put;
(5) The priorities, preferences, and rights of each class of preferred stock;
(6) If the preferred stock is to be subject to retirement, the retirement price of each share thereof;
(7) If the preferred stock is to be subject to conversion into common stock, the terms and conditions upon which such conversion shall be effected;
(8) The rate of dividend to be paid on the preferred stock, and whether such rate is to be based upon the par value or the issue price of the stock;
(9) If a sinking fund is to be established for the retirement of preferred stock, the terms and conditions governing the establishment and maintenance of such fund;
(10) The amount which shall be paid upon each such share of preferred stock upon the dissolution of the bank.
B. In addition to the matters required by subsection A of this section, the original or amended certificate of incorporation and the merger agreement pursuant to which preferred stock is issued may contain such other provisions as may be necessary or convenient, including, by way of description and not by way of limitation,
(1) A provision that, upon a meeting called to approve the voluntary dissolution of the bank, the holders of preferred stock may have two votes for each share of stock;
(2) A provision for the increase of the common stock, without further act of the stockholders, upon the conversion of preferred stock into common stock;
(3) A provision that, upon the issuance of preferred stock, or upon the issuance of common stock to effect a conversion of preferred stock, such stock may be issued without an offer thereof to existing stockholders.
##### **§ 17:9A-126** Priorities; preferences; rights; limitations {#sec-17-9a-126 omnilex-key=us-nj-statutes--title-17--17:9A-126}
Every issue of preferred stock shall be subject to the following:
(1) The issue price for each share shall be not less than the par value, and shall be the same for all shares included within a single class;
(2) So long as a bank is not in default in the payment of dividends on preferred stock, or in meeting any requirements specified in its certificate of incorporation or in a merger agreement providing for the issuance of preferred stock for the maintenance of a sinking fund for the retirement of preferred stock, the holders of preferred stock shall have no greater voting rights than the holders of common stock; but, if so provided in the certificate of incorporation or merger agreement, the holders of preferred stock of any class or classes shall, upon either such default, have two votes for each share of such stock so held;
(3) The retirement price, if any, of each share of preferred stock shall be not less than its par value or greater than its issue price, plus any accrued dividends thereon;
(4) No more than the par value of shares of preferred stock shall be charged against the capital stock of a bank upon retirement of such stock;
(5) No preferred stock shall be retired if the effect of such retirement would be to reduce the capital stock of the bank below the minimum specified in section 121;
(6) The valuation placed upon preferred stock for the purpose of its conversion into common stock shall be not less than its par value nor greater than the price approved by the commissioner on the issue of such preferred stock, plus any accrued dividends thereon. The valuation placed upon common stock issued on the conversion of preferred stock shall be not less than par value of such common stock;
(7) The dividend rate shall not exceed 6% per annum of the par value of such stock or of the issue price thereof, if the issue price is greater; except that the commissioner may approve a rate in excess of 6% per annum if, upon application, the commissioner deems a higher rate is appropriate after giving consideration to the bank's capital surplus, and earnings.
##### **§ 17:9A-127** Dividends {#sec-17-9a-127 omnilex-key=us-nj-statutes--title-17--17:9A-127}
No dividend shall be declared or paid on common stock until all accrued dividends shall have been paid on preferred stock, or until funds shall have been set aside for such payment; nor shall any dividends be paid on common stock until the provisions, if any, of the certificate of incorporation or merger agreement governing the establishment and maintenance of a sinking fund for the retirement of preferred stock, shall have been satisfied.
##### **§ 17:9A-128** Priority on dissolution {#sec-17-9a-128 omnilex-key=us-nj-statutes--title-17--17:9A-128}
Upon a bank's dissolution in any manner, the holders of preferred stock shall be entitled to receive in full the amount specified in the certificate of incorporation or merger agreement providing for the issuance of preferred stock, before any distribution is made to the holders of common stock.
##### **§ 17:9A-129** Consideration for preferred stock {#sec-17-9a-129 omnilex-key=us-nj-statutes--title-17--17:9A-129}
Except to the extent otherwise expressly provided in this act, no bank shall issue its preferred stock for any consideration other than money.
##### **§ 17:9A-130** Retirement or conversion {#sec-17-9a-130 omnilex-key=us-nj-statutes--title-17--17:9A-130}
Upon the retirement or conversion of preferred stock, a certificate thereof, in such form as the commissioner shall approve, shall be made by any two officers of the bank, and shall be filed in the department within ten days after such retirement or conversion.
##### **§ 17:9A-131** Application of article; limitation {#sec-17-9a-131 omnilex-key=us-nj-statutes--title-17--17:9A-131}
Preferred stock issued prior to the effective date of this act shall be subject to this article, except insofar as the provisions of this article would impair any right vested under the law pursuant to which such stock was issued.
##### **§ 17:9A-131.1** Borrowing money to retire preferred stock {#sec-17-9a-131.1 omnilex-key=us-nj-statutes--title-17--17:9A-131.1}
A bank, as defined in section 1 of the act to which this act is a supplement, may, with the approval of the Commissioner of Banking and Insurance, borrow money for the purpose of retiring all or part of any class or classes of preferred stock issued by it prior to September 16, 1948. The commissioner shall not approve any loan for the purposes of this act unless he shall be satisfied that the funds required for the retirement of preferred stock cannot be obtained by the issuance of preferred stock or common stock without undue hardship, cost or disadvantage to the bank or its stockholders. Any loan or loans made pursuant to this act shall be evidenced by debentures or capital notes which shall have such maturities, and, shall contain such terms, covenants and conditions as the Commissioner of Banking and Insurance may approve, within the provisions of this act.
##### **§ 17:9A-131.2** Debentures or capital notes {#sec-17-9a-131.2 omnilex-key=us-nj-statutes--title-17--17:9A-131.2}
A. Debentures or capital notes issued pursuant to this act
(a) shall be unsecured; and
(b) shall provide that the indebtedness evidenced thereby shall be subordinate to the claims of depositors and all other creditors of the bank, regardless whether the claims of such depositors or other creditors arose before or after the issuance of such debentures or capital notes; and
(c) shall not confer any voting rights upon the holders thereof under any circumstances; and
(d) shall not be convertible into capital stock.
B. Debentures or capital notes issued pursuant to this act, and debentures or capital notes issued prior to the effective date of this act for the purpose of retiring all or part of any class or classes of preferred stock issued prior to September 16, 1948, shall be treated as capital stock for the purposes of sections 24, 51, 52, 62, 69, 72 and 211 of The Banking Act of 1948 (P.L.1948, c. 67).
##### **§ 17:9A-131.3** Borrowing to be pursuant to act only {#sec-17-9a-131.3 omnilex-key=us-nj-statutes--title-17--17:9A-131.3}
No bank shall borrow money for the purpose of retiring preferred stock except pursuant to this act.
##### **§ 17:9A-131.20** Definitions. {#sec-17-9a-131.20 omnilex-key=us-nj-statutes--title-17--17:9A-131.20}
1. As used herein, (a) "capital notes" means notes, debentures and other like writings having maturities of more than one year, issued by a bank pursuant to P.L.1966, c.272 (C.17:9A-131.20 et seq.) and included in the bank's capital funds pursuant to section 10 of P.L.1966, c.272 (C.17:9A-131.29) to evidence its obligation to repay money borrowed by it; (b) "Commissioner" means the Commissioner of Banking and Insurance; (c) "bank" means those corporations defined as banks in section 1 of the act to which this act is a supplement and does not include savings banks; and (d) "capital funds" means the aggregate of the unimpaired capital stock, surplus, undivided profits and contingent reserves of a bank.
##### **§ 17:9A-131.21** Issuance of convertible or nonconvertible capital notes by banks {#sec-17-9a-131.21 omnilex-key=us-nj-statutes--title-17--17:9A-131.21}
A bank may, from time to time, issue convertible or nonconvertible capital notes, or both, in series or otherwise.
##### **§ 17:9A-131.22** Capital notes issued for cash; limitation on conversion of convertible capital notes {#sec-17-9a-131.22 omnilex-key=us-nj-statutes--title-17--17:9A-131.22}
Capital notes may be issued only for cash. Convertible capital notes issued by a bank may be converted only into common stock of the issuing bank or of a company as such term is defined in P.L.1957, c. 70, s. 1 (C. 17:9A-344), as amended, owning more than 25% of the capital stock of such bank.
##### **§ 17:9A-131.23** Unsecured indebtedness; claims subordinate to depositors and creditors; liquidation {#sec-17-9a-131.23 omnilex-key=us-nj-statutes--title-17--17:9A-131.23}
The indebtedness evidenced by capital notes shall be unsecured and shall be subordinate to the claims of depositors and other creditors of the bank, regardless whether such claims predate or postdate the issuance of such notes. Upon the liquidation of the bank, depositors and other creditors shall be entitled to payment in full before any payment on account of principal or interest is made on such capital notes.
##### **§ 17:9A-131.24** Nonconvertible capital notes; issuance pursuant to resolution {#sec-17-9a-131.24 omnilex-key=us-nj-statutes--title-17--17:9A-131.24}
Nonconvertible capital notes may be issued pursuant to a resolution of a bank's board of directors without action by the bank's stockholders.
##### **§ 17:9A-131.25** Convertible capital notes; issuance pursuant to amendment of certificate of incorporation of issuing bank {#sec-17-9a-131.25 omnilex-key=us-nj-statutes--title-17--17:9A-131.25}
Convertible capital notes may not be issued except pursuant to an amendment of the issuing bank's certificate of incorporation made as provided in article 19 of the act to which this act is a supplement. Such amendment shall also make provision for authorized but unissued shares of the bank's capital stock in an aggregate par value sufficient to effect the conversion of such capital notes into shares of capital stock according to the provisions of such capital notes.
##### **§ 17:9A-131.26** Sale of convertible capital notes {#sec-17-9a-131.26 omnilex-key=us-nj-statutes--title-17--17:9A-131.26}
No bank shall issue its convertible capital notes to others than the holders of its common stock until after it has offered such notes to such holders for purchase by each of them in an amount sufficient to give effect to such stockholder's right to participate ratably in an increase in the bank's common stock as provided by section 99 of the act to which this act is a supplement. Capital notes not purchased by stockholders in the exercise of the right conferred by this section may be sold by the bank to such persons, who may but need not be stockholders, as shall be determined by the board of directors, at a price not less than that paid by stockholders of the bank in the exercise of their rights under this section.
##### **§ 17:9A-131.27** Certificate stating amount of capital notes converted; filing {#sec-17-9a-131.27 omnilex-key=us-nj-statutes--title-17--17:9A-131.27}
Within 90 days after any capital notes are converted, a certificate made by 2 officers of the bank which issued such capital notes, one of whom shall be the president or a vice president, shall be filed in the Department of Banking and Insurance, stating the amount of the capital notes so converted, and the number and the par value of the shares into which they were converted.
##### **§ 17:9A-131.28** Approval of issuance of capital notes by commissioner {#sec-17-9a-131.28 omnilex-key=us-nj-statutes--title-17--17:9A-131.28}
No capital notes shall be issued unless they and any agreement to which they are subject are approved by the commissioner. Such capital notes and such agreements may contain such provisions, not inconsistent with the provisions of this act, as are customarily made in connection with similar evidences of indebtedness issued by corporations other than banks, including, but not limited to, provisions respecting maturities, interest rates, conversion ratios, rates of amortization of principal, prepayment privileges, reserves, sinking funds, and the like, except that no capital notes shall be issued which provide for conversion at a rate per share less than the par value of the shares issued on such conversion. Unless special cause is shown to the satisfaction of the commissioner, (a) no capital note shall be issued by a bank at a time when the principal amount owing on all outstanding capital notes of the bank exceeds 50% of the bank's capital funds, or if such issue would cause such amount to exceed 50% of the bank's capital funds; and (b) no payment shall be made on account of the principal of any such note otherwise than as provided in such note or in any agreement to which such note is subject; and (c) no capital notes shall mature in more than 25 years from their dates. The commissioner may withhold his approval of any capital notes containing provisions which, in his opinion, are prejudicial to the interests of the bank's depositors or other creditors, or are inconsistent with sound financing or with the maintenance by the bank of a sound capital structure.
##### **§ 17:9A-131.29** Inclusion of amount owing on capital notes in bank's capital funds {#sec-17-9a-131.29 omnilex-key=us-nj-statutes--title-17--17:9A-131.29}
The principal amount owing on all capital notes of a bank at any time outstanding, whether issued by the bank pursuant to this act, or issued as capital notes or debentures before the effective date of this act with the approval of the commissioner, or issued as an incident of a merger effected pursuant to article 21 (C. 17:9A-132 to 17:9A-148) of The Banking Act of 1948, P.L.1948, c. 67, shall be included with the amount of the bank's capital funds for the purpose of determining the limitations on liability to a bank pursuant to article 13 of the act to which this act is a supplement.
##### **§ 17:9A-131.30** Issuance of capital notes, debentures. {#sec-17-9a-131.30 omnilex-key=us-nj-statutes--title-17--17:9A-131.30}
11. No bank shall hereafter issue capital notes or debentures except pursuant to P.L.1966, c.272 (C.17:9A-131.20 et seq.), provided, however, that P.L.1966, c.272 (C.17:9A-131.20 et seq.) shall not affect the authority of a bank to issue debt, including notes or debentures, under subsection (3) of section 24 of P.L.1948, c.67 (C.17:9A-24) which debt shall not be included in the bank's capital funds pursuant to section 10 of P.L.1966, c.272 (C.17:9A-131.29).
##### **§ 17:9A-131.31** Application of act {#sec-17-9a-131.31 omnilex-key=us-nj-statutes--title-17--17:9A-131.31}
This act shall not apply to any borrowing by a bank, however evidenced, which is payable in 1 year or less from the date of such borrowing nor shall the provisions of sections 4, 9 and 10 of this act apply to any obligation issued by a bank to evidence a loan or loans made to such bank by the New Jersey Mortgage Finance Agency pursuant to the New Jersey Mortgage Finance Agency Law, P.L.1970, c. 38, nor shall the following sections of this act apply to capital notes issued as an incident of a merger effected pursuant to article 21 (C. 17:9A-132 to 17:9A-148) of The Banking Act of 1948, P.L.1948, c. 67:
a. Section 1 (C. 17:9A-131.20), insofar as it provides that capital notes may be issued only to evidence obligations to repay money borrowed by a bank;
b. Section 3 (C. 17:9A-131.32), insofar as it provides that capital notes may be issued only for cash, and insofar as it provides that such notes may be converted only into common stock;
c. Section 6 (C. 17:9A-131.25);
d. Section 7 (C. 17:9A-131.26); and
e. Section 11 (C. 17:9A-131.30).
##### **§ 17:9A-131.32** Review {#sec-17-9a-131.32 omnilex-key=us-nj-statutes--title-17--17:9A-131.32}
A determination made by the commissioner pursuant to this act shall be subject to review, hearing and relief in the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-131.33** Repeal in part {#sec-17-9a-131.33 omnilex-key=us-nj-statutes--title-17--17:9A-131.33}
P.L.1953, chapter 215, is hereby repealed, insofar as it provides for the original issuance of capital notes or debentures after the effective date of this act.
##### **§ 17:9A-132** Definitions {#sec-17-9a-132 omnilex-key=us-nj-statutes--title-17--17:9A-132}
As used in this article:
(1) "Merging bank" means a bank which is merged, or which is in process of being merged, into another bank; and, in a case where a national banking association is merged into or consolidated with, or is in process of being merged into or consolidated with, a bank under the charter of such bank, "merging bank" also means such national banking association;
(2) "Receiving bank" means a bank into which one or more other banks are merged, or are in process of being merged; and, in a case where a national banking association is merged into or consolidated with, or is in process of being merged into or consolidated with, a bank under the charter of such bank, "receiving bank" also means the bank into which such national banking association is merged or consolidated, or is in process of being merged or consolidated;
(3) "Company" as used in sections 133 and 134 (C. 17:9A-133 and 17:9A-134) means a corporation, joint stock company, business trust, general or limited partnership, voting trust and any similar organized group of persons whether incorporated or not, owning more than 25% of the capital stock of a receiving bank after a merger is effected.
##### **§ 17:9A-133** What banks may merge; means of effectuation of merger {#sec-17-9a-133 omnilex-key=us-nj-statutes--title-17--17:9A-133}
A. Any two or more banks may, with the approval of the commissioner, merge one or more of them into another of them as provided in this article.
B. A merger may be effected by any one or by any combination of any two or more or all of the following methods:
(1) By the exchange of shares of capital stock of each merging bank for the shares of capital stock of the receiving bank;
(2) By the exchange of shares of capital stock of each merging bank for the shares of capital stock of a company as such term is defined in paragraph (3) of section 132 (C. 17:9A-132);
(3) By the exchange of shares of capital stock of each merging bank for capital notes of the receiving bank;
(4) By the exchange of shares of capital stock of each merging bank for cash received from the receiving bank or from a company as such term is defined in paragraph (3) of section 132 (C. 17:9A-132);
(5) By the exchange of shares of capital stock of each merging bank for capital notes of a company as such term is defined in paragraph (3) of section 132 (C. 17:9A-132).
##### **§ 17:9A-133.1** Interstate merger transactions {#sec-17-9a-133.1 omnilex-key=us-nj-statutes--title-17--17:9A-133.1}
16. a. One or more banks or savings banks may, with the approval of the commissioner, enter into an interstate merger transaction with an out-of-State bank or banks pursuant to section 11 of P.L.1982, c.9 (C.17:9A-8.11), article 21 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-132 et seq.) or article 31 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-199 et seq.), as applicable.
b. Except as otherwise expressly provided in this subsection b., an interstate merger transaction shall not be permitted if, upon consummation of the transaction, the resulting state or federally chartered bank or savings bank, including all federally insured depository institutions that would be affiliates as defined in subsection (k) of section (2) of the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1841(k), would control 30 percent or more of the total amount of deposits held by insured depository institutions in this State. The commissioner may by regulation adopt a procedure whereby the foregoing limitation on control of deposits may be waived for good cause.
c. The commissioner shall not permit before June 1, 1997, an interstate merger transaction involving one or more banks or savings banks and an out-of-State bank or banks unless the home state of each bank involved in the transaction has in effect, as of the date of the approval of such transaction, a law that applies equally to all out-of-state banks and expressly permits interstate merger transactions with all out-of-state banks.
d. The commissioner shall not permit on or after June 1, 1997, an interstate merger transaction involving one or more banks or savings banks and an out-of-State bank or banks if the home state of any bank or savings bank involved in the merger transaction has enacted a law after September 29, 1994, and before June 1, 1997, that applies equally to all out-of-State banks and expressly prohibits merger transactions involving out-of-State banks.
e. An out-of-State bank may, with the approval of the commissioner, acquire a branch office of a bank, out-of-State bank, national bank or savings bank, and the branch shall be treated, for purposes of this section, as a bank or savings bank, as appropriate.
f. A bank or savings bank may, with the approval of the commissioner, acquire an out-of-State branch office of a bank, savings bank or an out-of-State bank, and the branch shall be treated, for purposes of this section, as an out-of-State bank.
g. Any out-of-State bank which shall be the resulting bank in an interstate merger transaction shall file with the commissioner in a manner consistent with regulations promulgated by the commissioner for this purpose.
##### **§ 17:9A-134** Merger agreement; authorization; contents {#sec-17-9a-134 omnilex-key=us-nj-statutes--title-17--17:9A-134}
A. The boards of directors of the several banks proposing to merge shall authorize the execution of a merger agreement which shall contain;
(1) The name of each merging bank and the location of the principal office and branch offices of each merging bank;
(2) The name of the receiving bank and the location of its principal office and branch offices;
(3) The name by which the receiving bank will be known after the merger is effected;
(4) The names of the persons who will be the directors of the receiving bank;
(5) The names of the persons who will be officers of the receiving bank;
(6) The location then occupied by the principal office or a branch office of a merging bank or the receiving bank at which the principal office of the receiving bank will be maintained;
(7) The locations then occupied by the principal offices and branch offices of the merging banks and the receiving bank which will be continued as branch offices of the receiving bank;
(8) The effective date of the merger;
(9) The amount of the capital stock, the number of shares into which it will be divided, the par value of each share, and the amount of the surplus which the receiving bank will have after the merger is effected;
(10) The basis upon which shares of each merging bank will be exchanged for shares of capital stock of the receiving bank, or for shares of capital stock of a company as such term is defined in paragraph (3) of section 132 (C. 17:9A-132), or for capital notes, or for cash, or for any one or more or all of the foregoing, as the case may be;
(11) A provision stating whether the capital notes to be issued pursuant to such agreement shall be convertible into shares of capital stock of the receiving bank, and, if so, shall contain a further provision for authorized but unissued shares of capital stock of the receiving bank in an aggregate par value sufficient to effect the conversion of such notes into such shares of capital stock of the receiving bank;
(12) If the merger agreement provides for the issuance of preferred stock, the provisions stated in subsection B of section 125 (C. 17:9A-125);
(13) Such other provisions, including the provisions stated in subsection B of section 125 (C. 17:9A-125), not inconsistent with the provisions of this act, as may be necessary or appropriate to effect the merger.
B. Capital notes issued pursuant to this section shall conform with and be subject to sections 4, 8, 9 and 10 of P.L.1966, chapter 272, (C. 17:9A-131.23, 17:9A-131.27, 17:9A-131.28, and 17:9A-131.29).
##### **§ 17:9A-135** Capital requirements {#sec-17-9a-135 omnilex-key=us-nj-statutes--title-17--17:9A-135}
A. When all the parties to a merger were organized prior to the effective date of this act, the capital stock of the receiving bank after merger shall be not less than an amount equal to the sum of the following: one hundred thousand dollars for each qualified bank which is a party to the merger, and fifty thousand dollars for each bank not a qualified bank, which is a party to the merger.
B. When any party to a merger shall have been organized after the effective date of this act, the capital stock and surplus of the receiving bank after merger shall at least equal the sum of the following:
(1) the minimum capital stock and surplus required of a bank on its establishment at the location to be occupied by the principal office of the receiving bank after the effective date of the merger, as such minimum is specified in section 4, and
(2) an amount equal to such minimum capital stock and surplus so specified in section 4, for each branch office to be maintained by the receiving bank after the effective date of the merger.
##### **§ 17:9A-136** Approval of agreement by commissioner; review {#sec-17-9a-136 omnilex-key=us-nj-statutes--title-17--17:9A-136}
A. The merger agreement, executed by all the parties thereto, shall be submitted to the commissioner who shall, within sixty days from the date of such submission, endorse thereon his approval or disapproval. If the commissioner shall disapprove the agreement, he shall forthwith file a memorandum in the department stating the reasons for his disapproval, and shall mail a copy of the memorandum to each of the banks which is a party to the merger agreement. The commissioner shall not withhold his approval unless he shall find that the merger agreement contains provisions which do not conform to this act, or that the merger will not be in the public interest.
B. The commissioner's disapproval of a merger agreement, as provided in subsection A of this section, shall be subject to review, hearing and relief in the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-137** Submission of agreement to stockholders; filing {#sec-17-9a-137 omnilex-key=us-nj-statutes--title-17--17:9A-137}
A. If the commissioner approves the merger agreement, it shall, within 180 days after the date of such approval, be submitted to the stockholders of each of the banks which are parties to the agreement, at separate meetings called for that purpose upon at least 20 days' notice given in the manner specified in section 81. A copy of the merger agreement shall be mailed to each stockholder of each of the banks which are parties to the agreement with the notice of the stockholders' meetings.
B. If the agreement is approved by the stockholders of each bank holding at least 2/3 of the capital stock entitled to vote, that fact shall be certified as to each bank by its president or a vice-president and the certifications shall be attached to the agreement. The agreement shall then be filed in the department, and thereupon it shall become effective.
##### **§ 17:9A-138** Merger agreement as evidence {#sec-17-9a-138 omnilex-key=us-nj-statutes--title-17--17:9A-138}
A. A copy of the merger agreement, certified by the commissioner, shall be evidence in all courts and places.
B. A copy of the merger agreement, certified by the commissioner, may be recorded in the office of the county recording officer charged with the duty of recording instruments affecting title to real property in such county, and such record shall have the same effect as if duly executed and acknowledged deeds to real property and assignments of mortgages affecting real or personal property owned by the merging banks had been made and delivered by the merging banks to the receiving bank, and had been duly recorded.
##### **§ 17:9A-139** Corporate existence; offices; rights and obligations {#sec-17-9a-139 omnilex-key=us-nj-statutes--title-17--17:9A-139}
Upon the merger of 2 or more banks,
(1) the corporate existence of each merging bank shall be merged into that of the receiving bank, and the property and rights of each merging bank shall thereupon vest in the receiving bank without further act or deed;
(2) the receiving bank may, without complying with the requirements of subsection C of section 19, or the requirements of section 20, establish and maintain its principal office and branch offices at the locations specified in the merger agreement;
(3) the rights and obligations of each merging bank shall become the rights and obligations of the receiving bank;
(4) if the receiving bank is a qualified bank, all fiduciary and agency duties and relationships of each merging bank shall vest in the receiving bank and be performed by it in the same manner as though the receiving bank itself originally assumed such fiduciary and agency duties and relationships;
(5) any pending action by or against a merging or receiving bank shall survive the merger and the receiving bank shall be substituted for the merging bank;
(6) the directors named in the agreement of merger shall be the directors of the receiving bank, to serve until the time when a majority of the directors elected at the annual meeting following the effective date of the merger, shall have qualified.
##### **§ 17:9A-140** Rights of dissenting stockholders; settlement by agreement {#sec-17-9a-140 omnilex-key=us-nj-statutes--title-17--17:9A-140}
A. A stockholder who
(1) is entitled to vote at the meeting of stockholders prescribed by section 137; and who
(2) serves a written notice of dissent from the merger agreement, in the manner, at the place, and within the time prescribed in subsections B and C of this section; and who
(3) does not vote to approve the merger agreement at the meeting prescribed by section 137, or at any adjournment thereof,
may, within thirty days after the filing of the agreement in the department as provided by section 137, serve a demand upon the receiving bank at its principal office, for the payment to him of the value of his shares of stock. The receiving bank may, within ten days after the receipt of such demand, offer to pay the stockholder a sum for his shares, which, in the opinion of the board of directors of the receiving bank, does not exceed the amount which would be paid upon such shares if the business and assets of the bank whose stock such stockholder holds were liquidated on the day of the filing of the agreement pursuant to section 137.
B. Service of the notice of dissent prescribed by paragraph (2) of subsection A of this section shall be made at the principal office of the bank whose stock is held by the dissenting stockholder, and shall be made not later than the third day prior to the day fixed for the meeting of the stockholders of such bank pursuant to section 137.
C. Service of the notice of dissent and of the demand for payment prescribed by this section may be made by registered mail or personally by the dissenting stockholder or his agent.
##### **§ 17:9A-141** Appointment of appraisers {#sec-17-9a-141 omnilex-key=us-nj-statutes--title-17--17:9A-141}
If a stockholder fails to accept the sum offered for his shares pursuant to section one hundred forty, he may, within three weeks after the receipt by him of the bank's offer of payment, or, if no offer is made by the bank, within three weeks after the date upon which his demand was served upon the bank as specified in section one hundred forty, institute an action in the Superior Court for the appointment of a board of three appraisers to determine the value of his shares of stock as of the day of the filing of the merger agreement pursuant to section one hundred thirty-seven. The court may proceed in the action in a summary manner or otherwise. Any other stockholder who has the right to institute a similar action may intervene. The court shall, in respect to any one bank, appoint a single board of three appraisers to determine the value of the shares of all stockholders of such bank who are parties to such action.
##### **§ 17:9A-142** Duties of appraisers; report; objections; compensation; vacancies {#sec-17-9a-142 omnilex-key=us-nj-statutes--title-17--17:9A-142}
A. The appraisers shall be sworn to the faithful discharge of their duties. They shall meet at such place or places, and shall give such notice of their meetings as the court may prescribe. The bank and each stockholder who is a party to the action instituted pursuant to section one hundred forty-one, may be represented by attorneys in the proceedings before such appraisers, and may present such evidence to them as shall be material to the issue. The determination of any two of the appraisers shall control. Upon the conclusion of their deliberations, the appraisers shall file in the Superior Court a report and appraisal of the value of the shares of stock, and shall mail a copy thereof to the bank and to each stockholder who is a party to said action.
B. The bank and each stockholder who is a party to said action shall have ten days after the filing of the report and appraisal within which to object thereto in the Superior Court. In the absence of any objections, the report and appraisal shall be binding upon the bank and upon such stockholders, and the bank shall pay each such stockholder the value of his shares, as reported by the appraisers, with interest from the date of the filing of the merger agreement pursuant to section one hundred thirty-seven, at such rate, not in excess of the legal rate, as shall be fixed by the appraisers. If objections are made, the court shall make such order or judgment thereon as shall be just.
C. The Superior Court shall fix the compensation of the appraisers, which shall be paid by the bank, and shall be vested with full jurisdiction over all matters arising out of an action instituted pursuant to section one hundred forty-one. In the case of a vacancy in the board of appraisers, the Superior Court shall, on its own motion, or upon motion of a stockholder, or of the receiving bank, fill such vacancy.
##### **§ 17:9A-143** Assignment of stock to bank {#sec-17-9a-143 omnilex-key=us-nj-statutes--title-17--17:9A-143}
Upon payment by the bank of the value of shares of stock pursuant to this article, the holder thereof shall assign such shares to the bank.
##### **§ 17:9A-144** Effect of stockholder's failure to act {#sec-17-9a-144 omnilex-key=us-nj-statutes--title-17--17:9A-144}
A stockholder who fails to act pursuant to sections 140 or 141 shall be forever barred from bringing any action to enforce his right to be paid the value of his shares in lieu of continuing his status as a stockholder in the receiving bank.
##### **§ 17:9A-145** Obligation of bank to pay stockholder {#sec-17-9a-145 omnilex-key=us-nj-statutes--title-17--17:9A-145}
An offer by the bank and an acceptance thereof by the stockholder pursuant to section 140 and the determination of value upon proceedings brought pursuant to sections 141 and 142 shall constitute a debt of the receiving bank for the recovery of which an action will lie.
##### **§ 17:9A-146** Action to enjoin merger {#sec-17-9a-146 omnilex-key=us-nj-statutes--title-17--17:9A-146}
A. A stockholder may, not later than five days prior to the date of the meeting called pursuant to section one hundred thirty-seven institute an action in the Superior Court to enjoin the merger on the ground that the agreement is unfair or inequitable, or contrary to law. The court may proceed in the action in a summary manner or otherwise.
B. A stockholder who fails to institute an action as specified in subsection A of this section shall thereafter be forever barred from bringing any action to enjoin, set aside, or otherwise affect such merger.
##### **§ 17:9A-147** Issuance of new stock certificates {#sec-17-9a-147 omnilex-key=us-nj-statutes--title-17--17:9A-147}
A. The receiving bank shall require each stockholder of each merging bank to surrender his certificates of capital stock of each such bank, and shall, upon such surrender, issue or deliver in lieu thereof, certificates for such number of its own shares of capital stock and such number of shares of capital stock of a company, as such term is defined in paragraph (3) of section 132 (C. 17:9A-132), and such amount of capital notes or cash, as such stockholder is entitled to receive pursuant to the terms of the merger agreement.
B. The increase in a receiving bank's capital stock resulting from the issuance of its shares of capital stock in exchange for the shares of capital stock of each merging bank, or in exchange for convertible capital notes converted into shares of capital stock pursuant to the merger agreement shall not entitle the stockholders of the receiving bank to acquire additional shares of capital stock.
##### **§ 17:9A-148** "Applicable federal law" defined; merger, consolidation of banks, national banking associations {#sec-17-9a-148 omnilex-key=us-nj-statutes--title-17--17:9A-148}
148. A. As used in subsection B. of this section, "applicable federal law" means the laws of the United States, as presently enacted and as hereafter from time to time supplemented or amended, governing the merger or consolidation of a bank organized under State laws into a national banking association, under the charter of such association; and, as used in subsection C. of this section, "applicable federal law" means the laws of the United States, as presently enacted and as hereafter from time to time supplemented or amended, governing the merger or consolidation of a national banking association into a bank organized under State laws, under the charter of such bank.
B. One or more banks may, without the approval of the commissioner or of any other officer, department, board or agency of this State, merge into or consolidate with a national banking association under the charter of such association, with the approval of the holders of at least 2/3 of the capital stock of each such bank entitled to vote. A majority of the directors of each such bank shall, within 10 days after such approval has been given, file in the department a certificate over their signatures that such approval has been given, and that the bank intends to act in pursuance thereof. Except as otherwise provided in subsection D. of this section, a merger or consolidation authorized by this subsection shall be effected solely in the manner and with the effect provided by applicable federal law, and no such merger or consolidation shall be subject to sections 132 through 147 of P.L.1948, c.67 (C.17:9A-132 through 17:9A-147) or to any other law of this State; but a copy of the agreement or merger or consolidation certified by the comptroller of the currency shall be evidence, and may be recorded, as provided by section 138 of P.L.1948, c.67 (C.17:9A-138). Upon the taking effect of the merger or consolidation, the bank shall be deemed to have surrendered its charter.
C. One or more national banking associations, or one or more national banking associations together with one or more banks may, with the approval of the commissioner as provided by section 136 of P.L.1948, c.67 (C.17:9A-136), merge into a bank, or may consolidate with a bank under the charter of such bank. Each bank which is a party to such a merger or consolidation as a merging bank or as the receiving bank shall, in all respects, comply with and be subject to the provisions of sections 134 through 147 of P.L.1948, c.67 (C.17:9A-134 through 17:9A-147), in the same manner and with the same effect as if all the parties to such merger or consolidation were banks; the rights, duties, obligations, powers and privileges of each such bank, whether such bank is a merging bank or the receiving bank, and of its or their depositors, other creditors, stockholders and all other persons in interest, shall be as prescribed and defined by sections 134 through 137 of P.L.1948, c.67 (C.17:9A-134 through 17:9A-137); and except as in this subsection otherwise provided in respect to national banking associations, every provision contained in sections 134 through 137 of P.L.1948, c.67 (C.17:9A-134 through 17:9A-137) shall be applicable to a merger or consolidation effected pursuant to this subsection, notwithstanding that a national banking association is a party to such a merger or consolidation. Each national banking association which is a party to a merger or consolidation authorized by this subsection shall comply with and be subject to the provisions of applicable federal law, and the rights, duties, obligations, powers and privileges of such national banking association, and of its depositors, other creditors, stockholders and all other persons in interest, shall be as prescribed and defined by such applicable federal law.
D. National banking associations may, under the laws of the United States, merge into or consolidate with a bank organized under State laws, without approval by any United States authority other than an authority empowered by United States law to approve or disapprove of a merger between, or a consolidation of, State-chartered banks.
E. Except as otherwise expressly provided in this subsection E., an interstate merger transaction shall not be permitted if, upon consummation of the transaction, the resulting state or federally chartered bank or savings bank, including all federally insured depository institutions that would be affiliates as defined in subsection (k) of section (2) of the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1841(k), would control 30 percent or more of the total amount of deposits held by insured depository institutions in this State. The commissioner may by regulation adopt a procedure whereby the foregoing limitation on control of deposits may be waived for good cause.
F. Before June 1, 1997, a merger involving a bank and a national banking association without a branch office in New Jersey shall not be permitted unless the home state of each institution involved in the transaction has in effect, as of the date of the approval of that transaction, a law that applies equally to all out-of-state banks and expressly permits interstate merger transactions with all out-of-state banks. On or after June 1, 1997, a merger involving a bank and a national banking association without a branch office in New Jersey, shall not be permitted if the home state of any institution involved in the transaction has enacted a law after September 29, 1994 and before June 1, 1997, that applies equally to all out-of-State banks and expressly prohibits merger transactions involving out-of-State banks.
G. A national banking association without a principal or branch office in New Jersey may acquire a branch office of a bank, and the branch shall be treated, for the purposes of this section, as a bank. A bank may acquire an out-of-State branch office of a national banking association, and the branch shall be treated, for purposes of this section, as a national banking association.
##### **§ 17:9A-149** Prerequisites to conversion; definition of "applicable Federal law" {#sec-17-9a-149 omnilex-key=us-nj-statutes--title-17--17:9A-149}
A. As used in this article, "applicable Federal law" means the laws of the United States, as presently enacted and as hereafter from time to time supplemented or amended, governing the conversion of a national banking association into a bank organized under State laws.
B. A national banking association which has its principal office in this State may become a bank in the manner following:
(1) it shall take such action, in the manner prescribed by applicable Federal law, as shall make its conversion into a bank effective;
(2) a majority of its directors shall execute, acknowledge and submit to the commissioner a certificate of incorporation setting forth the matters specified in paragraphs (1), (2), (3), (4), (5), (8), (9) and (10) of section 3, together with a copy of the plan of conversion, and together with an affidavit setting forth the matters specified in paragraphs (1) and (2) of subsection A of section 9.
##### **§ 17:9A-150** Procedure {#sec-17-9a-150 omnilex-key=us-nj-statutes--title-17--17:9A-150}
The submission to the commissioner of the certificate of incorporation, the plan of conversion, and the affidavit pursuant to section 149, shall constitute an application for charter. If the commissioner shall be satisfied that
(1) the capital stock and surplus of the national banking association upon its conversion pursuant to this article complies with the requirements of section 151;
(2) the national banking association has complied in all respects with applicable Federal law;
(3) the matters set forth in the affidavit submitted to him pursuant to paragraph (2) of subsection B of section 149 are true;
(4) the certificate of incorporation complies with the requirements of paragraph (2) of subsection B of section 149;
(5) the plan of conversion contains no provisions violative of the laws of this State; and
(6) the directors designated in the certificate of incorporation possess capacity and fitness for the duties and responsibilities with which they will be charged;
he shall endorse upon or annex to the certificate of incorporation a certificate of approval, and the certificate shall thereupon be filed in the department. Upon such filing, the subscribers to the certificate, their successors and assigns shall be a corporation, in the manner provided by, and subject to the provisions of, section 13. The commissioner shall thereupon issue a certificate of authority in the form prescribed by section 14, and shall file a copy thereof in the department, and the bank shall be authorized to transact business.
##### **§ 17:9A-151** Capital stock and surplus {#sec-17-9a-151 omnilex-key=us-nj-statutes--title-17--17:9A-151}
The capital stock and surplus of a bank incorporated pursuant to this article shall be at least equal to the minimum capital stock and surplus required by section 4, and shall be in such greater amount as the commissioner may deem to be necessary in the public interest. The capital stock and surplus of such bank need not be paid in cash, but may consist of assets of the national banking association approved by the commissioner as to value.
##### **§ 17:9A-152** Effect of conversion {#sec-17-9a-152 omnilex-key=us-nj-statutes--title-17--17:9A-152}
Upon compliance with the requirements of this article,
(1) the bank shall be authorized to transact business pursuant to this act;
(2) the property and rights of the national banking association shall vest in the bank without further act or deed;
(3) the rights and obligations of the national banking association shall become the rights and obligations of the bank;
(4) if the bank is a qualified bank, it shall, without further act or deed and without order or judgment of any court, succeed the national banking association in every fiduciary and agency capacity of the association, unless prohibited by the instrument under which the association acted in such fiduciary or agency capacity; and
(5) any pending action by or against the national banking association shall survive its conversion into a bank, and the bank shall be substituted for the association.
##### **§ 17:9A-153** Rights of dissenting stockholders {#sec-17-9a-153 omnilex-key=us-nj-statutes--title-17--17:9A-153}
A stockholder of a national banking association which converts into a bank pursuant to this article may make a demand for and receive payment of the value of his shares in such association in the manner defined, prescribed and limited by applicable Federal law, and the bank shall make such payment to such stockholder, and shall pay the costs of appraisal, in the amount and in the manner required by applicable Federal law.
##### **§ 17:9A-154** Issuance of stock {#sec-17-9a-154 omnilex-key=us-nj-statutes--title-17--17:9A-154}
Stockholders of a national banking association who do not demand payment for their shares of stock as specified in section 153, shall become stockholders of the bank, and shall be entitled to receive stock of the bank in an amount which bears the same ratio to the entire capital stock of the bank that the stock held by such stockholder in the association bore to the entire capital stock of the association. In the exchange of stock, the bank may issue preferred stock to those who held preferred stock in the association, and may provide for such of the priorities and preferences to which such stock was entitled when held in the association, as may be lawful under the provisions of this act.
##### **§ 17:9A-154.1** Conversion without approval of state officials; certificate required {#sec-17-9a-154.1 omnilex-key=us-nj-statutes--title-17--17:9A-154.1}
A bank, as defined in section 1 of "An act concerning banking and banking institutions (Revision of 1948)," approved April twenty-ninth, one thousand nine hundred and forty-eight (P.L.1948, c. 67) may, without the approval of any officer, department, board or other agency of this State, convert itself into and become a national banking association in the manner and with the effect provided by the laws of the United States, as presently enacted, and as hereafter from time to time supplemented or amended, governing the conversion of a bank organized under State laws into a national banking association. A majority of the directors of such bank shall file in the Department of Banking and Insurance a certificate over their signatures that the stockholders of the bank have given their approval to the conversion of such bank into a national banking association in the manner required by the laws of the United States, and that such bank intends to act in pursuance thereof. Upon the taking effect of such conversion pursuant to the laws of the United States, the bank shall be deemed to have surrendered its charter. No bank shall convert itself into a national banking association unless a national banking association may, under the laws of the United States, convert into a bank organized under State laws, without approval by any United States authority, nor shall any bank convert itself into a national banking association at any time when the laws of the United States applicable thereto provide that such conversion may be effected by vote of the shareholders owning less than fifty-one per centum (51%) of the capital stock of such bank entitled to vote.
##### **§ 17:9A-155** Procedure {#sec-17-9a-155 omnilex-key=us-nj-statutes--title-17--17:9A-155}
A. A bank may be dissolved in the manner provided by sections 14A:12-3 or 14A:12-4 of Title 14A, Corporations, General, of the New Jersey Statutes, except that the filings required to be made by section 14A:12-3 or 14A:12-4 of the New Jersey Statutes shall be made in the department; and except further, that the consent of the holders of 2/3 of all the stock of the bank shall be required before a bank may effect its voluntary dissolution.
B. If a bank has heretofore suspended or shall hereafter suspend the transaction of its business, except that incidental to the liquidation and distribution of its assets, and such suspension has heretofore continued or shall hereafter continue for a period of not less than 12 months, and such bank has not been dissolved pursuant to law, the commissioner may make an order, to be filed in the department, forfeiting the bank's rights, powers and privileges as a corporation, and, upon such filing, the corporate rights, powers and privileges of the bank shall cease, and the bank shall thereupon be dissolved. This subsection shall not abridge or affect the rights and powers conferred by article 42.
##### **§ 17:9A-156** Effect {#sec-17-9a-156 omnilex-key=us-nj-statutes--title-17--17:9A-156}
Upon its dissolution pursuant to section 155 or upon the filing of an order of the commissioner pursuant to section 17, the bank, its officers, directors, stockholders, depositors and other creditors shall become and be subject to all the provisions of chapter 12 of Title 14A of the New Jersey Statutes to the extent that such provisions are not inconsistent with this act.
##### **§ 17:9A-157** Application of article {#sec-17-9a-157 omnilex-key=us-nj-statutes--title-17--17:9A-157}
A bank may reorganize in the manner provided by this article if
(1) it is insolvent, or has suspended its business for lack of funds to carry it on, and the commissioner is in possession of its property and business; or
(2) a receiver has been appointed pursuant to section 303.
##### **§ 17:9A-158** Who may propose plan; approval or disapproval by commissioner {#sec-17-9a-158 omnilex-key=us-nj-statutes--title-17--17:9A-158}
A. The commissioner, a bank acting by its board of directors, or three or more depositors or other creditors of the bank who have claims, liquidated as to amount and not contingent as to liability, amounting in the aggregate to ten thousand dollars or more, or the holders of not less than ten per centum of the capital stock of the bank may propose a plan for the reorganization of the bank.
B. If the plan is not proposed by the commissioner or by the bank, it shall first be submitted to the commissioner for approval. The commissioner shall approve a plan if he is satisfied
(1) that it complies with the provisions of section 161;
(2) that it is fair, equitable and feasible;
(3) that the persons who will be the directors and officers of the bank upon reorganization, possess capacity and fitness for the duties and responsibilities with which they will be charged; and
(4) that the interest of the public will be served to advantage by the adoption of the plan.
##### **§ 17:9A-159** Action for approval of plan {#sec-17-9a-159 omnilex-key=us-nj-statutes--title-17--17:9A-159}
A. The commissioner, or the bank, if either is the proponent of a plan of reorganization, or other proponents of a plan which has been approved by the commissioner pursuant to section one hundred fifty-eight, may, if no other action has been instituted pursuant to this section, institute an action in the Superior Court for approval of the plan. Process against and notice to the stockholders, depositors and other creditors may be served by mail addressed to each at his address as it appears on the bank's records.
##### **§ 17:9A-160** Jurisdiction of Superior Court {#sec-17-9a-160 omnilex-key=us-nj-statutes--title-17--17:9A-160}
The Superior Court shall have jurisdiction of actions pursuant to this article and to make such orders and judgments as may be necessary to
(1) determine the rights, equities and priorities of all parties;
(2) fix the division of creditors and stockholders into classes according to the nature of their respective claims or stock; and, to that end, summarily determine the value of security so as to classify as unsecured the amount in excess of such value;
(3) approve a plan in compliance with the provisions of this article; and
(4) consummate such plan as may be approved by the court.
##### **§ 17:9A-161** Provisions of plan of reorganization {#sec-17-9a-161 omnilex-key=us-nj-statutes--title-17--17:9A-161}
A. Every plan of reorganization shall state:
(1) the names of the persons who will be the directors of the bank;
(2) the names of the persons who will be the officers of the bank;
(3) the amount of the capital stock, the classes into which it will be divided, the par value of the shares of each class, and the number of shares in each class; if preferred stock is to be issued, the plan shall state the matters specified in subsection A of section 125;
(4) the amount of the surplus of the bank upon reorganization;
(5) the powers authorized by this act which the bank will have power to exercise;
(6) the claims of creditors, if any, which will be paid in cash in full;
(7) the creditors or stockholders, or any class of creditors or stockholders, not adversely affected by the plan, and the provisions, if any, with respect to them;
(8) the provisions for any class or classes of creditors or stockholders adversely affected by the plan;
(9) the means for execution of the plan; and
(10) the provisions for payment of all costs and expenses of reorganization and other allowances which may be approved or made by the court.
B. In addition to the matters required by subsection A of this section, a plan of reorganization may contain other appropriate provisions not inconsistent with the provisions of this act including, by way of description and not by way of limitation,
(1) provision for the termination of any executory contract, including a lease of real property;
(2) provision for the settlement or adjustment of obligations owing to the bank and for the disposition of such obligations which are not settled or adjusted in the plan;
(3) provision for one or more classes of preferred stock, to be issued for cash, or in whole or in part satisfaction of claims of depositors or other creditors, or in exchange for shares of the capital stock of the bank of any class or classes;
(4) the transfer to a trustee or trustees of any part of the bank's assets for liquidation for the benefit of one or more or all of the classes of creditors and stockholders; and
(5) the merger of the bank with another bank or other banks.
##### **§ 17:9A-162** Approval of plan by the court {#sec-17-9a-162 omnilex-key=us-nj-statutes--title-17--17:9A-162}
The proposed plan may be modified under the direction of the court. If, after a hearing, the court shall find that the plan, as proposed or modified,
(1) complies with the provisions of this article,
(2) is fair, equitable and feasible, and,
if the plan is proposed by the bank,
(3) that the persons who will be the directors and officers of the bank upon reorganization, possess capacity and fitness for the duties and responsibilities with which they will be charged; and
(4) that the interest of the public will be served to advantage by the adoption of the plan,
it shall approve the plan and fix a time within which the creditors and stockholders adversely affected thereby may accept or reject the plan.
##### **§ 17:9A-163** Transmittal of plan and court approval to creditors and stockholders {#sec-17-9a-163 omnilex-key=us-nj-statutes--title-17--17:9A-163}
Upon approval of the plan by the court, as provided by section 162, the commissioner or receiver who is in possession of the property and business of the bank shall transmit to all depositors, other creditors and stockholders who are affected by the plan,
(1) a copy of the plan as approved;
(2) a copy of the opinion of the court, if any, approving the plan, or a summary of the opinion approved by the court;
(3) a summary of the rights of depositors, other creditors and stockholders provided in sections 164, 165 and 166, approved by the court; and
(4) such other matters as the court may deem necessary or desirable for the information of depositors, other creditors and stockholders.
##### **§ 17:9A-164** Acceptance or rejection of plan {#sec-17-9a-164 omnilex-key=us-nj-statutes--title-17--17:9A-164}
A. Following the approval of a plan by the court and its transmittal to depositors, other creditors and stockholders pursuant to sections 162 and 163, the proponent or proponents of the plan shall solicit acceptances from creditors and stockholders of each class adversely affected by the plan. Acceptances of creditors and stockholders shall be filed in the court.
B. No acceptances shall be required of creditors or stockholders of any class which is not adversely affected by the plan, or of stockholders of any class, if the court determines that the liabilities of the bank are in excess of its assets.
C. No person shall, without the consent of the court, solicit any acceptance, conditional or unconditional, of any plan, or any authority, conditional or unconditional, to accept any plan, whether by proxy, deposit, power of attorney or otherwise, until after the entry of an order approving such plan and its transmittal to depositors, other creditors and stockholders as provided in sections 162 and 163. Any such acceptance or authority given, procured or received prior to such approval and transmittal shall be invalid, unless such consent of the court has been so obtained.
D. Any depositor, other creditor or stockholder who is adversely affected by the plan may file a rejection of the plan in the Superior Court within the time limited by the order of the court made pursuant to section 162. Each depositor, other creditor or stockholder who fails to file such a rejection shall be deemed to have accepted the plan.
E. Every fiduciary, every banking institution, insurance company or other corporation of this State, and every officer of this State or of a county, municipality, school district, public board, commission or other body of this State shall have the power to accept or reject a plan of reorganization of a bank and to do such other acts as may be necessary to make such acceptance or rejection effective.
F. If the acceptance or rejection of a plan by the holder of any claim or stock is not in good faith, in the light of or irrespective of the time of acquisition thereof, the court may, after hearing upon notice, direct that such claim or stock be disqualified for the purpose of determining the requisite majority for the acceptance of a plan, as provided in subsection G of this section.
G. If two-thirds in amount of the claims or shares of any class of creditors or stockholders accept or are deemed to have accepted the plan, all creditors or stockholders in such class shall be bound by the plan.
##### **§ 17:9A-165** Provision for classes of creditors or stockholders not bound by plan {#sec-17-9a-165 omnilex-key=us-nj-statutes--title-17--17:9A-165}
A. The court, upon such notice and hearing as it shall determine, shall, subject to confirmation of the plan, provide for any class of creditors which is adversely affected by and is not bound by the plan, adequate protection for the realization by the creditors of such class of the value of their claims against the property dealt with by the plan and affected by such claims,
(1) by the transfer or sale, or by the retention by the bank, of such property subject to such claims; or
(2) by a sale of such property free of such claims, at not less than a fair upset price, and the transfer of such claims to the proceeds of such sale; or
(3) by appraisal and payment in cash of the value of such claims; or
(4) by such other method as will, under and consistent with the circumstances of the particular case, equitably and fairly provide such protection.
B. The court, upon such notice and hearing as it shall determine, shall, subject to confirmation of the plan, provide for any class of stockholders which is adversely affected by and is not bound by the plan, adequate protection for the realization by the stockholders of such class of the value of their equity, if any, in the property of the bank dealt with by the plan,
(1) by the sale of such property at not less than a fair upset price; or
(2) by appraisal and payment in cash of the value of their stock; or
(3) by such other method as will, under and consistent with the circumstances of the particular case, equitably and fairly provide such protection; but the protection afforded by this subsection shall not be required if the court shall determine that the liabilities of the bank are in excess of its assets.
##### **§ 17:9A-166** Confirmation of plan {#sec-17-9a-166 omnilex-key=us-nj-statutes--title-17--17:9A-166}
If the court, upon such notice and hearing as it shall prescribe shall be satisfied that depositors, other creditors and stockholders holding two-thirds in amount of the claims or shares of each class are bound by the plan, as provided in section one hundred sixty-four, exclusive of creditors and stockholders whose acceptances are not required pursuant to subsections B and F of section one hundred sixty-four, and exclusive of each class of creditors or stockholders for which provision is made pursuant to section one hundred sixty-five, it may enter a judgment confirming the plan.
##### **§ 17:9A-167** Allowances for services, costs and expenses {#sec-17-9a-167 omnilex-key=us-nj-statutes--title-17--17:9A-167}
The Superior Court may allow reasonable compensation for services rendered and reimbursement for proper costs and expenses incurred by the commissioner, the bank, and depositors, other creditors and stockholders, and their counsel, in connection with the submission by them of a plan or suggestions for modification of a plan, or in connection with objections by them to the approval or confirmation of a plan. In fixing any such allowances, the court shall give consideration only to the services which contributed to the reorganization of the bank, or to the rejection of a plan of reorganization, and the proper costs and expenses incidental thereto.
##### **§ 17:9A-168** Consummation of plan {#sec-17-9a-168 omnilex-key=us-nj-statutes--title-17--17:9A-168}
A. If no appeal from the judgment confirming the plan is pending at the expiration of the time limited for taking appeals, a copy of the plan, certified by two officers of the bank named in the plan, shall be filed in the department, together with such proof as the commissioner shall require that no such appeal is pending.
B. If an appeal shall be taken from the judgment confirming the plan, no action shall be taken to consummate the plan pending final disposition of the appeal. If the appeal results in an affirmance of the judgment confirming the plan, or if the plan is modified and confirmed in conformance with the decision of the appellate court, a copy of the plan as finally confirmed, certified by two officers of the bank named in the plan, shall be filed in the department with such proof of the final disposition of the appeal as the commissioner shall require.
C. Following the filing of a certified copy of the plan in the department pursuant to subsection A or subsection B of this section, and following the consummation of the plan pursuant to its provisions and pursuant to such orders of the court as may be necessary therefor, the commissioner shall issue a certificate of authority to the bank. Upon the issuance of the certificate of authority the bank shall be authorized to transact business pursuant to this act.
D. Any certificate, agreement or other instrument required to be executed, or executed and acknowledged, for the purpose of the consummation of the plan may be executed, or executed and acknowledged, by such persons as shall be named therefor by the court or in the plan of reorganization, if there shall be no persons otherwise authorized by law to execute, or execute and acknowledge, such certificates, agreements or other instruments.
##### **§ 17:9A-169** Amendment of certificate of incorporation {#sec-17-9a-169 omnilex-key=us-nj-statutes--title-17--17:9A-169}
A. Whenever a plan of reorganization confirmed by the court and filed in the department contains one or more provisions which may be effected under this act only by an amendment to the certificate of incorporation of the bank, a certificate of amendment, provided for by section 117, or an amended certificate of incorporation, provided for by section 118, shall be executed and acknowledged by two officers of the bank named in the plan of reorganization, one of whom shall be the president or a vice-president. The provisions of section 117 for a resolution by the board of directors of the bank setting forth the proposed amendment and for the approval of the proposed amendment or any modification thereof by the stockholders, shall not be required in the case of a certificate executed pursuant to this section. Such certificate shall be submitted to the commissioner for his approval.
B. If the commissioner shall find that a certificate which has been executed pursuant to this section conforms to the plan of reorganization, he shall endorse his approval upon the certificate and shall file it in the department. The certificate of incorporation of the bank shall thereupon be amended as set forth in the certificate of amendment or in the amended certificate of incorporation.
##### **§ 17:9A-170** Modification of plan {#sec-17-9a-170 omnilex-key=us-nj-statutes--title-17--17:9A-170}
A. A plan of reorganization may be modified, with the approval of the Superior Court, at any time prior to the issuance of the certificate of authority pursuant to subsection C of section 168, if, in the opinion of the court, the modification does not materially and adversely affect the interests of the depositors, other creditors or stockholders of the bank.
B. If the court finds that the proposed modification merits consideration, and that it materially and adversely affects the interests of the depositors, other creditors or stockholders of the bank, it shall fix a time for a hearing for the consideration of the proposed modification. The proceedings upon the proposed modification, and the rights of the depositors, other creditors and stockholders with respect thereto shall be as provided in sections 162 to 169, inclusive.
##### **§ 17:9A-171** Effect of reorganization upon claims and property {#sec-17-9a-171 omnilex-key=us-nj-statutes--title-17--17:9A-171}
Upon the issuance of the certificate of authority pursuant to subsection C of section 168,
(1) the plan shall be binding upon the bank and upon all of its depositors, other creditors and stockholders; and
(2) the property dealt with by the plan shall be free and clear of all claims and interests, except as provided in the plan or in such order as the court may make authorizing or directing the transfer of such property.
##### **§ 17:9A-173** Limitation on actions {#sec-17-9a-173 omnilex-key=us-nj-statutes--title-17--17:9A-173}
No reorganization effected pursuant to the provisions of this article shall be questioned in any action in any court unless such action is instituted within three months from the issuance of the certificate of authority pursuant to subsection C of section 168.
##### **§ 17:9A-174** Application of article {#sec-17-9a-174 omnilex-key=us-nj-statutes--title-17--17:9A-174}
A. The provisions of this article shall apply to the investment of the funds of all savings banks. All investments of money and all sales and transfers of securities may be made as provided in this article, notwithstanding any provision in the certificate of incorporation prescribing the number of managers who shall act in the investment of money and the sale or transfer of securities.
B. The powers conferred by this article shall be cumulative, and an investment or loan made pursuant to one section or subsection hereof shall not abridge the power to make an investment or loan pursuant to any other section or subsection.
##### **§ 17:9A-175** Federal, State, county and municipal securities {#sec-17-9a-175 omnilex-key=us-nj-statutes--title-17--17:9A-175}
A. A savings bank may invest in
(1) stocks, bonds, and notes or obligations of or guaranteed by the United States, or those for which the credit of the United States is pledged for the payment of the principal and interest or dividends thereof;
(2) bonds or obligations of or guaranteed by this State or heretofore authorized by the laws of this State to be issued pursuant to any law of this State; by any commission appointed by the Supreme Court of New Jersey, as the said court was constituted prior to September 15, 1948;
(3) bonds, notes or obligations of or guaranteed by any other State of the United States which has not, within 10 years prior to the making of the investment, defaulted in the payment of any part of the principal or interest of any debt evidenced by bonds, notes or obligations;
(4) bonds, notes or obligations of any county, municipality, public school district, union graded school district, regional board of education, water district, sewer district, or other municipal or political subdivision of this State, issued pursuant to a law of this State; provided, that, the issuer has not, within 5 years prior to the making of the investment, been in default for more than 6 months in the payment of any part of the principal or interest of any debt evidenced by its bonds, notes or obligations;
(5) bonds, notes or other obligations issued, guaranteed or assumed by any municipality, county, school district, water district, sewer district or other municipal or political subdivision of any other State of the United States; provided, (a) that any such municipality, county, school district, water district, sewer district or other municipal or political subdivision of any other State of the United States, or the total of its component parts, shall have a population as shown by the last preceding Federal census of not less than 25,000; and (b) the issuer, guarantor or assumer of such bonds, notes or other obligations
(i) shall have pledged its faith and credit for the payment of the principal and interest of such bonds, notes or other obligations, and
(ii) shall have the power to levy taxes on the taxable real property therein for the payment of both principal and interest of such bonds, notes or other obligations without limitation of rate or amount, and
(iii) shall not within 10 years prior to the making of the investment have defaulted in payment of principal or interest of any debt evidenced by its bonds, notes or other obligations for more than 60 days.
(6) bonds, including consolidated bonds, or other obligations, issued by Federal land banks, and debentures, including consolidated debentures, or other obligations, issued by Federal intermediate credit banks or banks for cooperatives organized under the laws of the United States;
(7) bonds, debentures or other obligations issued by the Home Owners' Loan Corporation, Federal Home Loan Banks or by any other agency or administration succeeding to its functions or powers, under the Act of Congress of June 13, 1933, known as the "Home Owners' Loan Act of 1933," as amended or supplemented from time to time;
(8) bonds, debentures or other obligations issued by any national mortgage association under the Act of Congress of June 27, 1934, known as the "National Housing Act," as amended or supplemented from time to time;
(9) bonds, debentures or other obligations issued by The United States Postal Service under the Postal Reorganization Act, Public Law 91-375, 84 Stat. 719, as amended or supplemented from time to time;
(10) bonds issued, guaranteed or assumed by any governmental unit, which, if issued, guaranteed or assumed by a private company, would be legal for investment under any of the provisions of this article; and
(11) other investments presently or from time to time hereafter authorized by law.
B. No savings bank shall make an investment pursuant to any one of paragraphs (6), (7), (8) or (9) of subsection A of this section at any time when the total of all investments of the nature authorized by such paragraph exceeds, or if the making of such an investment would cause such total to exceed, 2% of its deposits; provided, however, investments under paragraph (6) hereof may be in the amount of 2% of each of the agencies referred to therein when the maturities of any such obligations are within 1 year. No savings bank shall make an investment pursuant to paragraph (10) of subsection A. of this section in the bonds of any one such governmental unit at any time when the total of all its investments in such bonds of such unit exceeds, or if the making of such investment would cause such total to exceed, 2% of its deposits. The acquisition of any such investment as a result of a refunding or other refinancing or an exchange of any investment authorized by such paragraphs shall not be considered the making of an investment for the purposes of this subsection.
C. A savings bank may make short term investments limited to a 1-year term in
(1) certificates of deposit in any bank whose stock qualifies as legal investment for savings banks;
(2) in United States Government securities and bonds or obligations of United States Governmental agencies otherwise legal investments hereunder, subject to repurchase agreements.
##### **§ 17:9A-175.1** Obligations of Canadian government, provinces or cities {#sec-17-9a-175.1 omnilex-key=us-nj-statutes--title-17--17:9A-175.1}
A. A savings bank may invest in
(1) bonds, debentures, notes or other obligations issued, guaranteed or assumed as to both principal and interest by the government of the Dominion of Canada or by any province of Canada or by any city of Canada which has a population of not less than 150,000 inhabitants; provided,
(i) that the faith and credit of the issuer, guarantor or assumer of such bonds, debentures, notes or other obligations is pledged for the payment of principal and interest thereof, and that the principal and interest thereof shall be payable in United States funds, either unconditionally or at the option of the holder; and
(ii) that any such city shall have power to levy taxes on the taxable real property therein for the payment of both principal and interest of such bonds, debentures, notes or other obligations without limitation of rate or amount; and
(iii) that the issuer, guarantor or assumer of such bonds, debentures, notes or other obligations has not within ten years prior to the making of the investment defaulted in payment of principal or interest of any debt evidenced by its bonds, debentures, notes or other obligations for more than 60 days.
B. No savings bank shall make an investment pursuant to the provisions of this section at any time when the total of all such investments exceeds, or if the making of such investment shall cause such total investment to exceed, 10% of its deposits. No savings bank shall make an investment pursuant to this section in the bonds, debentures, notes or other obligations of any province or city at any time when the total of all its investments in bonds, debentures, notes or other obligations of any such province or city exceeds, or if the making of such investment will cause such total to exceed, 1% of its deposits.
##### **§ 17:9A-175.2** Definitions {#sec-17-9a-175.2 omnilex-key=us-nj-statutes--title-17--17:9A-175.2}
As used in this act, the following words and terms shall be deemed to have the following meanings:
(a) The word "unit" shall mean any State or any political subdivision thereof, any authority, department, district or commission, or any agency or instrumentality of any of the foregoing, or any agency or instrumentality of the Federal Government, or a commission or other public body created by an Act of Congress or pursuant to a compact between any 2 or more States.
(b) The word "utility" shall mean any waterworks system, gas system, electric light system, sewer or sewerage disposal system, bridge, tunnel, turnpike or other highway, or any combination of 2 or more of the foregoing. The word "system" as used herein shall mean a supply or a generating system, or a transmission or a distribution system, or both such supply or generating system and such transmission or distribution system, and all appurtenances thereof.
(c) The term "revenue bonds" shall mean any bonds or other interest-bearing obligations of a unit, the principal and interest of which are by their terms payable from the revenues derived from a utility owned or operated by the unit which issued such bonds or obligations, or by an agency or instrumentality thereof, whether or not said bonds are secured by a mortgage or a trust indenture.
(d) The term "debt service" shall mean provision for the payment of principal and interest on revenue bonds, including mandatory sinking funds, if any.
(e) The term "enabling legislation" shall mean any Act of Congress or of the Legislature of any State or territory, any ordinance or resolution of any unit authorizing or providing for the issuance of revenue bonds, or any mortgage, trust indenture, trust agreement or other instrument executed as security for revenue bonds.
(f) The term "consolidated net revenues" shall mean the revenue derived from the utility and available for debt service, as reported. In computing the consolidated net revenues available for debt service in previous years the consolidated net revenues so available of any utility acquired by any unit may be included, such consolidated net revenues to be calculated as though such utility had been operated by a unit and an equivalent amount of bonded debt was outstanding.
##### **§ 17:9A-175.3** Revenue bonds of governmental unit payable from revenues of utility operated by unit {#sec-17-9a-175.3 omnilex-key=us-nj-statutes--title-17--17:9A-175.3}
A savings bank may, in addition to other investments, presently or from time to time hereafter authorized by law (including specifically revenue bonds so authorized, notwithstanding such bonds do not qualify as legal investments under this act invest in revenue bonds of a unit; provided that
(a) The utility, on account of which such revenue bonds shall have been issued, shall have been in operation (whether or not owned by said unit) for at least 5 years prior to the investment; and
(b) the consolidated net revenues derived from the utility and available for debt service for the 5 fiscal years of the unit next preceding the investment have averaged not less than (1) 125% in the case of gas, water, electrical and sewer utilities, or (2) 150% in the case of bridges, tunnels, turnpike and highway utilities, of the average debt service requirements for the same period on the revenue bonds and other obligations of the unit having a lien or charge on such revenues equal or prior to the lien or charge thereon of such revenue bonds; and
(c) said bonds are not in default at the time of investment and were not within 5 years prior to the time of investment in default for a period of more than 6 months in the payment of any part of the principal or interest thereon; and
(d) the enabling legislation contains provisions or covenants
(1) requiring the unit issuing such revenue bonds to fix, maintain and collect charges for the services furnished by the utility adequate to provide revenues sufficient to pay its debt service and the proper operation and maintenance of the utility; and
(2) pledging a sufficient amount of such revenues for the payment of debt service and other obligations of the unit having a lien or charge on such revenues equal or prior to the lien or charge thereon of such revenue bonds; and
(e) if the enabling legislation permits sale of the utility in whole or in any substantial part, then the enabling legislation shall prohibit the sale of the utility as a whole or any substantial part thereof unless, at the time of such sale, provision shall be made for the continuance of debt service on the revenue bonds or for payment thereof; and
(f) in the case of a unit outside of the State of New Jersey, it had outstanding at the time of the investment at least $5,000,000.00 of debt secured by the revenues pledged to secure said revenue bonds.
##### **§ 17:9A-175.4** Restriction on investment by savings banks {#sec-17-9a-175.4 omnilex-key=us-nj-statutes--title-17--17:9A-175.4}
No savings bank shall make an investment pursuant to this act at any time
(a) when the total of all of such investments exceeds, or if the making of such investment would cause such total to exceed 10% of its deposits; or
(b) when the total of all such investments in the revenue bonds of one unit exceeds, or if the making of such investment would cause the total investment in the revenue bonds of any 1 unit to exceed 1% of its deposits; or
(c) when the total of all such investments in revenue bonds of any 1 unit exceeds, or if the making of such investment would cause such total to exceed 5% of the total amount of all revenue bonds of that unit issued and outstanding.
##### **§ 17:9A-175.5** Construction of act {#sec-17-9a-175.5 omnilex-key=us-nj-statutes--title-17--17:9A-175.5}
Nothing in this act shall be construed to enlarge the classes of investments permitted for fiduciaries, or any other type of investor whose investments are regulated by statute, by reference in any such statute to investments which are legal for savings banks.
##### **§ 17:9A-177** Railroad bonds {#sec-17-9a-177 omnilex-key=us-nj-statutes--title-17--17:9A-177}
A. For the purposes of this section,
(1) "railroad company" shall include predecessor and constituent corporations, and shall mean a railroad company which is not in receivership, bankruptcy, or reorganization, and which, or the corporation or corporations to which it is the successor shall, for the five fiscal years next preceding an investment pursuant to this section, (a) have owned and operated at least five hundred miles of standard gauge railroad line within the United States, exclusive of sidings, or (b) shall have had annual railway operating revenues of not less than ten million dollars;
(2) "eligible railroad company" shall mean a railroad company
(a) which, for the latest three fiscal years preceding an investment pursuant to this section for which the necessary statistical data is available in respect to such railroad company and in respect to all Class I railroads in the United States, shall have had an average annual balance of income available for the payment of fixed charges in such an amount that, when divided by an amount equal to its fixed charges for the last fiscal year of the said three year period, the quotient shall at least equal the quotient obtained by dividing the average annual balance of income available for the payment of fixed charges of all Class I railroads in the United States for the same three year period, by an amount equal to the fixed charges of all such Class I railroads for the last fiscal year of the said three year period; and
(b) whose average annual balance of income available for the payment of fixed charges during the said three year period, exceeds its fixed charges for the last fiscal year of the said three year period by an amount such that, when it is divided by its average annual railway operating revenues for the same three year period, the quotient shall at least equal the quotient obtained by dividing the excess of the average annual balance of income available for the payment of fixed charges of all Class I railroads of the United States for the same three year period, over the fixed charges of all such Class I railroads in the United States for the last fiscal year of such three year period, by the average annual railway operating revenues of all such Class I railroads during the same three year period; and
(c) whose average annual balance of income available for the payment of fixed charges during the same three year period shall not be less than one and one-quarter times its fixed charges for the last fiscal year of such three year period;
(3) "balance of income available for the payment of fixed charges" , "fixed charges" , and "railway operating revenues" shall have the same meaning, except as in this section otherwise provided, as in the accounting reports filed or published by the railroad company pursuant to regulations for common carriers by rail subject to the provisions of the Interstate Commerce Act; and
(4) "balance of income available for the payment of fixed charges" shall be computed before deduction of federal income or excess profits taxes; and, in computing "fixed charges" or "annual requirement for fixed charges" of the railroad company in whose bonds an investment is being made, there shall be excluded interest and amortization charges in respect to debt called for redemption, or which will otherwise mature, within six months from the time of such investment, and for the payment of which funds have been or are being contemporaneously set aside in trust.
B. Subject to the limitations prescribed by section 179.1, a savings bank may invest in
(1) bonds issued, guaranteed, assumed or otherwise agreed to be paid by an eligible railroad company, and which are secured (a) by a first mortgage upon not less than three-fourths of the rail mileage subject to the lien of the mortgage, or (b) by a refunding mortgage under which bonds may be issued for the retirement or refunding of all debts secured by prior lien mortgages on all or any part of the property subject to the lien of the refunding mortgage; or (c) by a mortgage prior in lien to such a refunding mortgage;
(2) bonds secured by a mortgage upon property leased to and operated by an eligible railroad company which has guaranteed, assumed, or otherwise agreed to pay (a) interest upon such bonds, and (b) a sum sufficient to pay dividends of not less than four per centum per annum during the unexpired term of the lease upon the capital stock of the lessor company outstanding at the time of the investment;
(3) bonds secured by a mortgage upon property leased to and operated by a railroad company, not an eligible railroad company, which
(a) has guaranteed or assumed or otherwise agreed to pay (1) the principal and interest of such bonds, and (2) a sum sufficient to pay dividends of not less than four per centum per annum during the unexpired term of the lease upon the capital stock of the lessor company outstanding at the time of the investments; and
(b) for at least four of the five fiscal years preceding the investment for which the necessary statistical data is available, and in the last of such fiscal years, or for at least four of five consecutive twelve-month periods ending within six months next preceding the investment, and in the last of such twelve-month periods, has had (i) a balance of income available for the payment of fixed charges not less than one and one-half times the annual requirement for fixed charges at the time of such investment, and (ii) a balance of income available for the payment of fixed charges as aforesaid, which exceeds the annual requirement for fixed charges at the time of such investment by an amount not less than seven and one-half per centum of the railway operating revenues for the same years or periods;
(4) bonds secured by a mortgage upon leased property which is prior in lien to a refunding mortgage thereon under which bonds may be issued for the retirement or refunding of all debts secured by prior lien mortgages on all or any part of the property covered by the refunding mortgage, provided the bonds secured by such refunding mortgage meet the requirements specified in paragraph (2) or (3) of subsection B of this section;
(5) bonds secured by mortgage upon a railroad terminal, depot, tunnel or bridge used by or leased to and operated by one or more railroad companies which has or have guaranteed, assumed or otherwise agreed to pay the principal and interest of such bonds, and at least one of which shall be an eligible railroad company; or at least two of which shall each meet the requirements specified in subparagraph (b) of paragraph (3) of subsection B of this section; and
(6) bonds of any railway terminal or dock company of this State secured by first mortgage on terminal or dock property (a) which fronts on the Hudson river or New York bay, (b) which is assessed for the purpose of taxation at a value in excess of the aggregate unpaid principal amount of all outstanding bonds secured by a mortgage lien thereon, and (c) which is used as a dock or terminal railroad by a railroad company or its successor operating in this State upon the effective date of this act; provided, that no part of the principal or interest of such bonds is in default at the time of the investment.
##### **§ 17:9A-178** Public utility bonds and debentures {#sec-17-9a-178 omnilex-key=us-nj-statutes--title-17--17:9A-178}
A. As used in this section,
(1) "bonds of a public utility company" and "debentures or other bonds of a public utility company" shall mean bonds or debentures, as the case may be, issued, guaranteed, assumed, or otherwise agreed to be paid by a public utility company;
(2) "public utility company" shall include constituent and predecessor companies, and shall mean:
(a) a corporation at least eighty-five per centum (85%) of whose gross operating revenues are derived within the United States from the sale or furnishing of one or more of the following:
(1) artificial gas,
(2) natural gas to consumers over systems owned or leased by it,
(3) a mixture of artificial and natural gas to consumers over systems owned or leased by it,
(4) electricity,
(5) water, or
(6) telephone, telegraph or other communication services, or any combination thereof, and
(b) except for the purposes of subsection B of this section, a corporation at least a majority of whose gross operating revenues are derived within the United States from furnishing telephone, telegraph or other communication services, or any combination thereof;
(3) "net operating revenues available for fixed charges" shall mean gross operating revenues less all operating expenses, but before deduction for (a) renewals and depreciation and (b) State and Federal income and profits taxes;
(4) "fixed charges" shall mean charges for (a) rentals, (b) interest on all outstanding mortgage debt, and (c) regularly recurring charges for amortization of discount and expense allocable to mortgage debt, but shall exclude intercompany items;
(5) "fixed assets" shall mean real property, interests in real property, plants, equipment, transmission or distribution systems, and other assets commonly accepted as fixed assets, and shall include fixed assets leased to a public utility company and operated by it under a lease expiring, by its terms, in not less than fifty years from the date an investment is made pursuant to this section;
(6) "book value of fixed assets" shall mean the value of such assets as shown on the books of the public utility company, less reserves for depreciation and renewals.
B. A savings bank may invest in
(1) bonds of a public utility company (a) whose gross operating revenues, for the five fiscal years next preceding the investment for which the necessary statistical data is available or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged at least two million five hundred thousand dollars ($2,500,000.00) for each such year or period, and (b) whose average net operating revenues available for fixed charges for the last three of such years or periods have equaled not less than two and one-half times the average annual requirement for fixed charges for the same years or periods;
(2) bonds of a public utility company (a) which derives at least ninety-five per centum (95%) of its gross operating revenues from the sale of water, and (b) whose gross operating revenues, for the five fiscal years next preceding the investment for which the necessary statistical data is available or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged at least five hundred thousand dollars ($500,000.00) for each such year or period, and (c) whose average net operating revenues available for fixed charges for the last three of such years or periods have equaled not less than one and three-quarters times the average annual requirement for fixed charges during the same years or periods.
C. Bonds invested in pursuant to subsection B of this section shall be secured by a mortgage on fixed assets which is (1) a first mortgage or (2) a refunding mortgage under which bonds may be issued for the retirement or refunding of all debts secured by mortgages on all or any part of such fixed assets prior to the lien of such refunding mortgage, or (3) a mortgage prior in lien to such a refunding mortgage, or (4) is secured by the pledge of mortgage bonds constituting not less than ninety-five per centum (95%) of all the outstanding mortgage debt secured by all or part of the fixed assets which are subject to the mortgage securing such pledged bonds. The aggregate principal amount of all outstanding bonds secured (1) by the mortgage securing the bonds so invested in, directly or by pledge of bonds, and by all other mortgages equal or prior thereto in lien, to which all or any part of such fixed assets are subject, or (2) by any such refunding mortgage inferior in lien to the mortgage securing the bonds so invested in, directly or by pledge of mortgage bonds, and by all other mortgages equal or prior in lien to such refunding mortgage to which all or any part of such fixed assets are subject, shall not, at the time of the investment exceed (1) sixty-six and two-thirds per centum (66 2/3 %) of the book value of such fixed assets, in the case of bonds invested in pursuant to paragraph (1) of subsection B of this section, or (2) seventy per centum (70%) of the book value of such fixed assets, in the case of bonds invested in pursuant to paragraph (2) of subsection B of this section.
D. A mortgage securing bonds shall satisfy the requirements of this section notwithstanding that it is
(1) subject to the lien of prior mortgages securing bonds which have been called for redemption or which will otherwise mature within six months of the time of the investment, and for the payment of which funds have been set aside in trust; and such bonds shall not be deemed to be outstanding for the purpose of computing the sixty-six and two-thirds per centum (66 2/3 %) and the seventy per centum (70%) limitations prescribed by subsection C of this section;
(2) subject to the lien of current taxes or assessments not past due;
(3) subject to the lien of past due taxes or assessments which are bona fide contested;
(4) subject to construction or other liens arising out of operations common to public utility companies of similar character and size.
E. A savings bank may invest in debentures or other bonds of a public utility company notwithstanding that such bonds or debentures are unsecured, or, if secured, that the mortgages securing them do not satisfy the requirements of subsection C of this section; provided, (1) that the gross operating revenues within the United States of the public utility company, for the five fiscal years next preceding the investment for which the necessary statistical data is available, or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged not less than twenty million dollars ($20,000,000.00) for each such year or period; and (2) that the average net operating revenues of the public utility company available for fixed charges, including charges on all outstanding funded debt, whether secured or unsecured, for the last three of such years or periods have equaled not less than four times the average annual requirement for fixed charges for the same years or periods.
F. No savings bank shall make an investment pursuant to this section at any time when the total of all such investments exceeds, or if the making of such an investment would cause such total to exceed, forty per centum (40%) of the deposits.
G. No savings bank shall make an investment pursuant to this section in any obligation for the payment of which any one public utility company is primarily liable, at any time when the total of all of its investments in such obligations of such company exceeds, or if the making of such an investment would cause such total to exceed, two per centum (2%) of its deposits. The acquisition of any such obligation as a result of a refunding or other refinancing or exchange of such obligations theretofore invested in shall not be considered the making of an investment for the purposes of this subsection.
H. A savings bank may invest in debentures or other bonds of a public utility company within the meaning of subparagraph (b) or paragraph (2) of subsection A of this section, notwithstanding that such debentures or other bonds do not satisfy the requirements of subsection E of this section, or, if secured, that the mortgages securing them do not satisfy the requirements of subsection C of this section; provided, (1) that the gross operating revenues within the United States of the public utility company, for the five fiscal years next preceding the investment for which the necessary statistical data is available, or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged not less than twenty million dollars ($20,000,000.00) for each such year or period; and (2) that the average net income of the public utility company for the last three of such years or periods, after adding to the net income for each of such three years or periods (a) charges for renewals and depreciation, (b) State and Federal income and profits taxes, and (c) interest charges and regularly recurring charges for amortization of debt discount and expense, deducted in computing the net income for such year or period, has equaled not less than four times the average annual requirement for interest charges and regularly recurring charges for amortization of debt discount and expense for the same years or periods.
##### **§ 17:9A-179** Equipment obligations {#sec-17-9a-179 omnilex-key=us-nj-statutes--title-17--17:9A-179}
Subject to the limitations prescribed by section 179.1 a savings bank may invest in equipment obligations or certificates secured by (a) a railroad equipment or car trust, or (b) a lease or conditional sale of or security interest in, or (c) a lien on, railroad equipment; provided, that a savings bank shall not invest in any such obligations or certificates:
(1) if, as of the date of issue, the original aggregate principal amount of all obligations or certificates of the same issue exceeded or exceeds (i) 80% of the lesser of the following amounts: (x) the aggregate purchase price originally paid, or to be paid, for the equipment securing the same, less the aggregate depreciation (if any) accrued thereon to the date of issue, and (y) the aggregate estimated replacement cost of such equipment as of the date of issue, less the aggregate depreciation (if any) accrued thereon to the date of issue, or (ii), if either amount is not ascertainable, 80% of the other amount; or
(2) unless all obligations or certificates of the same issue mature within 15 years from the date of issue, in equal installments beginning not later than 3 years after the date of issue and payable at intervals of not exceeding 1 year.
##### **§ 17:9A-179.1** Limitations on investments in railroad obligations {#sec-17-9a-179.1 omnilex-key=us-nj-statutes--title-17--17:9A-179.1}
A. No savings bank shall make an investment pursuant to section 177 or section 179 at any time when the total of all its investments made pursuant to both such sections exceeds, or if the making of any such investment would cause such total to exceed, twenty-five per centum of its deposits.
B. No savings bank shall make an investment pursuant to section 177 or section 179 in any obligation for the payment of which any one corporation is primarily liable, at any time when the total of all its investments in such obligations of such corporation exceeds, or if the making of such an investment would cause such total to exceed, two per centum of its deposits; nor shall any savings bank make an investment pursuant to section 177 or section 179 in any obligation (1) which is secured by lien upon properties in any one system of railroads under unified operation, or (2) for the payment of which any corporation in such system is primarily liable, or (3) which is dependent as to legality for investment by a savings bank upon the obligation, assumption or guarantee of any corporation in such system, at any time when the total of all its investments in such obligations of all corporations in such system exceeds, or if the making of such an investment would cause such total to exceed, five per centum of its deposits. The acquisition of any such obligation as a result of a refunding or other refinancing or exchange of such obligations theretofore invested in shall not be considered the making of an investment for the purposes of this subsection.
##### **§ 17:9A-180** Industrial obligations {#sec-17-9a-180 omnilex-key=us-nj-statutes--title-17--17:9A-180}
A. A savings bank may invest in bonds, debentures, notes, or other obligations which mature within thirty years from the time of the investment, and which are issued by an industrial company incorporated within and transacting business within the United States,
(1) whose annual consolidated net sales or consolidated gross income has averaged not less than ten million dollars ($10,000,000.00) for the five fiscal years next preceding the investment for which the necessary statistical data is available; and
(2) whose annual consolidated net income available for dividends has averaged not less than one million dollars ($1,000,000.00) for the five fiscal years next preceding the investment for which the necessary statistical data is available; and
(3) whose total consolidated debt, including current liabilities, as shown on its latest published consolidated balance sheet, does not exceed forty per centum (40%) of its gross assets less reserves as shown on such balance sheet; and
(4) whose consolidated current assets, as shown on its latest published consolidated balance sheet, are not less than two and one-half times its consolidated current liabilities as shown on such balance sheet. In computing current assets and current liabilities for the purposes of this paragraph, there shall be eliminated from current assets, cash and United States Government notes, bonds, treasury bills and certificates of indebtedness in an amount not in excess of Federal income and excess profits taxes included in current liabilities, and there shall be eliminated from current liabilities such Federal income and excess profits taxes in an amount not in excess of the amount eliminated from current assets; and
(5) whose consolidated net income for the five fiscal years next preceding the investment for which the necessary statistical data is available after deducting reserves, regularly recurring charges for amortization of discount and expenses allocable to funded debt, and after deducting all other charges except interest, income and profits taxes, has averaged not less than four times the average annual consolidated interest charges during such period; and
(6) whose consolidated net income, computed as prescribed in the next preceding paragraph, has not, in two or more of the five fiscal years next preceding the investment for which the necessary statistical data is available, been less than twice the annual consolidated interest charges during the same years; and
(7) whose consolidated net income, computed as prescribed in paragraph (5) of this subsection, for the last fiscal year next preceding the investment for which the necessary statistical data is available, was (a) not less than three times the consolidated interest charges for such year, and (b) not less than three times the annual consolidated charges on the funded debt outstanding at the time of the investment. For the purposes of this section, "debt" shall exclude all debt which has been called for redemption or which otherwise matures within six months from the time of the investment, and for the payment of which funds have been set aside in trust.
B. "Industrial company" shall for the purpose of this section, include predecessor and constituent corporations, and shall mean corporations engaged in manufacturing, mining, merchandising, commercial financing, and other corporations commonly accepted as industrial companies.
C. No savings bank shall make an investment pursuant to this section at any time when the total of all such investments exceeds, or if the making of such an investment would cause such total to exceed, twenty-five per centum (25%) of its deposits.
D. No savings bank shall make an investment pursuant to this section in any obligation for the payment of which any one industrial company is primarily liable, at any time when the total of all its investments in such obligations of such company exceeds, or if the making of such an investment would cause such total to exceed, two per centum (2%) of its deposits. The acquisition of any such obligation as a result of a refunding or other refinancing or exchange of such obligations theretofore invested in shall not be considered the making of an investment for the purposes of this subsection.
##### **§ 17:9A-180.1** Corporate interest bearing securities not otherwise eligible {#sec-17-9a-180.1 omnilex-key=us-nj-statutes--title-17--17:9A-180.1}
A savings bank may, in addition to other investments presently or from time to time hereafter authorized by law, invest in corporate interest-bearing securities not otherwise eligible for investment by savings banks;
(1) which are not in default as to either principal or interest when acquired, and
(a) which have a maturity of not less than five years from the date of issue, or,
(b) which are part of an issue, issued in a series or repayable in installments, the whole of which issue has an average maturity of not less than five years from the date of issue.
##### **§ 17:9A-180.2** Limitations on investments in such corporate interest bearing securities {#sec-17-9a-180.2 omnilex-key=us-nj-statutes--title-17--17:9A-180.2}
No savings bank shall make an investment pursuant to this act at any time when the total of all such investments in obligations of such corporation, including bonds issued, guaranteed, assumed or otherwise agreed to be paid by such corporation, exceeds, or if the making of such investment would cause such total to exceed, five per centum (5%) of such obligations of such corporation, or two per centum of the assets of the savings bank, whichever amount is less.
##### **§ 17:9A-180.3** Additional limitation on investments in such corporate interest bearing securities {#sec-17-9a-180.3 omnilex-key=us-nj-statutes--title-17--17:9A-180.3}
No savings bank shall make an investment pursuant to this act at any time when the total of all such investments exceeds, or if the making of such investment would cause such total to exceed 75% of the aggregate of its surplus, undivided profits and unallocated reserves. As used in this section, the aggregate of the surplus, undivided profits and unallocated reserves shall be that amount as shown as the total surplus accounts in the latest report of condition made and filed as required by section 256(A), of the Banking Act of 1948.
##### **§ 17:9A-180.3a** Transfer of securities to other classes becoming eligible for investment; determination of limitations {#sec-17-9a-180.3a omnilex-key=us-nj-statutes--title-17--17:9A-180.3a}
Whenever a savings bank shall have made an investment pursuant to the act to which this is a supplement and any such security shall thereafter become eligible for investment under other statutes permitting investment by savings banks, said savings bank may transfer any such securities on its books to the class of investment under which such securities shall have become eligible for investment, and said securities shall not thereafter be included in the total of investments under the act to which this is a supplement by said savings bank in determining the limitations set forth in sections 2 and 3 of the act to which this is a supplement.
##### **§ 17:9A-180.4** Classes of investments for fiduciaries or others not enlarged {#sec-17-9a-180.4 omnilex-key=us-nj-statutes--title-17--17:9A-180.4}
Nothing in this act shall be construed to enlarge the classes of investments permitted for fiduciaries or any other type of investor whose investments are regulated by statute, by reference in any such statute to investments which are legal for savings banks.
##### **§ 17:9A-180.5** Investment in corporate stock {#sec-17-9a-180.5 omnilex-key=us-nj-statutes--title-17--17:9A-180.5}
A savings bank may, in addition to other investments, presently or from time to time hereafter authorized by law, invest in (1) stocks, preferred or common, issued or guaranteed by a corporation created or existing under the laws of the United States or any state, district or territory thereof, provided
(a) that for a period of five fiscal years for which the necessary statistical data are available next preceding the date of investment by such savings bank such corporation as disclosed by its published annual fiscal statements shall have had an average annual net income plus its average annual fixed charges (as herein used, fixed charges shall mean interest on funded or unfunded debt, contingent interest charges, amortization of debt discount and expense and rentals for leased property and, in the case of consolidated earnings statements of parent and subsidiary corporations (which must be used if available) shall include all such fixed charges and the preferred dividend requirement, if any, of such subsidiaries) at least equal to 1 1/2 times the sum of its average annual dividend requirement for preferred stock and its average annual fixed charges for the same period; and
(b) during neither of the last two years of such period shall the sum of its annual net income and its annual fixed charges have been less than 1 1/2 times the sum of its dividend requirement for preferred stock and its fixed charges for the same period; and
(c) such corporation shall have no arrears of dividends on its preferred stock; and
(d) as to the common stock of any corporation that
i. such common stock is registered on a national securities exchange as provided in an Act of Congress of the United States entitled "Securities Exchange Act of 1934," 48 Stat. 881 (15 U.S.C. s. 78a et seq.), as amended or for which quotations are available through the National Association of Securities Dealers Automated Quotation System (NASDAQ); and
ii. such corporation shall have paid a cash dividend on its common stock in each year of the 10-year period next preceding the date of investment by such savings bank and the aggregate net earnings available for dividends on the common stock of such corporation for the whole of such period shall have been at least equal to the amount of such dividends paid.
(e) in applying the earnings test under this act to any issuing, assuming or guaranteeing corporation, where such corporation shall have acquired its property or any substantial part thereof within such five-year period immediately preceding the date of investment by consolidation or merger, or by the purchase of all or a substantial portion of the property of any other corporation or corporations, or shall have acquired the assets of any unincorporated business enterprise by purchase or otherwise, net income, fixed charges and preferred dividends of the several predecessor or constituent corporations or enterprises shall be consolidated and adjusted so as to ascertain whether or not the applicable requirements of this act have been complied with;
(2) stock or shares of a corporation which is an investment company as defined by, and which is registered under, an Act of Congress entitled "Investment Company Act of 1940," 54 Stat. 847 (15 U.S.C. s. 80a-1 et seq.), as amended; provided
(a) all the stock and shares of such investment company are or are to be owned by savings banks of this State; and
(b) such company may invest only in such investments as are eligible for savings banks of this State including investments made eligible for savings banks by this act; and
(c) the amount of stock of any corporation which may be held by such investment company shall not exceed at the time of investment by such company, 5% of the number of shares of stock of such corporation then outstanding or 3% of the assets of such investment company, whichever amount is the lesser;
(3) common stock of a national banking association or trust company doing business anywhere within the United States which is a member of the Federal Reserve System and which, at the date of its last published statement preceding the date of investment, had a combined total of capital stock, surplus, reserve for contingencies and undivided profits equal to at least $40,000,000.00 and also equal to at least 6% of its aggregate deposit liability and which, in each of the five fiscal years preceding the date of investment, paid dividends in cash of not less than 4% on its common stock without having reduced the aggregate par value thereof within such five-year period;
(4) common stock of an insurance company, authorized to transact business in New Jersey, which has combined capital stock, surplus and special surplus funds (based on consolidated statements of parent and subsidiary companies, if any) at least equal to $20,000,000.00 and which has paid cash dividends on its common stock in each of its five fiscal years next preceding the date of investment.
##### **§ 17:9A-180.6** Limitation on investment in corporate stock; exemptions {#sec-17-9a-180.6 omnilex-key=us-nj-statutes--title-17--17:9A-180.6}
No savings bank shall make an investment in the stock of any corporation pursuant to this act, except in investment under section 1(2), hereof, which investments are exempt from the limitations imposed by this section, at any time when the total of all such investments in stocks of such corporation, issued or guaranteed, exceeds or if the making of such investment would cause such investment to exceed two per centum of the total outstanding shares of the guaranteed, or of the preferred, or of the common stock of such corporation or three per centum of the surplus (as hereinafter defined) of the savings bank, whichever amount is less.
##### **§ 17:9A-180.7** Investment in stocks limited to certain percentage of surplus {#sec-17-9a-180.7 omnilex-key=us-nj-statutes--title-17--17:9A-180.7}
No savings bank shall make an investment pursuant to this act at any time when the total of all such investments exceeds, or if the making of such investment would cause such total to exceed 75% of its surplus (as hereinafter defined).
##### **§ 17:9A-180.8** Regulations regarding investments in stocks {#sec-17-9a-180.8 omnilex-key=us-nj-statutes--title-17--17:9A-180.8}
The Commissioner of Banking and Insurance may issue such regulations as he finds necessary and proper to carry out the provisions of this act.
##### **§ 17:9A-180.9** "Surplus" defined {#sec-17-9a-180.9 omnilex-key=us-nj-statutes--title-17--17:9A-180.9}
As used in sections 2 and 3 hereof, surplus of a savings bank shall mean the total of its surplus, undivided profits and unallocated reserves, and shall be the amount shown as the total surplus accounts in the latest report of condition made and filed as required by section 256(A) of the Banking Act of 1948.
##### **§ 17:9A-180.10** Legal investments for fiduciaries and others not enlarged {#sec-17-9a-180.10 omnilex-key=us-nj-statutes--title-17--17:9A-180.10}
Nothing in this act shall be construed to enlarge the classes of investments permitted for fiduciaries or any other type of investor whose investments are regulated by statute, by reference in any such statute to investments which are legal for savings banks.
##### **§ 17:9A-180.11** Investments in debentures of New York trust companies {#sec-17-9a-180.11 omnilex-key=us-nj-statutes--title-17--17:9A-180.11}
A savings bank may, in addition to other investments presently or from time to time hereafter authorized by law, subscribe for, purchase, hold and surrender from time to time debentures of any trust company organized under the laws of New York State for the purpose of securing credit accommodations at such trust company, provided all of the stock of such trust company is owned by not less than 20 savings banks organized under the laws of New York State, and any participation certificates or any other form of participation, though junior in interest, issued by any such trust company representing participation in first mortgages assigned by a savings bank in payment of debentures of any such trust company.
##### **§ 17:9A-182** Loans on collateral security {#sec-17-9a-182 omnilex-key=us-nj-statutes--title-17--17:9A-182}
A. In addition to loans elsewhere in this act authorized, a savings bank may make loans
(1) to a depositor, in a sum or sums not greater than the amount of his deposit, upon the promissory note of the depositor, secured by the pledge of his deposit;
(2) to any person, in an amount or amounts aggregating not more than $10,000.00, upon the pledge of a life insurance policy or policies issued by a company which has been authorized to transact business in this State for not less than five years next preceding the making of such loan; but no such loan shall exceed 90% of the cash surrender value of such policy or policies; and
(3) to any person, (i) in an amount or amounts aggregating not more than $10,000.00, upon the pledge of securities which (a) have a value not less than twice the amount of such loan, and (b) are of the kind in which a savings bank may by law invest, or (c) if not eligible for such investment, have a readily ascertainable market value or are listed upon a registered stock or securities exchange, or (ii) in an amount or amounts aggregating not more than $20,000.00 upon the pledge of stocks, bonds, and notes or obligations of or guaranteed by the United States, or those for which the credit of the United States is pledged for the payment of the principal and interest or dividends thereof, which have a value not less than 110% of such loan.
B. No savings bank shall make any loan of the character described in paragraphs (2) or (3) of subsection A of this section at any time when the total of all such loans made pursuant to both of such paragraphs exceed, or if the making of such a loan would cause such total to exceed, 10% of its deposits.
##### **§ 17:9A-182.1** Regulations authorizing certain loans and investments; powers of commissioner {#sec-17-9a-182.1 omnilex-key=us-nj-statutes--title-17--17:9A-182.1}
The Commissioner of Banking and Insurance shall have power to make, amend and repeal regulations authorizing savings banks to make specified kinds of loans or investments not authorized by the act to which this act is a supplement, or not otherwise authorized; except that the commissioner shall not make or continue in force any regulation authorizing savings banks to make any kind of loan or investment which Federally chartered savings and loan associations are not authorized to make.
##### **§ 17:9A-182.2** Objective of regulations {#sec-17-9a-182.2 omnilex-key=us-nj-statutes--title-17--17:9A-182.2}
In exercising the power conferred upon him by this act, the commissioner shall consider the statutes, regulations and rulings governing the lending and investing powers of Federally chartered savings and loan associations, and the regulations made by him shall have as their objective the placing of savings banks on a substantial competitive parity with Federally chartered savings and loan associations.
##### **§ 17:9A-182.3** Investment in specified investment securities not otherwise authorized; regulations {#sec-17-9a-182.3 omnilex-key=us-nj-statutes--title-17--17:9A-182.3}
The Commissioner of Banking shall have power to make, amend and repeal regulations authorizing savings banks to invest in specified investment securities not authorized by the act to which this is a supplement, or not otherwise authorized. "Investment securities" means those marketable corporate obligations in the form of bonds, debentures or similar instruments as are commonly known as investment securities under such further definition of investment securities as may be prescribed by the commissioner pursuant to P.L.1948, c. 67 s. 60 (C. 17:9A-60(2)).
##### **§ 17:9A-183** Legality of investments; retention of investments {#sec-17-9a-183 omnilex-key=us-nj-statutes--title-17--17:9A-183}
A. The board of managers, in determining whether any investment is lawful, may rely upon statistical, financial, corporate or other information as to such investment, and upon ratings or other opinion as to the financial or other status thereof or its legality for investment, contained in or offered by any financial, statistical, investment, rating or other publication or service published for the use of investors and accepted as reliable by the commissioner, or upon information contained in the prospectus circulated with a new issue and filed with the Securities and Exchange Commission.
B. An investment made by a savings bank, legal when made, may be retained by a savings bank, but nothing herein shall relieve the board of managers from the duty to exercise reasonable discretion in deciding whether to retain or to dispose of such investment; provided, that any securities issued in exchange for a lawful investment under any reorganization or recapitalization, if not legal for investment, shall be sold or disposed of within five years from the time of acquisition by the savings bank, unless, upon application by the savings bank to the commissioner, he shall extend the time for the sale or disposition thereof.
##### **§ 17:9A-184** Deposits; maximum and minimum amounts {#sec-17-9a-184 omnilex-key=us-nj-statutes--title-17--17:9A-184}
A. Subject to paragraph C. of this section, a savings bank may receive on deposit any sum of money which may be offered for that purpose.
B. A savings bank may (1) subject to paragraph C. of this section, limit to any sum it deems expedient, the aggregate amount which any one depositor may deposit, and (2) fix the minimum amount of any deposit which it will receive at not over $10.00, and (3) refuse to receive a deposit, and (4) return all or any part of any deposit at any time.
C. A savings bank may receive any deposit to the credit of a depositor, if the aggregate of the balances of all accounts of such depositor does not exceed, or as a result of receiving such deposit would not exceed $150,000.00, and a savings bank may receive additional deposits from such depositor if made:
(a) Pursuant to the order or direction of any court of record or officer of any such court,
(b) To the credit of any governmental, State, county, municipal or other public authority, body, board, officer or agent,
(c) To the credit of any religious, charitable, cemetery, educational, benevolent or other corporation, association, organization or society established or existing for any lawful purpose other than for pecuniary profit, or
(d) To the credit of any unincorporated or incorporated labor union, welfare, strike, benefit or insurance fund, any foundation created by will or otherwise, or any profit sharing, welfare or pension fund or employee thrift fund created jointly or individually by any person, firm or corporation,
(e) Pursuant to regulations from time to time promulgated by the commissioner.
##### **§ 17:9A-185** Payment to depositors; regulations {#sec-17-9a-185 omnilex-key=us-nj-statutes--title-17--17:9A-185}
Subject to the provisions of article 35, the deposits made in a savings bank, together with any dividend or interest credited thereto, shall be repaid to the depositors, or to their legal representatives or other persons entitled thereto, after demand, in such amounts, in such manner, at such times, upon such notice and under such regulations, as the board of managers may from time to time prescribe. The regulations (1) shall be posted in a conspicuous place in the principal room or rooms where deposits are customarily received, and (2) copies shall be provided for each depositor, and (3) shall be evidence between the savings bank and the depositors of the terms upon which deposits are made and held.
##### **§ 17:9A-186** Interest and dividends {#sec-17-9a-186 omnilex-key=us-nj-statutes--title-17--17:9A-186}
A. Except as may otherwise be hereinafter provided or provided by law now or hereafter enacted or by rules and regulations promulgated pursuant to law or to which the savings bank is subject by reason of membership in the Federal Deposit Insurance Corporation or any successor corporation having for its purpose the insurance of deposits, every savings bank
(1) shall allow interest or dividends upon the deposits therewith, so that the depositors receive, as nearly as possible, all the profits of the savings bank, after deducting necessary expenses and reserves and after reserving an amount the managers deem expedient as a surplus or contingent fund for the security of depositors, which, to the amount of 20% of the deposits, the managers may accumulate and hold, to meet any contingency or loss;
(2) may (a) classify its depositors according to the character, amount, activity and duration of their dealings with it, and (b) regulate such interest or dividends as are allowed so that each depositor receives the same ratable proportion of interest or dividends as all others of his class;
(3) shall not declare or allow interest or dividends on any deposits for a longer period than they have been deposited, except that (a) deposits made not later than the fifth business day of any monthly period for which interest or dividends are declared or allowed, or the tenth business day of the month commencing any quarterly or longer interest or dividend periods, may have interest or dividends declared upon them for the whole of the period or month when so deposited; and (b) deposits withdrawn during the last 3 business days of any quarterly or longer interest or dividend period may have interest allowed or dividends declared and credited upon them for the whole of such period;
(4) shall, within 1 year of the time its surplus reaches an amount equal to 20% of such deposits, divide equitably substantially all of the surplus in excess, at the time of such division, of 20% of such deposits, as an additional dividend to depositors, in addition to other interest or dividends herein authorized; provided, that no such additional dividend shall be declared or paid except after 1 month's prior written notice to the commissioner of its intention to declare and pay such additional dividend;
(5) may refuse to allow interest or dividends on deposit balances of less than a specified minimum amount;
(6) may refuse to allow interest or dividends upon sums on deposit for less than a specified minimum period; and
(7) may refuse to allow interest or dividends for a fractional part of a month or other interest or dividend period, or upon a fractional part of a dollar or other specified multiple thereof.
B. No dividends or interest shall be declared, credited or paid, except by the authority of a vote of the board of managers duly entered upon its minutes. No savings bank which is a qualified bank shall declare or pay any interest or dividend in an amount which would reduce its surplus to less than $500,000.00.
##### **§ 17:9A-187** Reserve balances {#sec-17-9a-187 omnilex-key=us-nj-statutes--title-17--17:9A-187}
A. Every savings bank shall maintain reserve balances on deposits and on such other liabilities of the savings bank in amounts as prescribed by the Federal Reserve Board pursuant to the "Depository Institutions Deregulation and Monetary Control Act of 1980," P.L. 96-221, and in such additional amounts as the Commissioner of Banking may prescribe from time to time by regulation if he deems those additional amounts necessary for the safety and soundness of the institution. The reserve balances may consist of (1) lawful currency of the United States, (2) demand deposits made (a) in a reserve depositary as defined in section 49, or (b) in a federal home loan bank of which the savings bank is a member, or (c) subject to the approval of the commissioner, in any bank, savings bank or trust company incorporated under the laws of any state of the United States or the District of Columbia, whether or not such bank, savings bank or trust company is a member of the Federal Reserve System, (3) immediately available funds which are transferred or sold by such savings bank to a member or nonmember bank of the Federal Reserve System for a period not to exceed the opening of business on the next succeeding banking day for such savings bank or (4) such other assets as the Commissioner of Banking may from time to time prescribe by regulation. Any additional reserve amounts prescribed by the commissioner pursuant to this subsection shall not exceed the amounts established for like institutions by the Federal Reserve Board.
B. The Commissioner of Banking may by regulation prescribe the method to be used in computing the required reserve.
##### **§ 17:9A-188** Board of managers; number; qualifications; oath {#sec-17-9a-188 omnilex-key=us-nj-statutes--title-17--17:9A-188}
188. Board of managers; number; qualifications; oath.
A. (1) Except as otherwise provided by subsection L of this section, every savings bank shall be managed by a board of not less than five and not more than twenty-one managers.
(2) For the first five years of operation, not less than two-thirds of the managers of a de novo savings bank shall be residents and citizens of this State.
B. Each manager shall, following his election and before he assumes office, take an oath that he will, so far as the duty devolves upon him, diligently and honestly administer the affairs of the savings bank, and that he will not knowingly violate or knowingly permit to be violated, any provisions of law applicable to the savings bank. Such oath shall be subscribed by the manager making it, certified by the officer before whom it is taken, and shall be transmitted to the commissioner and filed in the department.
C. A manager who, within thirty days after his election, or, in case of his disability, within such further time as the commissioner shall fix, fails to subscribe the oath specified in subsection B of this section, shall cease to be a manager.
D. Vacancies in the board of managers shall be filled by the board within one year after the vacancies occur. If the board fails to do so, the commissioner may fill any vacancy with a person qualified under this article.
E. The board of managers may meet at such times and so often as they shall deem necessary, but shall meet at least once in each calendar month excepting July and August. A meeting held in January of each year shall be designated the annual meeting of the board; or, in the case of a savings bank operating on a fiscal-year basis, the annual meeting shall be held no later than 120 days after the closing of the fiscal year.
F. Managers shall be elected by a plurality of the votes of the members of the board of managers at the time in office, present and voting at such election, including those managers whose terms are then expiring. Except as hereinafter provided, each manager shall be elected for a term of three years, and until his successor is elected and shall have qualified. Managers shall be eligible for election to succeed themselves. Elections of managers shall be held annually at an annual meeting of the board.
G. Every savings bank hereafter organized shall, at the first meeting of its board of managers, divide the managers named in its certificate of incorporation into three classes of equal size; the members of one class shall hold office until the first annual meeting of the board next succeeding the first meeting; the members of one class shall hold office until the second annual meeting next succeeding the first meeting; and the members of one class shall hold office until the third annual meeting next succeeding the first meeting, so that, at each election of managers following the first meeting, an equal number of managers shall be elected.
H. Every savings bank organized prior to the effective date of P.L.1992, c.187 shall, commencing with the first annual meeting of the board following the effective date of P.L.1992, c.187, elect managers as terms expire for terms of three years.
I. The requirements of subsections G and H of this section shall be satisfied if the number of managers in any one class of managers does not exceed by more than one the number of managers in any other class.
J. All classifications and elections of managers made pursuant to this section shall be certified by any two officers of the savings bank, and shall be filed in the department within fifteen days after such classification or election.
K. Except as herein otherwise provided, the acts of a majority of the board of managers at any time in office shall be the acts of the savings bank.
L. Upon the merger of two or more savings banks, the board of managers of the receiving savings bank, as defined in section 205 of P.L.1948, c.67 (C.17:9A-205), may consist of not less than five and not more than the total number then in office of the managers of all the savings banks which are parties to the merger. So long as the board of managers of such receiving bank shall exceed twenty-one in number (1) the number of managers shall not be increased, but may be decreased to any number not less than five; (2) vacancies in the board of managers shall not be filled; and (3) the requirements of subsections G and H of this section shall be satisfied if the number of managers in any one class or in any two classes of managers does not exceed by more than one the managers in the remaining classes or class. For the purposes of this subsection, the expiration of the term for which a manager is elected shall not be deemed to create a vacancy.
##### **§ 17:9A-189** Board of managers; change in number {#sec-17-9a-189 omnilex-key=us-nj-statutes--title-17--17:9A-189}
A. Subject to the provisions of subsection L of section one hundred eighty-eight, the board of managers may, from time to time, increase or decrease the number of managers within the limits prescribed by subsection A of section one hundred eighty-eight; provided, that, except to the extent permissible pursuant to subsection I of section one hundred eighty-eight, (1) the number of managers after such increase or decrease shall be a multiple of three, and (2) such increase or decrease shall not create a disparity between the numbers of members in the several classes.
B. A copy of the resolution changing the number of managers, certified by two officers of the savings bank, shall be filed in the department within fifteen days after its adoption.
##### **§ 17:9A-190** By-laws; chairman of the board; committees {#sec-17-9a-190 omnilex-key=us-nj-statutes--title-17--17:9A-190}
A. The board of managers of every savings bank shall have power to make, amend and repeal by-laws not inconsistent with this act, providing for the management of its property; the regulation and government of its affairs; the terms of office, manner of appointment, duties and powers of officers and committees; and such other matters as the board may from time to time deem advisable.
B. The by-laws may provide for and the board of managers may appoint or elect a chairman of the board of managers; an executive committee of the board of managers; a trust committee, when the savings bank is a qualified bank; and other committees. For the purpose of this section, the provisions of sections 107, 108, 109 and 110 shall be applicable to savings banks, and the board of managers shall have all the powers and be subject to all the limitations therein conferred or imposed upon the board of directors, and the chairman of the board of managers, the executive committee, the trust committee, and other committees shall, respectively, have the powers and be subject to the limitations imposed by sections 107, 108, 109 and 110.
##### **§ 17:9A-191** Officers; tenure {#sec-17-9a-191 omnilex-key=us-nj-statutes--title-17--17:9A-191}
191. The board of managers may elect from its own number or otherwise, such officers as it may from time to time see fit or may delegate the authority to appoint officers other than the president or chairman to the president by resolution of the board of managers or by the bylaws. The tenure of officers shall be fixed in the bylaws or by resolution of the board of managers.
##### **§ 17:9A-192** Officers and managers; removal {#sec-17-9a-192 omnilex-key=us-nj-statutes--title-17--17:9A-192}
A. A manager of a savings bank may be removed at any time by vote of two-thirds of the entire membership of the board at the time in office.
B. An officer of a savings bank may be removed at any time by vote of a majority of the entire membership of the board at the time in office.
##### **§ 17:9A-193** Officers and managers; compensation {#sec-17-9a-193 omnilex-key=us-nj-statutes--title-17--17:9A-193}
A savings bank may pay its managers for attendance at meetings of the board, or for service upon committees, or for other service rendered, such reasonable compensation as shall be from time to time fixed by a vote of a majority of the board of managers; and it may pay its officers and employees such reasonable compensation as shall be fixed by the managers. The commissioner may direct that the amount of such compensation be reduced if in his judgment it is excessive.
##### **§ 17:9A-194** Officers and managers; bonding {#sec-17-9a-194 omnilex-key=us-nj-statutes--title-17--17:9A-194}
Every savings bank shall cause its managers, officers and employees to be bonded in the manner required by section 115. For the purposes of this section, "bank" as used in section 115 shall include savings banks, and "directors" as used in the said section, shall include managers of savings banks.
##### **§ 17:9A-195** Officers and managers; permitted loans {#sec-17-9a-195 omnilex-key=us-nj-statutes--title-17--17:9A-195}
Officers and managers; permitted loans. The Commissioner of Banking may promulgate rules and regulations for the purpose of establishing the terms and conditions of loans made by a savings bank to its managers, directors and officers and their families and other persons with which the manager, director or officer may be affiliated as stockholder, agent, trustee, partner, endorser, surety or obligor. The rules and regulations may prescribe limits on the amount of liability which may be incurred, establish criteria for the terms and security for the loans and set forth procedures for the review and approval of the loans by the management of the savings bank.
##### **§ 17:9A-196** Retirement benefits for officers and employees {#sec-17-9a-196 omnilex-key=us-nj-statutes--title-17--17:9A-196}
A savings bank may pay retirement and other benefits to its officers and employees in the manner provided by the Banks' and Savings Banks' Officers' and Employees' Retirement and Benefit Act.
##### **§ 17:9A-197** Amendments to certificate of incorporation; objects {#sec-17-9a-197 omnilex-key=us-nj-statutes--title-17--17:9A-197}
A savings bank may, by amending its certificate of incorporation in the manner provided by this article
(1) change its corporate name; or
(2) assume the authority to exercise any or all of the powers specified in paragraphs (1), (5), (6) and (9) of section 28; or
(3) relinquish the authority to exercise any or all of the powers specified in section 28; or
(4) effect any other object which pursuant to any other provision of this act is required or permitted to be effected by amendment of the certificate of incorporation.
##### **§ 17:9A-197.1** Savings bank official immunity {#sec-17-9a-197.1 omnilex-key=us-nj-statutes--title-17--17:9A-197.1}
Notwithstanding the provisions of section 197 of P.L. 1948, c. 67 (C. 17:9A-197), a savings bank may, by amending its certificate of incorporation in the manner provided in section 198 of P.L. 1948, c. 67 (C. 17:9A-198), provide that a manager or officer shall not be personally liable, or shall be liable only to the extent therein provided, to the savings bank or its depositors for damages for breach of any duty owed to the savings bank or its depositors, except that such provision shall not relieve a manager or officer from liability for an act or omission (a) in breach of such person's duty of loyalty to the savings bank or its depositors, (b) not in good faith or involving a knowing violation of law or (c) resulting in receipt by such person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the savings bank or its depositors in connection with a matter in which he has a material conflict of interest.
The Commissioner of Banking shall approve such amendment unless he finds that it unreasonably affects the interests of the depositors.
##### **§ 17:9A-198** Amendment procedure {#sec-17-9a-198 omnilex-key=us-nj-statutes--title-17--17:9A-198}
198. A. Whenever the board of managers of any savings bank shall deem it advisable to amend the certificate of incorporation, it shall, by a vote of not less than 2/3 of the managers then in office, adopt a resolution setting forth the proposed amendment, and shall publish notice of intention to apply to the commissioner for approval of such amendment at least once a week for four successive weeks, in the manner provided in section 10. A copy of the resolution, certified by two officers, together with proof of such publication and a certified statement that the amendment was made for a purpose authorized by law in the manner specified by this section shall be submitted to the commissioner for approval. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment.
B. When the amendment is for the purpose specified in paragraph (2) of section 197, the commissioner shall give special consideration to the following:
(1) the needs of the community for trust services, and the probable volume of trust business which will be available to the savings bank;
(2) the condition of the savings bank, particularly the adequacy of its capital deposits, if any and surplus in relation to its deposit liabilities and other corporate responsibilities, including the proposed exercise of fiduciary powers; but no savings bank shall be authorized to make such an amendment unless its capital deposits, if any, and surplus amount to at least $500,000.00;
(3) the general character and ability of the management of the savings bank;
(4) the nature of the supervision to be given to the proposed fiduciary activities;
(5) the qualifications, experience and character of the proposed officer or officers who will have control or supervision of the proposed fiduciary activities;
(6) whether the savings bank has available competent legal counsel to advise and pass upon trust matters whenever necessary; and
(7) any other matters which, in the discretion of the commissioner, are relevant.
##### **§ 17:9A-199** What savings banks may merge {#sec-17-9a-199 omnilex-key=us-nj-statutes--title-17--17:9A-199}
Any two or more savings banks, may, with the approval of the commissioner, merge one or more of them into another of them, as provided herein.
##### **§ 17:9A-200** Merger agreement; authorization {#sec-17-9a-200 omnilex-key=us-nj-statutes--title-17--17:9A-200}
The boards of managers of the several savings banks proposing to merge shall, by a vote of two-thirds of the members of each board then in office, authorize the execution of a merger agreement which shall contain the matters required to be set forth as provided in section 134, so far as applicable, and, for the purposes of this section, the word "directors" as used in section 134, shall be deemed to mean managers.
##### **§ 17:9A-201** Adjustment of interests of depositors {#sec-17-9a-201 omnilex-key=us-nj-statutes--title-17--17:9A-201}
The merger agreement, for the purpose of equalizing or adjusting the interests of the respective depositors of the merging savings banks in the respective surpluses thereof, or in the respective assets thereof according to a fair valuation, may provide for the declaration and payment of a special dividend, at the time and in the manner therein provided, to the respective depositors who are such at the close of business on the day preceding the meetings of the respective boards of managers to take action upon the proposed merger agreement, or may provide for the distribution of specified assets among such depositors.
##### **§ 17:9A-202** Surplus requirements {#sec-17-9a-202 omnilex-key=us-nj-statutes--title-17--17:9A-202}
The surplus of the savings bank after the merger shall at least equal the sum of the following:
(1) the minimum capital deposits required of a savings bank on its establishment at the location to be occupied by the principal office of the savings bank after the effective date of the merger, as such minimum is specified in section 8, and
(2) an amount equal to the minimum surplus as required in subsection D of section 19 for each branch office to be maintained by the savings bank after the effective date of the merger.
##### **§ 17:9A-203** Approval of agreement by commissioner; review {#sec-17-9a-203 omnilex-key=us-nj-statutes--title-17--17:9A-203}
The merger agreement, executed by all the parties thereto, shall be submitted to the commissioner, and thereafter all proceedings thereon shall be as prescribed by section 136.
##### **§ 17:9A-204** Publication of notice of merger agreement; filing {#sec-17-9a-204 omnilex-key=us-nj-statutes--title-17--17:9A-204}
A. If the commissioner approves the merger agreement, it shall be open to the inspection of depositors and other parties in interest at the offices of the savings banks which are parties to the merger. Notice of the merger shall be published within fifteen days after the date of the approval by the commissioner, at least once, in a newspaper in which a notice under section 10 might be published, and proof of such publication shall be filed in the department, together with a copy of the merger agreement, and the merger shall thereupon become effective at the time specified in the merger agreement.
##### **§ 17:9A-205** Corporate existence; offices; rights and obligations {#sec-17-9a-205 omnilex-key=us-nj-statutes--title-17--17:9A-205}
A. Upon the merger of two or more savings banks
(1) the corporate existence of each merging savings bank shall be merged into that of the receiving savings bank, and the property and rights of each merging savings bank shall thereupon vest in the receiving savings bank without further act or deed;
(2) the receiving savings bank may, upon complying with the requirements of section 202, establish and maintain its principal office and branch offices at the locations specified in the merger agreement;
(3) the rights and obligations of each merging savings bank shall become the rights and obligations of the receiving savings bank;
(4) if the receiving savings bank is a qualified bank, all fiduciary and agency duties and relationships of each merging savings bank shall vest in the receiving savings bank and be performed by it in the same manner as though the receiving savings bank had itself originally assumed such fiduciary and agency duties and relationships;
(5) any pending action by or against a merging or receiving savings bank shall survive the merger and the receiving savings bank shall be substituted for the merging savings bank.
B. As used in this section,
(1) "merging savings bank" shall mean a savings bank which is merged into another savings bank;
(2) "receiving savings bank" shall mean a savings bank into which one or more other savings banks are merged.
##### **§ 17:9A-206** Certified copy of agreement; use as evidence; recording {#sec-17-9a-206 omnilex-key=us-nj-statutes--title-17--17:9A-206}
A. A copy of the merger agreement, certified by the commissioner, shall be evidence in all courts and places.
B. A copy of the merger agreement, certified by the commissioner, may be recorded in the office of the county recording officer charged with the duty of recording instruments affecting title to real property in such county, and such record shall have the same effect as if duly executed and acknowledged deeds to real property and assignments of mortgages affecting real or personal property owned by the merging savings banks had been made and delivered by the merging savings banks to the receiving bank, and had been duly recorded.
##### **§ 17:9A-207** Dissolution; procedure {#sec-17-9a-207 omnilex-key=us-nj-statutes--title-17--17:9A-207}
A. If the managers of a savings bank deem it advisable and in the public interest that the savings bank be dissolved, they shall, by the vote of at least 2/3 of all the managers, at a regular or at a special meeting called for the purpose upon not less than 20 days written notice, adopt a resolution to that effect.
B. A copy of the resolution, certified by any 2 officers of the savings bank, shall be filed in the department, together with an affidavit by such officers that the resolution was adopted in the manner prescribed by subsection A of this section, and the commissioner shall thereupon fix a time and place for a hearing, and shall require publication of notice of the impending dissolution to be made in newspapers and for the period specified in section 10.
C. If, as a result of such hearing, and upon proof by affidavit of 2 officers of the savings bank that publication of the notice has been made pursuant to subsection B of this section, the commissioner shall determine that it is in the public interest that the savings bank be dissolved, he shall make an order accordingly, to be filed in the department, and shall designate a date in such order upon which the dissolution shall become effective.
D. On and after that date so fixed by the commissioner, the savings bank shall be dissolved, and it shall transact no further business except that concerned with the winding up of its affairs. Upon its dissolution pursuant to this section, or pursuant to section 17, or pursuant to any other law of this State, the managers shall become trustees in dissolution, and the savings bank, its managers and creditors, including depositors, shall be subject to the provisions of chapter 12 of Title 14A of the New Jersey Statutes to the extent that such provisions are not inconsistent with this act.
##### **§ 17:9A-208** Surplus; determination by savings bank {#sec-17-9a-208 omnilex-key=us-nj-statutes--title-17--17:9A-208}
A. For the purpose of determining the surplus of a savings bank from time to time, the board of managers shall value the assets of the savings bank as follows:
(1) all bonds, notes and other obligations for the payment of money not in default as to principal or interest for more than one month, other than mortgage loans, shall be valued at the cost thereof to the savings bank, less, if the cost exceeds the face value thereof, an amount at least equal to the sum of (a) periodical amortization of such excess in an amount sufficient to reduce such cost to the face value thereof at the maturity thereof, and (b) additional amortization sufficient to reduce such cost to the price at which the same is redeemable at the time being or, if not then redeemable, at the earliest redemption date;
(2) mortgage loans shall be valued at the amount due thereon, unless in default, according to their terms, for more than three months;
(3) all bonds, notes and other obligations for the payment of money, other than mortgage loans, if in default as to principal or interest for more than one month, and all mortgage loans, if in default, according to their terms, for more than three months, and all other assets not otherwise specified in this section, shall be valued at such amounts as shall be determined by the board of managers to represent the true value thereof, not in excess of cost; and
(4) real property held by a savings bank in accordance with subparagraph (a) of paragraph (5) of section 24, and all fixtures, furniture and equipment, shall be valued at an amount not in excess of cost less depreciation, or, if cost is not ascertainable, at such amount as shall be determined by the board of managers to represent the true value thereof; provided, that in lieu of such valuation of the assets specified under the foregoing paragraphs (3) and (4) of this subsection, the board of managers may establish specific or general valuation reserves applicable thereto in amounts equal to the excess of the book value thereof on the books of the savings bank over such true value.
B. This section shall not affect
(1) the power of the commissioner to order a savings bank (a) to increase any valuation reserve established pursuant to subsection A of this section or (b) to write down any asset valued in the manner required by this section, if, upon due consideration, he finds that (i) such reserve is insufficient, or (ii) the values determined by the board of managers do not represent true value, or (iii) conditions are such that the valuation of assets in the manner required by any provision of this section would constitute transacting business in an unsafe manner; or
(2) the power of the board of managers to establish valuation or other reserves applicable to specific assets or groups or classes of assets in such amounts as the board of managers may from time to time determine, notwithstanding that such assets have been valued in the manner required by this section; or
(3) the commissioner in the exercise of the powers conferred by section 265.
##### **§ 17:9A-209** Use of capital stock or surplus {#sec-17-9a-209 omnilex-key=us-nj-statutes--title-17--17:9A-209}
A. No bank shall use any part of its capital stock or surplus paid in pursuant to its certificate of incorporation until it receives a certificate of authority pursuant to section 14.
B. No savings bank shall use any part of its capital deposits paid in pursuant to its certificate of incorporation until it receives a certificate of authority pursuant to section 14.
##### **§ 17:9A-210** Write-up of assets; changes in reserves {#sec-17-9a-210 omnilex-key=us-nj-statutes--title-17--17:9A-210}
No bank or savings bank shall, except with the written approval of the commissioner, write up any of its assets, or reduce or eliminate any reserve which shall have been established by it pursuant to paragraph (4) of subsection A of section 50, or with respect to its furniture and fixtures, its banking houses, or its other real estate, or any other reserve which shall have been established at the direction of the commissioner; but this section shall not prevent a charge to a reserve established for a specific purpose or contingency or a transfer from such a reserve when such purpose or contingency shall have happened or shall have been removed.
##### **§ 17:9A-211** Liability secured by own stock {#sec-17-9a-211 omnilex-key=us-nj-statutes--title-17--17:9A-211}
No bank shall permit the incurring of any liability to it on the security of shares of its own capital stock; but a bank may take shares of its own capital stock as security or additional security for a debt previously contracted in good faith.
##### **§ 17:9A-212** Acquisition of own stock {#sec-17-9a-212 omnilex-key=us-nj-statutes--title-17--17:9A-212}
Acquisition of own stock. a. Except as otherwise provided in this section, no bank or capital stock savings bank shall purchase or otherwise acquire shares of its own capital stock, except as a result of a merger or to prevent or minimize loss upon a debt previously contracted in good faith; shares of stock so purchased or acquired shall, not later than one year after the date of purchase or acquisition, be sold or be paid as a stock dividend, or be disposed of in part by sale and in part by payment of a stock dividend, as the board of directors may determine. The commissioner may, prior or subsequent to the expiration of the one year period or prior or subsequent to the expiration of any extended period, extend or further extend the time within which the actions required by this subsection may be done.
b. A bank or capital stock savings bank may, with the approval of the commissioner, provide in its original or amended certificate of incorporation for the acquisition, through purchase, of shares of its own capital stock. Shares so purchased or shares which the bank or capital stock savings bank may otherwise be authorized to issue may, with the approval of the commissioner, be sold by the bank or capital stock savings bank to those of the bank's or capital stock savings bank's stockholders who pay therefor with cash dividends declared by the bank or capital stock savings bank on its capital stock. These shares may, with the approval of the commissioner, be purchased by the bank or capital stock savings bank for such other uses and purposes, not contrary to law or sound banking principles, and for such consideration as the board of directors may from time to time determine. All shares acquired pursuant to this subsection shall be designated as "treasury stock," and, so long as they remain the property of the bank or capital stock savings bank, they shall not constitute capital stock for the purposes of P.L. 1948, c. 67 (C. 17:9A-1 et seq.).
##### **§ 17:9A-213** Limitations on exercise of powers. {#sec-17-9a-213 omnilex-key=us-nj-statutes--title-17--17:9A-213}
213. Limitations on exercise of powers.
(a) Except as otherwise provided by law, only a banking institution shall exercise within this State any of the powers enumerated in paragraph (4) of section 24 of P.L.1948, c.67 (C.17:9A-24), paragraphs (4), (5) and (13) of section 25 of P.L.1948, c.67 (C.17:9A-25), and paragraphs (1) and (5) of section 26 of P.L.1948, c.67 (C.17:9A-26), and except as otherwise provided in this section, no corporation other than a qualified bank shall exercise within this State any of the powers specified in paragraphs (3), (4), (5), (6), (7), (8) and (9) of section 28 of P.L.1948, c.67 (C.17:9A-28), provided that no corporation organized prior to March 24, 1899, authorized to exercise all or any of the powers specified in paragraph (13) of section 25 of P.L.1948, c.67 (C.17:9A-25) or in paragraph (3) of section 28 of P.L.1948, c.67 (C.17:9A-28), shall be prohibited from exercising such powers, and further provided that if, prior to the effective date of this amendatory act, a not-for-profit corporation was exercising any of the powers specified in paragraph (6) or (9) of section 28 of P.L.1948, c.67 (C.17:9A-28) as trustee of a trust created to administer insurance programs, that corporation shall not be prohibited, on and after the effective date of this act, from exercising the powers specified in paragraph (6) or (9) of section 28 of P.L.1948, c.67 (C.17:9A-28) over the trust, and further provided that no qualified corporation, as hereinafter defined, shall be prohibited from exercising all or any of the powers specified in paragraph (3) of section 28 of P.L.1948, c.67 (C.17:9A-28), or in paragraph (13) of section 25 of P.L.1948, c.67 (C.17:9A-25). A qualified corporation shall mean a domestic corporation or a foreign corporation authorized to transact business in this State and registered with the Department of Banking and Insurance which (a) has such capital, surplus and undivided profits as may be fixed by the Commissioner of Banking and Insurance commensurate with the nature and volume of its business; (b) has adequate vault or other safe keeping facilities for the safeguarding of stocks and other securities received, processed or otherwise held for the account of customers; and (c) is adequately insured, as may be provided by regulation, to protect its customers and the holders or transferees of securities issued by its customers.
(b) Notwithstanding the provisions of subsection (a) of this section to the contrary, a qualified educational institution shall not be prohibited from exercising the powers specified in paragraphs (6) and (9) of section 28 of P.L.1948, c.67 (C.17:9A-28) as trustee of funds in which the qualified educational institution has a qualifying interest. For the purposes of this subsection, a "qualified educational institution" means a not-for-profit corporation which is operated pursuant to Title 15A of the New Jersey Statutes (N.J.S.15A:1-1 et seq.) and which is organized and operated exclusively for educational purposes, is exempt from federal income taxation pursuant to paragraph (3) of subsection (c) of section 501 or section 115 of the Internal Revenue Code of 1986, 26 U.S.C. s.501(c)(3) and 26 U.S.C. s.115, and has registered with the department pursuant to this section. A "qualified interest" means the interest of the qualified educational institution as an income beneficiary, a principal beneficiary of a trust, or both, which is a charitable remainder trust, charitable lead trust or a pooled income fund, as those terms are commonly used under the Internal Revenue Code, or a similar split interest trust, and in which the qualified educational institution is entitled to receive at least 51% of the income of the trust or 51% of the principal.
(c) Each qualified educational institution shall:
(1) have unrestricted net assets (as defined by the Statement of Financial Accounting Standard (SFAS) No. 117, "Financial Statement of Not-for-Profit") in an amount fixed by the commissioner commensurate with the volume of its trust operations;
(2) provide for adequate vault or other safe-keeping facilities for the safeguarding of stocks and other securities held for their trust accounts;
(3) be adequately insured, as required by regulation;
(4) have officers or other employees determined by the commissioner to possess the qualifications, experience and character required for the duties and responsibilities for which they will be responsible in administering and investing the assets of the trusts: and
(5) have available competent legal counsel to advise and pass upon trust matters whenever necessary.
(d) A qualified corporation and qualified educational institution shall be subject to any regulations which may be adopted by the Commissioner of Banking and Insurance and subject to examination by the Department of Banking and Insurance to ensure compliance with those regulations, the cost of which shall be paid by the qualified corporation or qualified educational institution. The Commissioner of Banking and Insurance may require qualified corporations and qualified educational institutions to file any reports the commissioner deems necessary to determine compliance with any regulations which may be issued and to pay fees set by regulation for filing those reports and for registering with the Department of Banking and Insurance.
(e) All moneys, securities and other properties held by a qualified educational institution in trust pursuant to this section shall be kept separate and apart from the moneys, securities and other property belonging to the qualified educational institution. The requirements of this subsection shall be satisfied as long as the qualified educational institution maintains at all times records that show the name of the party on whose account the moneys, securities and other property are held. All moneys, securities and other property held by a qualified educational institution in trust pursuant to this section shall not be liable for the debts and obligations of the qualified educational institution.
(f) Subsections (c) and (d) of this section shall not apply to any qualified educational institution that was acting as a trustee prior to 1983, that holds in unrestricted assets an amount equal to ten times all assets under trust management and that has over $100 million under trust management.
##### **§ 17:9A-213.1** Limitation on powers of banks, savings banks. {#sec-17-9a-213.1 omnilex-key=us-nj-statutes--title-17--17:9A-213.1}
213.1. Except as in this act or otherwise by law provided, and except for letters of credit issued pursuant to N.J.S.12A:5-101 et seq., no bank or savings bank shall have power to guarantee the obligations of others; or to insure or indemnify against the acts, omissions, undertakings, liabilities or losses of others.
##### **§ 17:9A-213.2** Violations of law, regulation by qualified corporation; penalty {#sec-17-9a-213.2 omnilex-key=us-nj-statutes--title-17--17:9A-213.2}
If the Commissioner of Banking finds that a qualified corporation is conducting its business in violation of any law or regulation of this State or in a manner hazardous to the citizens of this State or any other state, he shall order the qualified corporation to cease its ultra vires or hazardous practices, as the case may be. A qualified corporation that continues to conduct business in violation of any law or regulation of this State or in a manner hazardous to the citizens of this State or any other state, shall be liable to a penalty of $1,000 for each day the default continues after the time specified in the order.
##### **§ 17:9A-214** Violations; penalty {#sec-17-9a-214 omnilex-key=us-nj-statutes--title-17--17:9A-214}
A violation of this article shall be a misdemeanor and the Superior Court shall have jurisdiction to enjoin such violation at the suit of the commissioner.
##### **§ 17:9A-215** Minors' deposit accounts {#sec-17-9a-215 omnilex-key=us-nj-statutes--title-17--17:9A-215}
Deposits may be made with a banking institution by or in the name of a minor. A minor may endorse and deposit to the credit of his account with a banking institution checks and other instruments for the payment of money which are payable to him or to his order. Moneys to the credit of such an account shall be subject to withdrawal by the minor by checks or other instruments for the payment of money. In all transactions with respect to such an account a minor shall, as between himself and the banking institution, be deemed to be of legal age.
##### **§ 17:9A-219** Cofiduciaries' deposit accounts {#sec-17-9a-219 omnilex-key=us-nj-statutes--title-17--17:9A-219}
Instruments for the payment of money may be indorsed and deposited to the credit of an account of cofiduciaries with a banking institution, and withdrawals may be made from such account by check or otherwise, by any one or more of such cofiduciaries who shall be authorized in writing by all the cofiduciaries to make such indorsements and deposits or withdrawals, unless the will or other instrument or the court order or decree under which such cofiduciaries are acting otherwise provides.
##### **§ 17:9A-221** Authority of depositor's agent to indorse and deposit instruments after death or incompetency of the depositor {#sec-17-9a-221 omnilex-key=us-nj-statutes--title-17--17:9A-221}
The death or incompetency of a depositor who has in writing appointed an agent to indorse instruments for the payment of money and to deposit such instruments to the credit of the depositor's account with a banking institution shall not terminate the authority of the agent to make such indorsements and deposits and such authority shall continue until the banking institution shall receive, at the office in which the account is maintained, actual notice of such death or incompetency.
##### **§ 17:9A-222** Deposits of interstate bodies {#sec-17-9a-222 omnilex-key=us-nj-statutes--title-17--17:9A-222}
A banking institution accepting deposits from the Port of New York Authority, or the Palisades Interstate Park Commissioners, or the Delaware River Joint Commission may give a good and sufficient undertaking, with such surety as shall be approved by such depositor, that the banking institution shall faithfully pay upon the order of the depositor all moneys to the credit of the depositor, at such times or upon such demands as may be agreed upon with such depositor, or, in lieu of such surety, furnish security for such deposits of such character and amount and upon such terms and conditions as may be agreed upon.
##### **§ 17:9A-223** Adverse claim to deposits {#sec-17-9a-223 omnilex-key=us-nj-statutes--title-17--17:9A-223}
Notice to any banking institution of an adverse claim to a deposit to the credit of any person shall not be effectual to cause the banking institution to recognize the adverse claimant unless the adverse claimant shall either procure a restraining order, injunction or other appropriate process against the banking institution from a court of competent jurisdiction in a cause wherein the person to whose credit the deposit stands is a complainant or is a defendant who has been served with process, or shall execute and deliver to the banking institution, in form and with surety acceptable to it, a bond indemnifying the banking institution against any liability, loss, damage, costs and expenses on account of the payment of the adverse claim or the dishonor of checks, notes or other instruments requiring payment of money by or for the account of the person to whose credit the deposit stands on the books of the banking institution. This section shall not apply when the person to whose credit the deposit stands is a fiduciary for the adverse claimant, and the facts showing such relationship and reasonable cause for belief that the fiduciary is about to misappropriate the deposit are made to appear by affidavit of the claimant.
##### **§ 17:9A-224** Postponement of deposit payments by commissioner {#sec-17-9a-224 omnilex-key=us-nj-statutes--title-17--17:9A-224}
A. The commissioner may, whenever in his judgment the circumstances so warrant, direct any bank or savings bank:
(1) to postpone for any length of time the payment of all or any proportion of its demand or time deposits, as he may deem necessary and expedient, to be determined by him according to the ability of the bank or savings bank to pay withdrawals; and
(2) thereafter to receive new deposits upon such terms as shall be approved by the commissioner.
B. Whenever the commissioner shall direct any bank or savings bank to act under the provisions of this section, he may make such rules and regulations as he shall deem proper for the protection of the bank or savings bank and its depositors, and may require daily reports of its financial condition and operations.
C. All moneys received by a bank or savings bank as new deposits pursuant to paragraph (2) of subsection A of this section shall be given preference over all liabilities of the bank or savings bank incurred prior to action by the commissioner pursuant to this section.
##### **§ 17:9A-224.1** Savings account promotions conducted by bank. {#sec-17-9a-224.1 omnilex-key=us-nj-statutes--title-17--17:9A-224.1}
1. a. A bank or savings bank may conduct a savings promotion provided that the bank or savings bank:
(1) conducts the promotion in a manner so as to ensure that each entry has an equal chance of winning the designated prize;
(2) fully discloses the terms and conditions of the promotion to each of its account holders;
(3) maintains records sufficient to facilitate an audit of the promotion;
(4) ensures that only account holders 18 years of age and older are permitted to participate in the promotion;
(5) does not require any consideration, other than the requirement that the participant deposit money into a savings account or other savings program to obtain entries in the promotion, to participate in the promotion; and
(6) offers an interest rate and charges fees on any qualifying account that are approximately the same as those on a comparable non-qualifying account.
b. For the purposes of this section, "savings promotion" means a raffle in which the sole consideration required for a chance of winning designated prizes is the deposit of a minimum specified amount of money in a savings account or other savings program.
##### **§ 17:9A-229.6** Notice of death of resident depositor; fee or service charge {#sec-17-9a-229.6 omnilex-key=us-nj-statutes--title-17--17:9A-229.6}
No bank or trust company after having received notice of the death of a resident depositor shall impose or collect a fee or service charge in connection with the maintenance of a checking account when held in the name of said resident decedent, in the joint names of said resident decedent and one or more persons in the name of said resident decedent's estate during the period when the funds in said account may not be withdrawn pending consent thereto by the Director of the Division of Taxation pursuant to the Transfer Inheritance Tax Law and regulations issued thereunder.
##### **§ 17:9A-247** Banking records {#sec-17-9a-247 omnilex-key=us-nj-statutes--title-17--17:9A-247}
247. Banking records.
a. Any banking institution may cause to have copied or reproduced by any photostatic, photographic, miniature photographic or any other process which correctly and accurately copies or reproduces, or forms a medium of copying or reproducing, all or any part of its documents and records relating to the accounts of its depositors and the operation of its business, other than its notes, bonds, mortgages and other securities and investments, and may substitute the copy or reproduction for the original thereof. Thereafter, the copy or reproduction shall be deemed for all purposes to be an original counterpart of the original thereof and shall have the same force and effect as the original thereof, and the banking institution may destroy or otherwise dispose of the original.
For the purposes of this section, open-end line-of-credit agreements, including, but not limited to, advance loan contracts made pursuant to P.L.1959, c.91 (C.17:9A-59.1 et seq.) and revolving credit equity loans pursuant to regulation of the commissioner, are not deemed to be notes, bonds, mortgages or other securities or investments and their copies shall be deemed to have the same force and effect as the originals, as set forth in this section.
b. The commissioner may adopt rules and regulations permitting the destruction of originals and copies of books, records, certificates, documents, reports, correspondence and other instruments, papers and writings of a banking institution, which, because of age or other reasons, need not be preserved.
##### **§ 17:9A-248** Fiduciary and agency records {#sec-17-9a-248 omnilex-key=us-nj-statutes--title-17--17:9A-248}
Any qualified bank, acting in any fiduciary or agency capacity, may cause to have copied or reproduced by any photostatic, photographic, or miniature photographic process which correctly and accurately copies or reproduces, or forms a medium of copying or reproducing, all or any part of its documents, books, records, correspondence and all other instruments, papers and writings relating to the conduct of its affairs in any fiduciary or agency capacity. Thereafter, the copy or reproduction, in the form of a positive print thereof, shall be deemed for all purposes to be an original counterpart thereof and shall have the same force and effect as the original thereof, and the qualified bank may destroy or otherwise dispose of the original.
##### **§ 17:9A-250** Action against directors, managers, officers or employees; indemnification {#sec-17-9a-250 omnilex-key=us-nj-statutes--title-17--17:9A-250}
Action against directors, managers, officers or employees; indemnification.
A. As used in this section
(1) "Corporate agent" means any person who is or was a director, officer, employee or agent of the indemnifying bank or of any constituent banking institution or corporation absorbed by the indemnifying bank in a consolidation or merger or created by or owned by the indemnifying bank and any person who is or was a director, officer, trustee, employee or agent of any other enterprise, serving as such at the request of the indemnifying bank, or of any constituent banking institution or corporation or the legal representative of any such director, officer, trustee, employee or agent;
(2) "Other enterprise" means any domestic or foreign corporation, other than the indemnifying bank, and any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, whether or not for profit, served by a corporate agent;
(3) "Expenses" means reasonable costs, disbursements and counsel fees;
(4) "Liabilities" means amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties;
(5) "Proceeding" means any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding;
(6) "Bank" includes savings bank and capital stock savings bank;
(7) "Directors" includes directors of a bank and capital stock savings bank and managers of a savings bank.
B. Any bank of this State shall have the power to indemnify a corporate agent against his expenses and liabilities in connection with any proceeding involving the corporate agent by reason of his being or having been such a corporate agent, other than a proceeding by or in the right of the bank, if
(1) Such corporate agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the bank;
(2) With respect to any criminal proceeding, such corporate agent had no reasonable cause to believe his conduct was unlawful.
The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that such corporate agent did not meet the applicable standards of conduct set forth in subdivisions (1) and (2) of this subsection.
C. Any bank of this State shall have the power to indemnify a corporate agent against his expenses in connection with any proceeding by or in the right of the bank to procure a judgment in its favor which involves the corporate agent by reason of his being or having been such corporate agent, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the bank. However, in such proceeding no indemnification shall be provided in respect of any claim, issue or matter as to which such corporate agent shall have been adjudged to be liable to the bank, unless and only to the extent that the Superior Court or other court in which such proceeding was brought shall determine upon application that despite the adjudication of liability, but in view of all circumstances of the case, such corporate agent is fairly and reasonably entitled to indemnity for such expenses as the Superior Court or other court shall deem proper.
D. Any bank of this State shall indemnify a corporate agent against expenses to the extent that such corporate agent has been successful on the merits or otherwise in any proceeding referred to in subsections B and C of this section or in defense of any claim, issue or matter therein.
E. Any indemnification under subsection B of this section, and, unless ordered by a court, under subsection C of this section, may be made by the bank only as authorized in a specific case upon a determination that indemnification is proper in the circumstances because the corporate agent met the applicable standard of conduct set forth in subsection B of this section or subsection C of this section. Unless otherwise provided in the certificate of incorporation or bylaws, the determination shall be made
(a) By the board of directors or a committee thereof acting by a quorum consisting of directors who were not parties to or otherwise involved in, the proceeding; or
(b) If such a quorum is not obtainable, or, even if obtainable and that quorum of the board of directors or committee by a majority vote of the disinterested directors so directs, by independent legal counsel in a written opinion, that independent legal counsel to be designated by the board of directors; or
(c) By the stockholders, if the certificate of incorporation or bylaws or a resolution of the board of directors or of the stockholders so directs, in the case of a bank which is not a savings bank, and by the commission, in the case of a savings bank.
F. Expenses incurred by a corporate agent in connection with a proceeding may be paid by the bank in advance of the final disposition of the proceeding, if authorized by the board of directors, upon receipt of an undertaking by or on behalf of the corporate agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified as provided in this section.
G. (1) If a bank upon application of a corporate agent has failed or refused to provide indemnification as required under subsection D of this section or permitted under subsections B, C and F of this section, a corporate agent may apply to a court for an award of indemnification by the bank, and such court
(2) May award indemnification to the extent authorized under subsections B and C of this section and shall award indemnification to the extent required under subsection D of this section, notwithstanding any contrary determination which may have been made under subsection E of this section; and
(3) May allow reasonable expenses to the extent authorized by, and subject to the provisions of, subsection F of this section, if the court shall find that the corporate agent has by his pleadings or during the course of the proceeding raised genuine issues of fact or law.
(4) Application for such indemnification may be made
(a) In the civil action in which the expenses were or are to be incurred or other amounts were or are to be paid; or
(b) To the Superior Court in a separate proceeding. If the application is for indemnification arising out of a civil action, it shall set forth reasonable cause for the failure to make application for such relief in the action or proceeding in which the expenses were or are to be incurred or other amounts were or are to be paid.
(5) The application shall set forth the disposition of any previous application for indemnification and shall be made in such manner and form as may be required by the applicable rules of court or, in the absence thereof, by direction of the court to which it is made. Such application shall be upon notice to the bank. The court may also direct that notice shall be given at the expense of the bank to the stockholders of a bank other than a savings bank and such other persons as it may designate in such manner as it may require.
H. The indemnification and advancement of expenses provided by or granted pursuant to the other subsections of this section shall not exclude any other rights, including the right to be indemnified against liabilities and expenses incurred in proceedings by or in the right of the bank, to which a corporate agent may be entitled under a certificate of incorporation, bylaw, agreement, vote of stockholders of a bank other than a savings bank, or otherwise; provided that no indemnification shall be made to or on behalf of a corporate agent if a judgment or other final adjudication adverse to the corporate agent establishes that his acts or omissions (a) were in breach of his duty of loyalty to the bank or its stockholders, (b) were not in good faith or involved a knowing violation of law or (c) resulted in receipt by the corporate agent of an improper personal benefit. As used in this subsection, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the bank, other than a savings bank, or its stockholders or the savings bank or its depositors in connection with a matter in which he has a material conflict of interest.
I. Any bank of this State shall have the power to purchase and maintain insurance on behalf of any corporate agent against any expenses incurred in any proceeding and any liabilities asserted against him by reason of his being or having been a corporate agent, whether or not the bank would have the power to indemnify him against those expenses and liabilities under the provisions of this section. The bank may purchase such insurance from, or such insurance may be reinsured in whole or in part by, an insurer owned by or otherwise affiliated with the bank, whether or not such insurer does business with other insureds.
J. The powers granted by this section may be exercised by a bank notwithstanding the absence of any provision in its certificate of incorporation or bylaws authorizing the exercise of such powers.
K. Except as required by subsection D of this section, no indemnification shall be made or expenses advanced by a corporation under this section, and none shall be ordered by the Superior Court or other court, if that action would be inconsistent with a provision of the certificate of incorporation, a bylaw, a resolution of the board of directors or of the stockholders, or an agreement or other proper corporate action, in effect at the time of the accrual of the alleged cause of action asserted in the proceeding, which prohibits, limits or otherwise conditions the exercise of indemnification powers by the corporation or the rights of indemnification to which a corporate agent may be entitled.
L. This section does not limit a bank's power to pay or reimburse expenses incurred by a corporate agent in connection with the corporate agent's appearance as a witness in a proceeding at a time when the corporate agent has not been made a party to the proceeding.
##### **§ 17:9A-251** Perpetual existence for banks and savings banks heretofore or hereafter organized {#sec-17-9a-251 omnilex-key=us-nj-statutes--title-17--17:9A-251}
Every bank and savings bank heretofore or hereafter organized, regardless of the term of its existence specified in its certificate of incorporation, shall have perpetual existence, subject to liquidation and dissolution as otherwise provided in this act.
##### **§ 17:9A-252** Definitions {#sec-17-9a-252 omnilex-key=us-nj-statutes--title-17--17:9A-252}
For the purposes of this article,
(1) "bank" shall mean a bank or savings bank;
(2) "board of directors" shall include the board of directors of a bank and the board of managers of a savings bank; and
(3) "director" shall include a director of a bank and a manager of a savings bank.
##### **§ 17:9A-253** Examinations of a bank by a public accountant or other qualified person {#sec-17-9a-253 omnilex-key=us-nj-statutes--title-17--17:9A-253}
A. The board of directors of every bank shall cause examinations of the affairs of the bank to be made from time to time by or under the supervision of a person who is not a director, officer or employee of the bank, and who is a public accountant, or such other person whose qualifications for making such examination have been approved by the commissioner. The scope of such examinations shall be determined by regulations of the commissioner or, in the absence of such regulations, by the board of directors of the bank. No person who is an officer or employee of the bank, and no person who, within a period of 13 months preceding the commencement of an examination made pursuant to this section was an officer or employee of the bank, shall participate in the making of any examination required by this section.
B. An examination pursuant to subsection A of this section shall be made at least once in each calendar year and shall be commenced not less than 6 months and not more than 15 months following the commencement of the next preceding examination made pursuant to subsection A of this section, but no such examination shall be commenced at any time when an examination pursuant to section 260 is being made.
C. The board of directors of a bank may, whenever it shall deem it advisable, cause examinations of the affairs of the bank to be made other than as required by this section.
##### **§ 17:9A-254** Report on examination; statement by directors; filing {#sec-17-9a-254 omnilex-key=us-nj-statutes--title-17--17:9A-254}
A. Within sixty days after the completion of an examination made pursuant to section 253, a report thereof, in such form as the commissioner may prescribe, certified by the person by whom or under whose supervision the examination was made, shall be presented to the directors at a meeting of the board. The board of directors thereupon shall cause a statement to be prepared showing in detail such of the assets of the bank, other than loans, which, in the judgment of the board, have a value less than the value at which they are carried on the books of the bank, and stating the value, in its judgment, of such assets. There shall also be included in the statement a list of those loans which, in the judgment of the board, are (1) worthless, or (2) doubtful, or (3) insufficiently secured.
B. Within the same sixty day period specified in subsection A of this section, the directors shall file in the department (1) a copy of the report of the examination, certified as required by said subsection, and (2) a copy of the statement prepared pursuant to said subsection, certified by an officer of the bank.
##### **§ 17:9A-255** Extensions of time by commissioner {#sec-17-9a-255 omnilex-key=us-nj-statutes--title-17--17:9A-255}
The commissioner shall have power, for good cause shown, to curtail the 6-month period specified in subsection B of section 253, and to extend the 15-month period specified in subsection B of section 253 for a period not exceeding 1 month in either case; and to extend the 60-day period specified in section 254 for a period not exceeding 30 days. No extension or curtailment shall be allowed by the commissioner which will result in the lapse of a calendar year without the commencement of an examination pursuant to section 253.
##### **§ 17:9A-256** Reports to commissioner; violations, penalties. {#sec-17-9a-256 omnilex-key=us-nj-statutes--title-17--17:9A-256}
256. A. Every bank and out-of-State bank with a branch office in this State shall make and file in the department, not less than two reports during each year, in the form prescribed by the commissioner.
B. Every report filed pursuant to subsection A of this section shall state in detail and under appropriate heads the assets and liabilities of the bank or out-of-State bank at the close of business on any day specified by the commissioner, and shall be filed in the department within ten days after the receipt by the bank or out-of-State bank of a request therefor. The report shall be attested by the signatures of at least three directors who are not officers of the bank or out-of-State bank, and shall be verified by the oaths of at least two officers of the bank or out-of-State bank. The commissioner may extend for not more than ten days the time within which such report shall be filed.
C. The commissioner shall have power to call for special reports from a bank or out-of-State bank when, in the commissioner's judgment, such special reports are necessary in order to obtain a full and complete knowledge of its condition.
D. A bank or out-of-State bank which fails to make and transmit a report required by this section shall be subject to a penalty of not more than $100 for each day during which such failure continues, and the commissioner may revoke or suspend its authority to do business in this State.
The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
E. The commissioner may waive the requirements of this section if the bank or out-of-State bank files a similar report with federal regulators and adequate provision is made for the commissioner to have access to that filing.
##### **§ 17:9A-258** Report of assets, liability; availability {#sec-17-9a-258 omnilex-key=us-nj-statutes--title-17--17:9A-258}
258. A summary of the report of assets and liabilities as of the end of the most recent fiscal year, required to be submitted to the department pursuant to section 256 of P.L.1948, c.67 (C.17:9A-256), shall be readily available to customers of the bank.
##### **§ 17:9A-260** Examination of banks by commissioner {#sec-17-9a-260 omnilex-key=us-nj-statutes--title-17--17:9A-260}
260. A. The commissioner shall, whenever and as often as the commissioner shall deem it advisable, cause the affairs of every bank, and every out-of-State bank with a branch office in New Jersey, to be examined to determine whether the bank or out-of-State bank is conducting its business in conformity with the laws of this State and its certificate of incorporation, and with safety to its depositors, other creditors and the public.
B. The officers and employees of every bank and out-of-State bank being examined shall exhibit to the examiners all its securities, books, records and accounts and shall otherwise facilitate the examination so far as it may be in their power.
C. The commissioner, a deputy commissioner, and every examiner assigned by the commissioner or by a deputy commissioner to examine the affairs of a bank or out-of-State bank may administer an oath to any person whose testimony is required for the purposes of the examination. The commissioner or deputy commissioner may compel the appearance of any person for the purposes of examination, by subpoena ad testificandum and the production of books, papers, documents, or other records by subpoena duces tecum.
D. For banks or out-of-State banks with branches in New Jersey and one or more states, the commissioner may contract with the state banking regulator in the other state or states where branch offices are located to conduct cooperative exams. Pursuant to those agreements, examiners of the department may examine branch offices of banks and out-of-State banks both in New Jersey and in other states, and examiners of other state banking regulators may examine branch offices of bank and out-of state- banks both in New Jersey and in other states. The fees for these examinations may be shared pursuant to a contract or agreement among the regulators.
##### **§ 17:9A-261** Enforcement of subpoena {#sec-17-9a-261 omnilex-key=us-nj-statutes--title-17--17:9A-261}
If any person shall refuse to obey a subpoena or a subpoena duces tecum issued pursuant to section 260, the Superior Court may, upon application by the commissioner and proof of such refusal, make an order directing such person to obey the subpoena or subpoena duces tecum, and may punish for contempt any person disregarding such order.
##### **§ 17:9A-262** False testimony; perjury {#sec-17-9a-262 omnilex-key=us-nj-statutes--title-17--17:9A-262}
A person who shall willfully testify falsely to a material and relevant matter, upon oath administered by the commissioner, a deputy commissioner, or an examiner pursuant to section 260 or section 261, shall be guilty of perjury.
##### **§ 17:9A-263** Immunity of person testifying {#sec-17-9a-263 omnilex-key=us-nj-statutes--title-17--17:9A-263}
Any person who has violated any provision of this act shall be a competent witness and compellable to testify in an examination as provided in sections two hundred sixty and two hundred sixty-one, but, when so compelled to testify, such person shall not be liable to criminal prosecution under this act or otherwise, for any matters in respect to which he shall be examined or to which his testimony shall relate except as provided in section two hundred sixty-two.
##### **§ 17:9A-264** Examinations confidential; subpoenas {#sec-17-9a-264 omnilex-key=us-nj-statutes--title-17--17:9A-264}
Every report and copy of a report of examination of a bank or out-of-State bank made by or under the supervision of the commissioner, and every report and copy thereof made by a bank or out-of-State bank pursuant to subsection C of section 256 of P.L.1948, c.67 (C.17:9A-256) shall be confidential, and shall not be made public by any officer, director or employee of a bank, and shall not be subject to subpoena or to admission into evidence in any action or proceeding in any court, except pursuant to an order of the court made upon notice to the commissioner and after affording the commissioner an opportunity to advise the court of reasons for excluding from evidence such report or any portion thereof. The court shall order the issuance of a subpoena for the production or admission into evidence of any such report or portion thereof, only if it is satisfied that (1) it is material and relevant to the issues in the proceedings, and (2) the ends of justice and public advantage will be subserved thereby. This section shall not prohibit the commissioner from sharing a report of examination with another state or federal regulator so long as provision is made for retaining the confidentiality of the report. This section shall not apply to any action or proceeding instituted by the commissioner or Attorney General pursuant to any law of this State.
##### **§ 17:9A-265** Valuations of assets by commissioner {#sec-17-9a-265 omnilex-key=us-nj-statutes--title-17--17:9A-265}
A. For the purposes of determining whether a bank is insolvent or is in an unsafe or unsound condition to transact business, within the meaning of paragraphs (4) or (6) or subsection A of section 269, the commissioner may, in his discretion, consider that obligations described in subsection B of this section are worth (1) their face amounts, or (2) their cost to the bank, or (3) any amount between their face amounts and such cost.
The commissioner may likewise, in his discretion, consider that all other assets have such values as he deems proper.
B. For the purposes of subsection A of this section, an obligation shall mean a bond or interest-bearing note or other obligation for the payment of money in sum certain, which is not in default as to principal or interest and
(1) which was issued or guaranteed by the United States, or issued by any agency, district, territory or possession of the United States, this State, any other state of the United States, the Port of New York Authority, the Palisades Interstate Park Commissioners, the Delaware River Joint Commission, the New Jersey Interstate Bridge and Tunnel Commission, the New Jersey Interstate Bridge Commission, any county, municipality, school district, board of park or sewer commissioners, or similar public authority of this State or any other state of the United States, or
(2) which was issued by any private corporation, if the obligation has a ready market over the counter, or on a stock, securities, or investment exchange.
##### **§ 17:9A-266** Definitions {#sec-17-9a-266 omnilex-key=us-nj-statutes--title-17--17:9A-266}
For the purposes of this article:
(1) "Bank" shall mean a bank or savings bank;
(2) "Board of directors" shall include the board of directors of a bank, and the board of managers of a savings bank;
(3) "Director" shall include a director of a bank and a manager of a savings bank;
(4) "Assets" or "property" shall include property held in fiduciary capacities; and
(5) The "business" of a bank shall include its fiduciary relationships.
##### **§ 17:9A-267** Commissioner's powers on ultra vires, unlawful and unsafe practices; review {#sec-17-9a-267 omnilex-key=us-nj-statutes--title-17--17:9A-267}
A. If the commissioner finds that a bank, or an out-of-State bank with a branch in this State, is violating the provisions of its certificate of incorporation, or is conducting its business in violation of any law of this State or another state where it is transacting business, or in an unsafe manner, the commisioner shall order the bank to cease its ultra vires, unlawful or unsafe practices, as the case may be.
B. An order of the commissioner made pursuant to subsection A of this section shall be subject to review, hearing and relief in the Superior Court by a proceeding in lieu of prerogative writ. The institution of proceedings for review in the Superior Court shall suspend the accrual of the penalties provided for by section 268 of P.L.1948,c.67 (C.17:9A-268) until the final determination of such proceedings.
##### **§ 17:9A-268** Penalty for failure to comply with commissioner's order {#sec-17-9a-268 omnilex-key=us-nj-statutes--title-17--17:9A-268}
268. A bank, or out-of-State bank with a branch in this State, which continues to violate the provisions of its certificate of incorporation or which continues to conduct its business in violation of any law of this State, or another state where it is transacting business, or in an unsafe manner, after having been ordered by the commissioner to cease such practices, shall be liable to a penalty of $1,000.00 to be recovered with costs by the State in any court of competent jurisdiction in a civil action prosecuted by the Attorney-General, and it shall be liable to a like penalty for each day's additional default from and after the time specified in the order. The penalty provided by this section shall be in addition to and not in lieu of any other provision of law applicable upon a bank's or out-of-State bank's failure to comply with an order of the commissioner.
##### **§ 17:9A-269** Possession by the commissioner; causes; purposes; return {#sec-17-9a-269 omnilex-key=us-nj-statutes--title-17--17:9A-269}
A. The commissioner may forthwith take possession of the property and business of any bank
(1) Which has failed or refused to comply with the provisions of any order lawfully made by the commissioner; or
(2) Which has failed or refused to submit to an examination as provided by section 260; or
(3) Whose officers or directors, or any of them, willfully impede an examination made pursuant to section 260; or
(4) Which is insolvent; or
(5) Which has suspended its business for want of funds to carry it on; or
(6) Which is, in the opinion of the commissioner, in an unsafe or unsound condition to transact business.
B. Notwithstanding the taking by the commissioner of possession of the property and business of a bank,
(1) Title to all the property of the bank, including property held in fiduciary capacities, shall remain in the bank;
(2) The corporate existence of the bank shall continue unless terminated as provided in this article; and
(3) The stockholders and directors of the bank shall be entitled to meet and the stockholders, directors and officers of the bank shall be entitled to act upon any matter which does not infringe upon the powers granted to the commissioner by this article.
C. The commissioner may retain possession of the property and business of the bank for the purpose of (1) liquidation, (2) merger or reorganization, to which end he may call stockholders' meetings, or (3) assumption of all or part of the bank's liabilities and fiduciary relationships and purchase of all or any part of the bank's assets by one or more other banking institutions. When the commissioner concludes that the cause or causes for his taking possession have been removed or remedied, he may return the property and business of the bank to the management and control of its officers and directors.
##### **§ 17:9A-271** Effect of possession by commissioner on liens; possession as a stay {#sec-17-9a-271 omnilex-key=us-nj-statutes--title-17--17:9A-271}
A. All levies, judgments, attachments and other liens, upon property obtained through legal proceedings against a bank when it is insolvent and within four months prior to the commissioner's taking possession of its property and business, and any title resulting from enforcement of any such lien, shall be void, except title obtained by a bona fide purchaser for value.
B. While the commissioner is in possession of the property and business of a bank, no person shall acquire a lien or charge on any assets of the bank for any liability of the bank existing at the time of the taking of possession.
C. So long as the commissioner retains possession of the property and business of a bank, and unless otherwise ordered by the Superior Court, upon notice to the commissioner,
(1) no person shall institute a proceeding in any court against the bank, except as authorized by this article, and the running of any statute of limitations shall be suspended so long as the disability imposed by this paragraph remains in effect;
(2) all proceedings pending in any court when the commissioner takes possession shall be stayed; and
(3) no judgment, levy, execution or distraint shall be enforced against the property of the bank.
D. The Superior Court shall have jurisdiction to make such orders as may be necessary to effect the purposes of this section.
##### **§ 17:9A-272** Powers of commissioner {#sec-17-9a-272 omnilex-key=us-nj-statutes--title-17--17:9A-272}
A. While in possession of the business and property of a bank, the commissioner may, in the name of the bank
(1) Continue the business of the bank in all its aspects, including, in the case of a qualified bank, the exercise of its fiduciary and agency powers; except that the commissioner may not
(a) Make loans other than loans for which there are outstanding commitments and loans wholly or partly renewing obligations to the bank outstanding when possession is taken;
(b) Invest the funds of the bank or of any fiduciary account other than in obligations of the United States or of this State, or in obligations unconditionally guaranteed both as to principal and interest by the United States or this State;
(c) Permit withdrawals from or charges against the account of a depositor, except to the extent that deposits are made after the commissioner takes possession; or
(d) Pay claims of creditors, other than depositors, arising prior to the taking of possession, except as provided in sections two hundred eighty-four and two hundred eighty-six;
(2) Demand, sue for, collect, receive, and take into his possession all the bank's real and personal property, including the power to sue for and recover any property transferred in fraud of the bank's creditors;
(3) Compound and settle with any of the bank's debtors or creditors, or with persons having possession of its property, or in any way responsible to the bank, and extend the time for payment of any obligation owing to the bank, upon such terms and conditions as he shall deem just and beneficial to the bank;
(4) Make or allow proper set-offs;
(5) Sell, assign, transfer, or convey all or any part of the real and personal property of the bank;
(6) Prosecute or defend any action or proceeding to which the bank is a party;
(7) Execute, acknowledge, and deliver any deed, assignment, release, agreement, warrant to cancel a mortgage or other lien, or other instrument necessary or appropriate to effect any sale of real or personal property, or to compromise or compound any claim, or to restore to any person any property deposited or transferred as security for the payment of a debt or the performance of an obligation, upon the payment of the debt or the performance of the obligation, or which is necessary or appropriate to effect any other power which the commissioner is authorized to exercise in respect to the business and property of such bank. Any deed or other instrument so executed and delivered shall be valid and effectual for all purposes as though executed and delivered by the officers of the bank by authority of its board of directors;
(8) Do all acts necessary or appropriate to conserve the property and business of the bank.
B. The commissioner shall have the power, while in possession of the property and business of a bank, to subpena any person to testify concerning the property and business of the bank, as in the manner provided in sections two hundred sixty and two hundred sixty-one. Any person so subpenaed shall be subject to the provisions of sections two hundred sixty-two and two hundred sixty-three.
C. While in possession of the business and property of a bank pursuant to Section 269, subsection A of this act, the commissioner may, upon application to the Superior Court, Chancery Division, and without notice to or approval of the stockholders of said bank, enter into a plan or agreement in the name of said bank whereby all or any part of said bank's liabilities and fiduciary relationships would be assumed by one or more banking institutions and all or any part of said bank's assets and business would be purchased by one or more banking institutions. To facilitate the consummation of such plan or agreement, the commissioner may, in the name of said bank, borrow money from the Federal Deposit Insurance Corporation and pledge or assign all or any part of said bank's assets as security for the money so borrowed; sell all or any part of said bank's assets, real or personal, to one or more banking institutions or to the Federal Deposit Insurance Corporation; and transfer to another banking institution all or any part of the money borrowed from the Federal Deposit Insurance Corporation in consideration of such banking institution's agreement to assume and pay the liabilities and fiduciary relationships of the bank in whose name the commissioner is acting.
D. While in possession of the property and business of a bank, the commissioner may offer to the Federal Deposit Insurance Corporation, or its successor, appointment as receiver of such bank. In the event the Federal Deposit Insurance Corporation, or its successor, accepts such appointment, it shall have and be authorized to exercise all rights, powers and privileges now possessed or hereafter granted to the commissioner by this article; it shall have all rights, powers and privileges now possessed or hereafter granted to a receiver by the laws of this State; and it shall be under the exclusive jurisdiction of the Superior Court.
##### **§ 17:9A-273** Jurisdiction of Superior Court {#sec-17-9a-273 omnilex-key=us-nj-statutes--title-17--17:9A-273}
The Superior Court shall have jurisdiction, on application by the commissioner for instructions in respect to the administration of the bank's affairs, to make such orders and enter such judgments as may be proper and appropriate, but no application by the commissioner pursuant to this article shall subject the business and property of the bank to the general jurisdiction of the Superior Court, nor shall such application be construed as a surrender or abandonment by the commissioner of the powers and duties conferred and imposed upon him by this article.
##### **§ 17:9A-274** Proceeds of liquidation; deposits; preference {#sec-17-9a-274 omnilex-key=us-nj-statutes--title-17--17:9A-274}
The proceeds of the liquidation by the commissioner of the assets of a bank shall be held by him, less the costs and expenses of administration and liquidation, until such proceeds shall be disposed of under the direction of the Superior Court. Pending such disposition, the moneys collected by the commissioner shall, from time to time, be deposited by him in a bank, and, in the case of the insolvency or suspension of the depositary, the deposits so made shall be preferred before all other deposits.
##### **§ 17:9A-275** Employees and assistants of commissioner; counsel {#sec-17-9a-275 omnilex-key=us-nj-statutes--title-17--17:9A-275}
The commissioner may, from time to time, appoint one or more special assistant deputy commissioners of banking and insurance, who may or may not be employees in the department, as agent or agents, to assist him in administering the business and affairs of a bank of which he has taken possession, and he may, from time to time, hire such employees and assistants as he shall deem necessary to the proper administration of the business and affairs of such bank, including officers and employees of the bank. He may further, notwithstanding any other provision of law, appoint an attorney or a counsellor-at-law of this State, who need not be a member or an employee of the Department of Law of this State, to represent and advise him and to act as counsel in the administration of the business and property of the bank. The commissioner may, at the expense of the bank, obtain such security for the faithful performance of the duties of such assistant deputy commissioners, counsel, and other employees as he shall deem necessary. Appointments of special assistant deputy commissioners and counsel made pursuant to this section shall be evidenced by writings signed by the commissioner and filed in the department.
##### **§ 17:9A-276** Compensation of employees, assistants, and counsel {#sec-17-9a-276 omnilex-key=us-nj-statutes--title-17--17:9A-276}
The compensation of the special assistant deputy commissioners, counsel, and of all other persons engaged in the administration of the business and affairs of a bank of which the commissioner has taken possession, and all other expenses of administration and liquidation, shall be fixed by the commissioner, subject to the approval of the Superior Court as hereinafter provided, and shall, upon the certificate of the commissioner, be paid out of the funds of the bank.
##### **§ 17:9A-277** Accounting by commissioner; notice to creditors {#sec-17-9a-277 omnilex-key=us-nj-statutes--title-17--17:9A-277}
On making the first application to the Superior Court for approval of expenses of administration, pursuant to this article, the commissioner shall file in the court an accounting of the administration of the bank's affairs from the date on which possession was taken, including an accounting of the administration of the bank's affairs by the commissioner's predecessor or predecessors in office, when such possession was initially taken by a predecessor. On making each further application to the court for approval of expenses of administration, the commissioner shall file in the court a further accounting for the period elapsed since the last prior accounting, and shall include a summary of the administration of the bank's affairs for the periods covered by prior accountings. In any such proceeding with respect to such expenses and account, notice to the stockholders, depositors and other creditors may be given by notices mailed to each at his address as it appears on the bank's records.
##### **§ 17:9A-279** Judgment on accounting {#sec-17-9a-279 omnilex-key=us-nj-statutes--title-17--17:9A-279}
In any proceeding the court shall have jurisdiction to hear and determine in a summary manner or otherwise all matters arising therein, and shall enter such judgment or order as may be proper and appropriate.
##### **§ 17:9A-280** Notice to creditors to present claims; publication; claims barred {#sec-17-9a-280 omnilex-key=us-nj-statutes--title-17--17:9A-280}
The commissioner shall, after taking possession of the business and property of a bank, cause notice to be given to all persons, other than depositors, who may have claims against the bank, to present their claims to him under oath at a time and place to be designated in the notice. The notice shall be published at least once in each week for three successive weeks in at least one newspaper designated by the commissioner and published in the municipality in which the bank has its principal office, and, if there be no such newspaper, then in a newspaper published in the county in which such municipality is located, or in an adjoining county, and which has a general circulation in such municipality. The time limited therein for the filing of claims shall be at least two months from the date of the last publication of the notice. A copy of the notice shall be mailed to all known creditors of the bank, other than depositors, at least thirty days before the expiration of the time limited for filing proofs of claim. Proof of the publication and mailing of the notice shall be filed in the department. Any creditor of a bank who is required by this section to file a claim and fails so to do within the time limited therefor shall not be entitled to share in the distribution of the bank's assets.
##### **§ 17:9A-281** Verification of deposit balances {#sec-17-9a-281 omnilex-key=us-nj-statutes--title-17--17:9A-281}
The commissioner shall verify all balances due depositors by causing a notice to be mailed to each depositor at his address as it appears on the records of the bank. The notice shall state the amount of the deposit balance as it appears on the bank's records, and shall instruct the depositor that, if he disputes the amount thereof, he shall within sixty days from the date of the mailing of the notice to him, file a claim with the commissioner for the amount he claims to be due him, and, in default thereof, his claim will be allowed only in the sum stated in the notice. The failure of a depositor to file a claim within the time so limited shall be conclusive evidence of the depositor's assent to the correctness of the balance stated in the notice. An affidavit of the mailing of notices pursuant to this section shall be filed in the department.
##### **§ 17:9A-282** Rejection of claims by commissioner; actions {#sec-17-9a-282 omnilex-key=us-nj-statutes--title-17--17:9A-282}
If the commissioner doubts the justice or validity of any claim made pursuant to sections 280 or 281, he shall reject it or shall allow it in the amount that he deems proper and shall serve notice of his action upon the claimant, either personally or by mail. An affidavit of service of such notice shall be filed in the department. An action upon such part of the claim as is rejected shall be brought within three months after such service, unless the commissioner, or the Superior Court, for cause shown, shall grant an additional period of time, not exceeding three months, and, if not brought within any period herein limited, shall thereafter be forever barred. A statement of the claimant's rights under this section shall be included in every notice of rejection.
##### **§ 17:9A-283** Objections to allowance of claims by commissioner {#sec-17-9a-283 omnilex-key=us-nj-statutes--title-17--17:9A-283}
The Superior Court shall have jurisdiction, on notice to the commissioner, to hear and to determine, in a summary manner or otherwise, objections to a claim or claims allowed against the bank by the commissioner, when such objection is made by depositor, other creditor or stockholder of the bank. Any issue triable of right by a jury shall be so tried unless a jury is waived.
##### **§ 17:9A-284** Distribution {#sec-17-9a-284 omnilex-key=us-nj-statutes--title-17--17:9A-284}
A. The proceeds of the liquidation of the assets of a bank, the property and business of which the commissioner has taken possession, shall be distributed according to the priorities and preferences provided by chapter 14 of Title 14A, Corporations, General, of the New Jersey Statutes; except that, in the case of a savings bank, the surplus remaining after the payment or provision for the payment of all of its liabilities, claims and deposits, with interest or dividends to the date when possession was taken by the commissioner, and payment of or provision for all expenses upon final distribution, shall be divided pro rata among its depositors according to the amounts of their deposits at the time such possession was taken by the commissioner.
B. After the expiration of the times limited for the filing of claims and for the institution of actions upon rejected claims as provided by sections 280, 281, and 282, the commissioner may, from time to time, file an accounting in the Superior Court and apply for an order authorizing the payment of a liquidating dividend out of the funds in his hands. No distribution shall be made by the commissioner until he has accounted as provided in sections 277 and 279, and judgment is entered allowing the account and directing such distribution.
C. Upon making final distribution, the commissioner shall file in the Superior Court a statement of such distribution, and he shall file in the department a certificate that such statement has been filed, specifying the date of such filing.
##### **§ 17:9A-285** Corporate dissolution {#sec-17-9a-285 omnilex-key=us-nj-statutes--title-17--17:9A-285}
Upon the filing of the certificate in the department pursuant to subsection C of section 284, the bank shall be dissolved, and its corporate rights, privileges and franchises shall be terminated. A copy of the certificate, certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:9A-286** Unclaimed funds; publication; disposition {#sec-17-9a-286 omnilex-key=us-nj-statutes--title-17--17:9A-286}
A. Within nine months from the date of the order authorizing a final liquidating dividend, the commissioner shall cause a notice to be published in at least one newspaper selected as in section 280 provided, containing the names and last known addresses of those persons entitled to participate in the distribution of the proceeds of the bank's assets who have failed to take payment thereof. Such publication shall be made at least once a month for three successive months, and the cost thereof shall be charged ratably against the several sums so unclaimed.
B. At the expiration of the period of publication specified in subsection A of this section, the commissioner shall file a petition in the Superior Court for leave to pay into that court the funds which then remain unclaimed. The petition shall recite the name, the last known address, and the amount due to each depositor, other creditor or stockholder who has failed to take payment of the distributive share due him. The court, on proof that the publication required by subsection A of this section has been made, shall make an order upon such petition directing the commissioner to pay the funds into court, there to be held for the benefit of those entitled thereto. Upon payment of the funds into court, the commissioner shall be relieved of all duties and responsibilities in connection therewith.
C. The Superior Court may make an order pursuant to subsection B of this section, without the prior publication of the notice specified in subsection A, upon proof that the cost of such publication is disproportionate to the amount to be paid into court.
##### **§ 17:9A-287** Unclaimed funds held under prior law {#sec-17-9a-287 omnilex-key=us-nj-statutes--title-17--17:9A-287}
Unclaimed funds held by the commissioner, pursuant to any prior law of this State, in trust for the several persons entitled thereto in the case of a bank fully liquidated by the commissioner prior to the effective date of this act, shall be paid into the Superior Court pursuant to section 286, without publication.
##### **§ 17:9A-288** Unclaimed funds; costs {#sec-17-9a-288 omnilex-key=us-nj-statutes--title-17--17:9A-288}
The costs of proceedings taken pursuant to sections 286 and 287 shall be charged ratably by the Clerk of the Superior Court against the funds so deposited in the court.
##### **§ 17:9A-289** Unclaimed funds; escheat {#sec-17-9a-289 omnilex-key=us-nj-statutes--title-17--17:9A-289}
Sections 286 and 287 shall not relieve the commissioner of any duty or responsibility imposed upon him by Chapter 199, Laws of 1945, as now or hereafter amended or supplemented, in respect to any bank the property and business of which he is in possession.
##### **§ 17:9A-290** Demand by commissioner for removal of property and contents of safe deposit boxes {#sec-17-9a-290 omnilex-key=us-nj-statutes--title-17--17:9A-290}
The commissioner may, after he has taken possession of the property and business of a bank, cause to be mailed to each person claiming to be, or appearing on the books of the bank to be,
(1) the owner of any package or other personal property in the custody or possession of the bank as custodian or as bailee or depositary for hire or otherwise, including the contents of any space, safe, vault or safe deposit box theretofore opened for nonpayment of rental, or
(2) the lessee of any space, safe, vault or safe deposit box, a notice in writing directed by registered mail to such person at his last address as it appears on the books of the bank, or at his last known address if no address appears on such books. The notice shall direct such person to remove all such property or the contents of any such space, safe, vault or safe deposit box, within a stated period, which shall be not less than sixty days from the date of such notice, and shall notify such person of the provisions of sections 290 to 298. The custodian agreement, or the contract of bailment or of deposit for hire, or the lease of any space, safe, vault or safe deposit box between the person to whom such notice is mailed and the bank shall cease upon the date for removal fixed in such notice. If any charge for acting as custodian, bailee or depositary, or if any rent for any such space, vault, safe, or safe deposit box has been paid to a date subsequent to the removal of such property or of the contents of such space, vault, safe, or safe deposit box, the charge or rent so paid shall be apportioned as of the date of such removal, and so much thereof as shall be allocable to the unexpired term of such letting shall be a debt of the bank, payable in the same manner as other unsecured and unpreferred debts, but no proof of claim shall be required to be filed in connection therewith.
##### **§ 17:9A-291** Inventory and storage of property not removed {#sec-17-9a-291 omnilex-key=us-nj-statutes--title-17--17:9A-291}
A. If property shall not be removed as provided in section 290, the commissioner shall cause such property to be inventoried, and, to that end, shall cause each space, safe, vault, or safe deposit box, and each package in the custody or possession of the bank as custodian or as bailee or depositary for hire or otherwise, to be opened and the contents, if any, to be removed. Such inventory, or opening, removal and inventory, shall be made in the presence of the commissioner or of a person designated by him, and of a notary public, not an officer or employee of the bank. The property or contents shall thereupon be sealed by the notary public in a package marked by him with the name of the person in whose name such property or such space, safe, vault, safe deposit box, or package stands upon the books of the bank. A copy of the inventory of the property therein shall be certified and attached to the package by the notary public.
B. Each package shall be kept by the commissioner at such place as he may determine, at the expense and risk of the person in whose name it stands, until delivered to such person or until sold, destroyed or otherwise disposed of pursuant to sections 293, 294 and 295. The package may, pending final disposition of its contents, be opened from time to time by the commissioner or by a person designated by him, in the presence of a notary public, not an officer or employee of the bank, for inspection or appraisal, or to enable the commissioner to exercise any of the powers conferred or duties imposed upon him by this article. Whenever a package is opened, the commissioner or the person designated by him and a notary public, not an officer or employee of the bank, shall endorse on the outside of the package the date of opening and resealing, and shall make an affidavit which shall be attached to the package, stating the reason for the opening and the items, if any, removed therefrom, or placed or replaced therein.
##### **§ 17:9A-292** Delivery of property to claimants {#sec-17-9a-292 omnilex-key=us-nj-statutes--title-17--17:9A-292}
At any time prior to the sale, destruction or other disposition of the contents of a package pursuant to sections 293, 294 and 295, the person in whose name such package stands may require its delivery upon payment of all charges or rent accrued, and all other charges or expenses paid or incurred to the date of the delivery, including the cost of inventorying or of opening and inventorying, the fees of the notary public, the cost of preparing and mailing the notice, and publication, if any. If the commissioner is in doubt concerning the person entitled to such package, or if there are conflicting claims thereto, he may require an order of the Superior Court authorizing and directing the delivery of the package.
##### **§ 17:9A-293** Sale of unclaimed property {#sec-17-9a-293 omnilex-key=us-nj-statutes--title-17--17:9A-293}
If, after the expiration of one year from the time of mailing the notice pursuant to section 290, there shall remain any unclaimed property, the commissioner shall offer it for sale at public auction upon such terms and conditions as he shall determine. After retaining from the proceeds of such sale the costs thereof, and the costs of publishing, opening, inventorying, removal, and storage, and the accrued charges or rent, the commissioner shall hold the balance of such proceeds as unclaimed funds, to be disposed of pursuant to section 286.
##### **§ 17:9A-294** Notice of auction {#sec-17-9a-294 omnilex-key=us-nj-statutes--title-17--17:9A-294}
At least sixty days notice of a public auction to be held pursuant to section 293 shall be given by registered mail to each person claiming to have or appearing on the books of the bank to have an interest in the unclaimed property. Notice of the auction shall also be published once a week for the three weeks next preceding the week in which the auction is to take place, in a newspaper published in the municipality in which the bank last maintained its principal office, and, if there be no such newspaper, then in one published in the county in which the bank last maintained its principal office or in an adjoining county, and which has a general circulation in such municipality.
##### **§ 17:9A-295** Disposition of unsold property {#sec-17-9a-295 omnilex-key=us-nj-statutes--title-17--17:9A-295}
If any property offered for sale at public auction pursuant to section 293 shall not be sold, the commissioner may, without notice, apply to the Superior Court for leave to sell such property at private sale, and upon failure to find a purchaser therefor, to destroy such property. Upon such application, the court may make such order as in its discretion the circumstances shall require. The proceeds of a private sale shall be held and disposed of as unclaimed funds, pursuant to section 286.
##### **§ 17:9A-296** Liability of third person {#sec-17-9a-296 omnilex-key=us-nj-statutes--title-17--17:9A-296}
No bank or other depositary to which any property is delivered by the commissioner for safe-keeping pursuant to this article, and no purchaser at any auction or private sale held pursuant to this article, shall be liable or accountable to any person for any error or irregularity of the commissioner or of any person acting on behalf of the commissioner in any proceeding taken pursuant to this article.
##### **§ 17:9A-297** Other remedies {#sec-17-9a-297 omnilex-key=us-nj-statutes--title-17--17:9A-297}
The provisions of sections 290 to 296 shall not affect or preclude any other remedy for the enforcement of the claims or rights of the commissioner, or of a bank of whose property and business he is in possession, against the person in whose name any property or any space, safe, vault or safe deposit box stands, or affect or bar the right of the commissioner or the bank to recover, before auction or sale, any debt or claim due him or it, or, after sale, so much of the debt or claim as shall not be paid by the proceeds of the auction or sale.
##### **§ 17:9A-298** Application of article to property held under prior law {#sec-17-9a-298 omnilex-key=us-nj-statutes--title-17--17:9A-298}
If the commissioner shall heretofore have taken possession of the business and property of any bank pursuant to the provisions of law then existing, and he (1) shall have given the notice then prescribed to the owner of any personal property in the custody or possession of the bank as custodian or as bailee, depositary for hire or otherwise, or to the lessee of any space, safe, vault or safe deposit box, and (2) shall have inventoried such property, or opened and inventoried the contents of such space, safe, vault, or safe deposit box or of any package in its custody or possession, such notice and inventorying shall be deemed to have been effected pursuant to the provisions of sections 290 and 291, in such case, all other provisions of sections 290 through 297 shall be applicable with the same force and effect as if such notice and inventorying had been effected pursuant to sections 290 and 291.
##### **§ 17:9A-299** Determination whether commissioner or agent shall wind up affairs {#sec-17-9a-299 omnilex-key=us-nj-statutes--title-17--17:9A-299}
When the commissioner has paid in full the claims of all persons, other than stockholders, entitled to share in the distribution of the proceeds of the liquidation of the assets of a bank, other than a savings bank, the business and property of which he has taken possession, and when the commissioner has made disposition of unclaimed deposits and liquidating dividends and of unclaimed property as in this article provided and when, after all expenses of administration have been paid, there shall remain any assets of the bank to be liquidated, the commissioner shall call and preside over a meeting of stockholders to determine whether he shall continue as liquidator to wind up the affairs of the bank, or whether an agent or agents shall be elected by the stockholders for that purpose. At least twenty days notice of such a meeting shall be given by mail directed to each stockholder at his address as it appears on the bank's records.
##### **§ 17:9A-300** Election of agents; powers; vacancies {#sec-17-9a-300 omnilex-key=us-nj-statutes--title-17--17:9A-300}
A. If, at a meeting of stockholders held pursuant to section 299, the holders of a majority of the stock shall vote, in person or by proxy, that liquidation be completed by an agent or agents elected by the stockholders, the stockholders shall elect such number of agents as they shall determine. Following such election, the commissioner shall deliver to the agents so elected all the assets of the bank remaining in his possession, custody, or control and, upon such delivery, the commissioner shall be discharged from all further duties and responsibilities in respect to the assets so delivered. A certificate of the election of the agents for liquidation and of the delivery of the assets by the commissioner shall be made by the commissioner and filed in the department. The agents shall complete the liquidation of the assets of the bank, and, to the extent necessary for such liquidation, shall have the powers and shall be subject to the duties conferred or imposed upon the commissioner by this article. Upon completion of the liquidation, and upon making final distribution to stockholders, the agent or agents shall file a certificate thereof in the department, and thereupon the bank shall be dissolved, and its corporate rights, powers and franchises shall terminate.
B. Vacancies caused by the death, resignation, removal or other disability or any agent elected pursuant to this section shall be filled by the surviving agents, and a certificate thereof shall be filed in the department. The acts of a majority of the agents shall constitute the acts of the bank.
##### **§ 17:9A-301** Continuance of liquidation by commissioner {#sec-17-9a-301 omnilex-key=us-nj-statutes--title-17--17:9A-301}
If, at a stockholder's meeting held pursuant to section 299, the stockholders vote to have liquidation continued by the commissioner, the commissioner shall continue with the liquidation, and shall wind up the affairs of the bank and shall make distribution of the proceeds thereof to the stockholders in the same manner, with all the powers and subject to all the duties as in this article provided.
##### **§ 17:9A-302** Liability of commissioner {#sec-17-9a-302 omnilex-key=us-nj-statutes--title-17--17:9A-302}
The commissioner shall not be subject to any civil liability or penalty nor to any criminal prosecution for any error in judgment or discretion in any action taken or omitted by him in good faith under the provisions of this article.
##### **§ 17:9A-303** Refusal or failure of commissioner to take possession; jurisdiction of the Superior Court; appointment of receiver {#sec-17-9a-303 omnilex-key=us-nj-statutes--title-17--17:9A-303}
A. When a bank is insolvent or has suspended its business for lack of funds to carry it on, a creditor or stockholder may serve a written demand upon the commissioner that he take possession of the property and business of the bank. If, after the lapse of twenty days from the day upon which the demand is served upon him, the commissioner shall have failed to take possession as in this article provided, the Attorney-General, or any creditor or stockholder of the bank may apply to the Superior Court in an action for injunctive relief and the appointment of a receiver or receivers in the manner provided by chapter fourteen of Title 14 of the Revised Statutes, and thereafter, so long as such action is pending in the Superior Court, the powers of the court and of any receivers appointed by it, and the rights and remedies of creditors and stockholders shall be as prescribed in chapter fourteen of Title 14 of the Revised Statutes. The court may proceed in the action in a summary manner or otherwise.
B. No receiver shall be appointed by the Superior Court to exercise the powers prescribed in chapter fourteen of Title 14 of the Revised Statutes unless
(1) the bank is insolvent or has suspended its business for lack of funds to carry it on;
(2) demand has been served upon the commissioner, as provided by subsection A of this section;
(3) the commissioner has failed to take possession within the time limited by subsection A of this section; and
(4) the commissioner has been made a party to the action in the Superior Court and has been served with a copy of the complaint and notice of the time and place of application for the appointment of a receiver not less than ten days prior to the application for the appointment of a receiver.
##### **§ 17:9A-304** Acceptance of loans from federal government {#sec-17-9a-304 omnilex-key=us-nj-statutes--title-17--17:9A-304}
While in possession of the business and property of a bank pursuant to the provisions of this article, the commissioner, or a receiver or receivers appointed pursuant to section 303, may, in the name of the bank, apply for and accept a loan or loans from the United States or from any officer, board, commissioner, corporation or other body created by the United States, and may pledge as security therefor all or any part of the assets of the bank.
##### **§ 17:9A-305** Continuance of banking advisory board {#sec-17-9a-305 omnilex-key=us-nj-statutes--title-17--17:9A-305}
The banking advisory board heretofore created and established in the department is continued, subject to the provisions of this act.
##### **§ 17:9A-306** Members; qualifications {#sec-17-9a-306 omnilex-key=us-nj-statutes--title-17--17:9A-306}
The board shall consist, as heretofore, of the commissioner, who shall be ex officio the chairman of the board, and nine other members appointed by the Governor with the advice and consent of the Senate, as hereinafter provided. Any appointed member of the board may be removed from office by the Governor whenever, in his judgment, the public interest may so require. Of the nine appointed members, at least six shall each have had, at the time of his appointment, not less than 5 years of practical experience as an active executive officer in a banking institution or a savings and loan association located in the State of New Jersey; and three shall be public members who are not salaried officers, directors, or employees of any financial institution. At no time, however, shall there be more than a single representative on the board from any one banking institution or group of banking institutions which form a holding company. The six members specified to have had practical executive experience shall be appointed at least one each, from the following groups:
(1) Savings banks;
(2) Banks located in the Second Federal Reserve District;
(3) Banks located in the Third Federal Reserve District; and
(4) Savings and loan associations.
##### **§ 17:9A-307** Term of office; removal; vacancies {#sec-17-9a-307 omnilex-key=us-nj-statutes--title-17--17:9A-307}
A. The members of the banking advisory board appointed prior to the effective date of this act shall continue in office for the terms for which they were last appointed.
B. Subject to the provisions of subsection A of this section, and subject to removal pursuant to section 306, each member of the board shall hold office for a term of four years, and thereafter until his successor is appointed and has qualified.
C. Members of the board shall be eligible for reappointment, subject, however, to compliance with the provisions of section 306.
D. Any vacancy in the board shall be filled for the unexpired portion of the term in the same manner as for a full term.
##### **§ 17:9A-308** Expenses of members {#sec-17-9a-308 omnilex-key=us-nj-statutes--title-17--17:9A-308}
The members of the banking advisory board shall serve without compensation, but shall be reimbursed for their actual and necessary expenses in attending meetings of the board. All claims for reimbursement shall be submitted in the form and manner prescribed for like claims of the commissioner.
##### **§ 17:9A-309** Meetings; quorum {#sec-17-9a-309 omnilex-key=us-nj-statutes--title-17--17:9A-309}
A. The board shall meet at least bimonthly at such times and places in the State as it may determine. The commissioner may call such other meetings as he may deem necessary, and he shall call a meeting when requested by two or more members of the board. At least three days notice of every meeting shall be given to each member of the board personally, or by mail, telephone, or telegraph.
B. A majority of the members of the board shall constitute a quorum. Any action which may be taken by the board at a meeting may be taken without a meeting, provided that an instrument evidencing such action is signed by all the members of the board, and filed in the department. Any number of copies of such instrument, each bearing one or more signatures, shall be deemed a single instrument.
##### **§ 17:9A-310** Secretary; appointment, qualifications and duties {#sec-17-9a-310 omnilex-key=us-nj-statutes--title-17--17:9A-310}
The board shall elect a secretary who may be an employee of the department, but who shall receive no extra compensation for serving as secretary. The secretary shall keep an accurate record of all meetings of the board, and shall perform such other duties as may be prescribed by the board.
##### **§ 17:9A-311** Powers of the banking advisory board {#sec-17-9a-311 omnilex-key=us-nj-statutes--title-17--17:9A-311}
A. In addition to the powers elsewhere in this act conferred upon it, the banking advisory board shall have power, by two-thirds vote of its members,
(1) to make recommendations to the commissioner upon any matter relating to the duties of the commissioner which he may submit to it;
(2) to make recommendations to the Governor concerning legislation affecting institutions which are subject to the provisions of this act.
B. In addition to the power specified in subsection A of this section, the banking advisory board shall have power, by two-thirds vote of its members, upon the request of and subject to the approval of the commissioner,
(1) to make, amend, and repeal regulations not in conflict with the powers conferred by law upon the commissioner, for the following purposes:
(a) to establish safe and sound methods of banking to safeguard the interests of depositors and other creditors;
(b) to define "conducting business in an unsafe manner" as applied to banks and savings banks;
(c) to define "unsafe or unsound condition to transact business" as applied to banks and savings banks;
(2) to consider the decision of the commissioner on any application for the establishment of a branch office of any bank or savings bank, or any amendment to the certificate of incorporation of any bank or savings bank, or the merger of any two or more banks or savings banks, and make recommendations to the commissioner thereon.
##### **§ 17:9A-312** Access to departmental records; information confidential {#sec-17-9a-312 omnilex-key=us-nj-statutes--title-17--17:9A-312}
For the purpose of discharging its duties, the board shall have access to all records in the department, including reports and confidential communications, but each member of the board shall treat all information so obtained as confidential, and shall not reveal any such information to any person other than another member of the board.
##### **§ 17:9A-313** Liability of members {#sec-17-9a-313 omnilex-key=us-nj-statutes--title-17--17:9A-313}
No member of the board, including the commissioner, shall be personally liable for any act done or omitted in connection with the performance of his duties under this article.
##### **§ 17:9A-314** Report to Governor {#sec-17-9a-314 omnilex-key=us-nj-statutes--title-17--17:9A-314}
The board shall submit to the Governor annually, on or before December 1, a report of the activities of the board during the period from the last prior report.
##### **§ 17:9A-316** Limitations on transaction of business by foreign banks in this State {#sec-17-9a-316 omnilex-key=us-nj-statutes--title-17--17:9A-316}
316. A. Except as otherwise provided pursuant to section 1 of P.L.1989, c.245 (C.17:9A-19.2) and sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467), no foreign bank organized under the laws of a foreign government shall transact any business in this State.
B. A foreign bank organized under the laws of the United States or another state may not transact business in this State other than a trust business. Before transacting trust business in this State, a foreign bank shall secure from the commissioner a certificate of authority to transact trust business. The commissioner shall not issue a certificate of authority to a foreign bank unless a qualified bank is permitted to transact trust business in the jurisdiction in which the foreign bank has its principal office without unduly burdensome conditions or restrictions.
C. Except as otherwise provided pursuant to P.L.1999, c.159 (C.17:9A-20.4 et al.), no foreign bank shall maintain an office in this State, except that a foreign bank may maintain one or more service facilities in this State, provided that the foreign bank performs only back office operations at the service facility and does not transact business with its customers or the public at the service facility. Prior to opening a service facility in this State, a foreign bank shall register the service facility with the commissioner, which registration shall include the address of the proposed service facility and the name and address of the foreign bank's agent in this State for service of process. No foreign bank organized under the laws of a foreign government which has an office licensed as a representative office pursuant to sections 55 and 56 of P.L.1996, c.17 (C.17:9A-436 and C.17:9A-437), shall be required to register under this subsection as a service facility. Each service facility shall comply with the requirements and pay the fees that the commissioner establishes by regulation. Each service facility shall be subject to examination by the department to determine whether the foreign bank has operated the service facility in accordance with the provisions of this subsection, the costs of which examination shall be paid by the foreign bank at the department's per diem rate for examinations of depository institutions. The commissioner may, upon notice and a hearing, order a foreign bank to close any trust office or service facility operated in violation of the provisions of this subsection or of other any law. Any entity acting as an agent pursuant to section 1 of P.L.1989, c.245 (C.17:9A-19.2) shall not be required to register and be regulated pursuant to this subsection C.
D. (1) For the purposes of this section, the term "transact business" shall not include back office operations and the term "back office operations" shall include the following activities: data processing, record-keeping, accounting, check and deposit sorting and posting, computation and posting of interest, other similar clerical and statistical functions, producing and mailing correspondence or documents and such other similar activities that the commissioner approves.
(2) For the purposes of this section, "trust business" means holding out to the public by advertising, solicitation or other means that a person or entity is available to perform any of the services of a trustee or fiduciary in this State or another state, and includes acting as a trustee, testamentary trustee, fiduciary, executor or guardian or exercising any of the powers specified in paragraphs (3) through (9) of section 28 of P.L.1948, c.67 (C.17:9A-28).
E. (1) For the purposes of Article 44 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-315 through 17:9A-332), a foreign bank, including one organized under the laws of a foreign country, shall not be deemed to transact business or maintain an office in this State by virtue of conducting business in this State through an agent in this State which is an insured depository institution affiliate or other agent.
(2) Nothing in this section or in "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-1 et seq.) shall prohibit a foreign bank, including one organized under the laws of a foreign country, from owning and operating in this State, as a subsidiary, a State or federally chartered bank and the ownership and operation of, and the sharing of directors, officers and employees with that subsidiary shall not constitute transacting business in this State.
##### **§ 17:9A-316.1** Merger or consolidation, foreign bank acting as fiduciary as successor to party to {#sec-17-9a-316.1 omnilex-key=us-nj-statutes--title-17--17:9A-316.1}
Nothing in section three hundred sixteen of chapter sixty-seven of the laws of one thousand nine hundred and forty-eight (The Banking Act of 1948) shall prevent a foreign bank, which results from a merger or consolidation of a foreign bank with one or more such other corporations, from continuing to transact business in this State in the place of and as successor to any party to the merger or consolidation, in any fiduciary capacity in which such party, at the time of the merger or consolidation, was lawfully acting in this State under appointment made prior to the sixteenth day of September, one thousand nine hundred and forty-eight, or from continuing to transact business in this State in the place of and as successor to any party to the merger or consolidation, under any appointment and qualification of such party on or subsequent to the sixteenth day of September, one thousand nine hundred and forty-eight, as executor or trustee of the last will and testament or codicil thereto of a decedent, and was lawfully acting as executor or trustee at the time of the merger or consolidation; provided, however, that any such foreign bank resulting from the merger or consolidation is authorized by the laws under which it is incorporated to so act as such successor in the place of any party to the merger or consolidation; and provided further, that no such foreign bank resulting from the merger or consolidation shall so act as such successor in the place of any party to the merger or consolidation contrary to the terms of any fiduciary instrument under which such party was acting; and provided further, that any such foreign bank resulting from the merger or consolidation shall comply with all the laws of this State applicable to it doing business herein; and provided further, that no such foreign bank resulting from the merger or consolidation shall so act as such successor in the place of any party to the merger or consolidation unless a qualified bank resulting from merger or consolidation is permitted to transact business in like fiduciary capacities in the jurisdiction in which the foreign bank has its principal office.
##### **§ 17:9A-316.2** Validation of fiduciary acts by foreign banks resulting from merger or consolidation {#sec-17-9a-316.2 omnilex-key=us-nj-statutes--title-17--17:9A-316.2}
Any fiduciary act, including but not by way of limitation, any conveyance of real property situated in this State, heretofore done by any foreign bank which resulted from a merger or consolidation of a foreign bank with one or more such other corporations lawfully authorized at the time of the merger or consolidation to do such fiduciary act, is hereby validated to the same extent as if such act had been done by the party to the merger or consolidation which was so lawfully authorized.
##### **§ 17:9A-316.3** Investment in common trust funds by foreign bank under certain circumstances {#sec-17-9a-316.3 omnilex-key=us-nj-statutes--title-17--17:9A-316.3}
1. A foreign bank authorized by section 316 of P.L.1948, c.67 (C.17:9A-316) to act as trustee, fiduciary, executor, testamentary trustee or guardian may, when acting in such capacity, invest any money received and held by it in such capacity, in any common trust fund or funds maintained by it in accordance with the laws of the state of its incorporation; provided, that the instrument under which it is acting as trustee, fiduciary, executor, testamentary trustee or guardian does not specifically prohibit such investment and any such investment is made subject to the provisions of subsection B of section 37 of P.L.1948, c.67 (C.17:9A-37), and the provisions of section 38 of P.L.1948, c.67 (C.17:9A-38) relating to investments by a qualified bank incorporated under the laws of this State in a common trust fund; and provided that a qualified bank incorporated under the laws of this State is permitted by the laws of the state of incorporation of such foreign bank, when acting in a similar fiduciary capacity in that state to invest any moneys, received and held by it in such capacity, in any common trust fund or funds maintained by it in accordance with the laws of this State.
##### **§ 17:9A-317** Qualification of foreign bank as fiduciary {#sec-17-9a-317 omnilex-key=us-nj-statutes--title-17--17:9A-317}
317. As a prerequisite to its qualification in any fiduciary capacity specified in section 316, in any court of this State, a foreign bank shall present to the court a certificate of the commissioner certifying that it is authorized to transact business in this State pursuant to this article and shall furnish a bond if required by the court pursuant to the provisions of N.J.S.3B:15-1 .
##### **§ 17:9A-318** Application for certificate of authority {#sec-17-9a-318 omnilex-key=us-nj-statutes--title-17--17:9A-318}
318. A foreign bank desiring to secure a certificate of authority to transact business in this State shall make application to the commissioner therefor and file with the application
(1) a copy of its certificate of incorporation, and all amendments thereto, certified by its president or a vice-president and attested under its corporate seal by its secretary, an assistant secretary, its cashier or an assistant cashier;
(2) proof of adequate insurance coverage in connection with the volume of transactions and nature of its business;
(3) (Deleted by amendment, P.L.1999, c.159).
(4) a certificate executed by its president or a vice-president and attested under its corporate seal by its secretary, an assistant secretary, its cashier or an assistant cashier, that, so long as it shall have a certificate of authority,
(a) it will comply with all the requirements of the laws of this State which shall be applicable from time to time to the transaction of its business in this State;
(b) it will, promptly following adoption, submit to the commissioner a copy of each amendment or other change in its certificate of incorporation, certified and attested as provided in paragraph (1) of this section;
(c) (Deleted by amendment, P.L.1999, c.159).
(5) a power of attorney, executed by its president or vice-president and attested under its corporate seal by its secretary, an assistant secretary, its cashier or an assistant cashier, authorizing the commissioner and his successors in office to accept service of process upon the foreign bank in any action or proceeding against it affecting or relating to any estate or trust administered under the laws of this State, with respect to which it shall act in a fiduciary capacity specified in section 316; such power of attorney shall provide that service of any such process upon the commissioner shall have the same force and validity as if served upon the foreign bank, and that the authority therein granted shall be irrevocable and shall continue in force indefinitely, notwithstanding the expiration, revocation or surrender of the certificate of authority or renewal thereof;
(6)(Deleted by amendment, P.L.1999, c.159).
##### **§ 17:9A-319** Issuance, denial of certificate of authority {#sec-17-9a-319 omnilex-key=us-nj-statutes--title-17--17:9A-319}
319. A. Within 60 days following the receipt of the application of a foreign bank for a certificate of authority to transact business in this State, the commissioner shall issue the certificate or make an order denying the application.
B. The commissioner shall issue the certificate if he is satisfied from the application submitted to him, or otherwise,
(1) that the foreign bank is authorized by the laws under which it is incorporated to act as trustee, testamentary trustee, fiduciary, executor or guardian;
(2) that the foreign bank has capital and surplus of not less than one million dollars; and
(3) that the foreign bank has complied in good faith with all of the requirements of section 318.
C. Before issuing or denying a certificate of authority, the commissioner may require a foreign bank which makes application for a certificate of authority to submit to him additional information, in such form and manner as he may require.
##### **§ 17:9A-322** Certificate of authority to continue in force {#sec-17-9a-322 omnilex-key=us-nj-statutes--title-17--17:9A-322}
322. A certificate of authority issued to a foreign bank shall continue in force, unless revoked by the commissioner or surrendered by the foreign bank. The commissioner may adopt regulations establishing requirements for periodic renewal of a certificate of authority, and for notification to the commissioner if a foreign bank named in a certificate of authority desires to surrender the certificate or merges with or is acquired by another financial institution or company. Failure to provide any notification required by regulations promulgated by the commissioner shall be grounds for revocation of the certificate.
##### **§ 17:9A-325** Additional statements by and examinations of foreign banks {#sec-17-9a-325 omnilex-key=us-nj-statutes--title-17--17:9A-325}
A. So long as a foreign bank shall be obligated in any manner with respect to any estate or trust administered under the laws of this State, the commissioner may, whenever and as often as he shall deem it advisable,
(1) require the filing by the foreign bank of additional statements of financial condition and other information as to its compliance with the provisions of this article; and
(2) examine into the affairs of the foreign bank to determine its financial condition and its compliance with the provisions of this article, such examination to be made by the commissioner, his deputy, or any other persons so authorized by the commissioner.
B. The officers and employees of every foreign bank being examined shall exhibit to the examiners all its securities, books, records and accounts which are pertinent to the examination, and shall otherwise facilitate the examination.
C. The commissioner, his deputy, and all other persons authorized by the commissioner to examine into the affairs of a foreign bank shall have the power to examine under oath or affirmation the directors, officers and employees of the foreign bank on matters pertinent to such examination, and, for that purpose, shall have power to administer oaths and affirmations.
##### **§ 17:9A-326** Certificate of authority; revocation {#sec-17-9a-326 omnilex-key=us-nj-statutes--title-17--17:9A-326}
326. The commissioner shall revoke the certificate of authority or renewal thereof of a foreign bank if:
(1) the foreign bank has ceased to be authorized by the laws under which it is incorporated to act as trustee, testamentary trustee, fiduciary, executor or guardian;
(2)(Deleted by amendment, P.L.1999, c.159).
(3) the foreign bank does not have capital and surplus of at least one million dollars;
(4) the commissioner finds that its financial condition or lack of insurance coverage makes it inadvisable to permit the foreign bank to act in the fiduciary capacities specified in section 316;
(5) the foreign bank, its directors, officers or employees refuse to permit an examination of its securities, books, records and accounts pursuant to section 325, or if any of its directors, officers or employees refuse to be examined under oath as provided in said section;
(6) the foreign bank does not, within such time as the commissioner may fix, deliver to the commissioner any information required by the commissioner under section 325;
(7) the foreign bank does not pay the costs of an examination made pursuant to section 325; or
(8)(Deleted by amendment, P.L.1999, c.159).
(9)(Deleted by amendment, P.L.1999, c.159).
(10) the foreign bank does not, after the time for appeal has expired and no appeal is pending, satisfy a judgment against it for a breach of any fiduciary obligation with respect to any estate or trust administered by it under the laws of this State.
##### **§ 17:9A-327** Procedure on revocation {#sec-17-9a-327 omnilex-key=us-nj-statutes--title-17--17:9A-327}
Before any certificate of authority or renewal of a certificate of authority of a foreign bank shall be revoked by the commissioner, he shall afford the foreign bank a hearing at which it may show cause why such revocation should not be made. The commissioner shall give the foreign bank at least ten days notice by registered mail of such hearing, addressed to its principal office as shown on the records of the department.
##### **§ 17:9A-328** Review of commissioner's refusal to issue a certificate or his revocation of a certificate {#sec-17-9a-328 omnilex-key=us-nj-statutes--title-17--17:9A-328}
A. If the commissioner shall fail for sixty days to act upon an application for a certificate of authority, or shall fail for thirty days to act upon an application for a certificate of renewal of a certificate of authority, the foreign bank may apply to the Superior Court for a review, hearing and relief.
B. The refusal of the commissioner to issue a certificate of authority or a certificate of renewal of a certificate of authority as provided in this article, or his revocation of such a certificate, shall be subject to review, hearing and relief in the Superior Court. No application to review such a refusal or revocation shall be heard by the Superior Court unless such application is made within thirty days from the date on which notice of the action of the commissioner is mailed to the foreign bank, and unless written notice of such application is given to the commissioner, with a copy of the affidavits and proofs upon which the application is based.
##### **§ 17:9A-329** Surrender of certificate of authority {#sec-17-9a-329 omnilex-key=us-nj-statutes--title-17--17:9A-329}
A certificate of authority or a certificate of renewal of a certificate of authority of a foreign bank may be surrendered by filing in the department
(1) a copy of a resolution of the board of directors of the foreign bank, authorizing such surrender, certified by the secretary, an assistant secretary, the cashier or an assistant cashier of the foreign bank; or
(2) a certificate of a receiver, trustee, conservator, or other administrative or judicial officer, by whatever name described, in possession of the property and business of the foreign bank, authorizing such surrender; or
(3) a copy of a certificate of dissolution of the foreign bank, issued by the appropriate officer of the jurisdiction in which the foreign bank was incorporated, certified by such officer under his official seal; or
(4) a copy of an order or a decree of dissolution of the foreign bank made by any court of competent jurisdiction, certified by the clerk of the court under his official seal.
Upon the filing of any such certificate, the commissioner shall issue and file in the department a certificate evidencing the surrender of the authority of the foreign bank to transact business in this State.
##### **§ 17:9A-330** Violations; disabilities; penalties {#sec-17-9a-330 omnilex-key=us-nj-statutes--title-17--17:9A-330}
A. A foreign bank shall not be entitled to maintain any action in any court of this State on any cause arising out of its transaction of business in this State in violation of the provisions of this article.
B. A foreign bank which violates any of the provisions of this article and its directors, officers, agents and employees who participate in any such violation shall be guilty of a misdemeanor.
##### **§ 17:9A-331** Exempt transactions {#sec-17-9a-331 omnilex-key=us-nj-statutes--title-17--17:9A-331}
Nothing in this article shall prohibit a foreign bank from
(1) contracting in this State with a banking institution for the acquisition by such foreign bank from such banking institution of a part interest in or the entire interest in a loan which such banking institution proposes to make, together with a like interest in any security and any security instrument proposed to be given to such banking institution to secure or evidence such loan;
(2) contracting in this State with a banking institution to acquire, and acquiring in this State from such banking institution, a part interest in or the entire interest in any loan heretofore or hereafter made by such banking institution, together with a like interest in any security and any security instrument heretofore or hereafter given to such banking institution to secure or evidence such loan;
(3) enforcing in this State obligations heretofore or hereafter acquired by it in the transaction of business outside of this State, or in the transaction of any business authorized by paragraph (1) or (2) of this section;
(4) acquiring, holding, leasing, mortgaging, contracting with respect to, or otherwise protecting or conveying property in this State heretofore or hereafter assigned, transferred, mortgaged or conveyed to it as security for, or in whole or part satisfaction of a loan or loans made by it or obligations acquired by it in the transaction of business outside of this State, or in the transaction of any business authorized by paragraphs (1) or (2) of this section.
##### **§ 17:9A-332** Sale of real property by foreign banks in the possession of an administrative or court officer {#sec-17-9a-332 omnilex-key=us-nj-statutes--title-17--17:9A-332}
When the property and business of a foreign bank not authorized to transact business in this State is in the possession of a banking commissioner, receiver, conservator, or other custodian or officer, by whatever name described, such officer may sell or make other disposition of any real property in this State to which title is vested in the foreign bank or in such officer, and may effect such sale or other disposition by deeds of conveyance or other instruments; provided, that a certified copy of any certificate of possession by such officer, or of any judgment, order or decree of a court appointing such officer to take possession, is filed in the department. If an order or decree of a court be required by the laws under which the foreign bank is incorporated, directing or confirming the sale or other disposition of the real property, a certified copy of such order or decree shall also be filed in the department.
##### **§ 17:9A-333** Department of Banking fees {#sec-17-9a-333 omnilex-key=us-nj-statutes--title-17--17:9A-333}
333. A bank or savings bank shall pay to the commissioner for the use of the State a fee, to be prescribed by the commissioner by regulation, in an amount not less than or not more than, the following minimum and maximum amounts:
Minimum Maximum
(1) For filing an application
for charter.................... $10,000.00 $20,000.00
(2) For the issuance by the
commissioner of a certificate
of authority .................. 500.00 1,000.00
(3) For filing a certificate
of amendment of a certificate
of incorporation, or an amended
certificate of incorporation... 200.00 500.00
(4) For filing any other
certificate ................... 50.00 250.00
(5) (a) For filing an application
for approval of the establishment
of a full branch office........ 1,000.00 3,000.00
(b) For filing an application
for approval of the establishment
of a mini-branch office ....... 1,000.00 3,000.00
(c) For filing an application
for approval of the establishment
of a communication terminal branch
office ........................ 500.00 2,000.00
(6) For filing an agreement of
merger, per bank .............. 1,500.00 4,000.00
(7) For filing a copy of a plan
of reorganization ............. 250.00 1,000.00
(8) For filing a report required
by this act ................... 100.00 250.00
(9) For filing an affidavit
required by this act .......... 50.00 100.00
(10) For filing proof of
publication and mailing, or other
proof required by this act .... 50.00 100.00
(11) For filing application
for approval of a change in
location of principal office or
full branch office ........... 500.00 2,000.00
(12) For filing an application
for approval of the cost of the
establishment of an auxiliary
office ........................ 500.00 2,000.00
(13) For the issuance of a
certified copy of any certificate
of incorporation or merger or
plan of reorganization or any other
certificate or affidavit filed in
the department ................ 25.00 100.00
plus $2.00 per page
(14) For filing an application for
approval of an interchange between
principal office and full branch
office ........................ 250.00 1,000.00
(15) For the issuance of any other
approval by the commissioner .. 100.00 250.00
plus per diem charges where applicable
(16) For the issuance of any
extension by the commissioner... 50.00 150.00
plus per diem charges where applicable
(17) For filing a pension plan... 250.00 500.00
(18) For filing an amendment or
alteration to a pension plan .. 100.00 250.00
(19) For filing plans of
acquisition, per company, per
bank or savings bank .......... 1,500.00 4,000.00
(20) Conversion from mutual to
stock savings bank ............ 3,500.00 10,000.00
(21) Request to commissioner to
require an institution to share
access to its communication terminal
branch office ................. 100.00 250.00
(22) Conversion from savings bank
to State association .......... 5,000.00 10,000.00
(23) Conversion from stock savings
bank to bank or conversion from bank
to stock savings bank ......... 5,000.00 10,000.00
(24) In addition to above fees,
a per diem charge may be assessed
when a special investigation of
a filing is required.
##### **§ 17:9A-334** Fees payable by foreign banks. {#sec-17-9a-334 omnilex-key=us-nj-statutes--title-17--17:9A-334}
334. A foreign bank shall pay to the commissioner for the use of the State a fee, to be prescribed by the commissioner by regulation, in an amount not less than or not more than, the following minimum and maximum amounts:
Minimum Maximum
(1) For filing a copy of its
certificate of incorporation or
amendment thereof or other
change therein $50.00 $250.00
(2) For filing a statement of
its financial condition 50.00 250.00
(3) For filing a power of
attorney 25.00 75.00
(4) (Deleted by amendment, P.L.2007, c.81).
(5) For registering a back office 500.00
The commissioner shall charge for the issuance of a certificate of authority or a certificate of renewal of a certificate of authority such fee as the commissioner shall prescribe by rule or regulation, not to exceed $1,500.00. The certificate shall run from the date of issuance for a term of not less than two years as set by the commissioner by regulation.
The commissioner may by rule or regulation adopted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) impose other fees and charges, including assessments and nonrefundable fees for application and examinations, on out-of-State banks establishing branch offices or agency offices in this State.
##### **§ 17:9A-335** Costs of examination of a bank, savings bank or foreign bank {#sec-17-9a-335 omnilex-key=us-nj-statutes--title-17--17:9A-335}
Every bank, savings bank and foreign bank shall pay to the commissioner for the use of the State the reasonable costs of each examination of its affairs made pursuant to this act. The Attorney General may prosecute an action in the name of and for the benefit of the State, in a court of competent jurisdiction, against any bank, savings bank or foreign bank which fails to pay such costs of examination.
##### **§ 17:9A-336** Repeal of prior law {#sec-17-9a-336 omnilex-key=us-nj-statutes--title-17--17:9A-336}
A. The following sections of the Revised Statutes are hereby repealed:
(1) section 7:4-7;
(2) sections 7:5-7 to 7:5-10, inclusive;
(3) sections 7:6-1 to 7:6-17, inclusive;
(4) sections 17:1A-1 to 17:1A-12, inclusive;
(5) sections 17:2-1 to 17:2-8, inclusive, insofar as they apply to banks and savings banks;
(6) sections 17:3-1 to 17:3-3, inclusive, insofar as they apply to banks and savings banks;
(7) sections 17:4-1 to 17:4-125, inclusive;
(8) sections 17:5-1 to 17:5-11, inclusive;
(9) sections 17:6-1 to 17:6-86, inclusive;
(10) sections 17:7-1 to 17:7-18, inclusive;
(11) sections 17:8-1 to 17:8-16, inclusive;
(12) sections 17:9-1 to 17:9-8.2, inclusive, and 17:9-10 to 17:9-16, inclusive;
(13) sections 17:16-1 to 17:16-19, inclusive.
B. The following acts are hereby repealed:
(1) Laws of New Jersey, 1938, Chapter 222, insofar as it applies to banks and savings banks;
(2) Laws of New Jersey, 1939, Chapters 25 and 123, and Chapter 189, insofar as it applies to banks and savings banks;
(3) Laws of New Jersey, 1940, Chapters 37 and 232;
(4) Laws of New Jersey, 1941, Chapters 39, 41, 106 and 190;
(5) Laws of New Jersey, 1942, Chapter 89;
(6) Laws of New Jersey, 1944, Chapter 30 and section 1 of Chapter 176;
(7) Laws of New Jersey, 1945, Chapter 190;
(8) Laws of New Jersey, 1946, Chapter 317;
(9) Laws of New Jersey, 1947, Chapters 258 and 268.
C. All other acts and parts of acts inconsistent with this act are hereby repealed.
##### **§ 17:9A-337** Reference to Revised Statutes and New Jersey Statutes {#sec-17-9a-337 omnilex-key=us-nj-statutes--title-17--17:9A-337}
When any section, chapter or title of the Revised Statutes or the New Jersey Statutes is cited or referred to in this act, such citation or reference shall be deemed to refer to the section, chapter or title of the Revised Statutes or the New Jersey Statutes as enacted and heretofore or hereafter amended or supplemented.
##### **§ 17:9A-338** Applicability of Title 14A of the New Jersey Statutes {#sec-17-9a-338 omnilex-key=us-nj-statutes--title-17--17:9A-338}
Except to the extent specifically made applicable by this act, the provisions of Title 14A of the New Jersey Statutes as enacted and as amended or supplemented shall not apply to banks and savings banks.
##### **§ 17:9A-339** Prior lawful acts not affected {#sec-17-9a-339 omnilex-key=us-nj-statutes--title-17--17:9A-339}
This act shall not invalidate, terminate, or otherwise affect any act or contract of a bank or savings bank or of the stockholders of a bank lawfully done or entered into prior to the effective date of this act.
##### **§ 17:9A-340** Separability of provisions {#sec-17-9a-340 omnilex-key=us-nj-statutes--title-17--17:9A-340}
If any section or portion of a section of this act shall be invalid for any reason, such invalidity shall not affect the validity of the remaining sections or portions of sections.
##### **§ 17:9A-341** Headnotes not part of act {#sec-17-9a-341 omnilex-key=us-nj-statutes--title-17--17:9A-341}
In the construction of this act or any part thereof, no headnote to any article or section shall be deemed to be a part of this act.
##### **§ 17:9A-342** Short title {#sec-17-9a-342 omnilex-key=us-nj-statutes--title-17--17:9A-342}
This act may be cited as "The Banking Act of 1948" .
##### **§ 17:9A-343** Effective date of act {#sec-17-9a-343 omnilex-key=us-nj-statutes--title-17--17:9A-343}
This act shall take effect on September 16, 1948.
##### **§ 17:9A-355** Definitions {#sec-17-9a-355 omnilex-key=us-nj-statutes--title-17--17:9A-355}
As used in this act,
(1) "Corporation" means a corporation organized under any law of this State heretofore, presently or hereafter in force, for a purpose or purposes for which a corporation may be organized under "An act revising the General Corporation Law and establishing a new Title to be known as Title 14A, Corporations, General, of the New Jersey Statutes" approved November 21, 1968 (P.L.1968, c. 350).
(2) "Bank" includes
(a) Every bank heretofore organized pursuant to "An act concerning banks and banking (Revision of 1899)," approved March 24, 1899;
(b) Every trust company heretofore organized pursuant to "An act concerning trust companies (Revision of 1899)," approved March 24, 1899;
(c) Every bank or trust company heretofore organized pursuant to chapter 4 of Title 17 of the Revised Statutes;
(d) Every bank and trust company heretofore authorized by any general or special law of this State to transact business as a bank or a trust company, or as both;
(e) Every bank heretofore or hereafter organized pursuant to articles 2 or 22 of "An act concerning banking and banking institutions (Revision of 1948)" approved April 29, 1948 (P.L.1948, c. 67).
(3) "Acquiring corporation" means a corporation whose board of directors has approved, and authorized the execution of, a plan of acquisition providing for the acquisition by such corporation of ownership of all the outstanding shares of capital stock of one or more banks;
(4) "Participating bank" means a bank whose board of directors has approved, and authorized the execution of, a plan providing for the acquisition by an acquiring corporation of ownership of all the outstanding shares of capital stock of such bank;
(5) "Department" means the Department of Banking and Insurance of New Jersey;
(6) "Commissioner" means the Commissioner of Banking and Insurance of New Jersey.
##### **§ 17:9A-356** Bank shares; acquisition by corporations {#sec-17-9a-356 omnilex-key=us-nj-statutes--title-17--17:9A-356}
2. (1) An acquiring corporation may acquire ownership of all the outstanding shares of the capital stock of one or more banks in the manner provided by this act.
(2) Shares of capital stock of an acquiring corporation, or other securities convertible into such shares, may be issued or delivered in exchange for shares of capital stock of one or more participating banks pursuant to a plan of acquisition without first being offered to existing shareholders of the acquiring corporation, (i) except, in the case of an acquiring corporation organized on or after January 1, 1969, as otherwise provided in its certificate of incorporation, or (ii) if, in the case of an acquiring corporation organized prior to January 1, 1969, its certificate of incorporation, as amended, so provides.
(3) The method of acquiring bank shares authorized by this act is not exclusive, but is in addition to any other lawful methods for the acquisition of bank shares by corporations.
##### **§ 17:9A-357** Plan of acquisition {#sec-17-9a-357 omnilex-key=us-nj-statutes--title-17--17:9A-357}
Plan of acquisition. (1) The boards of directors of the corporation which seeks to become an acquiring corporation and of each bank which seeks to become a participating bank shall authorize the execution of a plan for the acquisition by such corporation of ownership of all the outstanding shares of the capital stock of each such bank.
(2) The plan of acquisition shall contain
(a) The name and address of the acquiring corporation;
(b) The name and address of each participating bank;
(c) The names and addresses of the members of the board of directors of the acquiring corporation;
(d) The names and addresses of all banks some or all of whose shares of capital stock are owned by the acquiring corporation, with the total number of shares of each such bank issued and outstanding, and the number of shares of each such bank owned by the acquiring corporation;
(e) The terms and conditions of the acquisition, and the mode of carrying it into effect, including the manner of exchanging the shares of each participating bank for cash or shares or other securities of the acquiring corporation, and including provisions respecting the disposition of securities issued by a participating bank and convertible into shares of its capital stock, and options granted to officers and employees of a participating bank to purchase shares of its capital stock;
(f) The effective date of the plan of acquisition;
(g) Such other provisions, including the payment of cash in lieu of the issuance of fractional shares, as may be necessary or appropriate to carry the plan of acquisition into effect.
(3) The plan of acquisition may provide that the shares of the participating bank be exchanged solely for cash or solely for shares or securities of the acquiring corporation or be exchanged for both cash and shares or other securities.
##### **§ 17:9A-358** Approval of plan of acquisition by commissioner; review {#sec-17-9a-358 omnilex-key=us-nj-statutes--title-17--17:9A-358}
(1) The plan of acquisition, executed by all the parties thereto, shall be submitted to the commissioner who shall, within 60 days from the date of such submission, endorse thereon his approval or disapproval. If the commissioner disapproves the plan of acquisition, he shall forthwith file a memorandum in the department stating the reasons for his disapproval, and shall mail a copy of the memorandum to the acquiring corporation and each participating bank. The commissioner shall not withhold his approval unless he shall find that the plan of acquisition contains provisions which do not conform to law, or that the plan of acquisition is not in the public interest.
(2) The commissioner's disapproval of a plan of acquisition shall be subject to review, hearing and relief in the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:9A-359** Submission of plan to stockholders; filing {#sec-17-9a-359 omnilex-key=us-nj-statutes--title-17--17:9A-359}
(1) If the commissioner approves the plan of acquisition, it shall, within 120 days after the date of such approval, be submitted to the stockholders of each of the participating banks at separate meetings called for that purpose upon at least 20 days' notice given in the manner specified in section 81 of "An act concerning banking and banking institutions (Revision of 1948), approved April 29, 1948 (P.L.1948, c. 67)." A copy of the plan of acquisition shall be mailed to each stockholder of each participating bank with the notice of the stockholders' meetings.
(2) If the plan is approved by the stockholders of one or more of the participating banks holding at least 2/3 of the capital stock entitled to vote, that fact shall be certified as to each such bank by its president or a vice-president and the certifications shall be attached to the plan. The plan shall then be filed in the department, and thereupon it shall become effective according to its terms as to the acquiring corporation and each participating bank whose stockholders have approved the plan of acquisition as provided in this section.
##### **§ 17:9A-360** Notice of dissent; "dissenting stockholder" defined {#sec-17-9a-360 omnilex-key=us-nj-statutes--title-17--17:9A-360}
(1) Any stockholder of a participating bank electing to dissent from the plan of acquisition may do so by filing with the participating bank of which he is a stockholder, a written notice of such dissent, stating that he intends to demand payment for his shares if the plan of acquisition becomes effective. Such dissent shall be filed before the taking of the vote of the stockholders on the plan of acquisition pursuant to section 5.
(2) Within 10 days after the date on which the plan of acquisition is approved by stockholders of a participating bank as provided in section 5 hereof, such bank shall give notice of such approval by certified mail to each stockholder who has filed written notice of dissent pursuant to subsection (1) of this section, except any who voted for or consented in writing to such plan of acquisition.
(3) Within 20 days after the mailing of such notice, any stockholder to whom the participating bank was required to give such notice, may make written demand on the participating bank for the payment of the fair value of his shares. A stockholder who makes a demand pursuant to this subsection (3) is hereafter in this act referred to as a "dissenting stockholder." Upon making such demand, the dissenting stockholder shall cease to have any rights of a stockholder except the right to be paid the fair value of his shares and any other rights of a dissenting stockholder under this act.
(4) Not later than 20 days after demanding payment for his shares pursuant to this section, the stockholder shall submit the certificate or certificates representing such shares to the participating bank of which he is a stockholder for notation thereon that such demand has been made, whereupon such certificate or certificates shall be returned to him. If shares represented by a certificate on which such notation has been made shall be transferred, each new certificate issued therefor shall bear similar notation, together with the name of the original dissenting holder of such shares, and a transferee of such shares shall acquire by such transfer no rights other than those which the original dissenting stockholder had after making a demand for payment of the fair value thereof.
(5) A stockholder may not dissent as to less than all of the shares owned beneficially by him. A nominee or fiduciary may not dissent on behalf of any beneficial owner as to less than all of the shares of such owner.
##### **§ 17:9A-361** Valuation date of fair value {#sec-17-9a-361 omnilex-key=us-nj-statutes--title-17--17:9A-361}
For the purposes of this act, the fair value of the shares of a participating bank shall be determined as of the day before the day on which the vote of stockholders of such bank was taken as provided in section 5. In determining fair value, there shall be excluded any appreciation or depreciation in value resulting from the consummation of the plan of acquisition.
##### **§ 17:9A-362** Termination of right of stockholder to be paid the fair value of his shares {#sec-17-9a-362 omnilex-key=us-nj-statutes--title-17--17:9A-362}
(1) The right of a dissenting stockholder to be paid the fair value of his shares shall cease if
(a) He has failed to present his certificates for notation as provided by subsection (4) of section 6, unless a court having jurisdiction, for good and sufficient cause shown, shall otherwise direct;
(b) His demand for payment is withdrawn with the written consent of the participating bank;
(c) The fair value of the shares is not agreed upon as provided in this act, and no action for the determination of fair value by the Superior Court is commenced within the time provided in this act;
(d) The Superior Court determines that the stockholder is not entitled to payment for his shares;
(e) The plan of acquisition of shares is abandoned, rescinded, or otherwise terminated in respect to the participating bank of which he is a stockholder; or
(f) A court having jurisdiction permanently enjoins or sets aside the acquisition of shares.
(2) In any case provided for in subsection (1) of this section the rights of the dissenting stockholder as a stockholder shall be reinstated as of the date of the making of a demand for payment pursuant to section 6 without prejudice to any corporate action which has taken place during the interim period. In such event, he shall be entitled to any intervening pre-emptive rights and the right to payment of any intervening dividend or other distribution, or if any such rights have expired or any such dividend or distribution other than in cash has been completed, in lieu thereof, at the election of the participating bank, the fair value thereof in cash as of the time of such expiration or completion.
##### **§ 17:9A-363** Rights of dissenting stockholder {#sec-17-9a-363 omnilex-key=us-nj-statutes--title-17--17:9A-363}
(1) A dissenting stockholder may not withdraw his demand for payment of the fair value of his shares without the written consent of the participating bank.
(2) The enforcement by a dissenting stockholder of his right to receive payment for his shares shall exclude the enforcement by such dissenting stockholder of any other right to which he might otherwise be entitled by virtue of share ownership, except as provided in subsection (2) of section 8 and except that this subsection shall not exclude the right of such dissenting stockholder to bring or maintain an appropriate action to obtain relief on the ground that consummation of the plan of acquisition will be or is ultra vires, unlawful or fraudulent as to such dissenting stockholder.
##### **§ 17:9A-364** Determination of fair value by agreement {#sec-17-9a-364 omnilex-key=us-nj-statutes--title-17--17:9A-364}
(1) Within 10 days after the expiration of the period within which stockholders may make written demand to be paid the fair value of their shares, or within 10 days after the plan of acquisition becomes effective, whichever is later, the participating bank shall mail to each dissenting stockholder the balance sheet and the surplus statement of the participating bank as of the latest available date, which shall not be earlier than 12 months prior to the making of the offer of payment hereinafter referred to in this subsection, and a profit and loss statement or statements for not less than a 12-month period ended on the date of such balance sheet or, if the participating bank was not in existence for such 12-month period, for the portion thereof during which it was in existence. The participating bank may accompany such mailing with a written offer to pay each dissenting stockholder for his shares at a specified price deemed by such bank to be the fair value thereof. Such offer shall be made at the same price per share to all dissenting stockholders of the same class, or, if divided into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day period limited by subsection (1) of this section, the fair value of the shares is agreed upon between any dissenting stockholder and the participating bank, payment therefor shall be made upon surrender of the certificate or certificates representing such shares.
##### **§ 17:9A-365** Procedure on failure to agree upon fair value; commencement of action to determine fair value {#sec-17-9a-365 omnilex-key=us-nj-statutes--title-17--17:9A-365}
(1) If the fair value of the shares is not agreed upon within the 30-day period limited by subsection (2) of section 10, the dissenting stockholder may serve upon the participating bank a written demand that it commence an action in the Superior Court for the determination of such fair value. Such demand shall be served not later than 30 days after the expiration of the 30-day period so limited and such action shall be commenced by the participating bank not later than 30 days after receipt by such bank of such demand, but nothing herein shall prevent such bank from commencing such action at any earlier time.
(2) If a participating bank fails to commence the action as provided in subsection (1) of this section a dissenting stockholder may do so in the name of such bank, not later than 60 days after the expiration of the time limited by subsection (1) of this section in which such bank may commence such an action.
##### **§ 17:9A-366** Action to determine fair value; jurisdiction of court; appointment of appraiser {#sec-17-9a-366 omnilex-key=us-nj-statutes--title-17--17:9A-366}
In any action to determine the fair value of shares pursuant to this act:
(a) The Superior Court shall have jurisdiction and may proceed in the action in a summary manner or otherwise;
(b) All dissenting stockholders, wherever residing, except those who have agreed with the participating bank upon the price to be paid for their shares, shall be made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive evidence and report to the court on the question of fair value, who shall have such power and authority as shall be specified in the order of his appointment; and
(d) The court shall render judgment against the participating bank and in favor of each stockholder who is a party to the action for the amount of the fair value of his shares.
##### **§ 17:9A-367** Judgment in action to determine fair value {#sec-17-9a-367 omnilex-key=us-nj-statutes--title-17--17:9A-367}
(1) A judgment for the payment of the fair value of shares shall be payable upon surrender to the participating bank of the certificate or certificates representing such shares.
(2) The judgment shall include an allowance for interest at such rate as the court finds to be equitable, from the day of the meeting of stockholders of the participating bank at which the plan of acquisition was approved to the day of payment. If the court finds that the refusal of any dissenting stockholder to accept any offer of payment made by the participating bank under section 10 was arbitrary, vexatious or otherwise not in good faith, no interest shall be allowed to him.
##### **§ 17:9A-368** Costs and expenses of action {#sec-17-9a-368 omnilex-key=us-nj-statutes--title-17--17:9A-368}
The costs and expenses of bringing an action pursuant to section 11 shall be determined by the court and shall be apportioned and assessed as the court may find equitable upon the parties or any of them. Such expenses shall include reasonable compensation for and reasonable expenses of the appraiser, if any, but shall exclude the fees and expenses of counsel for and experts employed by any party; but if the court finds that the offer of payment made by the participating bank under section 10 was not made in good faith, or if no such offer was made, the court in its discretion may award to any dissenting stockholder who is a party to the action reasonable fees and expenses of his counsel and of any experts employed by the dissenting stockholder.
##### **§ 17:9A-369** Disposition of shares {#sec-17-9a-369 omnilex-key=us-nj-statutes--title-17--17:9A-369}
Upon payment for shares pursuant to subsection (2) of section 10, or upon payment of a judgment pursuant to subsection (1) of section 13, the participating bank making such payment shall acquire all the right, title and interest in and to such shares, notwithstanding any other provision of law. Shares so acquired by the participating bank shall be disposed of as a stock dividend as provided by section 212 of the Banking Act of 1948, P.L.1948, chapter 67. L.1969, c. 118, s. 15, eff. June 30, 1969.
##### **§ 17:9A-382** Definitions {#sec-17-9a-382 omnilex-key=us-nj-statutes--title-17--17:9A-382}
1. As used in sections 1 through 27 of P.L.1987, c.201 (C.17:9A-382 et seq.):
a. "Beneficial owner":
(1) Includes any person who, directly or indirectly through any contract, arrangement, understanding, relationship or otherwise, has or shares:
(a) Voting power which includes the power to vote, or to direct the voting of shares; or
(b) Investment power which includes the power to dispose, or to direct the disposition of shares;
(2) Includes any person who directly or indirectly creates or uses a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement or device with the purpose or effect of divesting the person of beneficial ownership of shares or preventing the vesting of such beneficial ownership as part of a plan or scheme to evade this act;
(3) Includes any person who has the right to acquire beneficial ownership of the shares as defined herein within sixty (60) days, including, but not limited to, any right to acquire:
(a) Through the exercise of any option, warrant or right;
(b) Through the conversion of a security;
(c) Pursuant to the power to revoke a trust, discretionary account, or similar arrangement; or
(d) Pursuant to the automatic termination of a trust, discretionary account or similar arrangement; except that, any person who acquires a security or power specified in subparagraph (a), (b), or (c) above, with the purpose or effect of changing or influencing the control of the issuer, or in connection with or as a participation in any transaction having such effect or purpose, immediately upon the acquisition shall be deemed to be the beneficial owner of the shares which may be acquired through the exercise or conversion of such security or power. Any securities not outstanding which are subject to these options, warrants, rights, or conversion privileges shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by the person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class by any other person;
(4) Does not include:
(a) Any member of a national securities exchange who holds shares directly or indirectly on behalf of another person solely because the member is the record holder of the securities and, pursuant to the rules of the exchange, may direct the vote of the shares without instruction on other than contested matters or matters that may affect substantially the rights or privileges of the holders of these shares to be voted, but is otherwise precluded by the rules of the exchange from voting without instruction; or
(b) Any person who in the ordinary course of business is a pledgee of securities under a written pledge agreement until the pledgee had taken all formal steps necessary which are required to declare a default and determines that the power to vote or direct a vote or to dispose or to direct the disposition of pledged shares will be exercised, provided that (i) the pledge agreement is bona fide and was not entered into with the purpose or the effect of changing or influencing the control of the issuer, or in connection with any transaction having any such purpose or effect including any transaction subject to this act; and (ii) the pledge agreement prior to default does not grant to the pledgee: (A) the power to vote or to direct the vote of the pledged securities; or (B) the power to dispose or to direct the disposition of the pledged securities other than the grant of this power pursuant to a pledged agreement under which credit is extended subject to Regulation T of the Federal Reserve Board, 12 C.F.R. 220, and in which the pledgee is a broker or dealer registered under section 15 of the "Securities Exchange Act of 1934," 48 Stat. 895 (15 U.S.C. s.78o); or
(c) Any person engaged in business as an underwriter of securities who acquires shares through participation in good faith in a firm commitment underwriting of shares registered under the "Securities Act of 1933," 48 Stat. 74 (15 U.S.C. s.77a et seq.), or under the "Securities Exchange Act of 1934," 48 Stat. 881 (15 U.S.C. s.78a et seq.), until the expiration of 40 days after the date of the acquisition.
All securities of the same class beneficially owned by a person, regardless of the forms the beneficial ownership takes, shall be aggregated in calculating the number of shares beneficially owned by the person.
b. "Capital stock savings bank" means any savings bank chartered pursuant to the provisions of P.L.1982, c.9 (C.17:9A-8.1 et seq.) and includes any person that controls a capital stock savings bank.
c. "Commissioner" means the Commissioner of Banking.
d. "Control of a capital stock savings bank" includes:
(1) Owning, beneficially or otherwise, controlling, or having power to vote 25% or more of the outstanding shares of any class of voting securities of a capital stock savings bank, directly or indirectly, or acting through one or more persons;
(2) Controlling in any manner the election of a majority of the directors of a capital stock savings bank;
(3) Exercising or having the power to exercise directly or indirectly a controlling influence over the management or policies of a capital stock savings bank; or
(4) Conditioning in any manner the transfer of 25% or more of any class of voting securities of a capital stock savings bank.
"Control of a capital stock savings bank" does not include a director or officer of a capital stock savings bank acting in the capacity of performing his duties or responsibilities of office.
e. "Converted savings bank" means an organizing mutual savings bank which has converted to a capital stock savings bank pursuant to the provisions of P.L.1982, c.9 (C.17:9A-8.1 et seq.) subsequent to the formation of a mutual savings bank holding company.
f. "Mutual savings bank holding company" means a mutual savings bank holding company which has its principal office of business in this State and which has been formed by an organizing mutual savings bank pursuant to sections 7 through 27 of P.L.1987, c.201 (C.17:9A-388 through 17:9A-408).
g. "Organizing mutual savings bank" means a mutual savings bank which has its principal office of business in this State, the board of managers of which propose to form a mutual savings bank holding company pursuant to the provisions of this act.
h. "Person" means an individual, bank, corporation, savings bank, savings and loan association, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any form of entity.
i. "Subsidiary capital stock savings bank" means a capital stock savings bank which has been incorporated by the directors of a mutual savings bank holding company, a majority of the stock of which subsidiary capital stock savings bank is held by a mutual savings bank holding company.
j. "Voting power" means that a person has or shares, directly or indirectly, through any option, contract, arrangement, understanding, conversion right or relationship, or by acting jointly or in concert or otherwise, the power to vote, or to direct the voting of voting shares.
k. "Department" means the Department of Banking.
l. "Capital stock savings bank holding company" means a bank holding company that has issued or intends to issue voting capital stock; and which controls one or more savings banks located in this State or any other state, the aggregate deposits of which controlled savings banks exceed the aggregate deposits of the bank holding company's subsidiaries which are banks, banks incorporated in other states or national banks wherever their principal office is located.
m. "Bank holding company" means a bank holding company subject to the "Bank Holding Company Act of 1956," 70 Stat. 133 (12 U.S.C. s.1841 et seq.).
n. "Bank" means a bank as defined in subsection (1) of section 1 of P.L.1948, c.67 (C.17:9A-1), a national banking association having its principal office in this State and a bank holding company.
##### **§ 17:9A-383** Prior approval {#sec-17-9a-383 omnilex-key=us-nj-statutes--title-17--17:9A-383}
2. No person shall, without the prior approval of the commissioner, acting directly or indirectly or through or in concert with one or more persons:
a. Obtain or exercise control of a capital stock savings bank;
b. Offer to acquire beneficial ownership or control of any voting shares of a capital stock savings bank if, after the acquisition, the person would beneficially own or control more than 25% of the then-outstanding voting shares of the capital stock savings bank; or
c. Acquire beneficial ownership or control of any voting shares of a capital stock savings bank, if, after the acquisition, the person would beneficially own or control more than 25% of the then-outstanding voting shares of the capital stock savings bank.
##### **§ 17:9A-384** Application; hearing {#sec-17-9a-384 omnilex-key=us-nj-statutes--title-17--17:9A-384}
3. a. An application by a person for the approval of the commissioner to obtain control of a capital stock savings bank, to offer to acquire beneficial ownership or control of more than 25% of the voting shares of a capital stock savings bank, or to acquire beneficial ownership or control of more than 25% of the voting shares of a capital stock savings bank shall be made on a form provided by the commissioner. The commissioner shall give notice to the capital stock savings bank involved in the proposed transaction and, upon request, shall send a copy of the application to the capital stock savings bank within five business days of receiving the application. If the commissioner decides to hold a hearing on the application, the notice shall include the hearing date established pursuant to subsection b. of this section.
No later than 10 days after the date upon which a completed application is filed with the commissioner, the applicant shall cause to be published a notice of application for control of a capital stock savings bank. This publication shall be made in a newspaper of general circulation in the county in which the capital stock savings bank has its principal office. The notice shall include whatever information the commissioner, by regulation, deems to be necessary and appropriate.
b. The commissioner may hold a hearing on the application within 60 days of receipt of the completed application. If the commissioner decides to hold a hearing on the application, the commissioner shall notify the applicant as to the date of the hearing within five business days of the date the commissioner receives the completed application. The hearing shall be held in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules and regulations promulgated by the commissioner.
##### **§ 17:9A-385** Factors for consideration {#sec-17-9a-385 omnilex-key=us-nj-statutes--title-17--17:9A-385}
In determining whether to approve an acquisition of shares or offer to acquire shares pursuant to section 2 of this act, the commissioner shall consider the following factors:
a. With respect to the applicant:
(1) The financial condition and the resources of the applicant;
(2) The competence, character, and banking experience of the applicant, including the applicant's record of compliance with laws and regulations;
(3) Whether the applicant has (i) employed any device, scheme or artifice to defraud; or (ii) obtained or will obtain any money or property by means of any untrue statement of a material fact or any omission of a material fact; or (iii) engaged in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon the capital stock savings bank, the shareholders of the capital stock savings bank, the depositors thereof, or the public at large; and
(4) The applicant's plans and intentions with respect to the operation of the capital stock savings bank.
b. With respect to the capital stock savings bank:
(1) The financial condition and prospects of the capital stock savings bank, which shall include consideration as to the sufficiency of current or projected capital positions, as well as the level of indebtedness of the capital stock savings bank before and after the acquisition;
(2) The convenience and needs of the depositors and the communities served by the capital stock savings bank; and
(3) The effect of the proposed acquisition on the safety and soundness of the capital stock savings bank.
c. Whether approval of the application would result in a person owning more shares than are permitted by the capital stock savings bank's charter or bylaws, in which case the commissioner shall not approve the application; except that this subsection shall not apply to an application for the acquisition of shares of a capital stock savings bank that the commissioner determines is in an unsafe or unsound condition.
In the event the commissioner grants approval of an acquisition of shares as described in subsection a. of this section, the approval shall apply only to the specific transaction set forth by the applicant in his application, and any subsequent acquisition which would further increase the applicant's beneficial ownership or control of the then-outstanding voting shares of the capital stock savings bank shall require the commissioner's prior approval in the same manner required under this act.
##### **§ 17:9A-386** Voter ineligibility; registration {#sec-17-9a-386 omnilex-key=us-nj-statutes--title-17--17:9A-386}
5. a. Any shares in excess of 25% of the outstanding voting shares of a capital stock savings bank which are acquired in violation of sections 2 through 4 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-385) shall not be eligible to be voted and shall not be counted in determining the number of shares outstanding for the purpose of determining the number or percent of shares required for shareholder action.
b. All shares of stock in a capital stock savings bank shall be registered in the name of the true owner of the shares, and if held as nominee or in trust or otherwise for the benefit of any other person, the person listed as registered owner shall disclose to the capital stock savings bank the names and addresses of all persons who hold a beneficial interest in the shares on written demand by the capital stock savings bank.
##### **§ 17:9A-387** Violations, penalties {#sec-17-9a-387 omnilex-key=us-nj-statutes--title-17--17:9A-387}
6. a. Whenever it appears to the commissioner that any person has engaged in or is about to engage in any act or practice which constitutes a violation of sections 2 through 5 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-386) or any regulations promulgated pursuant thereto, the commissioner may conduct an investigation and issue cease and desist orders if he deems it necessary. In addition to all other remedies, the commissioner may bring an action in the Superior Court, Law Division on behalf of the State against any person or persons participating in or about to participate in a violation. In any court proceeding, the commissioner may apply for and shall be entitled to have issued the court's subpoena requiring the appearance of any defendant and the defendant's employees or agents, and the production of documents, books and records as may be necessary for the hearing of the action. Upon a proper showing, the court may grant a permanent or preliminary injunction or temporary restraining order or may order the rescission of any sale, tender for sale, purchase or tender for purchase of equity securities determined to be unlawful under sections 2 through 5 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-386).
b. Whenever any person has engaged in or is about to engage in any act or practice which constitutes a violation of sections 2 through 5 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-386) or any regulation or order issued thereunder, the capital stock savings bank or any record or beneficial owner of an equity security of the capital stock savings bank may bring an action to enjoin the person from continuing or doing any act in violation of this act. Upon a proper showing, the court may grant a permanent or preliminary injunction or temporary restraining order or may order the rescission of any sale, tender for sale, purchase or tender for purchase of equity securities determined to be unlawful under P.L.1987, c.201 (C.17:9A-382 et seq.) or under any regulation or order of the commissioner.
c. (1) In addition to any other penalties herein or otherwise provided by law, the commissioner may, upon notice and hearing impose a penalty not exceeding $10,000.00 for any violation of sections 2 through 5 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-386) or of any rule or regulation promulgated thereto. The penalty shall be recovered by and in the name of the commissioner in a civil action by a summary proceeding under "the penalty enforcement law," N.J.S. 2A:58-1 et seq., in the Superior Court, Law Division. Whenever any violation of sections 2 through 5 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-386) or of any regulation hereunder is of a continuing nature, each day during which the violation continues shall constitute an additional, separate and distinct offense, except during the time an appeal from the order or notice may be taken or is pending.
(2) Sections 2 through 6 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-387) shall apply to all capital stock savings banks organized pursuant to P.L.1982, c.9 (C.17:9A-8.1 et seq.) whether chartered prior to or after the enactment of this act. Any person who prior to the effective date of this act directly or indirectly, beneficially owned or controlled more than 25% of the outstanding voting shares of a capital stock savings bank may continue such ownership after the effective date of this act without approval of the commissioner. This act shall not be construed to limit the applicability of any law governing the acquisition of securities.
(3) Sections 2 through 6 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-387) shall not apply to any merger of a capital stock savings bank with another capital stock savings bank or mutual savings bank. The provisions of P.L.1982, c.9 (C.17:9A-8.1 et seq.) and sections 132 through 148 of P.L.1948, c.67 (C.17:9A-132 through C.17:9A-148) shall be the exclusive governing provisions.
(4) Notwithstanding any other law of this State, the provisions contained in sections 2 through 6 of P.L.1987, c.201 (C.17:9A-383 through 17:9A-387) shall also apply to an acquisition of voting shares of a bank or company which controls a bank by a savings bank or a savings bank holding company if, after the acquisition, the savings bank or savings bank holding company would beneficially own or control more than 25% of the outstanding voting shares of the bank or company which controls a bank. For the purpose of this paragraph (4), "savings bank" means any capital stock savings bank or mutual savings bank chartered under the laws of this State; "savings bank holding company" means any company located in this State which controls a savings bank and does not also control a bank; and "bank" shall have the same definition as provided in subsection (1) of section 1 of P.L.1948, c.67 (C.17:9A-1) and shall also include a national banking association having its principal office in this State.
##### **§ 17:9A-388** Formation of mutual savings bank holding company {#sec-17-9a-388 omnilex-key=us-nj-statutes--title-17--17:9A-388}
The board of managers of an organizing mutual savings bank, by 2/3 vote of the board, may apply to the commissioner to form a mutual savings bank holding company which may be formed in accordance with either subsection a., b., or c. of this section.
a. The board of managers of an organizing mutual savings bank may incorporate a mutual savings bank holding company pursuant to the provisions of section 8 of this act, and subsequently:
(1) Convert to a capital stock savings bank pursuant to section 26 of this act; or
(2) If the mutual savings bank holding company has formed a subsidiary capital stock savings bank pursuant to sections 16 through 24 of this act, either (i) merge with the subsidiary capital stock savings bank pursuant to section 25 of this act or (ii) sell or transfer its assets and liabilities to the subsidiary capital stock savings bank and dissolve pursuant to article 32 of P.L. 1948, c. 67 (C. 17:9A-207); or
b. The board of managers of an organizing mutual savings bank may form a mutual savings bank holding company by:
(1) Incorporating a subsidiary capital stock savings bank pursuant to sections 16 through 24 of this act; and
(2) Transferring the substantial part of the organizing mutual savings bank's assets and liabilities, including all of its deposit liabilities, to the subsidiary capital stock savings bank in return for a majority of the capital stock of the subsidiary capital stock savings bank in accordance with section 17 of this act. Capital deposits and surplus in an amount approved by the commissioner may be retained by the organizing mutual savings bank, which shall be deemed a mutual savings bank holding company, if it follows the procedures set forth in section 27 of this act; or
c. The board of managers of an organizing mutual savings bank may form a mutual savings bank holding company by any other method of reorganization approved by the commissioner.
##### **§ 17:9A-389** Certificate of incorporation {#sec-17-9a-389 omnilex-key=us-nj-statutes--title-17--17:9A-389}
a. The board of managers of the organizing mutual savings bank shall execute a certificate of incorporation for the mutual savings bank holding company stating:
(1) The name by which the mutual savings bank holding company shall be known;
(2) The street, street number, and municipality where the principal office of the mutual savings bank holding company is to be located;
(3) The names and addresses of the trustees of the organizing mutual savings bank;
(4) The number of trustees of the mutual savings bank holding company;
(5) The names of persons who are to act as trustees of the mutual savings bank holding company, until their successors are elected and qualified;
(6) The amount of capital deposits and surplus which are to be transferred from the organizing mutual savings bank to the mutual savings bank holding company; and
(7) Any other provisions as the incorporators of the mutual savings bank holding company deem necessary, or as are required by the commissioner by regulation.
b. The certificate of incorporation of a mutual savings bank holding company shall provide for the retention of any interests of the respective depositors of the organizing mutual savings bank in the assets of the organizing mutual savings bank, according to a fair valuation, including assets which are proposed to be transferred from the organizing mutual savings bank to the mutual savings bank holding company.
c. The certificate of incorporation of the mutual savings bank holding company shall also provide that a liquidation account shall be established, on terms established or approved by the commissioner.
##### **§ 17:9A-390** Approval of charter {#sec-17-9a-390 omnilex-key=us-nj-statutes--title-17--17:9A-390}
If the commissioner determines that the establishment of a mutual savings bank holding company is in the best interests of the depositors of the organizing mutual savings bank, that the qualifications, experience and character of the proposed officers and directors of the mutual savings bank holding company are sufficient to result in the successful operation of the mutual savings bank holding company, and that the interests of the public will be served by the establishment of a mutual savings bank holding company, that the mutual savings bank holding company is adequately capitalized, and that the establishment of the mutual savings bank holding company otherwise meets the requirements of law, he may approve the charter.
##### **§ 17:9A-391** General powers {#sec-17-9a-391 omnilex-key=us-nj-statutes--title-17--17:9A-391}
a. The general powers of the mutual savings bank holding company shall be those powers conferred on corporations pursuant to the provisions of N.J.S. 14A:3-1, N.J.S. 14A:3-2, N.J.S. 14A:3-4, and N.J.S. 14A:3-5. Mutual savings bank holding companies shall be subject to the requirements of chapter 4 of Title 14A of the New Jersey Statutes, article 28 of P.L. 1948, c. 67 (C. 17:9A-188 through C. 17:9A-195), article 29 of P.L. 1948, c. 67 (C. 17:9A-196) and article 30 of P.L. 1948, c. 67 (C. 17:9A-197 and C. 17:9A-198), to the extent that those requirements do not conflict with the provisions of this act.
b. In addition to other activities authorized by law for a mutual savings bank holding company, a mutual savings bank holding company may:
(1) With the prior approval of the commissioner, merge with or into, or consolidate with, another mutual savings bank holding company or capital stock savings bank holding company;
(2) With the prior approval of the commissioner, incorporate a new subsidiary capital stock savings bank pursuant to the provisions of sections 16 through 24 of this act; except that paragraph (4) of subsection (a) of section 17 of this act shall not apply to such subsidiary capital stock savings bank;
(3) With the prior approval of the commissioner, convert itself into a capital stock savings bank holding company, pursuant to applicable provisions of this act;
(4) Issue capital debentures, which shall be legal investments for banks, savings banks, savings and loan associations; and
(5) Exercise such power or engage in such activity authorized for a bank holding company or savings and loan holding company as the commissioner shall by regulation permit.
c. The commissioner may exercise any of the powers vested in him by article 42 of P.L. 1948, c. 67 (C. 17:9A-226 et seq.) with respect to the affairs of the mutual savings bank holding company. The mutual savings bank holding company or capital stock savings bank holding company shall be subject to the requirements of subsection a. of section 2, section 3, and section 5 of P.L. 1986, c. 6. Whenever in said sections the term "bank holding company" is used it shall be deemed to refer also to a mutual savings bank holding company or a capital stock savings bank holding company and the term "bank" shall be deemed to refer also to a savings bank.
d. Notwithstanding the provisions of subsection b. of this section, or the provisions of P.L. 1986, c. 5 (C. 17:9A-370 et seq.), a mutual savings bank holding company or a capital stock savings bank holding company shall not be granted authority to exercise any powers granted to a bank holding company pursuant to P.L. 1986, c. 5.
##### **§ 17:9A-392** Board of directors {#sec-17-9a-392 omnilex-key=us-nj-statutes--title-17--17:9A-392}
Every mutual savings bank holding company shall be managed by a board of not less than six nor more than 21 directors. Directors shall be elected by a plurality of the members of the board of directors of the mutual savings bank holding company at the annual meeting, for a term of up to three years, as provided in the bylaws. Each director shall serve for the term for which he is elected and until his successor is elected and has qualified. A vacancy on the board of directors may be filled by a plurality of the members of the board of directors for the remainder of the unexpired term. If the board fails to fill the vacancy within one year, the commissioner may do so. Elections of directors shall be certified by the board and shall be filed with the department within 15 days.
The board of directors shall hold an annual meeting within the first four months of each calendar year, and other meetings at such times and so often as they shall deem necessary. The annual meeting shall be held at a location within the State. A majority of a quorum of the board of directors shall be necessary to transact the business of the board.
##### **§ 17:9A-393** Bylaws; executive committee {#sec-17-9a-393 omnilex-key=us-nj-statutes--title-17--17:9A-393}
a. The board of directors of every mutual savings bank holding company shall have the power to make, amend and repeal bylaws not inconsistent with this act, providing for:
(1) The management of its property;
(2) The regulation and government of its affairs;
(3) The terms of office, manner of appointment, and the duties and powers of its officers and committees; and
(4) Such other matters as the board from time to time deems advisable.
b. The bylaws may provide for and the board may elect an executive committee of the board, and other committees as the board may deem advisable. The executive committee may exercise all of the powers of the board, except that the executive committee may not:
(1) Exercise its powers while a quorum of the board is actually convened for the conduct of business;
(2) Declare a dividend or approve any other distribution to the parties in interest;
(3) Make, alter, or repeal the bylaws of the holding company;
(4) Elect or appoint any officer or director; or
(5) Exercise any other power which this act specifically provides shall be exercised by at least a majority of all the directors.
The minutes of each meeting of the executive committee shall be presented to the board of directors at its next meeting following the meeting of the executive committee.
##### **§ 17:9A-394** Election of officers {#sec-17-9a-394 omnilex-key=us-nj-statutes--title-17--17:9A-394}
At the first meeting of the board of directors of the mutual savings bank holding company following each annual meeting, the board may elect a Chairman of the Board, and shall elect a President, either of whom may be chief executive officer, or another officer whom it may designate to be chief executive officer, all of whom shall be directors, and a Secretary and a Treasurer, neither of whom need be directors. Other officers of the mutual savings bank holding company may be appointed from time to time by the directors, as provided in the bylaws.
Reasonable compensation may be paid to directors of the mutual savings bank holding company for attendance at meetings of the board, or for service upon committees, or for other service rendered, and shall be fixed from time to time by a vote of a majority of the board. The commissioner may direct that the amount of compensation paid to directors of any mutual savings bank holding company be reduced if in his judgment it is excessive.
A mutual savings bank holding company may pay its officers any reasonable compensation as may be from time to time fixed by the board of directors. The commissioner may direct that the amount of compensation be reduced if in his judgment it is excessive.
##### **§ 17:9A-395** Distribution of surplus {#sec-17-9a-395 omnilex-key=us-nj-statutes--title-17--17:9A-395}
The board of directors of the mutual savings bank holding company may, from time to time, by a majority vote of the directors, divide equitably any surplus which may be in excess of the amount required for the operations of the mutual savings bank holding company or to maintain the safety and soundness of the mutual savings bank holding company, and distribute the same to the respective depositors of its subsidiary capital stock savings bank or banks, in the manner prescribed by this act, and with the approval of the commissioner. The commissioner may, if he deems the surplus held by a mutual savings bank holding company to be excessive, order such a distribution to be made by the directors.
##### **§ 17:9A-396** Retention of interests in assets {#sec-17-9a-396 omnilex-key=us-nj-statutes--title-17--17:9A-396}
Upon the formation of a mutual savings bank holding company pursuant to the provisions of this act, the depositors of the organizing mutual savings bank shall retain the same interests in the assets of the mutual savings bank holding company as they had in the organizing mutual savings bank and, upon the reorganization of an organizing mutual savings bank into a mutual savings bank holding company and a subsidiary capital stock savings bank pursuant to this act, the depositors of the subsidiary capital stock savings bank shall retain the same interests in the mutual savings bank holding company. Any interests in the assets of the mutual savings bank holding company which are placed in a liquidation account as provided in section 8 of this act shall be for the benefit of the depositors of the organizing mutual savings bank, or the depositors of the subsidiary capital stock savings bank, as the case may be. Upon the merger or consolidation of a mutual savings bank holding company or capital stock savings bank holding company with another mutual savings bank holding company, the merger or consolidation agreement shall provide for the retention of any interests of the respective depositors of the subsidiary capital stock savings bank or banks in the assets of the merged or consolidated mutual savings bank holding companies according to a fair valuation, as approved by the commissioner.
##### **§ 17:9A-397** Incorporation of subsidiary bank {#sec-17-9a-397 omnilex-key=us-nj-statutes--title-17--17:9A-397}
The directors of a mutual savings bank holding company which has been established pursuant to sections 7 through 15 of this act may apply to the commissioner to incorporate a capital stock savings bank in accordance with this section through section 24 of this act, as a subsidiary of the mutual savings bank holding company. They shall issue a certificate of incorporation stating:
a. The name by which the subsidiary capital stock savings bank shall be known;
b. The street, street number and municipality in which the principal office of the subsidiary capital stock savings bank is to be located;
c. The names and addresses of the directors of the mutual savings bank holding company who will be the incorporators of the subsidiary capital stock savings bank;
d. The number of directors on the board of directors;
e. The names of the persons who will serve as directors until their successors are elected and qualified;
f. The amount of capital stock, the number of shares into which it is divided, and the par value of each share, not less than a majority of the total outstanding shares of which shall be held in the name of the mutual savings bank holding company; and
g. The amount of surplus with which the subsidiary capital stock savings bank will commence business.
##### **§ 17:9A-398** Submission of certificate of incorporation {#sec-17-9a-398 omnilex-key=us-nj-statutes--title-17--17:9A-398}
a. The certificate of incorporation of every subsidiary capital stock savings bank established pursuant to this act shall be submitted to the commissioner within 60 days after its execution, together with an affidavit made by each of its incorporators, setting forth:
(1) That no fee, commission, or other compensation has been paid, directly or indirectly, by the mutual savings bank holding company or by the subsidiary capital stock savings bank in the course of organizing the subsidiary capital stock savings bank, and that no promotion fees or charges have been provided or are contemplated;
(2) A complete disclosure of all fees paid or agreed to be paid in the matter of chartering and organizing the proposed subsidiary capital stock savings bank;
(3) That at least a majority of the shares of the authorized stock of the subsidiary capital stock savings bank is held by the mutual savings bank holding company; and
(4) That the subsidiary capital stock savings bank proposes to:
(a) Merge with the organizing mutual savings bank pursuant to section 25 of this act; or
(b) Purchase the assets of the organizing mutual savings bank pursuant to section 25 of this act; or
(c) Receive the assets and liabilities of the organizing mutual savings bank pursuant to paragraph (2) of subsection b. of section 7 of this act.
b. The commissioner may grant a certificate of authority to a subsidiary capital stock savings bank pursuant to the provisions of section 14 of P.L. 1948, c. 67 (C. 17:9A-14).
##### **§ 17:9A-399** Approval of charter {#sec-17-9a-399 omnilex-key=us-nj-statutes--title-17--17:9A-399}
If the commissioner determines that the qualifications, experience and character of the proposed officers and directors of the subsidiary capital stock savings bank are sufficient to result in the successful operation of the subsidiary capital stock savings bank, and that the interests of the public will be served by the establishment of the subsidiary capital stock savings bank, and that the capital stock of the subsidiary capital stock savings bank is in accordance with the amount required for banks pursuant to section 4 of P.L. 1948, c. 67 (C. 17:9A-4), he may approve the charter.
##### **§ 17:9A-400** Bylaws of subsidiary {#sec-17-9a-400 omnilex-key=us-nj-statutes--title-17--17:9A-400}
a. The stockholders of a subsidiary capital stock savings bank shall have the power to make, alter, and repeal bylaws. The directors of the mutual savings bank holding company which holds stock in the subsidiary capital stock savings bank shall vote the shares held by the mutual savings bank holding company.
b. If the certificate of incorporation of the subsidiary capital stock savings bank so provides, the directors of the subsidiary capital stock savings bank may have the power to make, alter and repeal bylaws, but any exercise of this power by the board of directors shall be subject to alteration or repeal by the stockholders. The bylaws may contain any provision not inconsistent with law for the regulation of the affairs of the subsidiary capital stock savings bank.
c. If a board of directors is empowered by the bylaws to make, alter, and repeal bylaws it may not, however, exercise this power with respect to bylaws:
(1) Fixing the number of directors of the subsidiary capital stock savings bank or the manner and time of determining this number;
(2) Establishing the requirement for calling a special meeting of the stockholders; or
(3) Setting forth the manner in which the bylaws may be made, altered, or repealed.
##### **§ 17:9A-401** Meetings for actions on bylaws {#sec-17-9a-401 omnilex-key=us-nj-statutes--title-17--17:9A-401}
Bylaws shall not be made, altered, or repealed by the stockholders of a subsidiary capital stock savings bank, except at an annual or special meeting of the stockholders, and by the affirmative vote of the holders of a majority of the capital stock of the subsidiary capital stock savings bank.
Bylaws shall not be made, altered or repealed by the board of directors of the subsidiary capital stock savings bank except by the affirmative vote of a majority of the whole board at any regular or special meeting of the board, unless at least two days' prior written notice of the intended action shall have been given to the directors. This notice may be waived by a director at or prior to the meeting.
##### **§ 17:9A-402** Amendment of certificate of incorporation {#sec-17-9a-402 omnilex-key=us-nj-statutes--title-17--17:9A-402}
21. Whenever the board of directors of a subsidiary capital stock savings bank deems it advisable to amend the certificate of incorporation, it shall adopt a resolution setting forth the proposed amendment, which amendment shall be approved, at a meeting of the stockholders entitled to vote, by at least 2/3 of the capital stock entitled to vote. If the holders of 2/3 of the shares of capital stock entitled to vote approve the amendment, a certificate of this approval setting forth the amendment and certifying that the amendment was made for a purpose authorized by law in the manner specified by this section, shall be attested by two officers of the bank, one of whom shall be the president or vice president, and shall be submitted to the commissioner for approval. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment.
##### **§ 17:9A-403** Governance of operations {#sec-17-9a-403 omnilex-key=us-nj-statutes--title-17--17:9A-403}
The annual meetings, voting rights of stockholders, liability of stockholders and the maintenance of a subsidiary capital stock savings bank's books and records shall be governed by the provisions of article 17 of P.L. 1948, c. 67 (C. 17:9A-79 through C. 17:9A-100).
##### **§ 17:9A-404** Declaration of dividends {#sec-17-9a-404 omnilex-key=us-nj-statutes--title-17--17:9A-404}
A subsidiary capital stock savings bank may declare dividends on its capital stock pursuant to the provisions of section 52 of P.L. 1948, c. 67 (C. 17:9A-52).
##### **§ 17:9A-405** Other powers, rights, privileges {#sec-17-9a-405 omnilex-key=us-nj-statutes--title-17--17:9A-405}
a. All other powers, rights, and privileges of a converted savings bank or a subsidiary capital stock savings bank not expressly provided for in this act shall be governed by the laws of this State relating to savings banks, including the laws relating to capital stock savings banks, but in any case where any power of investment of a mutual savings bank is limited to a percentage of its capital deposits or surplus, any limitation upon a subsidiary capital stock savings bank shall be expressed in terms of total capital funds, as defined by the commissioner by regulations.
b. A subsidiary capital stock savings bank or a converted savings bank may merge with a mutual savings bank or with a capital stock savings bank pursuant to the provisions of Article 21 of P.L. 1948, c. 67 (C. 17:9A-132 et seq.). In the event of the merger of a subsidiary capital stock savings bank or converted savings bank with another savings bank, in which the resulting savings bank shall be a subsidiary capital stock savings bank or capital stock savings bank held by a mutual savings bank holding company, the plan of merger or consolidation shall provide for the retention of any interests of the depositors of the merging or consolidating savings bank in the assets of the resulting savings bank's parent mutual savings bank holding company according to a fair valuation.
##### **§ 17:9A-406** Merger; consolidation {#sec-17-9a-406 omnilex-key=us-nj-statutes--title-17--17:9A-406}
a. A subsidiary capital stock savings bank may, pursuant to a plan of merger approved by the commissioner, merge with the organizing mutual savings bank or, pursuant to a plan of consolidation approved by the commissioner, purchase or retain the assets and assume the liabilities of the organizing mutual savings bank, whereupon the organizing mutual savings bank shall dissolve pursuant to the provisions of article 32 of P.L. 1948, c. 67 (C. 17:9A-207).
b. Upon the merger of the organizing mutual savings bank with the subsidiary capital stock savings bank or the purchase and assumption of the liabilities of the organizing mutual savings bank:
(1) The corporate existence of the organizing mutual savings bank shall be merged with that of the subsidiary capital stock savings bank, and the property and rights of the organizing mutual savings bank shall vest in the subsidiary capital stock savings bank without further word or deed;
(2) The subsidiary capital stock savings bank may, upon complying with the minimum surplus requirements established by law or regulation, establish and maintain its principal office and branch offices at the locations specified in the plan of merger or consolidation;
(3) The rights and obligations of the organizing mutual savings bank shall become the rights and obligations of the subsidiary capital stock savings bank; and
(4) Any pending action by or against an organizing mutual savings bank or a subsidiary capital stock savings bank shall survive the merger or consolidation and the subsidiary capital stock savings bank shall be substituted as a party for the organizing mutual savings bank.
c. The plan of merger or consolidation may contain a provision for the adjustment of the interest of the depositors pursuant to section 201 of P.L. 1948, c. 67 (C. 17:9A-201).
d. The plan of merger or consolidation shall provide that each depositor in the organizing mutual savings bank shall receive an equivalent account in the subsidiary capital stock savings bank.
##### **§ 17:9A-407** Conversion to capital stock savings bank {#sec-17-9a-407 omnilex-key=us-nj-statutes--title-17--17:9A-407}
As an alternative to the formation of a subsidiary capital stock savings bank pursuant to the provisions of sections 16 through 24 of this act, an organizing mutual savings bank which has established a mutual savings bank holding company pursuant to sections 7 through 15 of this act may, in accordance with a plan approved by the commissioner, convert to a capital stock savings bank pursuant to the provisions of P.L. 1982, c. 9 (C. 17:9A-8.1 et seq.), except that:
a. Not less than a majority of the shares of the converted savings bank shall be held in the name of the mutual savings bank holding company; and
b. The requirement of subsection g. of section 14 of P.L. 1982, c. 9 (C. 17:9A-8.14g.) that a liquidation account be established shall not apply.
##### **§ 17:9A-408** Amended certificate of incorporation {#sec-17-9a-408 omnilex-key=us-nj-statutes--title-17--17:9A-408}
In the event that the board of managers elects to follow the procedures provided in subsection b. of section 7 of this act, the managers shall, with the approval of the commissioner:
a. Adopt an amended certificate of incorporation which changes the name of the organizing mutual savings bank and conforms its organization, governance and powers to those prescribed for a mutual savings bank holding company by section 8 and sections 10 through 15 of this act.
b. The amended certificate of incorporation adopted pursuant to subsection a. of this section shall state:
(1) The amount of capital deposits and surplus which are to be retained by the organizing mutual savings bank holding company;
(2) The amount of assets and liabilities of the organizing mutual savings bank that are to be transferred to the subsidiary capital stock savings bank; and
(3) A means of retaining any interests of the respective depositors of the organizing mutual savings bank in the assets of the organizing mutual savings bank, according to a fair valuation, including assets which are proposed to be retained by the organizing mutual savings bank holding company.
##### **§ 17:9A-409** Definitions relative to acquisitions {#sec-17-9a-409 omnilex-key=us-nj-statutes--title-17--17:9A-409}
28. As used in sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417):
"Acquire" means:
(1) That a company merges or consolidates with a bank holding company;
(2) That a company assumes direct or indirect ownership or control of:
(a) more than 25 percent of any class of voting shares of a bank holding company or a bank, if the acquiring company was not a bank holding company prior to that acquisition;
(b) more than 5 percent of any class of voting shares of a bank holding company or a bank, if the acquiring company was a bank holding company prior to that acquisition;
(c) all or substantially all of the assets of a bank holding company or a bank; or
(3) That a company takes any other action that results in the direct or indirect acquisition or control by that company of a bank holding company or a bank.
"Affiliate," "bank," "company," and "subsidiary" have the meanings set forth in section 2 of the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1841.
"Bank holding company" has the meaning set forth in subsection (a) of section 2 of the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1841(a) and, unless the context requires otherwise, includes a New Jersey bank holding company, an out-of-State bank holding company and a foreign bank holding company.
"Bank supervisory agency" means any of the following:
(1) The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and any successor to these agencies; and
(2) Any agency of another state with primary responsibility for chartering and supervising banks.
"Branch" has the meaning set forth in section 1 of P.L.1948, c.67 (C.17:9A-1).
"Control" shall be construed consistently with the provisions of paragraph (2) of subsection (a) of section 2 of the "Bank Holding Company Act of 1956," 12 U.S.C. 1841(a)(2).
"Commissioner" means the Commissioner of Banking.
"Deposit" has the meaning set forth in the "Federal Deposit Insurance Act," 12 U.S.C. 1813.
"Depository institution" means any institution included for any purpose within the definitions of "insured depository institution" as set forth in the "Federal Deposit Insurance Act," 12 U.S.C. 1813(c)(2) and (3).
"Foreign bank holding company" means a bank holding company that is organized under the laws of a country other than the United States, including any territory or possession thereof.
"New Jersey bank" means a bank that is:
(1) organized under P.L.1948, c.67 (C.17:9A-1 et seq.); or
(2) organized under federal law and having its principal place of business in this State.
"New Jersey bank holding company" means a bank holding company that:
(1) has its principal place of business in this State; and
(2) is not controlled by a bank holding company other than a New Jersey bank holding company.
"Out-of-State bank holding company" means:
(1) a bank holding company that is not a New Jersey bank holding company; and
(2) unless the context requires otherwise, includes a foreign bank holding company.
"Person" has the meaning given it pursuant to R.S.1:1-2.
"Principal place of business" of a bank holding company means the state in which the total deposits of its bank subsidiaries are the greatest.
"State" means any state, territory, or other possession of the United States, including the District of Columbia.
##### **§ 17:9A-410** Acquisition of New Jersey bank, bank holding company {#sec-17-9a-410 omnilex-key=us-nj-statutes--title-17--17:9A-410}
29. Sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) set forth the conditions under which a person may acquire a New Jersey bank or New Jersey bank holding company. Sections 28 through 36 are intended not to discriminate against out-of-State bank holding companies or against foreign bank holding companies in any manner that would violate subsection (d) of section 3 of the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1842(d), as amended effective September 29, 1995.
##### **§ 17:9A-411** Approval of commissioner required for acquisition of New Jersey bank holding company, bank {#sec-17-9a-411 omnilex-key=us-nj-statutes--title-17--17:9A-411}
30. a. Except as otherwise expressly permitted by federal law, no person may acquire a New Jersey bank holding company or a New Jersey bank without the prior approval of the commissioner.
b. The prohibitions in subsection a. of this section shall not apply if the acquisition is made:
(1) in a transaction arranged by the commissioner or another bank supervisory agency to prevent the insolvency or closing of the acquired bank; or
(2) in a transaction in which a bank forms its own bank holding company, if the ownership rights of the former bank shareholders are substantially similar to those of the shareholders of the new bank holding company.
c. In a transaction for which the commissioner's approval is not required under this section, the parties shall give written notice to the commissioner at least 15 days before the effective date of the acquisition, unless a shorter period of notice is required under applicable federal law.
##### **§ 17:9A-412** Procedure for acquisition {#sec-17-9a-412 omnilex-key=us-nj-statutes--title-17--17:9A-412}
31.a. A person that proposes to make an acquisition under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) shall:
(1) file with the commissioner an application in the form that the commissioner requires; and
(2) pay to the commissioner an application fee prescribed by the commissioner.
b. To the extent consistent with the effective discharge of the commissioner's responsibilities, the forms established under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) for application and reporting shall conform to those established by the Board of Governors of the Federal Reserve System under the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1841 et seq.
c. In connection with an application received under this section, the commissioner shall:
(1) require that prior notice of the application be published in a daily newspaper of general circulation and provide an opportunity for public comment; and
(2) make the application available for public inspection to the extent required or permitted under applicable State or federal law.
d. If the applicant is an out-of-State bank holding company it shall submit with the application proof that the applicant has complied with or is exempted from the requirements of N.J.S.14A:13-3 and N.J.S.14A:13-4, requiring registration by foreign corporations doing business in this State.
##### **§ 17:9A-413** Approval of application for proposed acquisition {#sec-17-9a-413 omnilex-key=us-nj-statutes--title-17--17:9A-413}
32. a. In deciding whether to approve an application for a proposed acquisition under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417), the commissioner shall consider whether the acquisition may:
(1) be detrimental to the safety and soundness of the New Jersey bank or New Jersey bank holding company to be acquired;
(2) result in an undue concentration of resources or a substantial reduction of competition in this State; or
(3) have a significantly adverse impact on the convenience and needs of the community or communities in this State that are served by the New Jersey bank or New Jersey bank holding company.
b. Except as otherwise provided in this section, the commissioner shall not approve an acquisition under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) if upon consummation of the transaction, the applicant, including any depository institution affiliated with the applicant, would control 30 percent or more of the total amount of deposits held by depository institutions in this State.
c. The commissioner may by regulation adopt a procedure whereby the limitation on control of deposits set forth in subsection b. of this section may be waived for good cause shown.
##### **§ 17:9A-414** Approval of acquisition {#sec-17-9a-414 omnilex-key=us-nj-statutes--title-17--17:9A-414}
33. a. The commissioner shall decide whether to approve an acquisition under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) within 60 days after receipt of a completed application, provided, that if the commissioner requests additional information from the applicant following receipt of a completed application, the time limit for decision by the commissioner shall be the later of:
(1) the date set forth above in this subsection, or
(2) 30 days after the commissioner's receipt of the requested additional information.
b. The commissioner may in the commissioner's discretion hold a public hearing in connection with an application.
c. If the commissioner holds a public hearing in connection with an application, the time limits specified in subsection a. of this section shall be extended to 30 days after the conclusion of the public hearing.
d. An application shall be deemed approved if the commissioner takes no action on the application within the time limits specified in this section.
##### **§ 17:9A-415** Submission of report to commissioner; violations; penalty. {#sec-17-9a-415 omnilex-key=us-nj-statutes--title-17--17:9A-415}
34. a. To the extent specified by the commissioner by regulation, order or written request:
(1) each bank holding company or person that controls a New Jersey bank or a New Jersey bank holding company shall submit to the commissioner one or more copies of each report filed with any bank supervisory agency, except for any report the disclosure of which would be prohibited by applicable federal or State law, within 15 days after the filing thereof with that agency; and
(2) each person that controls a New Jersey bank or a New Jersey bank holding company that does not file a report with any other bank supervisory agency shall file an annual report with the commissioner.
b. At the request of the commissioner, to the extent permitted by applicable State and federal law, each bank holding company or person that controls a New Jersey bank or a New Jersey bank holding company shall provide to the commissioner copies of the reports of examination of any New Jersey bank or New Jersey bank holding company.
c. A bank holding company or person that controls a New Jersey bank or a New Jersey bank holding company that fails to make and file a report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and, to the extent permitted by applicable State or federal law, the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:9A-416** Enforcement of C.17:9A-409 through C.17:9A-417 {#sec-17-9a-416 omnilex-key=us-nj-statutes--title-17--17:9A-416}
35. The commissioner may enforce the provisions of sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) by any appropriate action in the Superior Court of this State, including an action for civil money penalties, injunctive relief or divestment.
##### **§ 17:9A-417** Powers of commissioner relative to C.17:9A-409 through C.17:9A-417 {#sec-17-9a-417 omnilex-key=us-nj-statutes--title-17--17:9A-417}
36. In order to carry out the purposes of sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) the commissioner may:
a. Adopt regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.);
b. Enter into cooperative, coordinating or information-sharing agreements with any other bank supervisory agency or any organization affiliated with or representing one or more bank supervisory agencies;
c. Accept any report of examination or investigation by another bank supervisory agency having concurrent jurisdiction over a New Jersey bank holding company or any New Jersey bank in lieu of conducting the commissioner's own examination or investigation of that bank holding company or bank;
d. Enter into joint examinations or joint enforcement actions with any other bank supervisory agency having concurrent jurisdiction over any New Jersey bank holding company or New Jersey bank; provided, however, that the commissioner may take any such action independently if the commissioner determines that the action is necessary or appropriate to carry out the commissioner's responsibilities under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) and to ensure compliance with the laws of this State; and
e. May assess supervisory and examination fees that shall be payable by New Jersey banks and New Jersey bank holding companies in connection with the commissioner's performance of the commissioner's duties under sections 28 through 36 of P.L.1996, c.17 (C.17:9A-409 through C.17:9A-417) and in accordance with regulations adopted by the commissioner. These fees may be shared with other bank supervisory agencies or any organizations affiliated with or representing one or more bank supervisory agencies in accordance with agreements between them and the commissioner.
##### **§ 17:9A-418** Law, definitions, standards applicable to foreign banks {#sec-17-9a-418 omnilex-key=us-nj-statutes--title-17--17:9A-418}
37. a. Sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) shall govern the establishment and operation in New Jersey of offices and certain commercial lending company affiliates of banks organized under the laws of a foreign country except that the operation of such foreign banks through subsidiary banks or depository institutions organized under the laws of the United States or any state of the United States, the deposits of which are insured by the Federal Deposit Insurance Corporation or any successor thereto, shall be governed by the other provisions of "The Banking Act of 1948," P.L.1948, c. 67 (C. 17:9A-1 et seq.).
b. For purposes of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467), unless the context clearly requires otherwise, the following terms shall be interpreted and applied in the same manner as the Federal Reserve interprets and applies the terms with respect to foreign banks and foreign banking organizations: "agency;" "branch;" "commercial lending company;" "to establish;" "foreign bank;" "foreign banking organization;" "office or office of a foreign bank;" "representative office;" and "subsidiary."
c. The provisions of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) are intended to authorize foreign banks to establish and operate branches, agencies, commercial lending company affiliates and representative offices in this State and generally to ensure that interstate branches of foreign banks may be established and operated in this State to the extent consistent with the provisions of section 5 of the "International Banking Act of 1978," 12 U.S.C. 3103, and the regulations of the Federal Reserve promulgated thereunder, 12 CFR 211.20 et seq., and under terms and conditions that are generally comparable to and no less favorable than those applicable to the establishment of interstate federal branches in this State by foreign banks.
d. As provided in subsection e. of this section, a foreign bank may establish a branch or agency in this State in the same manner (including by merger or other transactions under the Federal Deposit Insurance Act, 12 U.S.C. 1831u, and comparable provisions of the laws of this State, with New Jersey banks or other institutions) as, and subject generally to the same criteria, standards, conditions, requirements and procedures applicable to the establishment of interstate branches in this State by an out-of-State bank having the same home state in the United States as the foreign branch or agency, notwithstanding any provisions of the laws or regulations of this State to the contrary.
e. In interpreting the provisions of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467), the commissioner:
(1) generally shall apply to the establishment of an initial office of a foreign bank whether or not the initial office is an interstate branch, and any subsequent intrastate offices of a foreign bank, the same criteria, standards, conditions, requirements and procedures applicable to the establishment of an initial branch in New Jersey by an out-of-State bank, and of subsequent intrastate branches in this State by an out-of-State bank;
(2) may apply any other criterion, standard, condition, requirement or provision of the laws or regulations of this State that is determined by the commissioner to be substantially equivalent to or consistent with a criterion, standard, condition, requirement or provision of federal law or regulation generally applicable to the establishment of offices in the United States by foreign banks or specifically applicable to the establishment of an office in the United States by the applicant foreign bank;
(3) may by regulation or order allow a foreign bank:
(a) to acquire an individual branch of any "insured bank," as that term is defined in the "Federal Deposit Insurance Act," 12 U.S.C. 1813(h), or of any other depository institution, including another foreign bank, without acquiring the entire bank or other institution;
(b) to acquire or merge with another foreign bank maintaining a branch or agency in this State and thereafter continue each operation as its own; or
(c) to acquire or establish an interstate office through any other means not inconsistent with section 5 of the "International Banking Act of 1978," 12 U.S.C. 3103.
For purposes of this section, "out-of-State bank" shall have the meaning given that term pursuant to section 1 of P.L.1948, c.67 (C.17:9A-1).
##### **§ 17:9A-419** Definitions relative to foreign banks {#sec-17-9a-419 omnilex-key=us-nj-statutes--title-17--17:9A-419}
38. As used in sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467):
"Agency" means any place of business of a foreign bank at which credit balances are maintained, checks are paid, money is lent, or, to the extent not prohibited by federal law, deposits are accepted from a person or entity that is not a citizen or resident of the United States. Obligations shall not be considered credit balances unless they are:
(1) Incidental to, or arise out of the exercise of, other lawful banking powers;
(2) To serve a specific purpose;
(3) Not solicited from the general public;
(4) Not used to pay routine operating expenses such as salaries, rent, or taxes in the United States;
(5) Withdrawn within a reasonable period of time after the specific purpose for which they were placed has been accomplished; and
(6) Drawn upon in a manner reasonable in relation to the size and nature of the account.
"Banking Act" means "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-1 et seq.).
"Banking subsidiary," with respect to a specified foreign bank, means a bank that is a subsidiary as the terms "bank" and "subsidiary" are defined in section 2 of the federal "Bank Holding Company Act of 1956," 12 U.S.C. 1841.
"Branch" means any place of business of a foreign bank at which deposits are received and that is not an agency, as that term is defined in this section.
"Business in this State," when used with respect to a foreign bank which is licensed to establish one or more agencies or branch offices, includes, without limitation, the aggregate business of all those offices and agencies.
"Change the status of an office" means convert a representative office into a branch or agency, or an agency into a branch, or the reverse of the foregoing, but does not include renewal of the license of an existing office.
"Commercial lending company" means any organization, other than a bank or an organization operating under section 25 of the Federal Reserve Act, 12 U.S.C. 601-604a, organized under the laws of any state of the United States or a foreign country, that maintains credit balances permissible for an agency and engages in the business of making commercial loans. "Commercial lending company" includes any company chartered under Article XII of the banking law of the State of New York.
"Commissioner" means the Commissioner of Banking of New Jersey.
"Controlling person," when used with respect to a foreign bank, means any person who, directly or indirectly, controls that bank.
"Department" means the Department of Banking of New Jersey.
"To establish" or "establish" means to:
(1) Open and conduct business through an office;
(2) Acquire directly, through merger, consolidation, or similar transaction with another foreign bank, the operations of an office that is open and conducting business;
(3) Acquire an office through the acquisition of a foreign bank subsidiary that will cease to operate in the same corporate form following the acquisition;
(4) Change the status of an office; or
(5) Relocate an office from one physical location to another, unless the new office is in the same building as the existing office.
"Executive officer," when used with respect to a foreign bank or a controlling person of a foreign bank, means the chief executive officer, the chief operating officer, the chief financial officer, and any other person who participates or has authority to participate in major policy-making functions of such bank or controlling person. "Executive officer," when used with respect to a foreign bank, includes the head of the international division, or, if there is no such division, the closest equivalent division or unit of that bank.
"Federal agency" has the meaning set forth in section 1(b) of the "International Banking Act of 1978," 12 U.S.C. 3101.
"Federal branch" has the meaning set forth in section 1(b) of the "International Banking Act of 1978," 12 U.S.C. 3101.
"FDIC" means the Federal Deposit Insurance Corporation established pursuant to "Federal Deposit Insurance Act," 12 U.S.C. 1811 et seq.
"Federal Reserve" means the Board of Governors of the Federal Reserve System.
"Foreign country" means any nation other than the United States, including, without limitation, any subdivision, territory, trust territory, dependency, or possession of any such nation. With respect to banks which do not have deposit insurance with the FDIC, "foreign country" also includes Puerto Rico, Guam, American Samoa, the Virgin Islands, and any territory, trust territory, dependency, or insular possession of the United States.
"Foreign bank" means an organization that is organized under the laws of a foreign country and that engages directly in the business of banking outside of the United States. The term "foreign bank" does not include a central bank of a foreign country that does not engage in a commercial banking business in the United States through an office.
"Foreign banking organization" means a foreign bank that operates a branch, agency or commercial lending company subsidiary in the United States or that controls a bank in the United States and any company of which such foreign bank is a subsidiary.
"License" means a license issued under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467), authorizing a foreign bank or a commercial lending company to establish and to maintain an office; to be "licensed" means to be issued or to hold a license; and to be "licensed to transact business in this State," when used with respect to a foreign bank or a commercial lending company, means that the bank is licensed to establish an agency or branch office or commercial lending company.
"Loans and extensions of credit" means all direct and indirect advances of funds to a person made on the basis of any obligation of that person to repay funds.
"Office" or "office of a foreign bank" means any branch, agency, representative office, or commercial lending company subsidiary of a foreign bank in the United States.
"Organization" means a corporation, government, partnership, association, or any other entity.
"Person" means an individual or an organization.
"Primary office," when used with respect to a foreign bank which is licensed to establish a single office, means that office and, when used with respect to a foreign bank which is licensed to establish two or more offices, means one of those offices which that bank has designated as its primary office in accordance with section 51 of P.L.1996, c.17 (C.17:9A-432).
"Representative office" means any place of business of a foreign bank that is not a branch, agency, or subsidiary of the foreign bank.
"State of the United States" means any state of the United States or the District of Columbia.
"Subsidiary" means an organization, 25 percent or more of whose voting shares is directly or indirectly owned, controlled, or held with the power to vote by a company, including a foreign bank or foreign banking organization, or any organization that is otherwise controlled or capable of being controlled by a foreign bank or foreign banking organization.
##### **§ 17:9A-420** Foreign bank offices; division into classes, ranking {#sec-17-9a-420 omnilex-key=us-nj-statutes--title-17--17:9A-420}
39. a. For purposes of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467), offices of foreign banks are divided into classes and ranked in ascending order, as follows:
(1) Representative office.
(2) Commercial lending company.
(3) Agency.
(4) Branch.
b. For purposes of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467):
(1) Changing a lower class office into a higher class office shall be treated as establishing the higher class office, but not as closing the lower class office.
(2) Changing a higher class office into a lower class office shall be treated as closing the higher class office, but not as establishing the lower class office.
c. In the case of changing a higher class office into a lower class office, when the application for approval to close the higher class office has been approved and all conditions precedent to the closing have been fulfilled, the foreign bank may change the higher class office into the lower class office, and the commissioner shall issue a license authorizing the bank to establish the lower class office.
##### **§ 17:9A-421** Fees relative to foreign banks {#sec-17-9a-421 omnilex-key=us-nj-statutes--title-17--17:9A-421}
40.Fees shall be paid to, and collected by, the commissioner as follows:
a. The fee for filing with the commissioner an application by a foreign bank which is not licensed to transact business in this State for approval to establish a branch office shall be $3,000.
b. The fee for filing with the commissioner an application by a foreign bank or commercial lending company which is not licensed to transact business in this State for approval to establish an agency or an office of a commercial lending company shall be $2,500.
c. The fee for filing with the commissioner an application by a foreign bank which is licensed to transact business in this State for approval to establish a branch office shall be $2,000.
d. The fee for filing with the commissioner an application by a foreign bank or commercial lending company which is licensed to transact business in this State for approval to establish an agency or an office of a commercial lending company shall be $1,500.
e. The fee for filing with the commissioner an application by a foreign bank for approval to establish a representative office shall be $1,500.
f. The fee for filing with the commissioner an application by a foreign bank or commercial lending company which is licensed to establish an agency, branch or commercial lending company office for approval to relocate or to close that office shall be $1,000.
g. The fee for filing with the commissioner an application by a foreign bank which is licensed to establish a representative office for approval to relocate or to close that representative office shall be $500.
h. The fee for issuing a license shall be $300.
i. The commissioner, by regulation, shall have the power to increase the fees set forth above and to set and to charge additional fees, including but not limited to, annual assessment fees.
##### **§ 17:9A-422** Application procedure {#sec-17-9a-422 omnilex-key=us-nj-statutes--title-17--17:9A-422}
41. a. Each application filed with the commissioner under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) or under any regulation or order issued under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) shall be in such form, shall contain the information, be signed in the manner, and, if the commissioner so requires, be verified in the manner the commissioner may by regulation or order require.
b. Without limiting the foregoing, the commissioner shall require as part of the application all of the information submitted to the Federal Reserve in connection with any application and may require only the information in the form submitted to the Federal Reserve as these are required pursuant to the "Bank Holding Company Act of 1956," 12 U.S.C. 1841 et seq., the "International Banking Act of 1978," 12 U.S.C. 3101 et seq. and regulation K, 12 CFR 211.20 et seq., issued by the Federal Reserve.
##### **§ 17:9A-423** "Act" defined, commissioner's findings relative to application {#sec-17-9a-423 omnilex-key=us-nj-statutes--title-17--17:9A-423}
42. a. In this section, "act" includes, without limitation, omission.
b. For purposes of making findings on an application by a foreign bank or commercial lending company for approval to establish an office:
(1) The commissioner may, in the absence of credible evidence to the contrary, find that the directors, executive officers, and any controlling person of the bank and the directors and executive officers of any controlling person of the bank are each of good character and sound financial standing.
(2) The commissioner may find that the bank, a director, executive officer, or a controlling person of the bank, or director or executive officer of a controlling person of the bank is not of good character if that person:
(a) Has been convicted of, or has pleaded nolo contendere to, any crime involving an act of fraud or dishonesty;
(b) Has consented to or suffered a judgment in any civil action based upon conduct involving an act of fraud or dishonesty;
(c) Has consented to or suffered the suspension or revocation of any professional, occupational, or vocational license based upon conduct involving an act of fraud or dishonesty;
(d) Has willfully made or caused to be made in any application or report filed with the commissioner or in any proceeding before the commissioner, any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has willfully omitted to state in any such application or report any material fact which was required to be stated therein; or
(e) Has willfully committed any violation of, or has willfully aided, abetted, counseled, commanded, induced, or procured the violation by any other person of, any provision of this section or of any regulation or order issued under this section.
c. Paragraph (2) of subsection b. of this section shall not be deemed to be an exclusive list of the grounds upon which the commissioner may find, for purposes of making findings on an application by a foreign bank or commercial lending company for approval to establish an office, that such bank or company, a director, executive officer, or controlling person of the bank, or a director or executive officer of a controlling person of the bank or company, is not of good character.
##### **§ 17:9A-424** Reports filed by foreign bank, commercial lending company {#sec-17-9a-424 omnilex-key=us-nj-statutes--title-17--17:9A-424}
43. a. Each foreign bank and commercial lending company which is licensed to establish an office shall file with the commissioner reports as and when the commissioner may by regulation or order require.
b. Each report filed with the commissioner under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) or under any regulation or order issued thereunder shall be in the form, contain the information, be signed in the manner, and, if the commissioner so requires, be verified in the manner the commissioner may by regulation or order require.
##### **§ 17:9A-425** Books, accounts, records of foreign bank, commercial lending company {#sec-17-9a-425 omnilex-key=us-nj-statutes--title-17--17:9A-425}
44. Each foreign bank and commercial lending company which is licensed to establish an office shall make, keep, and preserve at an office or at any other place as the commissioner may by regulation or order approve, the books, accounts, and other records relating to the business of the office, in the form, manner, and for the time the commissioner may by regulation or order provide.
##### **§ 17:9A-426** Prohibition on concurrent establishment of federal and State branch office {#sec-17-9a-426 omnilex-key=us-nj-statutes--title-17--17:9A-426}
45. a. No foreign bank which is licensed to establish an agency or branch office shall concurrently establish a federal agency or federal branch in this State.
b. No foreign bank which establishes a federal agency or federal branch in this State shall concurrently be licensed to establish an agency or branch office in this State.
##### **§ 17:9A-427** Opening, maintenance of offices {#sec-17-9a-427 omnilex-key=us-nj-statutes--title-17--17:9A-427}
46. A foreign bank or commercial lending company may open one or more offices in this State. Each office shall be separately licensed and each office of a separate class shall be separately maintained.
##### **§ 17:9A-428** Requirement that commissioner be appointed as attorney to receive service of process; service {#sec-17-9a-428 omnilex-key=us-nj-statutes--title-17--17:9A-428}
47. a. (1) No foreign bank, other than a foreign bank which is licensed to establish an agency or branch office, shall be issued a license to establish a representative office or commercial lending company unless it shall have first filed with the commissioner, in the form as the commissioner may by regulation or order require, an appointment irrevocably appointing the commissioner to be the bank's or commercial lending company's attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the bank or any of its successors which arises out of the activities in this State of the representative office or commercial lending company after the appointment has been filed, with the same force and validity as if served personally on the bank or its successor, as the case may be.
(2) Any foreign bank, other than a foreign bank which is licensed to establish an agency or branch office or which establishes a federal agency or federal branch in this State, which establishes a representative office or commercial lending company and which has not filed with the commissioner an appointment pursuant to paragraph (1) of this subsection a., shall be deemed by the establishment of that office to have appointed the commissioner as its attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the bank or any of its successors which arises out of the activities in this State of the representative office or commercial lending company with the same force and validity as if served personally on the bank or its successor, as the case may be.
b. (1) No foreign bank shall be issued a license to establish an agency or branch office unless it shall have first filed with the commissioner, in a form as the commissioner may by regulation or order require, an appointment irrevocably appointing the commissioner to be the bank's attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the bank or any of its successors which arises after the appointment has been filed, with the same force and validity as if served personally on the bank or its successor, as the case may be.
(2) Any foreign bank which establishes an agency or branch office, other than a federal agency or federal branch, and which has not filed with the commissioner an appointment pursuant to paragraph (1) of this subsection b. shall be deemed by the establishment of that office to have appointed the commissioner as its attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the bank or any of its successors with the same force and validity as if served personally on the bank or its successor, as the case may be.
c. Service may be made on a foreign bank which has appointed or is deemed to have appointed the commissioner as its attorney for service of process by leaving a copy of the process at any office of the commissioner. However, this service is not effective unless (1) the party making the service, who may be the commissioner, forthwith sends notice of the service and a copy of the process by registered or certified mail to the foreign bank at its last address on file with the commissioner at any of its offices in this State or at its primary office wherever located, and (2) an affidavit of compliance with this subsection c. by the party making service is filed in the case on or before the return date, if any, or within such further time as the court, in the case of a judicial proceeding, or the administrative agency, in the case of an administrative proceeding, allow.
##### **§ 17:9A-429** License not transferable, assignable {#sec-17-9a-429 omnilex-key=us-nj-statutes--title-17--17:9A-429}
48. No license shall be transferable or assignable.
##### **§ 17:9A-430** Posting of license {#sec-17-9a-430 omnilex-key=us-nj-statutes--title-17--17:9A-430}
49. Each foreign bank and commercial lending company which is licensed to establish an office shall post its license in a conspicuous place at that office.
##### **§ 17:9A-431** Popular name assigned to foreign bank, commercial lending company {#sec-17-9a-431 omnilex-key=us-nj-statutes--title-17--17:9A-431}
50. a. Each foreign bank and commercial lending company which is licensed to establish an office shall assign to that office a popular name which consists of a specific designation by name, number or both, and shall post the popular name and the name of the bank in a conspicuous place at the office.
b. The popular name that a foreign bank assigns to a representative office which it is licensed to establish shall include the term "representative office."
c. The popular name that a foreign bank assigns to an agency which it is licensed to establish shall not include the term "branch" unless that term is modified by the word "foreign" or "overseas" or by a similar word.
d. Each foreign bank which is licensed to establish a commercial lending company shall select a popular name that includes the term "commercial lending company" and shall post with that popular name a clear expression of whether the foreign bank is liable for the debts and obligations of the commercial lending company.
##### **§ 17:9A-432** Designation of primary office {#sec-17-9a-432 omnilex-key=us-nj-statutes--title-17--17:9A-432}
51. Whenever a foreign bank is licensed to establish two or more offices it shall designate one of those offices as its primary office.
##### **§ 17:9A-433** Conduct of business in single building, adjoining buildings; exceptions {#sec-17-9a-433 omnilex-key=us-nj-statutes--title-17--17:9A-433}
52. Each foreign bank and commercial lending company which is licensed to establish an office shall conduct all of the business of that office in a single building or in a single building and adjoining buildings. However, for good cause and with the approval of the commissioner, the bank may conduct part of the business of the office elsewhere in the same vicinity.
##### **§ 17:9A-434** Examination of licensed office. {#sec-17-9a-434 omnilex-key=us-nj-statutes--title-17--17:9A-434}
53. a. The department shall have the right to examine each office which the commissioner licenses under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467). The department shall insure that each office which is licensed hereunder is examined by either the Federal Reserve or the department as often as the commissioner deems it advisable. The costs of any examination by the department shall be assessed to the bank or commercial lending company which is the holder of the license. The examination fees shall be assessed in the same manner and on the same basis as examination fees are assessed for banks or trust companies organized under the Banking Act.
b. The commissioner may contract with the Federal Reserve or the bank examination officials in any other state of the United States or in any other foreign country to conduct cooperative examinations. Every report and copy of a report of examination of a foreign bank or office of a foreign bank made by or under the supervision of the commissioner, and every report and copy thereof made by a bank pursuant to the requirement of the commissioner, shall be confidential, and shall not be made public by any officer, director or employee of a foreign bank, and shall not be subject to subpoena or to admission into evidence in any action or proceeding in any court, except pursuant to an order of the court made upon notice to the commissioner and after affording the commissioner an opportunity to advise the court of reasons for excluding from evidence that report or any portion thereof. The court shall order the issuance of a subpoena for the production or admission into evidence of any report or portion thereof, only if it is satisfied that (1) it is material and relevant to the issues in the proceedings, and (2) the ends of justice and public advantage will be subserved thereby. This section shall not prohibit the commissioner from sharing a report of examination with another state or federal regulator or a bank regulator from a foreign country, or other person, so long as provision is made for retaining the confidentiality of the report. This section shall not apply to any action or proceeding instituted by the commissioner or Attorney General pursuant to any law of this State.
##### **§ 17:9A-435** Compliance with applicable interest rate limitations {#sec-17-9a-435 omnilex-key=us-nj-statutes--title-17--17:9A-435}
54. A foreign bank or commercial lending company which makes a loan or extends credit from an office in this State, or books a loan or extension of credit in this State, shall comply with any applicable interest rate limitations imposed by the laws of this State or the United States which would be applicable to that loan if made by a commercial bank organized under the Banking Act. When transacting business in this State, an office of a foreign bank shall comply with all other laws and regulations of the State governing the business in which the office is engaged, unless the commissioner, for good cause shown, exempts the office by regulation or order from compliance.
##### **§ 17:9A-436** License required for establishment of representative office {#sec-17-9a-436 omnilex-key=us-nj-statutes--title-17--17:9A-436}
55. a. No foreign bank shall establish a representative office in this State unless it is licensed to establish a representative office at that place.
b. (1) No person shall establish a representative office in this State as representative of a foreign bank unless that bank is licensed to establish the office as a representative office.
(2) For purposes of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467), if any person establishes an office in this State as representative of a foreign bank, that foreign bank shall be deemed to establish the office as a representative office.
c. Neither subsection a. nor subsection b. of this section shall prohibit a foreign bank which establishes a federal agency or federal branch in this State from establishing one or more representative offices in this State.
##### **§ 17:9A-437** Approval for foreign bank to establish representative office {#sec-17-9a-437 omnilex-key=us-nj-statutes--title-17--17:9A-437}
56. a. (1) No foreign bank shall establish a representative office unless the commissioner shall have first approved the establishment of that office and issued a license authorizing the foreign bank to establish the office.
(2) Paragraph (1) of this subsection a. shall not prohibit a foreign bank which establishes a federal agency or federal branch in this State from establishing one or more representative offices in this State.
b. If the commissioner finds the following with respect to an application by a foreign bank to establish a representative office, the commissioner shall approve the application:
(1) That the bank, any controlling person of the bank, the directors and executive officers of the bank or of any controlling person of the bank, and the proposed management of the office are each of good character and sound financial standing;
(2) That the financial history and condition of the bank are satisfactory;
(3) That the management of the bank and the proposed management of the office are adequate;
(4) That it is reasonable to believe that, if licensed to establish the office, the bank will operate the office in compliance with all applicable laws, regulations, and orders;
(5) That the bank's establishment of the office will promote the public convenience and advantage; and
(6) Such other standards as the commissioner may by regulation require.
If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a foreign bank to establish a representative office has been approved and all conditions precedent to the issuance of a license authorizing the foreign bank to establish the representative office have been fulfilled, the commissioner shall issue the license.
##### **§ 17:9A-438** Approval for relocation of representative office of foreign bank {#sec-17-9a-438 omnilex-key=us-nj-statutes--title-17--17:9A-438}
57. a. No foreign bank which is licensed to establish a representative office shall relocate its office unless the commissioner shall have first approved the relocation and issued a license authorizing the foreign bank to establish the office at the new site.
b. If the commissioner finds the following with respect to an application by a foreign bank to relocate a representative office, the commissioner shall approve the application:
(1) If the new site of the office is in the same vicinity as the old site, that the relocation of the office will not be substantially detrimental to the public convenience and advantage; or
(2) If the new site of the office is not in the same vicinity as the old site:
(a) that the relocation of the office from the old site will not be substantially detrimental to the public convenience and advantage in the area which is primarily served by the office at the old site; and
(b) that the relocation of the office to the new site will promote the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a foreign bank to relocate a representative office has been approved and all conditions precedent to the issuance of a license authorizing such bank to establish the office at the new site have been fulfilled, the commissioner shall issue the license.
d. Promptly after a foreign bank which is licensed to establish a representative office relocates its office, the bank shall surrender to the commissioner the license which authorized it to establish the office at the old site.
##### **§ 17:9A-439** Restrictions upon representative office {#sec-17-9a-439 omnilex-key=us-nj-statutes--title-17--17:9A-439}
58. A foreign bank which is licensed to establish a representative office may, subject to regulations the commissioner may prescribe, engage in representational functions at that office but shall not solicit or accept deposits or credit balances or otherwise transact business at the office.
##### **§ 17:9A-440** Approval for closing representative office of foreign bank {#sec-17-9a-440 omnilex-key=us-nj-statutes--title-17--17:9A-440}
59. a. (1) No foreign bank which is licensed to establish a representative office shall close its office unless the commissioner shall have first approved the closing.
(2) Paragraph (1) of this subsection a. shall not prohibit a foreign bank which is licensed to establish a representative office from closing the office in accordance with sections 79 through 85 of P.L.1996, c.17 (C.17:9A-460 through C.17:9A-466).
b. If the commissioner finds, with respect to an application by a foreign bank to close a representative office, that the closing of that office will not be substantially detrimental to the public convenience and advantage, the commissioner shall approve the application. If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a foreign bank to close a representative office has been approved and all conditions precedent to the closing have been fulfilled, that bank may close the office and shall promptly thereafter surrender to the commissioner the license which authorized it to establish the office.
##### **§ 17:9A-441** Existing office granted license {#sec-17-9a-441 omnilex-key=us-nj-statutes--title-17--17:9A-441}
60. Any office of a foreign bank existing in this State on the effective date of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) which had been previously approved by the commissioner shall be granted a license by the commissioner as a representative office for purposes of that act.
##### **§ 17:9A-442** Transaction of business limited to licensed agency, branch office {#sec-17-9a-442 omnilex-key=us-nj-statutes--title-17--17:9A-442}
61. a. No foreign bank shall transact business in this State except at an agency or branch office which it is licensed to establish and at which it is permitted by sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) to transact that business.
b. Subsection a. of this section shall not be deemed to prohibit:
(1) Any foreign bank which establishes a federal agency or federal branch in this State from transacting at that federal agency or federal branch such business as it may be authorized to transact under applicable federal laws and regulations;
(2) Any foreign bank from carrying on the activities described in paragraph (2) of N.J.S. 14A:13-3;
(3) Any foreign bank which does not establish an agency or branch office from making, in this State, loans secured by liens on real or personal property located in this State or enforcing those loans in this State; or
(4) Any foreign bank which does not establish an agency or branch office from transacting trust business in this State if the trust business is not conducted from an office or location in this State and that trust business is limited to trust business permitted by, and conducted pursuant to a certificate of authority issued by the commissioner in accordance with subsection B. of section 316 of P.L.1948, c.67 (C.17:9A-316).
##### **§ 17:9A-443** Approval, license required for establishment of agency, branch office of foreign bank {#sec-17-9a-443 omnilex-key=us-nj-statutes--title-17--17:9A-443}
62. a. (1) No foreign bank shall establish an agency or branch office unless the commissioner shall have first approved the establishment of that office and issued a license authorizing the bank to establish the office.
(2) Paragraph (1) of this subsection a. shall not prohibit a foreign bank from establishing a federal agency or federal branch in this State.
b. If the commissioner finds the following with respect to an application by a foreign bank to establish an agency or branch office, the commissioner shall approve that application:
(1) That the bank, any controlling person of the bank, the directors and executive officers of the bank or of any controlling person of the bank, and the proposed management of the office are each of good character and sound financial standing;
(2) That the financial history and condition of the bank are satisfactory;
(3) That the management of the bank and the proposed management of the office are adequate;
(4) That it is reasonable to believe that, if licensed to establish the office, the bank will operate the office in a safe and sound manner and in compliance with all applicable laws, regulations, and orders;
(5) That the bank's plan to establish and to operate the office affords reasonable promise of successful operation; and
(6) That the bank's establishment of the office will promote the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a foreign bank to establish an agency or branch office has been approved and all conditions precedent to the issuance of a license authorizing the bank to establish the office have been fulfilled, the commissioner shall issue the license.
##### **§ 17:9A-444** Approval for relocation of agency, branch office of foreign bank {#sec-17-9a-444 omnilex-key=us-nj-statutes--title-17--17:9A-444}
63. a. No foreign bank which is licensed to establish an agency or branch office shall relocate that office unless the commissioner shall have first approved the relocation and issued a license authorizing the bank to establish the office at the new site.
b. If the commissioner finds the following with respect to an application by a foreign bank to relocate any agency or branch office, the commissioner shall approve the application:
(1) If the new site of the office is in the same vicinity as the old site:
(a) That it will not be unsafe or unsound for the bank to relocate the office; and
(b) That the relocation of the office will not be substantially detrimental to the public convenience and advantage, or that the relocation is necessary in the interests of the safety and soundness of the bank; or
(2) If the new site of the office is not in the same vicinity as the old site:
(a) That the bank's plan to relocate the office and to establish the office at the new site affords reasonable promise of successful operation;
(b) That the relocation of the office from the old site will not be substantially detrimental to the public convenience and advantage in the area which is primarily served by the office at the old site, or that the relocation is necessary in the interests of the safety and soundness of the bank; and
(c) That the relocation of the office to the new site will promote the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a foreign bank to relocate an agency or branch office has been approved and all conditions precedent to the issuance of a license authorizing the bank to establish the office at the new site have been fulfilled, the commissioner shall issue the license.
d. Promptly after a foreign bank which is licensed to establish an agency or branch office relocates the office, the bank shall surrender to the commissioner the license which authorized it to establish the office at the old site.
##### **§ 17:9A-445** Transaction of business by foreign bank at agency or branch office {#sec-17-9a-445 omnilex-key=us-nj-statutes--title-17--17:9A-445}
64. a. A foreign bank which is licensed to establish an agency or branch office may transact banking business at that office, subject to the following:
(1) If the office is an agency, the bank shall not transact the business of accepting deposits, other than deposits of: (a) a foreign nation; (b) an agency or instrumentality of a foreign nation; or (c) a person which resides, is domiciled, and maintains its principal place of business in a foreign nation. For purposes of this paragraph "person" means any individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, or any other organization or any branch or division thereof.
(2) If the office is a branch office, the bank shall not transact the business of accepting any deposits other than: (a) deposits of the kind described in paragraph (1) of this subsection a.; (b) deposits of $100,000 or more; (c) deposits of less then $100,000 which the branch is permitted to accept under applicable federal law; or (d) deposits the acceptance of which the commissioner determines by regulation or order does not constitute engaging in domestic retail deposit activities requiring deposit insurance protection.
(3) If the office is an agency or branch office or commercial lending company, the bank or lending company may maintain credit balances as those obligations are defined under the term "agency" in section 38 of P.L.1996, c.17 (C.17:9A-419).
(4) In any case, the bank or commercial lending company shall not transact any business which it is not authorized to transact or is prohibited from transacting under the laws of its domicile or which banks organized under the laws of this State are not authorized to transact or are prohibited from transacting.
b. No foreign bank which is licensed to establish an agency or branch office shall transact any trust business at that office unless the commissioner expressly authorizes the trust business by order upon a finding by the commissioner that the agency or branch is qualified to transact such business under standards similar to those required to obtain a charter for a trust company under the Banking Act.
c. All provisions of the Banking Act shall apply to any foreign bank or commercial lending company licensed to transact business in this State, unless the commissioner by regulation or order otherwise specifies.
d. (1) Any provisions of the Banking Act which are applicable to or with respect to foreign banks licensed to transact business in this State, whether by law, regulation or order, shall be applied with any changes in interpretation or application as may be necessary or appropriate.
(2) Without limiting the provisions of paragraph (1) of this subsection d., for purposes of any provision of the Banking Act, which are applicable to or with respect to a foreign bank or commercial lending company licensed to transact business in this State:
(a) "Approved by, or approval of, the board" means approved or ratified by the board of the bank, by a committee of the board authorized to exercise the powers of the board with respect to the particular matter, or by an officer of the bank who is assigned to the head office of the bank and who has authority over the bank's business in this State, including authority to approve or ratify the particular matter.
(b) "Principal office" means the primary office of the bank.
(c) "Shareholders' equity" means the shareholders' equity of the bank or, if the bank has no shareholders' equity, the closest equivalent account or accounts.
e. Whenever any provision of the Banking Act, which is applicable to or with respect to a foreign bank or commercial lending company licensed to transact business in this State limits the amount of any assets or liabilities of the bank, including, by way of example, the amount of borrowings of, obligations to, or investment of the bank or commercial lending company, for purposes of calculating the amount of such assets or liabilities, only assets or liabilities of the agencies or branch offices of the bank or commercial lending company shall be included, and the assets and liabilities of offices of the bank or commercial lending company outside this State shall be excluded.
##### **§ 17:9A-446** Report of condition, income {#sec-17-9a-446 omnilex-key=us-nj-statutes--title-17--17:9A-446}
65. a. Whenever the commissioner calls for a report of condition or income from commercial banks organized under the laws of this State, the commissioner shall call for a like report from each foreign bank which is licensed to transact business in this State.
b. Whenever a foreign bank which is licensed to transact business in this State files with the commissioner a report called for under subsection a. of this section, that report shall be readily available to the customers of the office of the bank.
c. The statement of condition shall be in the form, contain the information, and be signed in the manner, and, if the commissioner so requires by regulation or order, be verified in the manner the commissioner may by regulation or order require.
##### **§ 17:9A-447** Notice of noninsurance of deposits {#sec-17-9a-447 omnilex-key=us-nj-statutes--title-17--17:9A-447}
66. Each foreign bank which is licensed to establish an agency or branch office shall, in accordance with the regulations the commissioner may prescribe, give notice that deposits in that office are not insured by the Federal Deposit Insurance Corporation.
##### **§ 17:9A-448** Compliance with regulations by foreign bank {#sec-17-9a-448 omnilex-key=us-nj-statutes--title-17--17:9A-448}
67. a. If a foreign bank is licensed to establish a depository agency or branch office and such office is not subject to the regulations of the Depository Institutions Deregulation Committee established pursuant to the "Depository Institutions Deregulation Act of 1980," 12 U.S.C. 3501 et seq., Regulation Q of the Federal Reserve, 12 CFR 217 et seq., or Part 329 of the regulations of the Federal Deposit Insurance Corporation, 12 CFR 329 et seq., the bank shall, with respect to deposits accepted at the office, comply with the regulations regarding maximum interest rates on deposits, prepayment of time deposits, and related matters the commissioner may prescribe as being necessary and appropriate to establish competitive equality between foreign banks and banks organized under the laws of this State which are subject to the regulations of the Depository Institutions Deregulation Committee, Regulation Q of the Federal Reserve, or Part 329 of the regulations of the Federal Deposit Insurance Corporation.
b. Whenever the commissioner adopts a regulation or order of repeal of a regulation under subsection a. of this section, the commissioner may, without describing specific facts showing the need for immediate action, make the regulation or order of repeal effective immediately.
##### **§ 17:9A-449** Assets kept separate, apart; priority of creditors {#sec-17-9a-449 omnilex-key=us-nj-statutes--title-17--17:9A-449}
68. a. Each foreign bank which is licensed to transact business in this State shall keep the assets of that business separate and apart from the assets of its business outside this State.
b. The creditors of the business in this State of a foreign bank which is licensed to transact business in this State shall be entitled to priority over other creditors with respect to the assets of the foreign banks's business in this State.
##### **§ 17:9A-450** Definitions of adjusted liabilities and eligible assets relative to foreign banks {#sec-17-9a-450 omnilex-key=us-nj-statutes--title-17--17:9A-450}
69. a. In this section:
(1) "Adjusted liabilities," when used with respect to a foreign bank, means the liabilities of the bank's business in this State, excluding: (a) accrued expenses; (b) any liability to an office, whether in or outside of this State, or subsidiary of the bank; and (c) such other liabilities as the commissioner may by regulation or order exclude.
(2) "Applicable minimum," when used with respect to eligible assets deposited or to be deposited with an approved depository by a foreign bank, means the amount as the commissioner may from time to time by regulation or order determine to be necessary for the establishment of sound financial condition, for the protection of the interests of creditors of the bank's business in this State, or for the protection of the public interest.
However, in the case of a foreign bank which is licensed to establish an agency or a branch office, the applicable minimum shall in no event be less than the greater of (a) 5 percent of the adjusted liabilities of the bank or (b) $1,000,000.
(3) "Approved depository," when used with respect to a foreign bank, means a bank organized under the laws of this State or a national bank headquartered in this State which has been selected by such foreign bank and approved by the commissioner for the purpose of acting as the approved depository of the foreign bank and which has filed with the commissioner, in the form as the commissioner may by regulation or order prescribe, an agreement to comply with all applicable provisions of this section and of any regulation or order issued under this section.
(4) "Eligible assets" when used with respect to a foreign bank, means any of the following:
(a) Cash.
(b) Any investment security which by regulation is eligible for investment by a commercial bank organized under the Banking Act.
(c) Any negotiable certificate of deposit which: (i) has a maturity of not more than one year, (ii) is payable in the United States, and (iii) is issued by a bank organized under the laws of a state of the United States, by a national bank, or by a branch office of a foreign bank which is located in the United States.
(d) Any commercial paper which is payable in the United States and which is rated P-1 or its equivalent by a nationally recognized rating service; provided, however, that any conflict in rating shall be resolved in favor of the lower rating.
(e) Any banker's acceptance which is payable in the United States and which is eligible for discount with a Federal Reserve bank.
(f) Any other asset which the commissioner by regulation or order determines to be eligible.
Notwithstanding the foregoing provisions of this paragraph, "eligible asset," when used with respect to a foreign bank, does not include any instrument the issuer of which: (i) is, or is affiliated with, the foreign bank; (ii) is domiciled in, or controlled by a bank or other person domiciled in, the same foreign nation as the foreign bank; or (iii) is, or is controlled by, the foreign nation. For purposes of the foregoing provision, to be "affiliated" means to control, to be controlled by, or to be under common control with.
b. For purposes of this section:
(1) The amount of adjusted liabilities of a foreign bank's business in this State shall be computed for the period, in the manner, and on the basis as the commissioner may by regulation or order prescribe.
(2) Any eligible asset shall be valued at the lesser of market or par.
c. (1) Before any foreign bank is licensed to transact business in this State, the bank shall deposit, and each foreign bank which is licensed to transact business in this State shall maintain on deposit, with an approved depository, eligible assets having a value in an amount not less than the applicable minimum.
(2) Whenever a foreign bank which is licensed to transact business in this State ceases to be so licensed, the bank shall thereafter establish on deposit, with an approved depository, eligible assets having a value in an amount not less than the applicable minimum for the period of time the commissioner may determine to be necessary for the protection of creditors of the bank's business in this State or for the protection of the public interest.
d. (1) No foreign bank which establishes eligible assets on deposit with an approved depository pursuant to this section shall withdraw any of those eligible assets except with the prior approval of the commissioner.
(2) No approved depository which holds eligible assets on deposit from a foreign bank pursuant to this section shall release any of those eligible assets except with the prior approval of the commissioner or as otherwise provided in subsection h. of this section.
e. Any foreign bank which establishes eligible assets on deposit with an approved depository pursuant to this section shall be entitled to receive any income paid on such eligible assets, unless the commissioner shall have suspended or revoked its license to transact business in this State or taken possession of its property and business in this State.
f. (1) Whenever a foreign bank deposits eligible assets with, or withdraws eligible assets from, an approved depository pursuant to this section, the bank shall do so in accordance with the procedures and requirements the commissioner may by regulation or order prescribe.
(2) Whenever an approved depository receives, holds, or releases eligible assets pursuant to this section, the approved depository shall do so in accordance with the procedures and requirements the commissioner may by regulation or order prescribe and shall file with the commissioner reports as and when the commissioner may by regulation or order require.
g. Whenever a foreign bank establishes eligible assets on deposit with an approved depository pursuant to this section:
(1) The eligible assets shall be deemed to be pledged to the commissioner for the benefit of the creditors of the bank's business in this State; and, notwithstanding any provision of the Uniform Commercial Code, N.J.S.12A:1-101 et seq., to the contrary, the commissioner, for the benefit of the creditors, shall be deemed to have a security interest in those eligible assets.
(2) The eligible assets shall be free from any lien, charge, right of setoff, credit, or preference in connection with any claim of the approved depository against the bank.
h. (1) If the commissioner takes possession of the property and business of a foreign bank which establishes eligible assets on deposit with an approved depository pursuant to this section, the approved depository shall, upon order of the commissioner, release those eligible assets to the commissioner, as liquidator of the property and business of the bank.
(2) If a foreign bank which establishes eligible assets on deposit with an approved depository pursuant to this section fails to pay any judgment creditor of its business in this State and the commissioner has not taken possession of the property and business of the bank, the approved depository shall release the eligible assets to the commissioner, and the commissioner shall make the disposition of the eligible assets, as a court of competent jurisdiction of this State or of the United States may order for the benefit of that judgment creditor. For purposes of this paragraph, "judgment creditor of its business in this State" means a person to whom the bank is required to pay money under a judgment which: (a) arose out of the bank's business in this State; (b) has been entered by a court of competent jurisdiction of this State or of the United States; (c) has become final, in that all possibility of direct attack on that judgment by way of appeal, motion for new trial, motion to vacate, or petition for extraordinary writ has been exhausted; and (d) has remained unpaid for a period of not less than 60 days after becoming final.
##### **§ 17:9A-451** Definitions of adjusted liabilities, eligible assets relative to agency or branch offices {#sec-17-9a-451 omnilex-key=us-nj-statutes--title-17--17:9A-451}
70. a. In this section:
(1) "Adjusted liabilities," when used with respect to a foreign bank which is licensed to establish an agency or a branch office this State, means the liabilities of that bank's business in this State, excluding: (a) accrued expenses; (b) any liability to an office, whether in or outside of this State, or majority-owned subsidiary of the bank; and (c) such other liabilities as the commissioner may by regulation or order exclude.
(2) "Eligible assets" means any asset which the commissioner by regulation or order determines to be eligible for purposes of this section. However, "eligible asset," when used with respect to a foreign bank which is licensed to establish an agency or a branch office, includes: (a) any asset which the bank establishes on deposit pursuant to section 69 of P.L.1996, c.17 (C.17:9A-450); and (b) any reserves which the bank establishes with respect to its business in this State in accordance with requirements prescribed by the Federal Reserve.
b. For purposes of this section, the amount of eligible assets and the amount of adjusted liabilities of a foreign bank which is licensed to establish an agency or a branch office in this State shall each be computed for the period, in the manner, and on the basis as the commissioner may by regulation or order prescribe.
c. A foreign bank licensed to establish an agency or a branch office in this State shall hold at its agency or branch offices in this State or at such other places as the commissioner may approve, eligible assets in the amount, if any, as the commissioner may from time to time by regulation or order determine to be necessary for the interests of creditors of the bank's business in this State, or for the protection of the public interest. However, in no event shall the amount exceed 108 percent of the adjusted liabilities of the bank's business in this State.
d. If the commissioner finds, with respect to a foreign bank licensed to establish an agency or a branch office in this State, that such action is necessary for the establishment of sound financial condition, for the protection of the public interest, the commissioner may order the bank to place all or part of the eligible assets which the bank is required to hold under subsection c. of this section in the custody of a bank organized under the laws of this State or a national bank headquartered in this State that the commissioner may designate.
##### **§ 17:9A-452** Approval required for closing of office of foreign bank {#sec-17-9a-452 omnilex-key=us-nj-statutes--title-17--17:9A-452}
71. a. (1) No foreign bank which is licensed to establish an agency or branch office shall close its office unless the commissioner shall have first approved the closing.
(2) Paragraph (1) of this subsection a. shall not prohibit a foreign bank which is licensed to establish an agency or branch office from closing that office in accordance with sections 79 through 85 of P.L.1996, c.17 (C.17:9A-460 through C.17:9A-466).
b. If the commissioner finds the following with respect to an application by a foreign bank to close an agency or branch office, the commissioner shall approve the application:
(1) That it will not be unsafe or unsound for the bank to close the office; and
(2) That the closing of the office will not be substantially detrimental to the public convenience and advantage or that the closing of the office is necessary in the interests of the safety and soundness of the bank.
If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a foreign bank to close an agency or branch office has been approved and all conditions precedent to the closing have been fulfilled, the bank may close the office and shall promptly thereafter surrender to the commissioner the license which authorized it to establish the office.
##### **§ 17:9A-453** Transaction of business by commercial lending company {#sec-17-9a-453 omnilex-key=us-nj-statutes--title-17--17:9A-453}
72. a. No commercial lending company shall transact business in this State except at an office it is licensed to establish and at which it is permitted by sections 72 through 78 of P.L.1996, c.17 (C.17:9A-453 through C.17:9A-459) to transact such business.
b. Subsection a. of this section shall not prohibit:
(1) Any commercial lending company from carrying on the activities described in paragraph (2) of N.J.S.14A:13-3;
(2) Any commercial lending company from making in this State loans secured by liens on real or personal property located in this State or enforcing those loans in this State; or
(3) Any commercial lending company from transacting trust business in this State so long as the trust business is not conducted from any office or location in this State and that trust business is limited to trust business permitted by, and conducted pursuant to a certificate of authority issued by the commissioner in accordance with subsection B. of section 316 of P.L.1948, c.67 (C.17:9A-316).
c. No person shall establish an office in this State for a commercial lending company unless the commercial lending company is licensed to transact business in this State. For purposes of this section, if anyone establishes an office to act on behalf of or solicit business for a commercial lending company in this State, the office shall be deemed to be the office of the commercial lending company regardless of whether the business of the commercial lending company is transacted at that office.
##### **§ 17:9A-454** Approval for establishment of office of foreign bank, commercial lending company {#sec-17-9a-454 omnilex-key=us-nj-statutes--title-17--17:9A-454}
73. a. No foreign bank and no commercial lending company shall establish an office of a commercial lending company in this State unless the commissioner shall have first approved the establishment of that office and issued a license authorizing the commercial lending company to maintain the office.
b. If the commissioner finds the following with respect to an application by a commercial lending company to establish a commercial lending company, the commissioner shall approve that application:
(1) That the commercial lending company, any controlling person of the commercial lending company, the directors and executive officers of the commercial lending company or of any controlling person of the commercial lending company, and the proposed management of the office are each of good character and sound financial standing;
(2) That the financial history and condition of the commercial lending company are satisfactory;
(3) That the management of the commercial lending company and the proposed management of the office are adequate;
(4) That it is reasonable to believe that, if licensed to establish the office, the commercial lending company will operate the office in a safe and sound manner and in compliance with all applicable laws, regulations, and orders; and
(5) That the commercial lending company's establishment of the office will promote the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny the application. The commissioner may, in approving any application, condition the issuance of the license upon the compliance by the commercial lending company with any provisions of sections 61 through 71 or sections 79 through 85 of P.L.1996, c.17 (C.17:9A-442 through C.17:9A-452 or C.17:9A-460 through C.17:9A-466) applicable to branches and agencies.
##### **§ 17:9A-455** Relocation of commercial lending company {#sec-17-9a-455 omnilex-key=us-nj-statutes--title-17--17:9A-455}
74. a. No commercial lending company which is licensed to establish a commercial lending office shall relocate that office unless the commissioner shall have first approved that relocation and issued a license authorizing the commercial lending company to establish the office at the new site.
b. If the commissioner finds the following with respect to an application by a commercial lending company to relocate a commercial lending office, the commissioner shall approve the application
(1) If the new site of the office is in the same vicinity as the old site, that the relocation of the office will not be substantially detrimental to the public convenience and advantage; or
(2) If the new site of the office is not in the same vicinity as the old site:
(a) That the relocation of the office from the old site will not be substantially detrimental to the public convenience and advantage in the area which is primarily served by the office at the old site; and
(b) That the relocation of the office to the new site will promote the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a commercial lending company for approval to relocate a commercial lending office has been approved and all conditions precedent to the issuance of a license authorizing the commercial lending company to establish an office at the new site have been fulfilled, the commissioner shall issue the license.
d. Promptly after a commercial lending company which is licensed to establish a commercial lending office relocates its office, that commercial lending company shall surrender to the commissioner the license which authorized it to establish an office at the old site.
##### **§ 17:9A-456** Commercial lending company, functions permitted {#sec-17-9a-456 omnilex-key=us-nj-statutes--title-17--17:9A-456}
75. A commercial lending company which is licensed to establish a commercial lending office may, subject to such regulations or orders as the commissioner may prescribe, engage in representational functions at the commercial lending office for a foreign bank but shall not solicit or accept deposits or credit balances or otherwise transact business at the office on behalf of a foreign bank.
##### **§ 17:9A-457** Approval for commercial lending company to close office {#sec-17-9a-457 omnilex-key=us-nj-statutes--title-17--17:9A-457}
76. a. (1) No commercial lending company which is licensed to establish a commercial lending office shall close its office unless the commissioner shall have first approved the closing.
(2) Paragraph (1) shall not prohibit a commercial lending company which is licensed to establish a commercial lending office from closing its office in accordance with sections 79 through 85 of P.L.1996, c.17 (C.17:9A-460 through C.17:9A-466).
b. If the commissioner finds, with respect to an application by a commercial lending company to close a commercial lending office, that the closing of the office will not be substantially detrimental to the public convenience and advantage, the commissioner shall approve the application. If the commissioner finds otherwise, the commissioner shall deny the application.
c. Whenever an application by a commercial lending company to close a commercial lending office has been approved and all conditions precedent to that closing have been fulfilled, the commercial lending company may close its office and shall promptly thereafter surrender to the commissioner the license which authorized it to establish the office.
##### **§ 17:9A-458** Powers of commercial lending company limited {#sec-17-9a-458 omnilex-key=us-nj-statutes--title-17--17:9A-458}
77. The powers of a commercial lending company in this State shall be limited as provided in section 64 and elsewhere in sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467).
##### **§ 17:9A-459** Granting of right to operate as commercial lending company {#sec-17-9a-459 omnilex-key=us-nj-statutes--title-17--17:9A-459}
78. The commissioner shall have the power to grant to any organization which is organized under the laws of this State, including but not limited to a corporation, limited partnership, limited liability company, joint venture or partnership, the right to operate as a commercial lending company if the commercial lending company: will be licensed under sections 72 through 77 of P.L.1996, c.17 (C.17:9A-453 through C.17:9A-458); is a subsidiary of a foreign bank; and agrees in its certificate of incorporation or organization or similar document to limit its activities to those permitted to a commercial lending company under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) and Regulation K promulgated by the Federal Reserve, 12 CFR 211 et seq. Any such grant shall be issued in connection with and as part of a license for a commercial lending office hereunder.
##### **§ 17:9A-460** Voluntary surrender of license {#sec-17-9a-460 omnilex-key=us-nj-statutes--title-17--17:9A-460}
79. a. Except as provided in subsection b. of this section, any foreign bank which holds a license to establish an office may voluntarily surrender that license by filing the license and a report with the commissioner. However, any foreign bank which holds licenses to establish two or more offices may not voluntarily surrender less than all of those licenses.
b. If the commissioner has reason to doubt a foreign bank's ability or willingness to pay in full the claims of its creditors, the commissioner shall take action as provided pursuant to section 85 of P.L.1996, c.17 (C.17:9A-466).
c. (1) Except as otherwise provided in paragraph (2) of this subsection c., a voluntary surrender of a license shall be effective on the 30th day after that license and the report called for in subsection a. of this section are filled with the commissioner or on such earlier date as the commissioner may by order specify.
(2) If a proceeding to revoke or suspend a license is pending at the time when that license and the report called for in subsection a. of this section are filed with the commissioner or if a proceeding to revoke or suspend a license or to impose conditions upon the surrender of a license is instituted before the 30th day after the license and the report called for in subsection a. of this section are filed with the commissioner, the voluntary surrender of the license shall become effective at the time and upon the conditions as the commissioner may by order specify.
##### **§ 17:9A-461** Violations, penalties {#sec-17-9a-461 omnilex-key=us-nj-statutes--title-17--17:9A-461}
80. If, after notice and a hearing, the commissioner finds that any person has violated any provision of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) or of any regulation or order issued thereunder, the commissioner may order that person to pay to the commissioner a civil penalty in an amount as the commissioner may specify; except that the amount of the civil penalty shall not exceed $100,000 for each violation or, in the case of a continuing violation, $100,000 for each day for which the violation continues.
##### **§ 17:9A-462** Suspension, revocation of license of bank, commercial lending company {#sec-17-9a-462 omnilex-key=us-nj-statutes--title-17--17:9A-462}
81. If, after notice and a hearing, the commissioner finds any of the following with respect to a foreign bank or commercial lending company which is licensed to establish an office, the commissioner may issue an order suspending or revoking the license of the bank or commercial lending company:
a. That the bank or commercial lending company has violated any provision of sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467) or of any regulation or order issued thereunder or any provision of any other applicable law, regulation, or order;
b. That the bank or commercial lending company, in case it is licensed to transact business in this State, is transacting that business in an unsafe or unsound manner or, in any case, is transacting business elsewhere in an unsafe or unsound manner;
c. That the bank or commercial lending company is in unsafe or unsound condition;
d. That the bank or commercial lending company has ceased to operate its office;
e. That the bank or commercial lending company is insolvent in that it has ceased to pay its debts in the ordinary course of business, it cannot pay its debts as they become due, or its liabilities exceed its assets;
f. That the bank or commercial lending company has suspended payment of its obligations, has made an assignment for the benefit of its creditors, or has admitted in writing its inability to pay its debts as they become due;
g. That the bank or commercial lending company has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under any bankruptcy, reorganization, insolvency, or moratorium law, or that any person has applied for any such relief under any such law against the bank or commercial lending company and the bank or commercial lending company has by any affirmative act approved of or consented to the action or the relief has been granted;
h. That a receiver, liquidator, or conservator has been appointed for the bank or commercial lending company or that any proceeding for such an appointment or any similar proceeding has been initiated in the place where the bank or commercial lending company is domiciled;
i. That the existence of the bank or commercial lending company or the authority of the bank or commercial lending company to transact banking business or lending under the laws of the place where the bank or commercial lending company is domiciled has been suspended or terminated; or
j. That any fact or condition exists which, if it had existed at the time when the bank or commercial lending company applied for its license to transact business in this State, would have been grounds for denying the application.
##### **§ 17:9A-463** Issuance of order suspending, revoking license of bank, commercial lending company, hearing {#sec-17-9a-463 omnilex-key=us-nj-statutes--title-17--17:9A-463}
82. a. If the commissioner finds that any of the factors set forth in section 81 of P.L.1996, c.17 (C.17:9A-462) is true with respect to any foreign bank or commercial lending company which is licensed to establish an office and that it is necessary, for the protection of the interests of creditors of the bank's or company's business in this State, or for the protection of the public interest, that the commissioner immediately suspend or revoke the license of the bank or commercial lending company, the commissioner may issue an order suspending or revoking the license of the bank or commercial lending company.
b. (1) Within 30 days after an order is issued pursuant to subsection a. of this section, the foreign bank or commercial lending company to which the order is issued may file with the commissioner an application for a hearing on the order. If the commissioner fails to commence that hearing within 15 business days after that application is filed with the commissioner, or within such longer period to which the bank consents, the order shall be deemed rescinded. Within 30 days after the hearing, the commissioner shall affirm, modify, or rescind the order; otherwise, the order shall be deemed rescinded.
(2) The right of any foreign bank or commercial lending company to which an order is issued under subsection a. of this section to petition for judicial review of that order shall not be affected by the failure of the bank or company to apply to the commissioner for a hearing on the order pursuant to paragraph (1) of this subsection b.
##### **§ 17:9A-464** Surrender of suspended, revoked license {#sec-17-9a-464 omnilex-key=us-nj-statutes--title-17--17:9A-464}
83. Any foreign bank or commercial lending company whose license to establish an office is suspended or revoked shall immediately surrender its license to the commissioner.
##### **§ 17:9A-465** Application to modify, rescind order {#sec-17-9a-465 omnilex-key=us-nj-statutes--title-17--17:9A-465}
84. a. Any foreign bank or commercial lending company to which an order is issued under section 81 or 82 of P.L.1996, c.17 (C.17:9A-462 or C.17:9A-463), may apply to the commissioner to modify or rescind the order. The commissioner shall not grant the application unless he finds that it is in the public interest to do so and that it is reasonable to believe that the bank or commercial lending company will, if and when it is again licensed to establish an office, comply with all applicable provisions of sections 79 through 85 of P.L.1996, c.17 (C.17:9A-460 through C.17:9A-466) and of any regulation or order issued thereunder.
b. The right of any foreign bank or commercial lending company to which an order is issued under section 81 or 82 of P.L.1996, c.17 (C.17:9A-462 or C.17:9A-463) to petition for judicial review of that order shall not be affected by the failure of that bank or commercial lending company to apply to the commissioner pursuant to subsection a. of this section to modify or rescind the order.
##### **§ 17:9A-466** Possession of property, business of bank by commissioner {#sec-17-9a-466 omnilex-key=us-nj-statutes--title-17--17:9A-466}
85 .a. If the commissioner finds that any of the factors set forth in section 81 of P.L.1996, c.17 (C.17:9A-462) or in subsection b. of section 79 of P.L.1996, c.17 (C.17:9A-460) is true with respect to any foreign bank which is licensed to transact business in this State and that it is necessary for the protection of the interests of the creditors of the bank's business in this State or for the protection of the public interest that the commissioner take immediate possession of the property and business of the bank, the commissioner may by order forthwith take possession of the property and business of the bank and retain possession until the bank resumes business in this State or is finally liquidated. The bank may, with the consent of the commissioner, resume business in this State upon such conditions as the commissioner may prescribe.
b. (1) Whenever the commissioner takes possession of the property and business of a foreign bank pursuant to subsection a. of this section, that bank may, within 10 days apply to the Superior Court in the county in which the primary office of the bank is located to enjoin further proceedings. The court may, after ordering the commissioner to show cause why further proceedings should not be enjoined and after a hearing, dismiss the application or enjoin the commissioner from further proceedings and order him to surrender the property and business of the bank to the bank or make such further order as may be just.
(2) The judgment of the court may be appealed by the commissioner or by the bank in the manner provided by law for appeals from the judgment of a Superior Court. In case the commissioner appeals the judgment of the court, an appeal shall operate as a stay of the judgment, and the commissioner shall not be required to post any bond.
c. Whenever the commissioner takes possession of the property and business of a foreign bank pursuant to subsection a. of this section, the commissioner shall conserve or liquidate the property and business of that bank pursuant to the receivership provisions of the Banking Act, including Article 42 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-266 et seq.), and these provisions shall apply as if the bank were a bank organized under the Banking Act.
d. When the commissioner has completed the liquidation of the property and business of a foreign bank, the commissioner shall transfer any remaining assets to the bank in accordance with the orders the court may issue. However, if the bank has an office in another state of the United States which is in liquidation and the assets of that office appear to be insufficient to pay in full the creditors of the office, the court shall order the commissioner to transfer to the liquidator of the office that amount of any such remaining assets as appears to be necessary to cover the insufficiency; if there are two or more such offices and the amount of remaining assets is less than the aggregate amount of insufficiencies with respect to the offices, the court shall order the commissioner to distribute the remaining assets among the liquidators of those offices in any manner the court finds equitable.
e. The commissioner may apply the provisions of this section to a commercial lending company, in which case these provisions shall take precedence over any other provisions of state law applying to the commercial lending company.
##### **§ 17:9A-467** Rules, regulations, orders {#sec-17-9a-467 omnilex-key=us-nj-statutes--title-17--17:9A-467}
86. The commissioner shall, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), issue the rules, regulations and orders the commissioner deems necessary in order to perform the commissioner's duties and functions under sections 37 through 86 of P.L.1996, c.17 (C.17:9A-418 through C.17:9A-467).
## **Chapter 10B** {#struct-chapter-10b}
##### **§ 17:10B-1** Definitions {#sec-17-10b-1 omnilex-key=us-nj-statutes--title-17--17:10B-1}
1. As used in this act:
"Advance fee" means any consideration which is assessed or collected by a loan broker, prior to the closing of a loan or issuing a credit card or approving a line of credit.
"Borrower" means a person obtaining or desiring to obtain a loan of money, credit card or line of credit for personal, family or household use.
"Commissioner" means the Commissioner of Banking or his designee.
"Department" means the Department of Banking.
"Loan broker" means any person who:
(1) For or in expectation of consideration, arranges or offers to arrange or offers to fund for a borrower a loan of money, credit card, or line of credit;
(2) For or in expectation of consideration, assists or advises or offers to assist or advise a borrower in obtaining or attempting to obtain a loan of money, credit card or line of credit; or
(3) Holds himself out as a loan broker.
##### **§ 17:10B-2** Prohibitions relative to loan brokers {#sec-17-10b-2 omnilex-key=us-nj-statutes--title-17--17:10B-2}
2. No loan broker shall:
a. Assess, collect or hold an advance fee, directly or indirectly, from or on behalf of a borrower to provide services as a loan broker;
b. Make or use any false or misleading representations or omit any material fact in the offer or sale of the services of a loan broker or lender, whether real or purported;
c. Engage, directly or indirectly, in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker or lender, whether real or purported, notwithstanding the absence of reliance by the borrower; or
d. Make any false or deceptive representation to the department or conceal a material fact from the department.
##### **§ 17:10B-3** Investigations, examinations by commissioner {#sec-17-10b-3 omnilex-key=us-nj-statutes--title-17--17:10B-3}
3. a. The commissioner may make such investigations and examinations upon reasonable suspicion as he deems necessary to determine whether a person has violated or is about to violate any provision of this act or any order, rule or regulation issued hereunder. For such purposes, he may investigate or examine the books, accounts, records, papers and other documents or matters of the person. He shall have the power to compel by subpena the attendance of witnesses and the production of all relevant books, accounts, records, papers and other documents or matters relative to an examination or investigation and to administer oaths and affirmations to any person. The costs of each examination shall be borne by the person at the department's regular per diem rate for examinations of licensees. Examinations conducted under the provisions of this act shall be confidential except as required in the administration, enforcement and prosecution of violations under this act, actions brought by the Attorney General, or pursuant to a court order.
b. If any person refuses to obey a subpena, or to give testimony or to produce evidence, the commissioner may apply ex parte to any court having jurisdiction over that person for an order compelling the appearance of the witness before the commissioner to give testimony or to produce evidence as required thereby, or both.
##### **§ 17:10B-4** Order to cease and desist, fine {#sec-17-10b-4 omnilex-key=us-nj-statutes--title-17--17:10B-4}
4. a. The commissioner may order a loan broker to cease and desist whenever the commissioner determines that the loan broker has violated, is violating, or is about to violate any provision of this act, any rule or regulation promulgated by the commissioner pursuant thereto, any order issued by the commissioner, or any written agreement entered into with the commissioner.
b. The commissioner may, after affording notice and a reasonable opportunity to be heard, impose and collect an administrative fine against any person found to have violated any provision of this act, any rule or regulation promulgated by the commissioner pursuant thereto, any order issued by the commissioner, or any written agreement entered into with the commissioner, in an amount not to exceed $5,000 for each such violation.
##### **§ 17:10B-5** Violations, penalties, injunctions, summary actions {#sec-17-10b-5 omnilex-key=us-nj-statutes--title-17--17:10B-5}
5. a. Any person who violates any provision of this act shall be liable to a civil penalty of not more than $7,500 for a first offense and not more than $15,000 for the second and each subsequent offense, to be recovered in a summary proceeding under "the penalty enforcement law," N.J.S.2A:58-1 et seq. Each violation shall constitute a separate offense.
b. If the commissioner has reason to believe that any person has engaged, is engaged, or is about to engage in any act or practice prohibited by this act, the commissioner may, in addition to any other remedies he may have, bring a summary action in the name and on behalf of the State against the person to enjoin the person from engaging in any act or practice in violation of this act.
##### **§ 17:10B-6** Action for recovery of damages {#sec-17-10b-6 omnilex-key=us-nj-statutes--title-17--17:10B-6}
6. a. Any borrower injured by a violation of this act may bring an action for recovery of damages. Judgment shall be entered for actual damages, but in no case less than the amount paid by the borrower to the loan broker, plus reasonable attorneys' fees and costs.
b. The remedies provided under this act are in addition to any other procedures or remedies for any violation or conduct provided for in any other law.
##### **§ 17:10B-7** Nonapplicability of act {#sec-17-10b-7 omnilex-key=us-nj-statutes--title-17--17:10B-7}
7. The provisions of this act shall not apply to State or federally chartered banks, savings banks, savings and loan associations or credit unions; mortgage solicitors as defined by section 2 of P.L.1996, c.157 (C.17:11C-2); licensees regulated pursuant to P.L.1996, c.157 (C.17:11C-1 et al.), P.L.1960, c.40 (C.17:16C-1 et seq.), P.L.1968, c.223 (C.17:16C-61.1 et seq.), P.L.1960, c.41 (C.17:16C-62 et seq.) and P.L.1968, c.224 (C.17:16C-95 et seq.); attorneys licensed to practice in this State; certified public accountants licensed to practice in this State pursuant to P.L.1977, c.144 (C.45:2B-1 et seq.); or insurance companies.
##### **§ 17:10B-8** Rules, regulations {#sec-17-10b-8 omnilex-key=us-nj-statutes--title-17--17:10B-8}
8. The commissioner may, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations as he deems necessary in the administration of this act.
## **Chapter 10C** {#struct-chapter-10c}
##### **§ 17:10C-1** Residential Mortgage and Consumer Finance Advisory Board. {#sec-17-10c-1 omnilex-key=us-nj-statutes--title-17--17:10C-1}
1. There is created in the Department of Banking and Insurance a Residential Mortgage and Consumer Finance Advisory Board. The board shall consist of the Commissioner of Banking and Insurance or his designee, who shall be ex officio the chair of the board, and seven members to be appointed by the Governor, with the advice and consent of the Senate, for a term of three years. Each member shall hold office for the term of appointment and until his successor is appointed and qualified. A member is eligible to be reappointed to the board. A member appointed to fill a vacancy occurring in the membership of the board for any reason other than the expiration of the term shall have a term of appointment for the unexpired term only. All vacancies shall be filled in the same manner as the original appointment. Any appointed member of the board may be removed from office by the Governor, for cause, after a hearing and may be suspended by the Governor pending the completion of the hearing. Appointed members of the board shall serve without compensation, but shall be reimbursed for necessary expenses incurred in the performance of their duties as members. Action may be taken and motions and resolutions may be adopted by the board at a board meeting by an affirmative vote of not less than four members. Of the seven appointed members, two shall have had, at the time of appointment, not less than five years of practical experience as a licensed residential mortgage lender located in the State of New Jersey; one shall have had, at the time of appointment, not less than five years of practical experience as a licensed residential mortgage broker located in the State of New Jersey; one shall be a representative from the licensed residential mortgage lending industry in the State of New Jersey who is not a salaried officer, director, partner, owner, principal, or employee of any licensed residential mortgage lender or broker; two shall have had, at the time of appointment, not less than five years of practical experience as lenders licensed for providing loans other than residential mortgage loans; and one shall be a public member who is not a salaried officer, director, partner, owner, principal, or employee of any licensed lender or broker. At no time shall there be more than one representative on the board from any one residential mortgage lender or broker.
Notwithstanding any provisions of this section to the contrary, the members of the board appointed by the Governor and serving on the effective date of P.L.2009, c.53 (C.17:11C-51 et al.) shall continue to serve until the expiration of their respective terms, but a member of the board appointed or reappointed by the Governor after the effective date of P.L.2009, c.53 (C.17:11C-51 et al.) shall qualify for membership pursuant to this section.
##### **§ 17:10C-2** Board duties. {#sec-17-10c-2 omnilex-key=us-nj-statutes--title-17--17:10C-2}
2. The board shall act as a resource to the commissioner by developing and recommending to the commissioner ideas, programs and tools to assist:
a. in the development of educational requirements for licensees;
b. licensed residential mortgage lenders, residential mortgage brokers, and mortgage loan originators in meeting the mortgage lending needs of consumers;
c. other consumer finance licensees in meeting the lending needs of consumers; and
d. consumers in understanding and using:
(1) residential mortgage lending information and choosing from available mortgage lending opportunities through licensed residential mortgage lenders, residential mortgage brokers, and mortgage loan originators in this State; and
(2) consumer lending information and choosing from available consumer lenders.
## **Chapter 11C** {#struct-chapter-11c}
##### **§ 17:11C-1** Short title amended. {#sec-17-11c-1 omnilex-key=us-nj-statutes--title-17--17:11C-1}
1. Sections 1 through 49 of this act, previously known and cited as the "New Jersey Licensed Lenders Act," shall be known and may be cited as the "New Jersey Consumer Finance Licensing Act," on or after the effective date of P.L.2009, c.53 (C.17:11C-51 et al.).
##### **§ 17:11C-2** Definitions regarding licensed lenders. {#sec-17-11c-2 omnilex-key=us-nj-statutes--title-17--17:11C-2}
2. As used in this act:
"Billing cycle" means the time interval between periodic billing dates. A billing cycle shall be considered monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from such date.
"Borrower" means any individual applying for a consumer loan from a lender licensed under this act, whether or not the loan is granted, and any individual who has actually obtained such a loan.
"Closed-end loan" means a consumer loan which meets the requirements of section 35 of P.L.1996, c.157 (C.17:11C-35) and pursuant to which the licensee advances a specified amount of money and the borrower agrees to repay the principal and interest in substantially equal installments over a stated period of time.
"Commissioner" means the Commissioner of Banking and Insurance.
"Consumer lender" means a person licensed, or a person who should be licensed, under P.L.1996, c.157 (C.17:11C-1 et al.) to engage in the consumer loan business.
"Consumer loan" means a loan of $50,000 or less made by a consumer lender, payable in one or more installments, pursuant to the terms of P.L.1996, c.157 (C.17:11C-1 et al.), and not a residential mortgage loan as defined by section 3 of P.L.2009, c.53 (C.17:11C-53).
"Consumer loan business" means the business of making loans of money, credit, goods or things in action, which are to be used primarily for personal, family or household purposes, in the amount or value of $50,000 or less and charging, contracting for, or receiving a greater rate of interest, discount or consideration therefor than the lender would be permitted by law to charge if he were not a licensee hereunder, except as authorized by this act and without first obtaining a license from the commissioner. Any person directly or indirectly engaging in the business of soliciting or taking applications for such loans of $50,000 or less, or in the business of negotiating or arranging or aiding the borrower or lender in procuring or making such loans of $50,000 or less, or in the business of buying, discounting or endorsing notes, or of furnishing, or procuring guarantee or security for compensation in amounts of $50,000 or less, shall be deemed to be engaging in the consumer loan business.
"Controlling interest" means ownership, control or interest of 25% or more of the licensee or applicant.
"Department" means the Department of Banking and Insurance.
"Depository institution" means a state or federally chartered bank, savings bank, savings and loan association, building and loan association or credit union, irrespective of whether the entity accepts deposits.
"Individual" means a natural person.
"Licensee" means a person who is licensed under this act, or who should be so licensed.
"Open-end loan" means a consumer loan made by a consumer lender pursuant to a written agreement with the borrower whereby:
(1) The lender may permit the borrower to obtain advances of money from the lender from time to time or the lender may advance money on behalf of the borrower from time to time as directed by the borrower;
(2) The amount of each advance and permitted interest and charges are debited to the borrower's account and payments and other credits are credited to the same account;
(3) Interest is computed on the unpaid principal balance or balances of the account from time to time; and
(4) The borrower has the privilege of paying the account in full at any time or, if the account is not in default, in monthly installments of fixed or determinable amounts as provided in the agreement.
"Person" means an individual, association, joint venture, partnership, limited partnership association, limited liability company, corporation, trust, or any other group of individuals however organized.
"Sales finance company" shall have the meaning ascribed to that term in section 1 of P.L.1960, c.40 (C.17:16C-1).
##### **§ 17:11C-3** License required for consumer lender, sales finance company. {#sec-17-11c-3 omnilex-key=us-nj-statutes--title-17--17:11C-3}
3. a. No person shall engage in business as a consumer lender or sales finance company without first obtaining a license or licenses under this act.
b. The department shall issue licenses under this act which specify whether a licensee may act as a consumer lender or a sales finance company. A licensee may not engage in a licensed activity under this act or the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), unless the license issued by the department specifies that the licensee may engage in that licensed activity.
c. (Deleted by amendment, P.L.2009, c.53)
d. (Deleted by amendment, P.L.2009, c.53)
##### **§ 17:11C-6** Exempt consumer loan business, certain {#sec-17-11c-6 omnilex-key=us-nj-statutes--title-17--17:11C-6}
6. A depository institution, trust company, insurance company, or pawnbroker operating under R.S.45:22-1 et seq., may conduct consumer loan business without obtaining a license under this act and without being subject to this act.
##### **§ 17:11C-7** Conditions for issuance of license. {#sec-17-11c-7 omnilex-key=us-nj-statutes--title-17--17:11C-7}
7. The commissioner shall issue a license under this act if the following conditions are met:
a. An application for a new license or for a renewal of a license shall be submitted to the commissioner on the forms and in the manner, and accompanied by such evidence in support of the application, as required by this act and as may be prescribed by the commissioner, and shall be accompanied by the required fees.
b. (Deleted by amendment, P.L.2009, c.53)
c. If the commissioner finds that the financial responsibility, experience, character, and general fitness of the applicant for a new license or for a renewal of a license demonstrate that the business will be operated honestly, fairly, and efficiently within the purposes of this act, and if all other licensing requirements of this act and regulations promulgated by the commissioner are met, the commissioner shall issue the license of the type sought by the applicant.
d. A person already holding a license under this act, or a business license as a residential mortgage lender or residential mortgage broker under the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.), may apply to the commissioner to act as a consumer lender or as a sales finance company pursuant to the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), by filing with the commissioner an abbreviated application containing the information which the commissioner deems necessary when considering whether to license that person for that specific type of license along with an application fee for the amount set forth in subsection e. of section 8 of P.L.1996, c.157 (C.17:11C-8).
e. Any person filing for licensure shall submit to the commissioner the name, address, fingerprints and written consent for a criminal history record background check to be performed on any officer, director, partner or owner of a controlling interest of that person. The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility for the person, based upon any findings related to an officer, director, partner or owner. The applicant shall bear the cost for the criminal history record background check. The Division of State Police shall promptly notify the commissioner in the event an officer, director, partner or owner of the person, who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed, whether the person is a prospective new licensee, or subsequently, a current license holder.
##### **§ 17:11C-8** Application, fee. {#sec-17-11c-8 omnilex-key=us-nj-statutes--title-17--17:11C-8}
8. a. (Deleted by amendment, P.L.2009, c.53)
b. (Deleted by amendment, P.L.2007, c.81).
c. (Deleted by amendment, P.L.2009, c.53)
d. An applicant for a new license or for a renewal of a license to be a consumer lender or a sales finance company shall pay to the commissioner at the time of the application a nonrefundable application fee not to exceed the amounts specified in this subsection. The nonrefundable application fee is also required for each branch office license of a consumer lender or sales finance company. The nonrefundable application fee shall be:
(1) For an application for one license, an application fee not to exceed $700;
(2) For an application for two licenses, an application fee not to exceed $1,000.
(3) (Deleted by amendment, P.L.2009, c.53)
(4) (Deleted by amendment, P.L.2009, c.53)
e. A licensee that seeks to add an additional license to an existing license held, which activity is regulated under the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.) or the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), shall pay an application fee not to exceed $300 per activity.
f. Fee amounts shall be prescribed by the commissioner by regulation.
##### **§ 17:11C-9** Maintenance of branch offices by licensee. {#sec-17-11c-9 omnilex-key=us-nj-statutes--title-17--17:11C-9}
9. a. A consumer lender or sales finance company may maintain a branch office or offices. The licensee shall obtain a license for each branch office from which the licensee has direct contact with New Jersey consumers regarding any consumer loan business or sales finance company business regulated under the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.) or the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), as appropriate.
b. The commissioner shall issue a branch office license if:
(1) The licensee has submitted a completed branch office application form, which includes any information required by the commissioner concerning the branch office, and an application fee pursuant to the schedule provided in subsection d. of section 8 of P.L.1996, c.157 (C.17:11C-8); and
(2) The application for the branch office demonstrates that the office is in a suitable location.
(3) (Deleted by amendment, P.L.2009, c.53)
c. (Deleted by amendment, P.L.2007, c.81).
##### **§ 17:11C-10** Information on license; posting, disposition of license. {#sec-17-11c-10 omnilex-key=us-nj-statutes--title-17--17:11C-10}
10. a. The consumer lender or sales finance company license shall state the name of the licensee and the licensee's place of business or businesses, as applicable, and shall contain any other information as the commissioner may see fit to require. No licensee shall transact business regulated by the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.) or the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.) under any name other than that named in the license.
b. The license shall be posted conspicuously in the place or places of business of the licensee.
c. A licensee or any other person shall not photocopy or otherwise reproduce the license except for legitimate business purposes.
d. Licenses issued pursuant to this act or, previously, the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), shall not be transferable or assignable, other than as provided by section 12 of this act.
e. No licensee shall change the name or address of the licensee's place or places of business without notice to the commissioner.
##### **§ 17:11C-11** Issuance, surrender, expiration of license. {#sec-17-11c-11 omnilex-key=us-nj-statutes--title-17--17:11C-11}
11. a. (1) Each consumer lender or sales finance company license issued pursuant to this act shall expire at the end of the license period of not less than two years as set by the commissioner by regulation.
(2) A licensee may surrender any license by delivering to the commissioner written notice that the license is surrendered, along with the license, and complying with any regulation set forth by the commissioner concerning the license surrender, but the surrender shall not affect the licensee's civil or criminal liability for an act committed prior to the surrender.
b. (Deleted by amendment, P.L.2007, c.81).
c. (Deleted by amendment, P.L.2009, c.53)
d. Each mortgage banker, correspondent mortgage banker, mortgage broker, and secondary lender license, and each mortgage solicitor registration issued pursuant to the provisions of the "New Jersey Licensed Lenders Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), prior to the effective date of its reform and re-titling as the "New Jersey Consumer Finance Licensing Act" pursuant to P.L.2009, c.53 (C.17:11C-51 et al.), shall expire in accordance with the following schedule:
(1) For any license or registration issued before the effective date of the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.), the license or registration shall expire on June 30, 2009.
(2) For any license or registration issued on or after July 1, 2009:
(a) the license or registration shall expire on July 31, 2010, or a later date approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s. 5107); and
(b) this date may be further modified by the commissioner pursuant to regulation or order, based upon any later date approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.5107), providing a temporary deadline extension with respect to complying with the licensing requirements for states established pursuant to the provisions of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.).
(3) Thereafter, the person licensed or registered shall only continue to engage in any activities for which the license or registration was previously issued if licensed under the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.).
##### **§ 17:11C-12** Approval of transfer, sale. {#sec-17-11c-12 omnilex-key=us-nj-statutes--title-17--17:11C-12}
12. Any sale or transfer of a controlling interest in a consumer lender or sales finance company licensee's or applicant's business shall be approved by the commissioner prior to the transfer or sale, after the licensee or applicant has provided an application which contains a written notice of the proposed sale or transfer to the commissioner. The application shall list each officer, director, partner or owner to receive a controlling interest as a result of the transfer or sale, and each shall be subject to a criminal history record background check as set forth in subsection e. of section 7 of P.L.1996, c.157 (C.17:11C-7) as a condition for the commissioner's approval of the transfer or sale. The commissioner shall approve the transfer or sale unless the commissioner determines, following an opportunity for a hearing, that sufficient grounds exist to deny, revoke or suspend the license. The sale or transfer shall be deemed approved if the commissioner does not deny a completed application within 90 days after its receipt.
##### **§ 17:11C-16** Net worth requirements for consumer lenders {#sec-17-11c-16 omnilex-key=us-nj-statutes--title-17--17:11C-16}
16. a. Every applicant for a license as a consumer lender shall prove in a form satisfactory to the commissioner, that the applicant has a net worth of at least $100,000, and has available for the purpose of making consumer loans liquid assets of at least $100,000.
b. Every consumer lender shall have at all times a net worth of at least $100,000 and shall maintain at all times assets of at least $100,000 in liquid form available for or actually used in the making of consumer loans.
##### **§ 17:11C-17** Change of address notice. {#sec-17-11c-17 omnilex-key=us-nj-statutes--title-17--17:11C-17}
17. a. Nothing in this act or in the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), shall be construed to require a consumer lender or a sales finance company to maintain an office in this State so long as it is qualified to do business here and has a registered agent for service of process.
b. (Deleted by amendment, P.L.2009, c.53)
c. Whenever the licensee changes the address of its principal office or a branch office serving New Jersey consumers, it shall file, as part of its notice of address change required pursuant to subsection e. of section 10 of P.L.1996, c.157 (C.17:11C-10), any documents required of it by regulation.
##### **§ 17:11C-18** Commissioner's authority relative to issuance, revocation, oversight of licenses, enforcement. {#sec-17-11c-18 omnilex-key=us-nj-statutes--title-17--17:11C-18}
18. The commissioner's authority with respect to issuing consumer lender and sales finance company licenses, and with respect to oversight of licensees and enforcement of the activities regulated under the "New Jersey Consumer Finance Licensing Act" shall include the following:
a. The commissioner may refuse to issue and may revoke, suspend or refuse to renew a license, or impose a penalty pursuant to this act, if the commissioner finds, after notice and an opportunity for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c. 410 (C.52:14B-1 et seq.) and any rules adopted thereunder, that any person, applicant for or holder of the license has:
(1) Violated any of the provisions of this act or any order, rule or regulation made or issued pursuant to this act;
(2) Failed at any time to meet the requirements for licensure, or withheld information or made a material misstatement in the application for the license;
(3) Been convicted of an offense involving breach of trust, moral turpitude or fraudulent or dishonest dealing, or had a final judgment entered against the person in a civil or administrative action upon grounds of fraud, misrepresentation, or deceit, or failure to maintain books, accounts, records and other documents as required by section 19 of P.L.1996, c.157 (C.17:11C-19);
(4) Become insolvent, or failed to attain or maintain the required net worth;
(5) Demonstrated unworthiness, incompetence, bad faith or dishonesty in the transaction of business as a licensee; or
(6) Engaged in any other conduct which would be deemed by the commissioner to be the cause for denial, revocation, suspension, or refusal of the license or license renewal.
b. A license may be suspended, revoked, or not renewed by the commissioner if any officer, director, partner, or owner of the licensee has committed any act which would be cause for suspending, revoking or not renewing a license if issued to that person as an individual.
c. If the license is suspended or revoked pursuant to subsection b. of this section, the license shall remain suspended or revoked, unless within the time fixed by the commissioner, in the case of a partnership, the connection therewith of the offending individual shall be severed and that individual's interest in the partnership and share in its activities brought to an end, or in the case of an association, corporation, or other legal entity, the offending individual shall be discharged and shall have no further participation in the legal entity's activities. In the case of an offending individual who is an officer or director of the corporation or other legal entity, that individual shall be required to fully divest himself of all stock, bonds or other corporate holdings.
d. (Deleted by amendment, P.L.2009, c.53)
e. (Deleted by amendment, P.L.2009, c.53)
f. The commissioner may access and examine books, accounts, records and other documents maintained by a consumer lender or sales finance company licensee pursuant to section 19 of P.L.1996, c.157 (C.17:11C-19).
g. The commissioner may conduct investigations, which may include the subpoena of witnesses and documents, pursuant to section 42 of P.L.1996, c.157 (C.17:11C-42).
h. Whenever it appears to the commissioner that any person has engaged, is engaging, or is about to engage, in any practice or transaction prohibited by the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), the commissioner may, in addition to any other remedy available, bring a summary action in a court of competent jurisdiction against the person, and any other person concerned or in any way participating in or about to participate in a practice or transaction in violation of the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), to enjoin the person from continuing the practice or transaction engaged, or from engaging in the practice or transaction, or doing any act in furtherance of engaging in the practice or transaction.
i. The commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.). Each violation of the act, including any order, rule or regulation made or issued pursuant to the act, shall constitute a separate offense. Additionally, each violation which constitutes a knowing violation shall be considered a crime of the third degree.
j. The commissioner may order that any person who has been found to have knowingly violated any provision of the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), or of the rules and regulations issued pursuant thereto, and has thereby caused financial harm to consumers, be barred for a term not exceeding 10 years from acting as a consumer lender or sales finance company, or a stockholder, or an officer, director, partner or other owner, or an employee of a consumer lender or sales finance company licensee, or acting in any other capacity pursuant to the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.). Violations of this final order shall be considered a crime of the third degree.
##### **§ 17:11C-19** Maintenance of books, accounts, records, documents. {#sec-17-11c-19 omnilex-key=us-nj-statutes--title-17--17:11C-19}
19. a. Every consumer lender or sales finance company licensee shall identify the place of business where those books, accounts, records and other documents of the business conducted under the license, as may be prescribed by the commissioner, are maintained, to enable the commissioner to determine whether the business of the licensee is being conducted in accordance with the provisions of this act and the orders, rules and regulations issued hereunder.
b. Upon appropriate notice to the commissioner and if a change in location of records is made, the commissioner shall be notified in writing of the change within five business days of the change.
c. Every licensee shall preserve all books, accounts, records and other documents pertaining to its business, and keep them available for examination by the commissioner, for at least three years from the date of original entry, or a longer time as prescribed by the commissioner by regulation.
d. A licensee may, upon approval of the commissioner, keep records at a location, identified by the licensee, outside this State, provided that the licensee shall make the records available in this State upon request of the commissioner.
##### **§ 17:11C-21** Purchase of insurance by borrowers. {#sec-17-11c-21 omnilex-key=us-nj-statutes--title-17--17:11C-21}
21. a. A borrower shall not be required to purchase credit life or accident and health insurance or credit involuntary unemployment insurance in connection with a consumer loan. If the borrower or borrowers consent thereto in writing, a licensee may obtain or provide:
(1) Insurance on the life and on the health or disability, or both, of one borrower, and on the lives, health or disability of two borrowers pursuant to the provisions of N.J.S.17B:29-1 et seq.; and
(2) Credit involuntary unemployment insurance in accordance with forms and rates filed and approved by the commissioner pursuant to applicable regulations.
b. If a licensee obtains or provides any credit insurance for a borrower or borrowers pursuant to subsection a. of this section, the licensee may deduct from the principal of a loan and retain an amount equal to the premium lawfully charged by the insurance company. The premium may be charged monthly in the case of an open-end consumer loan. The amount so deducted and retained shall not be considered a prohibited charge or amount of any examination, service, brokerage, commission, expense, fee or bonus or other thing or otherwise.
c. If a borrower or borrowers obtain the credit insurance from or through a licensee, the licensee shall show the amount of the charge for the insurance and cause to be delivered to the borrower or borrowers a copy of the policy, certificate or other evidence of that insurance when the loan is made. Nothing in this act shall prohibit the licensee from collecting the premium or identifiable charge for insurance permitted by this section and from receiving and retaining any dividend, or any other gain or advantage resulting from that insurance.
d. (Deleted by amendment, P.L.2009, c.53)
e. Incident to a consumer loan, a licensee may make available, insurance covering direct or indirect damage or loss, by fire or other perils, including those of extended coverage, to the personal property of the borrower all or part of which is security for the loan. The insurance shall be for an amount and term not to exceed the total amount of payments and term of the loan.
The licensee shall provide the borrower with the following written statement, to be printed in at least 10-point bold type:
NOTICE TO THE BORROWER
YOU ARE NOT REQUIRED TO PURCHASE PERSONAL PROPERTY INSURANCE AS A CONDITION OF RECEIVING THE CONSUMER LOAN. IF YOU DESIRE PERSONAL PROPERTY INSURANCE YOU MAY SECURE INSURANCE FROM A COMPANY OR AGENT OF YOUR OWN CHOOSING.
##### **§ 17:11C-32** Consumer loans permitted by consumer lender, terms. {#sec-17-11c-32 omnilex-key=us-nj-statutes--title-17--17:11C-32}
32. a. Notwithstanding the provisions of R.S.31:1-1 or any other law to the contrary, every consumer lender authorized to engage in the consumer loan business may loan any sum of money not exceeding $50,000, repayable in an installment or installments, and may charge, contract for, and receive thereon, interest at an annual percentage rate or rates agreed to by the licensee and the borrower.
b. A closed-end consumer loan contract may provide for a variation in the interest rate in which adjustments to the interest rate shall correspond directly to the movement of an interest rate index which is readily available to and verifiable by the borrower and is beyond the control of the lender. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period. The lender shall not be obligated to decrease the interest rate more than 6% over the term of the loan, nor more than 3% per annum during any 12-month period. If a rate increase is applied to the loan, the lender shall also be obligated to adopt and implement uniform standards for decreasing the rate. If the contract provides for the possibility of an increase or decrease or both in the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the contract. No rate increase shall take effect unless (1) at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes such increase, and (2) unless at least 365 days have elapsed without any increase in the rate. Where the loan contract so provides for an increase or decrease in the rate of interest, the installments may vary in amount, notwithstanding any other law to the contrary, except that if the rate increases, the borrower may request, and the lender shall provide for, either an increase in the amount of the installment payment or an extension of the term of the loan, or some combination of an increase in the amount of the installment payment and extension of the term.
c. An open-end loan agreement may provide that the lender may at any time, or from time to time, change the terms of the agreement, including the terms governing the periodic interest rate, calculation of interest or the method of computing the required amount of periodic installment payments, provided however, that:
(1) the periodic interest rate shall not be changed more than once in each billing cycle;
(2) any change in the periodic interest rate shall correspond to the movement of a market interest rate index specified in the agreement which is readily verifiable by the borrower and beyond the control of the lender;
(3) a change in any term of the agreement, including the periodic interest rate, may be permitted to apply to any then-outstanding unpaid indebtedness in the borrower's account, including any indebtedness which shall have arisen from advances obtained prior to the effective date of the change, so long as that fact is clearly and conspicuously disclosed in the agreement;
(4) if the agreement provides for the possibility of a change in any term of the agreement, including the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the written notice; and
(5) no change in any term of the agreement or of the index specified in the agreement shall be effective unless: (a) at least 30 days prior to the effective date of the change, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes the change and the indebtedness to which it applies, and states that the incurrence by the borrower or another person authorized by him of any further indebtedness under the law to which the agreement relates on or after the effective date of the change specified in the notice shall constitute acceptance of the change; and (b) either the borrower agrees in writing to the change or the borrower or another person authorized by him incurs further indebtedness on or after the effective date of the change stated in that notice, which indebtedness may include outstanding balances. Any borrower who fails to use the borrower's account or so to indicate agreement to the change shall be permitted to pay the outstanding unpaid indebtedness in the borrower's account in accordance with the terms governing the open-end consumer loan agreement without giving effect to the change.
d. The consumer lender shall notify each affected borrower in a consumer loan agreement of any change in the manner set forth in the closed-end and open-end agreement governing the plan and in compliance with the requirements of the federal "Truth in Lending Act," Pub.L.90-321 (15 U.S.C. s.1601 et seq.), and regulations promulgated thereunder, as in effect from time to time, if applicable.
e. The interest and periodic payments for consumer loans at these rates shall be computed from the standard tables based on the actuarial or annuity method which conforms to the so-called "United States Rule of Partial Payments," which provides that interest shall be calculated whenever a payment is made and the payment shall be first applied to the payment of interest and if it exceeds the interest due, the balance is to be applied to diminish principal. If the payment is insufficient to pay the entire amount of interest, the balance of interest due shall not be added to principal, so as to produce interest thereon.
f. No interest on a consumer loan shall be paid, deducted, or received in advance. Interest shall not be compounded and shall be computed only on unpaid principal balances. For the purpose of computing interest, all installment payments shall be applied on the date of receipt, and interest shall be charged for the actual number of days elapsed at the daily rate of 1/365 of the yearly rate.
g. No consumer lender shall induce or permit any person nor any husband and wife, jointly or severally, to become obligated, directly or contingently or both, under more than one contract of a consumer loan at the same time for the purpose of obtaining a higher rate of interest than would otherwise be permitted by this section. This prohibition shall not apply to any loan made pursuant to any other law of this State.
##### **§ 17:11C-33** Additional charges prohibited on consumer loan; violations. {#sec-17-11c-33 omnilex-key=us-nj-statutes--title-17--17:11C-33}
33. a. In addition to the interest herein provided for on a consumer loan, no further or other charge, or amount whatsoever for any examination, service, brokerage, commission, expense, fee, or bonus or other thing or otherwise shall be directly or indirectly charged, contracted for, or received, except for any amount actually paid by a licensee to a public official for the recording of a security interest in connection with security given for the loan and: (1) amounts for insurance obtained or provided by the licensee in accordance with the provisions of this act; (2) on actual sale of the security in foreclosure proceedings or upon the entry of judgment; (3) a returned check fee in an amount not to exceed $20, which the licensee may charge the borrower if a check of the borrower is returned to the licensee uncollected due to insufficient funds in the borrower's account; and (4) an annual fee on open-end accounts which may not exceed an amount equal to one percent of the line of credit or $50, whichever is less.
b. A consumer lender who violates or participates in the violation of any provision of section 3, 19, 21, 34, 35 or 36, or subsection a. of section 10, or subsection a., b., or c. of section 32, or subsection a. of this section, or subsection e., f., g., or h. of section 41 of this act, shall be guilty of a crime of the fourth degree. A contract of a loan not invalid for any other reason, in the making or collection of which any act shall have been done which constitutes a crime of the fourth degree under this section, shall be void and the lender shall have no right to collect or receive any principal, interest or charges unless the act was the result of a good faith error, including a good faith error made as a result of a licensee's acting in conformity with a rule or regulation of the commissioner which is later held to be invalid or in violation of any provision of this act by a judgment of a court of competent jurisdiction, and the licensee notifies the borrower of the error within 90 days after discovering it and makes adjustments in the account necessary to assure that the borrower will not be required to pay any interest, costs, or other charges which aggregate in excess of the charges permitted under this act. If any interest, consideration or charges in excess of those permitted are charged, contracted for or received, except as the result of a good faith error, the consumer lender may collect only the principal amount of the loan, and may not collect interest, costs or other charges with respect to the loan. In addition, a consumer lender who knowingly and willfully violates any provision of this act shall also forfeit to the borrower three times any amount of the interest, costs or other charges collected in excess of that authorized by law.
c. A consumer lender shall have no liability on a consumer loan for an unintentional error if within 90 days after discovering an error the licensee notifies the borrower of the error and makes adjustments in the account as necessary to assure that the borrower will not be required to pay any interest, costs or other charges which aggregate in excess of the charges permitted under this act for consumer loans. The discovery of an unintentional error within the meaning of this section shall include an entry of a judgment by a court of competent jurisdiction, holding that a rule or regulation with which the consumer lender acted in conformity was invalid or in violation of this act, and a consumer lender shall have no liability for such unintentional error if the consumer lender takes the actions required by this section upon discovery of such an error, within the time stated therein following entry of such a judgment.
##### **§ 17:11C-34** Requirements for consumer lender relative to closed-end loan. {#sec-17-11c-34 omnilex-key=us-nj-statutes--title-17--17:11C-34}
34. Every consumer lender, incident to a closed-end consumer loan, shall:
a. Deliver to the borrower at the time a loan is made a statement in the English language showing in clear and distinct terms the amount and date of the loan and its maturity, the nature of the security, if any, for the loan, the name and address of the borrower and of the licensee, the payment schedule, the amount of interest charges, and the annual percentage rate of interest;
b. Give to any borrower who makes a payment in cash a plain and complete receipt for all payments made on account of the loan at the time payments are made, specifying the amount applied to interest and the amount, if any, applied to principal, and stating the unpaid balance, if any of the loan;
c. Permit payment to be made in advance in any amount on any contract of a loan at any time, but the licensee may apply the payment first to all interest in full at the agreed rate up to the date of payment;
d. Upon repayment of the loan in full, mark indelibly every obligation and security signed by the borrower, or a copy thereof, with the word "paid" or "canceled," and release, or give the borrower evidence to release any mortgage, or security interest which no longer secures an obligation to the licensee, restore any pledge, cancel and return any note or a copy thereof, and cancel and return any assignment or a copy thereof given to the licensee by the borrower.
No consumer lender shall take any confession of judgment incident to a closed-end consumer loan. No consumer lender shall, incident to a closed-end consumer loan take any note, promise to pay, or security that does not accurately disclose the amount of the loan, the date of the loan, the payment schedule, the amount of interest charges, and the annual percentage rate of interest, nor any instrument in which blanks are left to be filled in after the loan is made.
##### **§ 17:11C-35** Limits on closed-end consumer loans {#sec-17-11c-35 omnilex-key=us-nj-statutes--title-17--17:11C-35}
35. a. No closed-end consumer loan in an amount of $1,000 or less shall be made for a greater period of time than 36 months and 15 days.
b. No closed-end consumer loan in an amount in excess of $1,000, but not exceeding $2,500, shall be made for a greater period of time than 48 months and 15 days.
c. No closed-end consumer loan in an amount in excess of $2,500, but not exceeding $5,000, shall be made for a greater period of time than 60 months and 15 days.
d. No closed-end consumer loan in an amount in excess of $5,000, but not exceeding $10,000, shall be made for a greater period of time than 84 months and 15 days.
e. No closed-end consumer loan in an amount in excess of $10,000 shall be made for a greater period of time than 120 months and 15 days.
##### **§ 17:11C-36** Open-end consumer loans; conditions, terms. {#sec-17-11c-36 omnilex-key=us-nj-statutes--title-17--17:11C-36}
36. a. A licensee authorized to engage in the consumer loan business may make open-end consumer loans and may contract for, and receive thereon, interest at an annual percentage rate or rates agreed to by the licensee and the borrower.
b. A consumer lender shall not compound interest on an open-end consumer loan by adding any unpaid interest authorized by this act to the principal balance of the borrower's account but the unpaid principal balance may include other charges permitted by this act.
c. Interest on an open-end consumer loan shall be computed in each billing cycle by one of the following methods:
(1) By converting each yearly rate to a daily rate and multiplying that daily rate by the applicable portion of the daily unpaid principal balance of the account, in which case each daily rate is determined by dividing each yearly rate by 365; or
(2) By multiplying one-twelfth of each yearly rate by the applicable portion of the average daily unpaid principal balance of the account in the billing cycle, in which case the average daily unpaid principal balance is the sum of the amount unpaid each day during the cycle divided by the number of days in the cycle; or
(3) By converting each yearly rate to a daily rate and multiplying that daily rate by the applicable portion of the average daily unpaid principal balance of the account in the billing cycle, in which case each daily rate is determined by dividing each yearly rate by 365, and the average daily unpaid principal balance is the sum of the amount unpaid each day during the cycle divided by the number of days in the cycle.
d. For all of the above methods of computation, the billing cycle shall be monthly and the unpaid principal balance on any day shall be determined by adding to any balance unpaid as of the beginning of that day all advances and other permissible amounts charged to the borrower and deducting all payments and other credits made or received that day.
e. In an open-end consumer loan, the borrower may at any time pay all or any part of the unpaid balance in his account; or, if the account is not in default, the borrower may pay the unpaid principal balance in monthly installments, subject to the following minimum payment requirements. Minimum monthly payments shall be in an amount which would result in the full repayment of the initial loan advance, exclusive of any interest, within the maximum term set forth for other loans of the same amount in section 35 of this act, except that the minimum payment for any initial advance not exceeding $2,500 shall be in an amount which would result in full repayment of the initial loan advance within the maximum term of 48 months and 15 days. This minimum payment shall continue at that amount until such time as an additional advance to the borrower is made, other than for permitted charges, at which time the minimum monthly payment shall be determined and shall be in that amount which would result in the full repayment of the unpaid principal balance of the loan, after the advance and including the advance, within the maximum term set forth for the other loans of the same amount, except that if the principal balance of the loan, after the advance and including the advance, does not exceed $2,500, the minimum payment shall be in that amount which would result in full repayment of the principal balance of the loan within the maximum term of 48 months and 15 days. Minimum payments after each subsequent advance shall be determined in the same manner. No minimum payment shall exceed the amount required to pay the balance in full, including unpaid interest and charges to date.
f. In addition to interest, a licensee may contract for and receive on an open-end consumer loan the charges permitted under this act for other consumer loans, subject to all the conditions and restrictions on those charges, with the following variations:
(1) If credit life, disability or involuntary unemployment insurance is provided pursuant to section 21 of P.L.1996, c.157 (C.17:11C-21) and if the insured dies or becomes disabled or involuntarily unemployed when there is an outstanding open-end loan indebtedness, the insurance shall be sufficient to pay the total balance of the loan due on the date of the borrower's death in the case of credit life insurance, all minimum payments which become due on the loan during the covered period of disability in the case of credit disability insurance or all covered minimum payments which become due on the loan during the covered period of involuntary unemployment in the case of involuntary unemployment insurance. The additional charge for credit life insurance, credit disability insurance or credit involuntary unemployment insurance shall be calculated in each billing cycle by applying the current monthly premium rate for that insurance, as determined by the commissioner, to the unpaid balances in the borrower's account, using any of the methods specified in subsection c. of this section for the calculation of interest;
(2) No credit life, disability or involuntary unemployment insurance written in connection with an open-end loan shall be canceled by the licensee because of delinquency of the borrower in the making of the required minimum payments on the loan unless one or more of the payments is past due for a period of 90 days or more; and the licensee shall advance to the insurer the amounts required to keep the insurance in force during that period, which amounts may be debited to the borrower's account.
g. A consumer lender may take a security interest in personal property to secure an open-end consumer loan. Any security may be retained until the open-end account is terminated, except that if the security interest covers consumer goods, then within one month, or within 10 days following written demand by the borrower, after there is no outstanding balance in the account and no commitment by the licensee to make advances, the licensee shall release the security interest. If a security interest is taken, the open-end consumer loan agreement shall state the nature and extent of that security interest.
h. No licensee in connection with an open-end consumer loan shall take any confession of judgment or power of attorney, or take any instrument in which blanks are left to be filled in after the loan is made.
##### **§ 17:11C-37** Prohibited charges for large consumer loans. {#sec-17-11c-37 omnilex-key=us-nj-statutes--title-17--17:11C-37}
37. No licensee authorized to engage in the consumer loan business shall directly or indirectly charge, contract for, or receive any interest, discount, or consideration greater than the licensee would be permitted by law to charge if he were not a licensee under this act upon the loan, use, or sale of credit, of the amount or value of more than $50,000. The foregoing prohibition shall also apply to any licensee who permits any person, as borrower or as endorser, guarantor, or surety for any borrower, or otherwise, to owe directly or contingently or both under one or more loan contracts to the licensee at any time the sum of more than $50,000 for principal.
##### **§ 17:11C-38** Certain payments deemed loan secured by assignment. {#sec-17-11c-38 omnilex-key=us-nj-statutes--title-17--17:11C-38}
38. The payment of $50,000 or less in money, credit, goods or things in action, as consideration for any sale, assignment or order for the payment of wages, salary, commissions or other compensation for services, whether earned or to be earned, shall, for the purposes of this act, be deemed a loan secured by the assignment. The transaction shall be governed by and subject to the provisions of this act and any such sale, assignment or order hereafter made shall, for the purposes of this act, be void and of no effect.
##### **§ 17:11C-39** Validity of chattel mortgage, security interest, conditions {#sec-17-11c-39 omnilex-key=us-nj-statutes--title-17--17:11C-39}
39. No chattel mortgage or security interest, as defined in N.J.S.12A:1-201, in, or other lien on, household furniture then in the possession and use of the borrower, taken in connection with a consumer loan, shall be valid unless that chattel mortgage and the financing statement and the security agreement are in writing, signed in person by the borrower, and if the borrower is married, unless it is signed in person by both husband and wife. The written assent of a spouse shall not be required when husband and wife have been living separate and apart for a period of at least five months prior to the making of the mortgage or lien or security interest.
##### **§ 17:11C-40** Loans secured by property. {#sec-17-11c-40 omnilex-key=us-nj-statutes--title-17--17:11C-40}
40. The payment of $50,000 or less in money, credit, goods or things in action as consideration for any sale of personal property which is made on condition that the property be sold back at a greater price shall, for the purposes of this act, be deemed to be a loan secured by the property and the amount by which the repurchase price exceeds the original payment actually paid shall be deemed interest or charges upon the loan from the date the original payment is made until the date the repurchase price is paid. The transaction shall be governed by and be subject to the provisions of this act as if it were a consumer loan.
##### **§ 17:11C-41** Consumer lenders, prohibited practices. {#sec-17-11c-41 omnilex-key=us-nj-statutes--title-17--17:11C-41}
41. The following practices shall be prohibited and a violation of the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.):
a. No consumer lender shall make any loan upon security of any assignment of or order for the payment of any salary, wages, commissions or other compensation for services earned, or to be earned, nor shall any such assignment or order be taken by a licensee at any time in connection with any consumer loan, or for the enforcement or repayment thereof, and any such assignment or order hereafter so taken or given to secure any loan made by any licensee under this act shall be void and of no effect.
b. No consumer lender shall take a lien upon real estate as security for any consumer loan, except a lien created by law upon the recording of a judgment.
c. No licensee shall conduct the consumer loan business within any office, room, or place of business in which any other business is solicited or engaged in, or in association or conjunction therewith, except as may be authorized in writing by the commissioner.
d. Every multiple installment consumer loan contract, other than an open-end consumer loan contract or a variable rate closed-end consumer loan contract under subsection b. of section 32 of this act, shall provide for repayment of principal and interest combined in installments which shall be payable at approximately equal periodic intervals of time and which shall be so arranged that no installment is substantially greater in amount than any preceding installment, except that the repayment schedule may reduce or omit installments when necessary because of the seasonal nature of the borrower's income.
e. No person, except as authorized by this act, shall directly or indirectly charge, contract for, or receive any interest, discount, or consideration greater than the lender would be permitted by law to charge if he were not a licensee hereunder upon the loan, use, or forbearance of money, goods, or things in action, or upon the loan, use, or sale of credit of the amount of $50,000 or less. This prohibition shall apply to any person who, by any device, subterfuge, or pretense, shall charge, contract for, or receive greater interest, consideration, or charges than is authorized by this act for the loan, use, or forbearance of money, goods, or things in action or for the loan, use, or sale of credit.
f. No consumer loans of the amount or value of $50,000 or less for which a greater rate of interest, consideration, or charge than is permitted by this act has been charged, contracted for, or received, whenever made, shall be enforced in this State and any person in any way participating therein in this State shall be subject to the provisions of this act. The foregoing shall not apply to loans legally made in any state which then has in effect a regulatory small loan law similar in principle to this act, but an action to enforce any loan made in any state to a person then residing in this State may be maintained in this State only if the amount of interest, discount, consideration or other charge for that loan, demanded to be paid in the action, does not exceed that permitted to a licensee authorized to engage in the consumer loan business by this act for a loan of the same amount repayable in the same manner.
g. No consumer lender shall make, advertise, print, display, publish, distribute, electronically transmit, telecast or broadcast, in any manner, any statement or representation which is false, misleading or deceptive.
h. No consumer lender shall make any statement or representation that the licensee will provide "immediate closing" of a loan or will afford unqualified access to credit.
##### **§ 17:11C-42** Investigations, examinations of licensees. {#sec-17-11c-42 omnilex-key=us-nj-statutes--title-17--17:11C-42}
42. a. The commissioner may make such investigations and examinations of any licensee or other person as the commissioner deems necessary to determine compliance with this act and the orders, rules and regulations issued hereunder. For these purposes, the commissioner may examine the books, accounts, records and other documents or matters of any licensee, maintained pursuant to section 19 of P.L.1996, c.157 (C.17:11C-19), or other person. Each licensee shall be subject to an examination by the commissioner, not more than once in any 18-month period, unless the commissioner has reason to believe that the licensee is not complying with the provisions of this act or any rule or regulation promulgated thereunder, or is not transacting business in accordance with law, at which time the commissioner may conduct an examination at any time. The commissioner shall have the power to compel by subpoena the production of all relevant books, accounts, records and other documents and materials relative to an examination or investigation. Examinations conducted under the provisions of this act shall be confidential except as required in the administration, enforcement and prosecution of violations under this act or pursuant to court order.
b. The commissioner or the commissioner's designee shall have power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, accounts, records and other evidence before him in any matter over which he has jurisdiction pursuant to this act, and to administer oaths and affirmations to any person.
c. If any person shall refuse to obey a subpoena, or to give testimony or to produce evidence as required thereby, the commissioner may apply ex parte to any court having jurisdiction over that person for an order compelling the appearance of the witness before the commissioner to give testimony or to produce evidence as required thereby, or both.
##### **§ 17:11C-43** Annual report by licensees; violations, penalties. {#sec-17-11c-43 omnilex-key=us-nj-statutes--title-17--17:11C-43}
43. A consumer lender or sales finance company licensee shall annually file a report with the commissioner which shall set forth such information as the commissioner shall require concerning the business conducted as a licensee during the preceding calendar year. The report shall be under oath and in a form and within the time specified by the commissioner by regulation.
A licensee that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner, as authorized pursuant to section 18 of P.L.1996, c.157 (C.17:11C-18) may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:11C-44** Agreements unenforceable, void {#sec-17-11c-44 omnilex-key=us-nj-statutes--title-17--17:11C-44}
44. Any agreement to waive any provision of this act shall be unenforceable and void.
##### **§ 17:11C-49** Rules, regulations {#sec-17-11c-49 omnilex-key=us-nj-statutes--title-17--17:11C-49}
49. The commissioner may issue and promulgate rules and regulations, in accordance with the "Administrative Procedure Act," P.L.1968, c. 410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
##### **§ 17:11C-51** Short title. {#sec-17-11c-51 omnilex-key=us-nj-statutes--title-17--17:11C-51}
1. Sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89) shall be known and may be cited as the "New Jersey Residential Mortgage Lending Act."
##### **§ 17:11C-52** Findings, declarations relative to certain licensed lending activities. {#sec-17-11c-52 omnilex-key=us-nj-statutes--title-17--17:11C-52}
2. The Legislature finds and declares that the activities of residential mortgage lenders and residential mortgage brokers, previously licensed in New Jersey as mortgage bankers, correspondent mortgage bankers, mortgage brokers, and secondary lenders in the secondary mortgage loan business, and mortgage loan originators, previously registered in this State as mortgage solicitors, and the origination or offering of financing for residential real property, have a direct, valuable and immediate impact upon the State's consumers, economy, neighborhoods and communities, and the housing and real estate industry. The Legislature also finds and declares that accessibility to mortgage credit is vital to the State's citizens.
The Legislature further finds and declares that it is essential for the protection of the citizens and the stability of the economy that reasonable standards for licensing and regulation of the business practices of residential mortgage lenders, brokers, and mortgage loan originators, formerly established under the "New Jersey Licensed Lenders Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), be modernized, particularly in response to new licensing and business practice standards set forth under the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.); and that the obligations of these licensees to consumers in connection with originating or making residential mortgage loans are of such importance as to warrant updating the State's regulation of the mortgage lending process.
Thus, the Legislature finds and declares that the intent of this act, the "New Jersey Residential Mortgage Lending Act," is to protect consumers seeking mortgage loans and to ensure that the mortgage lending industry operates without unfair, deceptive, and fraudulent practices by establishing, in coordination with the provisions of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008" and the Nationwide Mortgage Licensing System and Registry, a revised system of licensing, supervision and enforcement, and by providing the Department of Banking and Insurance and its commissioner broad administrative authority to oversee the operation of the mortgage lending industry in this State.
##### **§ 17:11C-53** Definitions relative to certain licensed lending activities. {#sec-17-11c-53 omnilex-key=us-nj-statutes--title-17--17:11C-53}
3. As used in this act:
"Approved conditional status" means the status of the license of an individual who has satisfied all conditions for licensure as a mortgage loan originator or qualified individual licensee except a satisfactory demonstration of his or her financial responsibility but who is making a good faith effort to achieve the level of financial responsibility required for such licensure.
"Approved inactive status" means the status of the license of an individual applicant who has satisfied all conditions for licensure except sponsorship by a licensed business entity or the status of a licensed individual who is no longer so sponsored.
"Bona fide not for profit entity" means an organization that:
a. maintains tax exempt status under section 501(c)(3) of the Internal Revenue Code of 1986, 26 U.S.C. s.501(c)(3);
b. promotes low to moderate income housing or provides homeownership education, or similar services;
c. conducts its activities in a manner that serves public or charitable purposes;
d. receives funding and revenue and charges fees in a manner that does not incentivize the organization or its employees to act other than in the best interests of its clients;
e. compensates employees in a manner that does not incentivize employees to act other than in the best interests of its clients;
f. provides to or identifies for the borrower residential mortgage loans with terms that are favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs; and
g. meets such other standards as may be prescribed by the commissioner through rulemaking.
"Borrower" means any individual applying for a loan from a licensee licensed under this act, whether or not the loan is granted, and any individual who has actually obtained a loan.
"Branch manager" means an employee of a licensed business entity with management responsibilities over a branch and who is identified as such with the Nationwide Mortgage Licensing System and Registry.
"Business licensee" means a corporation, association, joint venture, partnership, limited liability company, limited liability partnership, sole proprietorship, or any other legal entity, however organized, permitted under the laws of this State, that is licensed as a residential mortgage lender or residential mortgage broker, or that should be so licensed.
"Clerical or support duties" means and includes: (1) the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; or (2) communicating with a borrower to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms, or counseling borrowers about loan rates or terms. However, the term "clerical or support duties" does not include making representations to the public, through advertising or other means of communicating or providing information, such as through the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, indicating that the person assigned to perform clerical or support duties can or will perform any of the activities of a licensee under this act or of a person exempt from licensure pursuant to section 5 of this act.
"Closed-end loan" with respect to a secondary mortgage loan means a mortgage loan pursuant to which the business licensee advances a specified amount of money and the borrower agrees to repay the principal and interest in substantially equal installments over a stated period of time, except that: (1) the amount of the final installment payment may be substantially greater than the previous installments if the term of the loan is at least 36 months, or under 36 months if the remaining term of the first residential mortgage loan is under 36 months; or (2) the amount of the installment payments may vary as a result of the change in the interest rate as permitted by this act.
"Commissioner" means the Commissioner of Banking and Insurance.
"Controlling interest" means ownership, control or interest of 25% or more of the business licensee or applicant.
"Correspondent mortgage lender" means a residential mortgage lender who: (1) in the regular course of business, does not hold any mortgage loans in its portfolio, or service mortgage loans, for more than 90 days; and (2) has shown to the department's satisfaction an ability to fund mortgage loans through warehouse agreements, table funding agreements or otherwise.
"Department" means the Department of Banking and Insurance.
"Depository institution" means "depository institution" as defined in section 3 of the "Federal Deposit Insurance Act," Pub.L.81-797 (12 U.S.C. s.1813), and also means any credit union.
"Exempt company" means a person other than a bona fide not for profit entity that is not subject to licensure as a residential mortgage lender or a residential mortgage broker under P.L.2009, c.53 (C.17:11C-51 et seq.) that is registered pursuant to subsection d. of section 4 of P.L.2009, c.53 (C.17:11C-54), and that employs, or will employ one or more licensed mortgage loan originators.
"Expungement" means, with respect to a record of criminal conviction entered in this State, an order issued pursuant to N.J.S. 2C:52-1 et seq. With respect to criminal convictions entered in another state, that other state's definition of expungement or the functional equivalent of expungement will apply.
"Federal banking agency" means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the National Credit Union Administration, or the Federal Deposit Insurance Corporation, or any of their successor agencies.
"Immediate family member" means a spouse, domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3), partner in a civil union couple as defined in section 2 of P.L.2006, c.103 (C.37:1-29), parent, stepparent, grandparent, sibling, stepsibling, child, stepchild, and grandchild, as related by blood or by law.
"Individual" means a natural person.
"Individual licensee" means a natural person licensed as a qualified individual licensee for a residential mortgage lender or residential mortgage broker, or a mortgage loan originator.
"Insurer" means an entity authorized to transact the business of insurance in this State pursuant to subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes.
"Licensee" means a legal entity or natural person who is licensed under this act, or who should be so licensed.
"Loan processor" or "loan underwriter" means an individual who performs clerical or support duties as an employee, at the direction of and subject to the supervision and instruction of a licensee under this act.
"Mortgage loan originator" means any individual, not exempt under section 5 of this act and licensed pursuant to the provisions of this act, and any individual who should be licensed pursuant to the provisions of this act, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application, or offers or negotiates terms of a residential mortgage loan. However, the term "mortgage loan originator" does not mean an individual:
a. who is a qualified individual licensee for a residential mortgage lender or residential mortgage broker;
b. engaged solely as a loan processor or underwriter, except as provided in section 4 of this act;
c. engaged solely in extensions of credit relating to timeshare plans, as defined in section 101(53D) of title 11, United States Code (11 U.S.C. s.101(53D)); or
d. (1) employed by a federal, state, or local government agency or a housing finance agency and who acts as a mortgage loan originator only pursuant to his or her official duties as an employee of the federal, state, or local government agency, or of a housing finance agency. The agency itself is not considered a mortgage loan originator under the provisions of P.L.2009, c.53 (C.17:11C-51 et seq.).
(2) For the purposes of subsection d. of this section:
(a) "Employee" means an individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person and whose compensation for federal income tax purposes is reported or required to be reported on a W-2 form issued by the controlling person;
(b) "Housing finance agency" means any organization that is:
(i) Chartered by a state to help meet the affordable housing needs of the residents of the state;
(ii) Supervised, directly or indirectly, by the state government;
(iii) Subject to audit and review by the state in which it operates; and
(iv) Whose activities make it eligible to be a member of the National Council of State Housing Agencies.
"Nationwide Mortgage Licensing System and Registry" means the mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, or their successors, and utilized for licensing and registering residential mortgage lenders and residential mortgage brokers as business licensees in accordance with this act, and residential mortgage lenders and brokers as qualified individual licensees and mortgage loan originators as required pursuant to the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.).
"Nontraditional mortgage product" means any mortgage product other than a 30-year fixed rate residential mortgage loan.
"Open-end loan" means a secondary mortgage loan made by a residential mortgage lender pursuant to a written agreement with the borrower whereby:
(1) The lender may permit the borrower to obtain advances of money from the lender from time to time or the lender may advance money on behalf of the borrower from time to time as directed by the borrower;
(2) The amount of each advance and permitted interest and charges are debited to the borrower's account and payments and other credits are credited to the same account;
(3) Interest is computed on the unpaid principal balance or balances of the account from time to time; and
(4) The borrower has the privilege of paying the account in full at any time or, if the account is not in default, in monthly installments of fixed or determinable amounts as provided in the agreement.
"Out-of-State mortgage loan originator" means an individual who maintains a unique identifier through the Nationwide Mortgage Licensing System and Registry and currently holds a valid mortgage loan originator license issued pursuant to the law of any state or other jurisdiction within the United States.
"Person" means an individual, sole proprietor, association, joint venture, partnership, limited partnership association, limited liability company, corporation, trust, or any other group of individuals however organized.
"Primary market" means the market wherein residential mortgage loans are originated between a residential mortgage lender and a borrower, whether or not through a residential mortgage broker or other conduit, and shall not include the sale or acquisition of a residential mortgage loan after the mortgage loan is closed.
"Qualified individual licensee" means an individual who is required to be licensed under this act as a condition for a person to be issued or hold a license as a business licensee, whereby the individual: (1) meets, at a minimum, the licensing criteria applicable to a mortgage loan originator; and (2) is an officer, director, partner, owner, or principal of the business licensee.
"Registered mortgage loan originator" means any individual who:
(1) is a mortgage loan originator and an employee of:
(a) a depository institution;
(b) a subsidiary that is (i) owned and controlled by a depository institution and (ii) regulated by a federal banking agency; or
(c) an institution regulated by the Farm Credit Administration established by section 5.7 of the "Farm Credit Act of 1971," Pub.L.92-181 (12 U.S.C. s.2241), or its successor; and
(2) is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry and was validly registered as a mortgage loan originator with a depository institution employer for at least the one-year period prior to applying for licensure under the "New Jersey Residential Mortgage Lending Act," P.L.2009, c.53 (C.17:11C-51 et seq.).
"Residential mortgage broker" means any person, not exempt under section 5 of this act and licensed pursuant to the provisions of this act, and any person who should be licensed pursuant to the provisions of this act, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application for others, or negotiates, places or sells for others, or offers to take an application for, negotiate, place or sell, residential mortgage loans in the primary market for others.
"Residential mortgage lender" means any person, not exempt under section 5 of this act and licensed pursuant to the provisions of this act, and any person who should be licensed pursuant to the provisions of this act, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application, or offers, negotiates, originates, or acquires residential mortgage loans in the primary market. The term "residential mortgage lender" also means, with respect to a business licensee, a correspondent mortgage lender, unless the provisions of this act clearly indicate otherwise.
"Residential mortgage loan" means any loan primarily for personal, family, or household purposes that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling, as defined in section 103(w) of the Truth in Lending Act, Pub.L.90-321 (15 U.S.C. s.1602(w)), or residential real estate upon which is constructed or intended to be constructed a dwelling.
"Residential real estate" means any real property located in this State, upon which is constructed or intended to be constructed a dwelling as defined in section 103(w) of the Truth in Lending Act, Pub.L.90-321 (15 U.S.C. s.1602(w)).
"Secondary mortgage loan" means a loan made to an individual, association, joint venture, partnership, limited partnership association, limited liability company, trust, or any other group of individuals, however organized, except a corporation, which is secured in whole or in part by a lien upon any interest in real property, including but not limited to shares of stock in a cooperative corporation, created by a security agreement, including a mortgage, indenture, or any other similar instrument or document, which real property is subject to one or more prior mortgage liens and on which there is erected a structure containing a one, two, three, or four family dwelling, as defined in section 103(w) of the Truth in Lending Act, Pub.L.90-321 (15 U.S.C. s.1602(w)), a portion of which structure may be used for nonresidential purposes.
"Sponsor" means a business licensee that employs a qualified individual licensee, a mortgage loan originator, or an applicant for a transitional mortgage loan originator license.
"State" means any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands unless the context clearly indicates otherwise.
"Transitional mortgage loan originator license" or "transitional license" means a license, issued to an out-of-State mortgage loan originator or registered mortgage loan originator that provides temporary authority to engage in the business of mortgage loan origination in this State pending the completion by the transitionally licensed individual of the requirements for licensure as a New Jersey mortgage loan originator as set forth in section 7 of P.L.2009, c.53 (C.17:11C-57). A transitional mortgage loan originator license shall be valid for a term of no longer than 120 days.
"Unique identifier" means a number or other identifier for a mortgage loan originator or a qualified individual licensee as a residential mortgage lender or residential mortgage broker, assigned by protocols established by the Nationwide Mortgage Licensing System and Registry.
##### **§ 17:11C-54** Licensing requirements. {#sec-17-11c-54 omnilex-key=us-nj-statutes--title-17--17:11C-54}
4. Except as provided under section 5 of this act, beginning no later than July 31, 2010, or a later date approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.5107), the licensing requirements under this act shall be as follows:
a. For residential mortgage lenders and residential mortgage brokers, as business licensees:
(1) No person shall act as a residential mortgage lender or broker without first obtaining a license under this act, except that a person licensed as a residential mortgage lender may act as a broker, if proper disclosure is made. The department shall issue licenses which specify whether a business licensee is licensed as a residential mortgage lender or broker.
(2) No person shall be issued or hold a license as a residential mortgage lender or residential mortgage broker unless one officer, director, partner, owner or principal is a qualified individual licensee. The commissioner may, by regulation, require a licensed residential mortgage lender or broker to employ additional qualified individual licensees to properly supervise the business licensee in its branch offices. If a qualified individual licensee allows his license to lapse or for some other reason is no longer affiliated with the business licensee, the business licensee shall notify the commissioner within 10 days, and shall appoint another qualified individual licensee within 90 days or a longer period as permitted by the commissioner.
(3) No person licensed as a mortgage banker, correspondent mortgage banker, mortgage broker, or secondary lender under the provisions of the "New Jersey Licensed Lenders Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), prior to the effective date of its reform and re-titling as the "New Jersey Consumer Finance Licensing Act" pursuant to P.L.2009, c.53 (C.17:11C-51 et al.), shall continue to engage in any activities for which a license was previously issued, and henceforth act as a residential mortgage lender or residential mortgage broker without first obtaining a license under this act.
b. For qualified individual licensees:
(1) No individual shall act as a qualified individual licensee for a residential mortgage lender or residential mortgage broker without first obtaining a license under this act. A qualified individual licensee may act as a mortgage loan originator.
(2) No individual licensee for a mortgage banker, correspondent mortgage banker, mortgage broker, or secondary lender under the provisions of the "New Jersey Licensed Lenders Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), prior to the effective date of its reform and re-titling as the "New Jersey Consumer Finance Licensing Act" pursuant to P.L.2009, c.53 (C.17:11C-51 et al.), shall continue to engage in any activities for which a license was previously issued, and henceforth act as a qualified individual licensee without first obtaining a license under this act.
c. For mortgage loan originators:
(1) (a) No individual shall act as a mortgage loan originator without first obtaining a license or transitional license under this act.
(b) No individual, except as provided in paragraph (2) of this subsection, shall be issued or hold a license or transitional license as a mortgage loan originator unless employed as an originator by one, and not more than one, business licensee, and is subject to the direct supervision and control of that licensee, employed by an exempt company, or who is under a written agreement with and sponsored in the Nationwide Mortgage Licensing System by one, and not more than one, person exempt from licensing requirements and registered with the department under subsection a. of section 5 of P.L.2009, c.53 (C.17:11C-55), and is subject to the direct supervision and control of that exempt person.
(2) No individual shall act as a loan processor or underwriter who is an independent contractor or employed by an independent contractor without first obtaining a mortgage loan originator license under this act, except as provided in subsection d. of this section.
(3) No individual registered as a mortgage solicitor under the provisions of the "New Jersey Licensed Lenders Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), prior to the effective date of its reform and re-titling as the "New Jersey Consumer Finance Licensing Act" pursuant to P.L.2009, c.53 (C.17:11C-51 et al.), shall continue to engage in any activities for which a registration was previously issued, and henceforth act as a mortgage loan originator without first obtaining a license under this act.
d. For exempt companies:
(1) No person shall qualify for registration as an exempt company unless the person is in the business of mortgage loan origination solely by virtue of its performance of loan processing or underwriting functions. The commissioner shall have the authority to adopt rules in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) specifying additional criteria on the basis of which a person in the business of mortgage loan origination solely by virtue of its performance of loan processing or underwriting functions may qualify for registration as an exempt company.
(2) An exempt company shall register with the commissioner and with the Nationwide Mortgage Licensing System and Registry. An applicant for registration or for renewal of registration as an exempt company shall:
(a) Submit a completed application to the commissioner on the form, in the manner, and with the appropriate evidence in support of the application as may be prescribed by the commissioner;
(b) Pay to the commissioner at the time of application a nonrefundable application fee not to exceed $500 as established by the commissioner by regulation;
(c) Pay to the Nationwide Mortgage Licensing System and Registry any fees required by that system and registry, or any fees which, by arrangement of the commissioner, are payable to the Nationwide Mortgage Licensing System and Registry on behalf of the commissioner; and
(d) Obtain a blanket bond in an amount and form prescribed by the commissioner, but not less than $25,000. The bond shall be obtained from a surety company authorized by law to do business in this State. The exempt company shall procure the bond to cover its mortgage loan origination related activities. The bond shall run to the State for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of any person covered by the bond. No bond shall comply with the requirements of this subparagraph unless the bond contains a provision that it shall not be canceled for any cause unless notice of intention to cancel is filed in the department at least 30 days before the day upon which cancellation shall take effect.
(3) A registered exempt company shall:
(a) Respond in a timely manner to any request of the commissioner for the production of and access to books, records, accounts, documents or other information relative to its operations;
(b) Submit to the Nationwide Mortgage Licensing System and Registry a mortgage call report of conditions, in the form and manner, and with such information, at any time as may be required by the nationwide system and registry, and any other report to, or through, the nationwide system and registry pursuant to an arrangement for reporting and sharing information;
(c) Provide written notice to the commissioner within 10 days of the occurrence of any event that would cause the exempt company to no longer qualify for registration as such under the terms of this subsection d. and so notify in writing all licensed mortgage loan originators employed or retained by the exempt company; and
(d) Employ at least one individual who is licensed as a mortgage loan originator who shall not engage in the origination of mortgage loans under P.L.2018, c.108 and shall be assigned supervision and instruction duties with respect to individuals employed as loan processors or loan underwriters as defined in section 3 of P.L.2009, c.53 (C.17:11C-53).
e. The provisions of the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89) shall also apply to residential mortgage lenders, residential mortgage brokers, mortgage loan originators, and other persons that are located out-of-State, provided they are otherwise required to be licensed pursuant to the provisions of the act in the State.
##### **§ 17:11C-55** Inapplicability of act. {#sec-17-11c-55 omnilex-key=us-nj-statutes--title-17--17:11C-55}
5. The requirements of this act shall not apply to:
a. Depository institutions; but subsidiaries and service corporations of these institutions shall not be exempt. A depository institution may register with the department for the purpose of sponsoring individuals, licensed as mortgage loan originators subject to subparagraph (b) of paragraph (1) of subsection c. of section 4 of P.L.2009, c.53 (C.17:11C-54), provided that such registered entity obtains and maintains bond coverage for mortgage loan originators consistent with section 13 of P.L.2009, c.53 (C.17:11C-63). A depository institution registered with the department in accordance with this subsection a. shall otherwise remain exempt from the licensing requirements of P.L.2009, c.53 (C.17:11C-51 et seq.).
b. A registered mortgage loan originator that is registered under the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.).
c. A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a residential mortgage lender, residential mortgage broker, or mortgage loan originator.
d. A person licensed as a real estate broker or salesperson pursuant to R.S.45:15-1 et seq., and not engaged in the business of a residential mortgage lender or residential mortgage broker. Any person holding a license under this act as a residential mortgage lender or broker shall be exempt from the licensing and other requirements of R.S.45:15-1 et seq. in the performance of those functions authorized by this act.
e. Any employer, other than a residential mortgage lender, who provides residential mortgage loans to his employees as a benefit of employment which are at an interest rate which is not in excess of the usury rate in existence at the time the loan is made, as established in accordance with the law of this State, and on which the borrower has not agreed to pay, directly or indirectly, any charge, cost, expense or any fee whatsoever, other than that interest.
f. The State of New Jersey or a municipality, or any agency or instrumentality thereof, which, in accordance with a housing element that has previously received substantive certification from the Council on Affordable Housing, or a judgment of repose or other court approval, pursuant to the "Fair Housing Act," P.L.1985, c.222 (C.52:27D-301 et al.), or in fulfillment of a regional contribution agreement with a municipality that has received a certification, employs or proposes to employ municipally generated funds, funds obtained through any State or federal subsidy, or funds acquired by the municipality under a regional contribution agreement, to finance the provision of affordable housing by extending loans or advances, the repayment of which is secured by a lien, subordinate to any prior lien, upon the property that is to be rehabilitated.
g. Any individual who offers or negotiates terms of a residential mortgage loan:
(1) with or on behalf of an immediate family member; or
(2) secured by a dwelling that serves as the individual's residence.
h. Any person who, during a calendar year takes three or fewer residential mortgage loan applications or offers or negotiates the terms of three or fewer residential mortgage loans or makes three or fewer residential mortgage loans related to manufactured housing structures which are:
(1) titled by the New Jersey Motor Vehicle Commission;
(2) located in a mobile home park as defined in subsection e. of section 3 of P.L.1983, c.400 (C.54:4-1.4); and
(3) exempt from taxation as real property pursuant to subsection b. of section 4 of P.L.1983, c.400 (C.54:4-1.5).
i. A bona fide not for profit entity and any individuals directly employed by that entity, so long as the entity maintains its tax exempt status under Section 501(c)(3) of the Internal Revenue Code of 1986 and otherwise meets the definition of "bona fide not for profit entity" in section 3 of P.L.2009, c.53 (C.17:11C-53), as periodically determined by the department in accordance with rules established by the commissioner.
##### **§ 17:11C-56** Conditions for issuance of licenses for residential mortgage lenders, brokers. {#sec-17-11c-56 omnilex-key=us-nj-statutes--title-17--17:11C-56}
6. Beginning no later than July 31, 2010, or a later date approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.5107), the commissioner shall begin issuing licenses for business licensees as residential mortgage lenders or residential mortgage brokers under this act if the following conditions are met:
a. A completed application for a new license or for a renewal of a license, submitted to the commissioner on the form, in the manner, and with appropriate evidence in support of the application, as required by this act and as may be prescribed by the commissioner.
b. The submission to the commissioner of the name, address, fingerprints and written consent for a criminal history record background check to be performed on any officer, director, partner or owner of a controlling interest of the person seeking licensure. The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility for the person, based upon any findings related to an officer, director, partner or owner. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the commissioner in the event an officer, director, partner or owner of the person, who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed, whether the person is a prospective new licensee, or subsequently, a current license holder.
c. A finding by the commissioner that the financial responsibility, experience, character, and general fitness of the person seeking licensure demonstrates that as a business licensee, the person will operate honestly, fairly, and efficiently within the purposes of this act. The commissioner may require any officer, director, partner, owner, or principal of an entity seeking licensure as a business licensee to authorize the Nationwide Mortgage Licensing System and Registry to obtain a credit report on such individual and at their cost.
d. A demonstration of an affiliated qualified individual licensee for the applicant, as required by paragraph (2) of subsection a. of section 4 of this act.
e. A demonstration of coverage by a surety bond as required by section 13 of this act.
f. A demonstration of the tangible net worth requirements as required by section 14 of this act.
g. The payment of any required fees under this act, as established by the commissioner by regulation and payable to the commissioner or, by arrangement of the commissioner, to the Nationwide Mortgage Licensing System and Registry on behalf of the commissioner, or as set forth by the nationwide system and registry and payable to that nationwide system and registry.
h. A person whose application is deemed abandoned shall be required to submit a new application in order to obtain licensure as a business licensee. The commissioner may adopt rules addressing notices of abandonment and the subsequent submission of new applications.
##### **§ 17:11C-57** Issuance of licenses for mortgage loan originators, individual licensees, lenders, brokers. {#sec-17-11c-57 omnilex-key=us-nj-statutes--title-17--17:11C-57}
7. Beginning no later than July 31, 2010, or a later date approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.5107), the commissioner shall begin issuing licenses for individual licensees under this act, utilizing the Nationwide Mortgage Licensing System and Registry, or other entity designated by that nationwide system and registry, as required or permitted by the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008" and as otherwise deemed appropriate by the commissioner to carry out the provisions of this act, if the following conditions are met:
a. For mortgage loan originators and transitional mortgage loan originators:
(1) A completed application for a new license or for a renewal of a license, submitted to the commissioner on the form, in the manner, and with appropriate evidence in support of the application, as required by this act and as may be prescribed by the commissioner.
(2) A background check in connection with an application, based upon information provided to and received from the Division of State Police, and provided to and received from or through the Nationwide Mortgage Licensing System and Registry, which does not contain any disqualifying information as set forth in this paragraph. The background check shall include a State criminal history record background check based upon an exchange of fingerprint data with the State Bureau of Identification in the Division of State Police, for which the division shall promptly notify the commissioner if the subject of the original criminal history record background check is arrested for a crime or offense in this State after the date the background check was performed, and a check of both criminal and non-criminal information as requested from and distributed to the Federal Bureau of Investigation and any other governmental agency through the Nationwide Mortgage Licensing System and Registry as follows:
(a) fingerprints, for submission to the Federal Bureau of Investigation and any other governmental agency authorized to receive this information for a state, federal, and international criminal history record background check, to determine whether the individual has been convicted of, or pled guilty or nolo contendere to, a felony in a domestic court, which in this State includes any crime of the fourth degree or higher punishable by a term of imprisonment of more than one year, or in a foreign or military court:
(i) during the seven-year period preceding the filing of the application, except that a conviction under this sub-subparagraph which is pardoned or expunged shall not be considered disqualifying information; or
(ii) at any time preceding the filing of the application, if the felony involved an act of fraud, dishonesty, a breach of trust, or money laundering, except that a conviction under this sub-subparagraph which is pardoned or expunged shall not be considered disqualifying information; and
(b) personal history and experience, collected in a form prescribed by the Nationwide Mortgage Licensing System and Registry, and with the permission of the applicant, in order for that nationwide system and registry and the commissioner to obtain:
(i) an independent credit report from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act, Pub.L.91-508 (15 U.S.C.s.1681a(p)), for use in making a determination of character and fitness pursuant to paragraph (3) of this subsection; and
(ii) information related to any administrative, civil or criminal findings by any governmental jurisdiction, to determine whether the individual had a mortgage loan originator license revoked in any governmental jurisdiction, except that a subsequent, formal vacation of a revocation shall not be considered disqualifying information.
(3) A determination of character and fitness, based upon the information related to personal history and experience obtained pursuant to subparagraph (b) of paragraph (2) of this subsection and other available sources, whereby the applicant has demonstrated financial responsibility, character, and general fitness as to command the confidence of the community and to warrant a determination that as a mortgage loan originator the applicant will operate honestly, fairly, and efficiently within the purposes of this act. For the purposes of this paragraph, a determination by the National Mortgage Licensing System and Registry that the applicant cheated or attempted to cheat on an examination required for licensure or for continued licensure under P.L.2009, c.53 (C.17:11C-51 et seq.) shall be evidence that the applicant lacks the requisite character and fitness for licensure. For purposes of this paragraph, an applicant has demonstrated not to be financially responsible if the applicant has shown a disregard in the management of the applicant's own financial condition, which may include, but is not limited to:
(a) current outstanding judgments, except judgments solely as a result of medical expenses;
(b) current outstanding tax liens or other government liens and filings;
(c) foreclosures during the three-year period preceding the filing of the application; or
(d) a pattern of seriously delinquent accounts during the three-year period preceding the filing of the application.
(4) A demonstration of employment by one, and not more than one, business licensee as required by paragraph (1) of subsection c. of section 4 of this act.
(5) The completion of any pre-licensing education requirements as set forth in section 9 of this act.
(6) The successful passage of a qualified written test based upon the testing requirements as set forth in section 10 of this act.
(7) The completion of any continuing education requirements, if applicable, as set forth in section 11 of this act.
(8) A registration with the Nationwide Mortgage Licensing System and Registry as required by section 12 of this act.
(9) A demonstration of coverage by a surety bond as required by section 13 of this act.
(10) The payment of any required fees under this act, as established by the commissioner by regulation and payable to the commissioner or, by arrangement of the commissioner, to the Nationwide Mortgage Licensing System and Registry on behalf of the commissioner, or as set forth by the nationwide system and registry and payable to that nationwide system and registry.
b. For qualified individual licensees:
(1) A completed application for a new license or for a renewal of a license as a qualified licensed individual for a residential mortgage lender or broker, submitted to the commissioner on the form, in the manner, and with appropriate evidence in support of the application, whereby the applicant follows the licensing procedure and meets the licensing criteria applicable to a mortgage loan originator, as set forth in subsection a. of this section, except that the applicant shall not request or be issued a separate license as a mortgage loan originator under that subsection.
(2) A determination with respect to any stricter or additional licensing requirements that the commissioner may, by regulation, establish.
(3) The payment of any required fees under this act, as established by the commissioner by regulation and payable to the commissioner or, by arrangement of the commissioner, to the Nationwide Mortgage Licensing System and Registry on behalf of the commissioner, or as set forth by the nationwide system and registry and payable to that nationwide system and registry.
c. For individuals, the following provisions shall also apply:
(1) An applicant for a mortgage loan originator license who has met all the requirements for licensure except the demonstration of employment referenced in paragraph (4) of subsection a. of this section shall be considered to be in approved inactive status and designated as such in the Nationwide Mortgage Licensing System and Registry and may remain in that status for as long as the applicant renews the approved inactive status annually and meets the continuing education requirements as required by section 11 of P.L.2009, c.53 (C.17:11C-61).
(2) An applicant for licensure as an individual licensee who has unresolved credit issues but who demonstrates to the satisfaction of the commissioner a good faith effort to achieve the level of financial responsibility required by paragraph (3) of subsection a. of section 7 of P.L.2009, c.53 (C.17:11C-57) may be deemed in approved conditional status and be designated as such in the Nationwide Mortgage Licensing System and Registry. The applicant may remain in approved conditional status so long as the applicant continues to demonstrate substantial progress toward the achievement of financial responsibility, renews the applicant's mortgage loan originator license or qualified individual license annually, and meets the continuing education requirements established by section 11 of P.L.2009, c.53 (C.17:11C-61). Upon demonstration to the satisfaction of the commissioner that the applicant has achieved financial responsibility, and predicated on the applicant continuing to fulfill all other applicable requirements for such status, the license status of the individual shall be revised to approved. While the applicant's license is in approved conditional status, an individual may engage in activity as a mortgage loan originator or a qualified individual licensee in accordance with the provisions of P.L.2009, c.53 (C.17:11C-51 et seq.) and all applicable rules.
(3) For applicants as individual licensees, an offense that was the subject of an order granting the individual admission to the New Jersey Pre-trial Intervention Program pursuant to the provisions of N.J.S. 2C:43-12 through 22, and such offense having been dismissed with prejudice in accordance with subsection d. of N.J.S. 2C:43-13, or the applicant having been admitted to a functionally equivalent program of another state or of the United Stated whereby an offense was dismissed or a felony conviction was avoided or eliminated from the record upon the applicant having successfully completed the program as established by the submission of confirming documentation, shall not be considered disqualifying information for purposes of subsection a. of this section.
(4) The commissioner may deem abandoned an application for licensure as a mortgage loan originator, transitional mortgage loan originator, or a qualified individual licensee if the application fails to meet all of the requirements of a complete application within 90 days of the date on which the application was initially submitted. A person whose application is deemed abandoned shall be required to submit a new application in order to pursue licensure as a mortgage loan originator, transitional mortgage loan originator, or a qualified individual licensee. The commissioner may adopt rules addressing notices of abandonment and the subsequent submission of new applications.
##### **§ 17:11C-58** Fees for license applications. {#sec-17-11c-58 omnilex-key=us-nj-statutes--title-17--17:11C-58}
8. a. An applicant for a new license or for a renewal of a license to be a residential mortgage lender or residential mortgage broker, as a business licensee:
(1) Shall pay to the commissioner at the time of the application a nonrefundable application fee, as established by the commissioner through regulation, not to exceed $2,800. The nonrefundable application fee is required for each residential mortgage lender or broker license issued, including for each branch office license of a business licensee.
(2) Shall additionally pay to the Nationwide Mortgage Licensing System and Registry any required fees as set forth by that nationwide system and registry, or any commissioner's fees, which by arrangement of the commissioner, are payable to the nationwide system and registry on behalf of the commissioner.
b. An applicant for a new license or for a renewal of a license as a qualified individual licensee:
(1) Shall pay to the commissioner at the time of the application a nonrefundable application fee, as established by the commissioner through regulation, not to exceed $500.
(2) Shall additionally pay to the Nationwide Mortgage Licensing System and Registry any required fees as set forth by that nationwide system and registry, or any commissioner's fees, which by arrangement of the commissioner, are payable to the nationwide system and registry on behalf of the commissioner.
c. An applicant for a new license or for a renewal of a license to be a mortgage loan originator or transitional mortgage loan originator:
(1) Shall pay to the commissioner at the time of the application a nonrefundable application fee, as established by the commissioner through regulation, not to exceed $500. A mortgage loan originator, who changes the employment affiliation on his license to a different business licensee, shall be required to submit any documentation required by regulation and comply with all requirements applicable to such changes of employment as prescribed by rule.
(2) Shall additionally pay to the Nationwide Mortgage Licensing System and Registry any required fees as set forth by that nationwide system and registry, or any commissioner's fees, which by arrangement of the commissioner, are payable to the nationwide system and registry on behalf of the commissioner.
##### **§ 17:11C-59** Required educational courses. {#sec-17-11c-59 omnilex-key=us-nj-statutes--title-17--17:11C-59}
9. a. An applicant for a new license as a mortgage loan originator or a qualified individual licensee shall complete, as a pre-licensing requirement, at least 20 hours of education from an educational course provided by an educational course provider, reviewed and approved by the Nationwide Mortgage Licensing System and Registry, based upon reasonable standards established by that nationwide system and registry.
(1) Pursuant to the reasonable standards established by the nationwide system and registry, an approved educational course provider may include the employer or affiliated business licensee of the applicant, or an entity which is affiliated with the applicant by an agency contract, or any subsidiary or affiliate of the applicant's employer, affiliated business licensee, or affiliated entity.
(2) Pursuant to the reasonable standards established by the nationwide system and registry, an approved educational course may be offered at any location and by any means, including live classroom instruction, prepared group or individual coursework, or the Internet.
b. The approved educational course shall include at a minimum, but not be limited to:
(1) 3 hours of instruction on federal statutes and regulations;
(2) 3 hours of instruction on ethics, including instruction on fraud, consumer protection, and fair licensing issues; and
(3) 2 hours of training related to lending standards for the nontraditional mortgage product marketplace.
c. Any pre-licensing educational requirements of another state, reviewed and approved by the Nationwide Mortgage Licensing System and Registry, and completed by an applicant for licensure in that state pursuant to the provisions of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.), shall be accepted by the commissioner from the applicant as credit towards completion of the reviewed and approved pre-licensing educational requirements of this section for licensure in this State.
##### **§ 17:11C-60** Written test required for licensure. {#sec-17-11c-60 omnilex-key=us-nj-statutes--title-17--17:11C-60}
10. a. (1) An applicant for a new license as a mortgage loan originator or a qualified individual licensee shall pass, as a pre-licensing requirement, a qualified written test, developed by the Nationwide Mortgage Licensing System and Registry, and administered by a test provider approved by the nationwide system and registry, based upon reasonable standards established by that nationwide system and registry. Pursuant to the reasonable standards established by the nationwide system and registry, a qualified written test may be administered at any location, including the location of the employer or affiliated business licensee of the applicant, or any subsidiary or affiliate of the applicant's employer or affiliated business licensee, or any entity with which the applicant holds an exclusive arrangement to engage in the business of a residential mortgage lender, residential mortgage broker, or mortgage loan originator.
(2) In addition to an applicant for a new license, an applicant for a license reinstatement after failing to maintain a valid license for a period of five years or longer shall be required to pass a qualified written test as set forth in this section as a requirement for the license reinstatement.
b. The qualified written test shall adequately measure the applicant's knowledge and comprehension in appropriate subject areas, which shall include at a minimum, but not be limited to:
(1) federal and State statutes and regulations pertaining to mortgage origination;
(2) other federal and State statutes and regulations, including those pertaining to fraud, consumer protection, fair lending issues, and the nontraditional mortgage marketplace; and
(3) ethics.
c. An applicant shall only be considered to have passed the qualified written test if the applicant achieves a test score of not less than 75 percent correct answers to the test questions.
d. An applicant may take the qualified written test up to three consecutive times in order to successfully pass and qualify for licensure. The applicant shall not take a subsequent, consecutive test until at least 30 calendar days next following the applicant's preceding test date. If the applicant fails to pass the qualified written test after three consecutive attempts, the applicant shall not be permitted to retake the test for a period of at least six months from the applicant's last preceding test date.
e. A determination by the National Mortgage Licensing System and Registry that an applicant has engaged in or attempted to engage in cheating while taking a qualified written test shall constitute evidence that the applicant lacks the character and fitness necessary to qualify for licensure pursuant to section 7 of P.L.2009, c.53 (C.17:11C-57) and may be grounds for action on an existing license pursuant to section 20 of P.L.2009, c.53 (C.17:11C-70).
##### **§ 17:11C-61** Educational requirements for license renewal. {#sec-17-11c-61 omnilex-key=us-nj-statutes--title-17--17:11C-61}
11. a. An applicant for a renewal of a license as a mortgage loan originator or a qualified individual licensee, shall complete, as a requirement for the license renewal, at least 12 hours of education from one or more continuing educational courses provided by a continuing educational course provider, reviewed and approved by the Nationwide Mortgage Licensing System and Registry, based upon reasonable standards established by that nationwide system and registry.
(1) Pursuant to the reasonable standards established by the nationwide system and registry, an approved continuing educational course provider may include the employer or affiliated business licensee of the individual licensee, or an entity which is affiliated with the individual licensee by an agency contract, or any subsidiary or affiliate of the individual licensee's employer, affiliated business licensee, or affiliated entity.
(2) Pursuant to the reasonable standards established by the nationwide system and registry, an approved continuing educational course may be offered at any location and by any means, including live classroom instruction, prepared group or individual coursework, or the Internet.
b. The approved continuing educational course shall include at a minimum, but not be limited to:
(1) 3 hours of instruction on federal statutes and regulations;
(2) 2 hours of instruction on ethics, including instruction on fraud, consumer protection, and fair lending issues;
(3) 2 hours of training related to lending standards for the nontraditional mortgage product marketplace; and
(4) 2 hours of instruction related to New Jersey laws and regulations on residential mortgage lending.
c. (1) Except as set forth by the commissioner in regulations consistent with this act and the provisions of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.), a licensed mortgage loan originator, or a licensed residential mortgage lender or residential mortgage broker as a qualified individual licensee, may only receive credit for an approved continuing educational course:
(a) in the calendar year in which the licensee takes the course; and
(b) that is not the same approved course already taken in that calendar year or the immediately preceding calendar year.
(2) A licensed mortgage loan originator or qualified individual licensee, who is an approved instructor of an approved continuing educational course, may receive credit towards the individual licensee's own continuing educational requirements set forth in this section at the rate of two hours of credit for every one hour of the approved continuing educational course taught.
(3) If a licensed mortgage loan originator or qualified individual licensee subsequently becomes unlicensed, the individual licensee shall complete the continuing educational requirements set forth in this section for the last calendar year in which the individual was licensed as a requirement for a license reinstatement.
d. Any continuing educational requirements of another state, reviewed and approved by the Nationwide Mortgage Licensing System and Registry, and completed by an applicant for a license renewal in that state pursuant to the provisions of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.), shall be accepted by the commissioner from an applicant as credit towards completion of the reviewed and approved continuing educational requirements of this section for a license renewal in this State.
e. A determination by the National Mortgage Licensing System and Registry that an applicant has engaged in or attempted to engage in cheating while taking a continuing education course shall constitute evidence that the applicant lacks the character and fitness necessary for licensure pursuant to section 7 of P.L.2009, c.53 (C.17:11C-57) and may be grounds for action on an existing license pursuant to section 20 of P.L.2009, c.53 (C.17:11C-70).
##### **§ 17:11C-62** Registration, assignment of unique identifier. {#sec-17-11c-62 omnilex-key=us-nj-statutes--title-17--17:11C-62}
12. a. An applicant for an initial license or for a renewal of a license as a mortgage loan originator, transitional mortgage loan originator, or a qualified individual licensee shall, as a licensing requirement, be registered and assigned a unique identifier through the Nationwide Mortgage Licensing System and Registry.
b. (1) In order to ensure compliance by an applicant with this registration requirement, the commissioner shall utilize, as required or permitted by the "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.) and as otherwise deemed appropriate by the commissioner, the Nationwide Mortgage Licensing System and Registry.
(2) The commissioner is authorized, through regulation, to coordinate the registration of an applicant through the nationwide system and registry with the State licensing of the applicant under this act, on any matters deemed necessary by the commissioner for participation in that nationwide system and registry, including but not limited to:
(a) background checks, including a criminal history record background check, a check of administrative and civil records, and a credit history check as set forth in section 7 of this act, and concerning any other information deemed necessary by the nationwide system and registry;
(b) setting or resetting of license renewal dates, and requirements for amending or surrendering a license;
(c) reporting requirements as set forth pursuant to section 35 of this act; and
(d) payment of any required fees, as established by the commissioner and payable to the commissioner or to the nationwide system and registry on behalf of the commissioner, and as set forth by the nationwide system and registry and payable to that nationwide system and registry.
(3) The commissioner shall, in order to participate in the nationwide system and registry, regularly report violations of this act by an applicant or licensee, as well as information concerning enforcement actions on those violations, along with any other relevant information, to the nationwide system and registry, in a manner and frequency established by that nationwide system and registry.
(4) The commissioner shall, in order to participate in the nationwide system and registry, establish by regulation a process by which an applicant or current licensee may request access to the applicant's or licensee's information or material provided to, received from, or collected by the nationwide system and registry, and a process by which that applicant or licensee may correct, amend or delete information or material disputed as incorrect or incomplete.
(5) Except as provided under section 1512 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.5111), any requirement under federal or State law, including P.L.1963, c.73 (C.47:1A-1 et seq.), regarding the privacy or confidentiality of any information or material provided to, received from, or collected by the nationwide system and registry, and any privilege arising under federal or State law, including any rules of court, with respect to the information or material, shall continue to apply after the information or material has been provided to, received from, or collected by the nationwide system and registry. The privacy, confidentiality, or privilege shall also continue to apply with respect to the sharing of the information or material, pursuant to procedures set forth by the nationwide system and registry, with any federal banking agency or other federal agency with mortgage industry oversight authority, or any state agency with mortgage industry oversight authority. This paragraph shall not apply to any information or material relating to the employment history of, and publicly adjudicated disciplinary or enforcement actions against, an applicant or licensee that is included in the nationwide system and registry for access by the public, based upon reasonable standards established by the nationwide system and registry.
(a) In order to ensure the application of privacy, confidentiality, and privilege protections to information and material as set forth in this paragraph, the commissioner may enter into any necessary arrangement with the nationwide system and registry, other federal or state agency, the Conference of State Bank Supervisors or its successor organization, or other organization representing a federal or state agency, regarding information and material the commissioner shares, and information and materials shared with the commissioner.
(b) The information and material subject to privacy, confidentiality, or privilege protections as set forth in this paragraph, notwithstanding any provisions of P.L.1963, c.73 (C.47:1A-1 et seq.) or any other State law concerning open records to the contrary, shall not be subject to:
(i) disclosure under any federal or State law governing the disclosure to the public of information or material held by an officer or agency of the federal government or any state; or
(ii) subpoena or discovery, or admission into evidence, in any private civil action or administrative process, except with respect to any privacy, confidentiality, or privilege held by the nationwide system and registry connected to an applicant's or licensee's information or material that the applicant or licensee gives permission to waive, in whole or in part.
##### **§ 17:11C-63** Business licensee required to obtain blanket bond. {#sec-17-11c-63 omnilex-key=us-nj-statutes--title-17--17:11C-63}
13. A business licensee, prior to doing business as a residential mortgage lender or residential mortgage broker, shall obtain a blanket bond in an amount and form prescribed by regulations of the commissioner, but not less than $25,000. The bond shall be obtained from a surety company authorized by law to do business in this State. The business licensee shall procure the blanket bond to cover its qualified individual licensees, and all mortgage loan originators, other employees, and agents in an amount as prescribed by regulation of the commissioner. The bond shall run to the State for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of the business licensee, or its qualifying individual licensees, mortgage loan originators, other employees, or agents. No bond shall comply with the requirements of this section unless the bond contains a provision that it shall not be canceled for any cause unless notice of intention to cancel is filed in the department at least 30 days before the day upon which cancellation shall take effect.
##### **§ 17:11C-64** Minimum net worth required for applicant for business license. {#sec-17-11c-64 omnilex-key=us-nj-statutes--title-17--17:11C-64}
14. a. (1) Each applicant for a business license as a residential mortgage lender shall demonstrate that it has tangible net worth of at least $250,000, except that an applicant for a business license as a correspondent mortgage lender shall demonstrate that it has a tangible net worth of at least $150,000. Each applicant for a business license as a residential mortgage broker shall demonstrate that it has tangible net worth of at least $50,000.
(2) Each licensed residential mortgage lender that is a business licensee shall maintain at all times tangible net worth of at least $250,000, except that a correspondent mortgage lender that is a business licensee shall maintain at all times tangible net worth of at least $150,000. Each licensed residential mortgage broker that is a business licensee shall maintain at all times tangible net worth of at least $50,000.
(3) The commissioner may by regulation:
(a) define the term "tangible net worth";
(b) establish standards for determining compliance with the tangible net worth requirements of this section; and
(c) determine any remedial action, as authorized pursuant to section 20 of this act, including suspension of a license, for failure to comply with these tangible net worth requirements.
b. The commissioner may, by regulation, require that a business licensee demonstrate to the satisfaction of the commissioner that it has adequate means to fund loans through lines of credit, or otherwise.
##### **§ 17:11C-65** Maintenance of branch offices; manager. {#sec-17-11c-65 omnilex-key=us-nj-statutes--title-17--17:11C-65}
15. a. A residential mortgage lender or residential mortgage broker that is a business licensee may maintain a branch office or offices. The business licensee shall obtain a license for each branch office in this State and each branch office outside this State from which the licensee has direct contact with New Jersey consumers regarding origination or brokering.
b. The commissioner shall issue a branch office license for a residential mortgage lender or broker if:
(1) The business licensee has submitted a completed branch office application form, which includes any information required by the commissioner concerning the branch office, and an application fee pursuant to section 8 of this act;
(2) The application for the branch office demonstrates that the office is in a suitable location; and
(3) The application contains a certification that the office is covered by the business licensee's surety bond, required of that licensee pursuant to section 13 of this act.
c. Each branch office shall be under the supervision of a branch manager. A branch manager shall supervise only one branch office at any given time except as may be permitted by the commissioner in accordance with applicable rules. In order to act in the capacity as a branch manager, an individual shall either possess a mortgage loan originator license or, if unlicensed, the qualified individual licensee of the business licensee shall certify that when acting in the capacity of a branch manager the unlicensed individual shall not engage in any activity that would require licensure as a mortgage loan originator.
##### **§ 17:11C-66** Construction of act relative to maintenance of office in-State. {#sec-17-11c-66 omnilex-key=us-nj-statutes--title-17--17:11C-66}
16. a. Nothing in this act shall be construed to require a business licensee that is licensed as a residential mortgage lender or residential mortgage broker to maintain an office in this State so long as it is qualified to do business here and has a registered agent for service of process.
b. Whenever the business licensee changes the address of its principal office or a branch office serving New Jersey consumers, it shall file, as part of its notice of address change required pursuant to paragraph (5) of subsection a. of section 17 of this act, any documents required of it by regulation.
##### **§ 17:11C-67** Regulations relative to license. {#sec-17-11c-67 omnilex-key=us-nj-statutes--title-17--17:11C-67}
17. a. (1) The license for a residential mortgage lender or residential mortgage broker, and the license of a qualified individual licensee, shall state the name of the business licensee and the licensee's place or places of business, as applicable, and shall contain any other information as the commissioner may require pursuant to regulation. A license shall not be issued in a name containing any words including "insured," "bonded," "guaranteed," "secured" and the like. Notwithstanding the provisions of section 18 of P.L.1948, c.67 (C.17:9A-18) or any other law to the contrary, a licensed residential mortgage lender or broker may use the terms "mortgage lender" or "mortgage broker," respectively, as part of the licensee's name; a licensed residential mortgage lender may also use the term "mortgage banker."
(2) The license of the business licensee shall be posted conspicuously in the place or places of business of that licensee, and the license of any qualified individual licensee shall be maintained by that business licensee and available for public inspection at the business licensee's place or places of business.
(3) A licensee or any other person shall not photocopy or otherwise reproduce the license except for legitimate business purposes or as required or permitted by the commissioner by regulation.
(4) Licenses issued to a business licensee pursuant to this act shall not be transferable or assignable, other than as provided by section 19 of this act.
(5) No business licensee shall change its name or the address of the business licensee's place or places of business without notice to the commissioner in accordance with regulations as prescribed by the commissioner.
b. (1) The license for a mortgage loan originator shall state the name of the originator's licensed or registered employer and shall contain such other information as the commissioner deems necessary.
(2) The license shall be maintained by the licensee and available for public inspection at the licensee's place or places of business.
(3) A licensee or any other person shall not photocopy or otherwise reproduce the license except for legitimate business purposes or as required or permitted by the commissioner by regulation.
(4) No licensee shall change the name or address of the licensee's place or places of business without notice to the commissioner, in accordance with regulations as prescribed by the commissioner.
##### **§ 17:11C-68** Expiration, continuance, reinstatement, surrender of license. {#sec-17-11c-68 omnilex-key=us-nj-statutes--title-17--17:11C-68}
18. a. Each residential mortgage lender, residential mortgage broker, and mortgage loan originator license issued pursuant to this act shall expire in accordance with the following schedule:
(1) for any license issued on or before July 31, 2010, or a later date approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.5107), the license shall expire on December 31, 2010; and
(2) for any license issued on or after January 1, 2011, the license shall expire annually on December 31 of the same year of issue.
However, the commissioner may modify this schedule pursuant to regulation or order, based upon any later dates approved by the Secretary of the United States Department of Housing and Urban Development pursuant to the provisions of section 1508 of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Pub.L.110-289 (12 U.S.C. s.1507), providing a temporary deadline extension with respect to complying with the licensing requirements for states established pursuant to the provisions of the federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," title V of Pub.L.110-289 (12 U.S.C. s.5101 et seq.).
b. (1) Consistent with the provisions of subsection a. of this section, the license of any person failing to satisfy the standards for license renewal set forth in sections 6 through 15 of this act shall expire. However, the commissioner may adopt regulations concerning procedures for a person with an expired license to obtain a reinstatement of that license, which in the case of a formerly licensed individual shall be consistent with any expired license reinstatement standards established by the Nationwide Mortgage Licensing System and Registry.
(2) The commissioner may by regulation provide for the license of a residential mortgage lender or residential mortgage broker, if a qualified individual licensee, to continue in existence in an inactive status for a specified period of time.
c. A licensee may surrender any license, consistent with paragraph (2) of subsection b. of section 12 of this act concerning the coordination of license surrender with the Nationwide Mortgage Licensing System and Registry, by delivering to the commissioner written notice that the license is surrendered, along with the license, but the surrender shall not affect the licensee's civil or criminal liability for any act committed prior to the surrender.
##### **§ 17:11C-69** Approval for sale, transfer of controlling interest. {#sec-17-11c-69 omnilex-key=us-nj-statutes--title-17--17:11C-69}
19. Any sale or transfer of a controlling interest in a residential mortgage lender or residential mortgage broker applicant's or licensee's business shall be approved by the commissioner prior to the transfer or sale, after the applicant or business licensee has provided an application which contains a written notice of the proposed sale or transfer to the commissioner. The application shall list each officer, director, partner or owner to receive a controlling interest as a result of the transfer or sale, and each shall be subject to a criminal history record background check as set forth in subsection b. of section 6 of this act as a condition for the commissioner's approval of the transfer or sale. The commissioner shall approve the transfer or sale unless the commissioner determines, following an opportunity for a hearing, that sufficient grounds exist to deny, revoke or suspend the residential mortgage lender's or broker's license. The sale or transfer shall be deemed approved if the commissioner does not deny a completed application within 90 days after its receipt.
##### **§ 17:11C-70** Authority of commissioner relative to issuing licenses. {#sec-17-11c-70 omnilex-key=us-nj-statutes--title-17--17:11C-70}
20. a. The commissioner's authority with respect to issuing licenses shall include the following:
(1) The commissioner may access, receive and use any information or material required of an applicant or licensee pursuant to sections 6 through 15 of this act, or any other information or material deemed relevant, to determine whether to issue or renew a license, or revoke, suspend, or refuse to renew a license.
(2) The commissioner may refuse to issue a license if an applicant fails to meet the requirements for licensure set forth in sections 6 through 15 of P.L.2009, c.53 (C.17:11C-56 through 17:11C-65), as applicable.
(3) The commissioner may revoke, suspend, or refuse to renew, a residential mortgage lender or residential mortgage broker license, including the license of a qualified individual licensee or a branch office license, or a mortgage loan originator license, or transitional mortgage loan originator license, or impose a penalty pursuant to this act, if the commissioner finds, after notice and an opportunity for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, that any person or holder of the license has:
(a) Violated any of the provisions of this act or any order, rule or regulation made or issued pursuant to this act;
(b) Failed at any time to meet the requirements for licensure set forth in sections 6 through 15 of this act, as applicable, or withheld information or made a material misstatement in the application for the license;
(c) Been convicted of an offense involving breach of trust, moral turpitude or fraudulent or dishonest dealing, including but not limited to the disqualifying criminal activities stated in paragraph (2) of subsection a. of section 7 of this act, if applicable, or had a final judgment entered against the person in a civil or administrative action upon grounds of fraud, misrepresentation, deceit, or failure to maintain books, accounts, records and other documents as required by section 21 of this act;
(d) Failed to comply with any reporting requirements set forth pursuant to section 35 of this act;
(e) Become insolvent;
(f) Demonstrated unworthiness, incompetence, bad faith or dishonesty in the transaction of business as a licensee; or
(g) Engaged in any other conduct which would be deemed by the commissioner to be the cause for denial, revocation, suspension, or refusal of the license or license renewal.
(4) A license of a business licensee may be suspended, revoked, or not renewed if any officer, director, partner, or owner of the licensee has committed any act which would be cause for suspending, revoking or not renewing a license if issued to that person as an individual.
(5) If the license issued to a residential mortgage lender or residential mortgage broker as a qualified individual licensee is revoked or suspended, the affiliated license issued to the business licensee shall also be revoked or suspended by the commissioner, unless within the time fixed by the commissioner, in the case of a partnership, the connection therewith of the offending qualified individual licensee whose license has been revoked or suspended shall be severed and that individual's interest in the partnership and share in its activities brought to an end, or in the case of an association, corporation, or other legal entity, the offending qualified individual licensee whose license has been revoked or suspended shall be discharged and shall have no further participation in the legal entity's activities. In the case of an offending qualified individual licensee who is an officer or director of the corporation or other legal entity, that individual shall be required to fully divest himself of all stock, bonds or other corporate holdings.
b. The commissioner's authority with respect to oversight of licensees, and enforcement of the activities regulated under this act, shall include the following:
(1) The commissioner may access and examine books, accounts, records and other documents maintained by a licensee pursuant to section 21 of this act.
(2) The commissioner may conduct investigations or examinations, which may include the subpoena of witnesses and documents, pursuant to section 34 of this act.
(3) Whenever it appears to the commissioner that any person has engaged, is engaged, or is about to engage in any practice or transaction prohibited by this act, the commissioner may issue, in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), a cease and desist order if the commissioner determines it necessary. In addition to any other remedy available, the commissioner may also bring a summary action in a court of competent jurisdiction against a person, and any other person concerned or in any way participating in or about to participate in a practice or transaction in violation of this act, to enjoin the person from continuing the practice or transaction engaged in, or from engaging in the practice or transaction, or doing any act in furtherance towards engaging in the practice or transaction.
(4) The commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of this act. Each violation of this act, including any order, rule or regulation made or issued pursuant to this act, shall constitute a separate offense. Additionally, each violation of this act which constitutes a knowing violation shall be considered a crime of the third degree.
(5) The commissioner may order that any person who has been found to have knowingly violated any provision of this act, or of the rules and regulations issued pursuant hereto, and has thereby caused financial harm to consumers, be barred from acting as a residential mortgage lender, residential mortgage broker, or mortgage loan originator, or a stockholder, an officer, director, partner or other owner, or an employee of a licensee, or acting in any other capacity pursuant to this act. Violations of this final order shall be considered a crime of the third degree.
(6) The commissioner may order a person found to be in violation of this act to make restitution to any person aggrieved by the violation.
(7) The commissioner may order any other remedial action with respect to a violation of this act as the commissioner deems necessary.
c. The commissioner, in order to fulfill the activities encompassed by the commissioner's authority set forth in this section, may:
(1) Retain attorneys, accountants, or other professionals or specialists as examiners, auditors, or investigators to conduct, or assist with, any licensing activity, examination, or investigation;
(2) Utilize any public or privately available analytical system, method, or software;
(3) Utilize any examination or investigative report prepared by any federal banking agency or other federal agency, or any state agency including another department, division, bureau, or office of this State; and
(4) Enter into any necessary arrangement with a federal or state agency, the Conference of State Bank Supervisors or its successor organization, or other organization representing any federal or state agency, in order to reduce the commissioner's regulatory burden by sharing resources, including sharing information and materials through the Nationwide Mortgage Licensing System and Registry in accordance with subsection b. of section 12 of this act, and following standardized or uniform methods or procedures.
##### **§ 17:11C-71** Identification of place of business, storing of books, accounts, records; accessibility. {#sec-17-11c-71 omnilex-key=us-nj-statutes--title-17--17:11C-71}
21. a. Every residential mortgage lender, residential mortgage broker, and mortgage loan originator shall identify the place of business where those books, accounts, records and other documents of the business conducted under the license, as may be prescribed by the commissioner, are maintained, to enable the commissioner to determine whether the business of the licensee is being conducted in accordance with the provisions of this act and the orders, rules and regulations issued hereunder.
b. Upon appropriate notice to the commissioner and if a change in location of records is made, the commissioner shall be notified in writing of the change within five business days of the change.
c. (1) Every licensee shall preserve all books, accounts, records and other documents pertaining to its business, and keep them available for examination by the commissioner, for at least three years from the date of original entry, or a longer time as prescribed by the commissioner by regulation.
(2) During any examination by the commissioner:
(a) The commissioner may control access to any books, accounts, records or other documents by either taking possession of the documents, or selecting a designee to be exclusively in charge of the documents in the location where the documents are maintained. During this period of controlled access, no person, other than the licensee as provided in subparagraph (b) of this paragraph, shall, or attempt to, alter, remove, abstract, mutilate, destroy, or secrete any of the documents, except with the written consent of the commissioner or pursuant to court order from a court of competent jurisdiction.
(b) Unless the commissioner has reasonable grounds to believe any books, accounts, records or other documents have been, or are at risk of being, knowingly withheld, altered, removed, abstracted, mutilated, destroyed, or secreted for the purpose of concealing a violation of this act, the documents shall be accessible as necessary for the licensee to continue to conduct business under the license.
d. A licensee may, upon approval of the commissioner, keep records at a location, identified by the licensee, outside this State, provided that the licensee shall make the records available in this State upon request of the commissioner, or, at its option have the records examined at its out-of-State location, for which it shall pay the reasonable expenses of the commissioner for the examination.
##### **§ 17:11C-72** Provision of unique identifier required. {#sec-17-11c-72 omnilex-key=us-nj-statutes--title-17--17:11C-72}
22. a. Every residential mortgage lender or residential mortgage broker as qualified individual licensees, and every mortgage loan originator licensee shall provide, in a conspicuous manner, the unique identifier assigned to the licensee through the Nationwide Mortgage Licensing System and Registry, on all residential mortgage loan application forms, solicitations, and advertisements, whether in print, broadcast, or electronically transmitted, and on any other document established by regulation of the commissioner. Every residential mortgage lender or broker as a business licensee shall ensure the provision of the unique identifier by its qualified individual licensees and mortgage loan originators as required by this section.
b. No residential mortgage lender, residential mortgage broker, or mortgage loan originator, whether a business or individual licensee, shall transact business provided for under this act using any name other than that named in the licensee's license, and if applicable, using any unique identifier other than the individual licensee's unique identifier assigned through the Nationwide Mortgage Licensing System.
##### **§ 17:11C-73** Insurance requirements for borrowers. {#sec-17-11c-73 omnilex-key=us-nj-statutes--title-17--17:11C-73}
23. a. A borrower shall not be required to purchase credit life or accident and health insurance or credit involuntary unemployment insurance in connection with any mortgage loan. If the borrower or borrowers consent thereto in writing, a residential mortgage lender or residential mortgage broker may obtain or provide:
(1) Insurance on the life and on the health or disability, or both, of one borrower, and on the lives, health or disability of two borrowers pursuant to the provisions of N.J.S.17B:29-1 et seq.; and
(2) Credit involuntary unemployment insurance in accordance with forms and rates filed and approved by the commissioner pursuant to applicable regulations.
b. If a licensee obtains or provides any credit insurance for a borrower or borrowers pursuant to subsection a. of this section, a licensee may deduct from the principal of the loan and retain an amount equal to the premium lawfully charged by the insurance company. The premium may be charged monthly in the case of an open-end, secondary mortgage loan. The amount so deducted and retained shall not be considered a prohibited charge or amount of any examination, service, brokerage, commission, expense, fee or bonus or other thing or otherwise.
c. If a borrower or borrowers obtain the credit insurance from or through a licensee, the licensee shall show the amount of the charge for the insurance and cause to be delivered to the borrower or borrowers a copy of the policy, certificate or other evidence of that insurance when the loan is made. Nothing in this act shall prohibit the licensee from collecting the premium or identifiable charge for insurance permitted by this section and from receiving and retaining any dividend, or any other gain or advantage resulting from that insurance.
d. A licensee may require a borrower to demonstrate that the property securing any mortgage loan is insured against damage or loss due to fire and other perils, including those of extended coverage, for a term not to exceed the term of the loan and in an amount not to exceed the amount of the loan, together with the amount needed to satisfy all prior liens on that property.
The licensee shall provide the borrower with the following written statement, to be printed in at least 10-point bold type:
NOTICE TO THE BORROWER
YOU MAY BE REQUIRED TO PURCHASE PROPERTY INSURANCE AS A CONDITION OF RECEIVING THE LOAN.
IF PROPERTY INSURANCE IS REQUIRED, YOU MAY SECURE INSURANCE FROM A COMPANY OR AGENT OF YOUR OWN CHOOSING.
##### **§ 17:11C-74** Permitted fees; definitions. {#sec-17-11c-74 omnilex-key=us-nj-statutes--title-17--17:11C-74}
24. a. Notwithstanding the provisions of any other law, a residential mortgage lender, incidental to the origination, processing and closing of any mortgage loan transaction, shall have the right to charge only the following fees: (1) application fee; (2) origination fee; (3) lock-in fee; (4) commitment fee; (5) warehouse fee; (6) discount points; and (7) fees necessary to reimburse the residential mortgage lender for charges imposed by third parties which shall include: (i) an appraisal fee; (ii) a credit report fee; and (iii) such other third party charges as the commissioner may expressly permit to lenders by rule in accordance with a procedure established by rule.
b. Notwithstanding the provisions of any other law, a residential mortgage broker, incidental to the brokering of any mortgage loan transaction, shall have the right to charge only the following fees: (1) application fee; (2) broker fee; and (3) fees necessary to reimburse the residential mortgage broker or lender for charges imposed by third parties, which shall include: (i) an appraisal fee; (ii) a credit report fee; and (iii) such other third party charges as the commissioner may expressly permit to brokers by rule or in accordance with a procedure established by rule.
c. For purposes of this section, the following terms shall have the meanings and permitted uses set forth below:
(1) "Application fee" means a fee imposed by a lender or a broker for taking or processing a loan application, which fee shall not be based upon a percentage of the principal amount of the loan or the amount financed. An application fee may be charged only once with respect to the same mortgage loan application and, where a loan is brokered, may be charged by a residential mortgage lender or a residential mortgage broker, but not by both.
(2) "Appraisal fee" means a fee charged to a borrower by a lender or broker to recover the direct cost of the fee charged by a duly credentialed real estate appraiser for an appraisal in connection with a mortgage loan application. An appraisal fee may be charged to a borrower by a residential mortgage lender or by a residential mortgage broker, but not by both in connection with the same mortgage loan application. A lender or broker may charge a borrower an appraisal fee for a second appraisal provided that requiring a second appraisal is in accordance with duly promulgated rules.
(3) "Broker fee" means a fee that may be charged to a borrower only by a broker and that shall be payable only at closing, which fee may be based on a percentage of the principal amount of the loan or a fraction thereof.
(4) "Commitment fee" means a fee, exclusive of third-party fees, imposed by a residential mortgage lender as consideration for binding the lender to make a loan in accordance with the terms and conditions of its written commitment and payable on or after the borrower's acceptance of the commitment. The amount of the commitment fee shall be reasonably related to its purpose and may be based upon a percentage of the principal amount of the loan. A commitment fee may not be charged or collected unless the borrower receives a written commitment from the lender by midnight of the third business day prior to the day upon which the mortgage loan closing occurs and the borrower has accepted such commitment.
(5) "Credit report fee" means a fee charged to a borrower by a lender or broker in connection with a mortgage loan application to recover the direct cost of the fee charged by a credit reporting agency for obtaining a credit report. A credit report fee may be charged to a borrower by a residential mortgage lender or by a residential mortgage broker, but not by both in connection with the same mortgage loan application. A lender or broker may charge a borrower a credit report fee for a second credit report provided that requiring a second credit report is in accordance with duly promulgated rules.
(6) "Discount point" means a fee charged by a lender based on a percentage of the principal amount of the loan and payable only at the closing of the mortgage loan, which fee operates to reduce the interest rate of the mortgage loan.
(7) "Lock-in agreement" means a written agreement between a lender and a borrower whereby the lender guarantees until a specified date or for a specified period of time the availability of a specified rate of interest or specified formula by which the rate of interest will be determined and, if applicable, the specific number of discount points required to obtain such rate or formula, provided the loan is approved and closed by the specified date. No lender may charge a lock-in fee for a lock-in agreement executed after midnight of the third business day prior to the day upon which the mortgage loan closing occurs.
(8) "Lock-in fee" means a fee that a lender may charge to a borrower for a lock-in agreement, which fee may be payable at closing, but shall in no event be payable prior to the commencement of the lock-in period.
(9) "Origination fee" means a fee that a lender may charge to a borrower for originating a loan and that is based on a percentage of the principal amount of the loan and is payable only at the closing of the mortgage loan. An origination fee may also be referred to as a "point."
(10) "Warehouse fee" means a fee charged by a lender not to exceed the cost associated with holding the particular mortgage loan pending its assignment to a permanent investor, and payable at closing. The fee shall be based on the actual holding period and warehouse rate and the initial coupon rate on the mortgage loan. No profit shall accrue to a lender from collection of a warehouse fee.
d. A residential mortgage lender or residential mortgage broker may use a term for a fee that is different from a term enumerated in this section or in duly promulgated rules implementing the provisions of this section, provided that the lender or broker can document to the department that such fee fits the definition and description of a fee permitted by this section or permitted in accordance with duly promulgated rules implementing the provisions of this section, provided that such fee functions accordingly, and provided that the lender or broker has disclosed such fee in writing to the borrower in conformity with applicable State and federal disclosure rules.
e. No residential mortgage lender or residential mortgage broker may charge any fee not expressly authorized either by this section or by the commissioner by regulation.
f. In addition to the rulemaking authority granted the commissioner with respect to subsections a. through e. of this section, the commissioner shall be authorized to promulgate such rules and forms as may reasonably be deemed necessary by the commissioner to provide for the adequate disclosure to borrowers of fees permitted under this section consistent with the provisions of this section and with applicable provisions of federal regulations and forms.
##### **§ 17:11C-75** Prohibited practices, violations. {#sec-17-11c-75 omnilex-key=us-nj-statutes--title-17--17:11C-75}
25. The following practices shall be prohibited and a violation of this act with respect to any mortgage loan:
a. No person shall use the word "mortgage" or similar word in any advertising, sign, letterhead, business card, or like matter which tends to represent that the person solicits, makes, brokers, or negotiates mortgage loans unless licensed to act as a residential mortgage lender, residential mortgage broker, or mortgage loan originator under this act, or is exempt from licensure pursuant to section 5 of this act.
b. No person shall obtain or attempt to obtain a license by fraud or misrepresentation in order to act as a licensee under this act.
c. No person shall assist, or aid or abet a licensee with respect to any licensed activities regulated by this act, unless properly licensed under this act, or exempt from licensure pursuant to section 5 of this act.
d. No residential mortgage lender, residential mortgage broker, or mortgage loan originator, whether a business or individual licensee, shall make, advertise, print, display, publish, distribute, electronically transmit, telecast or broadcast, or cause or permit to be made, advertised, printed, displayed, published, distributed, electronically transmitted, televised or broadcast, in any manner, any statement or representation which is false, misleading or deceptive.
e. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall engage in any unfair or deceptive practice toward any person, or directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers, lenders, or any other person, including any action to misrepresent, circumvent, or conceal the nature of any information or material particular of any transaction, or to obtain the real property that is, or intended to be, the security for the loan.
f. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall advertise, solicit, or make, broker, or negotiate a mortgage loan for a specific interest rate, points, or other financing terms unless those terms are actually available at the time of advertising, making, brokering, or negotiating the loan.
g. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall make any statement or representation that the licensee will provide "immediate approval" of any mortgage loan application or "immediate closing" of a loan, or will afford unqualified access to credit.
h. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall fail to make any disclosures concerning a mortgage loan as required by federal and State law, including any order, rule or regulation made or issued pursuant to that law.
i. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall make any payment, threat, or promise, directly or indirectly, to any person for the purposes of influencing the independent judgment of the person in connection with a mortgage loan, including to any appraiser of the real property that is, or intended to be, the security for the loan for the purposes of influencing the appraiser's judgment with respect to the value of the property.
j. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall, in connection with or incidental to the making of any mortgage loan, require or permit a party to the transaction to sign the loan agreement, promissory note, bond or other mortgage instrument if it contains any blank space to be filled in after it has been signed, except a blank space relating to recording.
k. With respect to any commission, bonus or fee:
(1) No person shall pay or receive any commission, bonus, or fee to or from any person not licensed under this act, or not exempt from licensure pursuant to section 5 of this act, in connection with soliciting, making, brokering, or negotiating any mortgage loan for a borrower.
(2) A residential mortgage lender, residential mortgage broker, or mortgage loan originator shall not solicit, make, broker, or negotiate a contract with a borrower that provides in substance that the licensee may earn a commission, bonus, or fee through "best efforts" to obtain a mortgage loan, even though no loan is actually consummated for the borrower.
l. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall charge or exact directly or indirectly from a borrower or any other person any commission, bonus, fee, or charge not authorized by this act.
m. No residential mortgage lender or residential mortgage broker shall fail to disburse funds in accordance with the licensee's agreements, unless otherwise ordered by the commissioner or a court of competent jurisdiction.
n. No residential mortgage lender or residential mortgage broker shall fail to place in escrow, immediately upon receipt, any money, fund, deposit, check, or draft entrusted to the licensee by any person, in a manner approved by the commissioner, or to deposit the funds in a trust or escrow account maintained by the licensee with a depository institution, wherein the funds shall be kept until the disbursement thereof is properly authorized.
o. If a residential mortgage lender or residential mortgage broker provides loan proceeds to a closing agent for the purpose of closing and settling a mortgage transaction, the licensee shall not fail: (1) to present a certified check, cashier's check, teller's check or bank check for the proceeds of the mortgage loan; (2) to arrange an electronic fund transfer for the proceeds of the loan; or (3) to provide for payment by cash to the closing agent at a reasonable time and place prior to the time of the mortgage closing transaction. The closing agent shall deposit the loan proceeds in a trust or escrow account, which shall not be commingled with the agent's own funds, and shall disburse the loan proceeds upon the closing or settlement in accordance with the settlement documents. Nothing contained in this subsection shall require the licensee to utilize a closing agent, or prevent the licensee from directly disbursing loan proceeds from the account of the licensee to the borrower and other persons entitled to receive disbursements from the settlement if a closing agent is not used. Nothing contained in this subsection shall prevent the licensee from assessing a reasonable charge as set forth by regulation of the commissioner to reflect the additional cost to the licensee for the issuance of a certified, cashier's, teller's or bank check or for arranging an electronic fund transfer. The reasonable charge shall be fully disclosed at application, or at or prior to the issuance of the loan commitment. In this subsection, a "bank check" means a negotiable instrument drawn by a federal or state chartered bank, savings bank or savings and loan association on itself or on its account in another federal or state chartered bank, savings bank or savings and loan association doing business in this State; and a "teller's check" means a draft drawn by a bank on another bank, or payable at or through a bank.
p. No residential mortgage lender, residential mortgage broker, or mortgage loan originator shall fail without good cause to truthfully account or deliver to any person any personal property, money, fund, deposit, check, draft, mortgage, document or thing of value, which is not the licensee's property, or which the licensee is not in law or equity entitled to retain under the circumstances, at the time which has been agreed upon, or is required by law, or, in the absence of a fixed time, upon demand of the person entitled to the accounting or delivery.
##### **§ 17:11C-75.1** Mortgagors to make biweekly, semi-monthly payments, principal payments, allowed. {#sec-17-11c-75.1 omnilex-key=us-nj-statutes--title-17--17:11C-75.1}
1. a. A financial institution shall allow mortgagors to:
(1) for mortgagors who are in good standing on the mortgage:
(a) make biweekly mortgage payments, in which any amount paid in excess of the total annual contractual mortgage payments due shall be applied to the mortgage loan principal; and
(b) make semi-monthly mortgage payments in the amount of half of the total monthly contractual mortgage payment due; and
(2) pay additional amounts to the mortgage loan principal, without the imposition of any penalty.
b. If, at the time an escrow analysis is performed, the analysis projects an escrow shortage or otherwise results in an increase to escrow amount payments:
(1) the financial institution shall:
(a) notify the mortgagor of the new contractual mortgage payment pursuant to Regulation E, 12 C.F.R. Part 1005 and Regulation X, 12 C.F.R. Part 1024 and shall adjust the amount of the mortgagor's recurring payment amount, if any, in accordance with the payment change resulting from the escrow analysis; and
(b) apply any additional amounts paid by the mortgagor first to any unsatisfied escrow payments and then to the mortgage loan principal, without the imposition of any penalty; and
(2) the mortgagor may elect to submit a payment or payments to the financial institution to reduce or eliminate any projected escrow shortage. A mortgagor that elects to make additional escrow payments pursuant to this paragraph shall notify the financial institution of their intent to make the payments. The payments shall be treated separately and independent of payments applied to the mortgage loan principal pursuant to this section.
c. As used in this section:
"Biweekly" means occurring every two weeks.
"Contractual mortgage payment" means the total amount of the monthly mortgage loan payment, comprised of the principal payment, interest payment, and any additional amounts being collected and held in an escrow account, including for property taxes and homeowners insurance.
"Escrow amount" means the amount of any additional funds that are collected by a financial institution pursuant to a mortgage loan and set aside in an escrow account to cover future expenses, including property taxes and homeowners insurance.
"Financial institution" means a State-chartered bank, savings bank, savings and loan association, or credit union, licensed lender, or mortgage servicer subject to the laws of this State.
"Interest" means the cost to the mortgagor of the mortgage loan, calculated as a percentage of the mortgage loan balance.
"Mortgage loan" means a loan made to a natural person to whom credit is offered or extended primarily for personal, family, or household purposes which is secured by a mortgage constituting a lien on real property located in this State on which there is erected or to be erected a structure containing one, two, three, four, five, or six dwelling units, a portion of which structure may be used for nonresidential purposes, in the making of which the financial institution relies primarily upon the value of the property.
"Mortgage servicer" means any person who, for the person or on behalf of a financial institution, receives payments of principal and interest in connection with a mortgage loan, records the payments on the person's books, and records and performs the other administrative functions as may be necessary to properly carry out the mortgage holder's obligations under the mortgage agreement including, when applicable, the receipt of funds from the mortgagor to be held in escrow for payment of real estate taxes and insurance premiums and the distribution of the funds to the taxing authority and insurance company.
"Mortgagor" means a person who borrows money by mortgaging property to a mortgagee as security for a mortgage.
"Principal" means the outstanding balance of the original mortgage loan, exclusive of interest.
"Semi-monthly" means occurring twice each month.
##### **§ 17:11C-76** Closed-end loan permitted, certain circumstances, interest rates. {#sec-17-11c-76 omnilex-key=us-nj-statutes--title-17--17:11C-76}
26. a. Notwithstanding the provisions of R.S.31:1-1 or any other law to the contrary, a residential mortgage lender may make a closed-end loan as a secondary mortgage loan, and may charge, contract for, and receive thereon, interest at an annual percentage rate agreed to by the licensee and the borrower.
b. The promissory note evidencing the closed-end loan may provide for a variation in the interest rate in which adjustments to the interest rate shall correspond directly to the movement of an interest rate index which is readily available to and verifiable by the borrower and is beyond the control of the licensee. If the note provides for a variation in the interest rate, that fact shall be clearly described in plain language, in at least eight-point bold face type on the face of the note. If the note provides for a final payment which is substantially greater than the previous installments, that fact, together with a statement that the licensee is under no obligation to refinance the loan, unless the licensee unconditionally obligates itself to do so, shall be clearly disclosed in plain language, in at least eight-point bold face type on the face of the note. No rate increase or decrease shall take effect during the first six months of the term of the loan. Thereafter, no rate increase or decrease shall take effect unless at least 30 days prior to the effective date of that increase or decrease, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes the increase or decrease, and unless at least six months have elapsed without any increase in the rate.
c. Upon written request from the borrower, the licensee shall give to the borrower, without charge, within five days from the date of receipt of that request, a written statement of the borrower's account, which shall show the dates and amounts of all installment payments on the closed-end loan credited to the borrower's account, the dates, amounts and explanation of all other charges or credits to the account and the unpaid balance thereof. The licensee shall not be required to furnish more than two statements pursuant to this subsection in any 12-month period.
##### **§ 17:11C-77** Open-end loan permitted, certain circumstances, interest rates. {#sec-17-11c-77 omnilex-key=us-nj-statutes--title-17--17:11C-77}
27. Notwithstanding the provisions of R.S.31:1-1 or any other law to the contrary, and subject to all applicable provisions of this act, a licensed residential mortgage lender shall have authority to make an open-end, secondary mortgage loan upon the same terms and conditions permitted to banks, savings banks, and savings and loan associations pursuant to State and federal statutes and regulations promulgated thereunder, and may charge, contract for, and receive thereon, interest at an annual percentage rate agreed to by the licensee and the borrower, provided however, that with respect to fees and other charges permitted in connection with the open-end loan, the licensee shall be subject to the provisions of this act.
##### **§ 17:11C-78** Requirements for instrument evidencing a secondary mortgage loan. {#sec-17-11c-78 omnilex-key=us-nj-statutes--title-17--17:11C-78}
28. An instrument evidencing a secondary mortgage loan shall:
a. Be in the form of a promissory note for a closed-end loan, and in the form of a loan agreement for an open-end loan, and shall be identifiable by the use of the words "Secondary Mortgage Loan" printed prominently, in 14-point bold type or larger, centered and at the top of the promissory note or loan agreement.
b. Provide for the payment, in full, of the total amount of the secondary mortgage loan in substantially equal payment periods, measured in terms of weeks or months, and, except as otherwise permitted, substantially equal installment payment amounts, except that the initial payment period may be deferred for 60 days, and, provided further, when appropriate for the purpose of facilitating payment in accordance with the borrower's intermittent income, a promissory note or loan agreement may provide an installment schedule which reduces or omits payments over any period of time during which the borrower's income is reduced or suspended, and the final installment may be $1 more or less than the amount of all other installment payments.
c. Contain the following notice printed prominently, in the identical form indicated below, in 10-point bold type or larger, directly above the space provided for the signature of the borrower.
"NOTICE TO BORROWER
Read this promissory note or loan agreement before you sign.
Do not sign this promissory note or loan agreement if it contains blank spaces.
The promissory note or loan agreement is secured by a secondary mortgage on your real property."
d. Be completed in full before it is signed by the borrower. In the event that it is unnecessary to fill in a blank space provided for in any instrument, the figure -0-, a dash, line or the word "none" shall be inserted in such blank space.
##### **§ 17:11C-79** Prohibited wording for secondary mortgage loan. {#sec-17-11c-79 omnilex-key=us-nj-statutes--title-17--17:11C-79}
29. No writing of any kind executed in connection with a secondary mortgage loan shall contain:
a. A power of attorney to confess judgment.
b. An assignment of or order for the payment of any salary, wages, commissions or any other compensation for services, or any part thereof, earned or to be earned.
c. An agreement to pay any amount other than the unpaid balance of the promissory note or loan agreement or any other charge authorized by this act.
d. A provision relieving the residential mortgage lender or residential mortgage broker from liability for any claim, or from any legal remedy, which the borrower may have against the licensee under the terms of the promissory note or loan agreement.
e. A provision whereby the borrower waives any right of action against the licensee, a subsequent holder or any person acting on the licensee's or holder's behalf for any illegal act committed in the collection of payments under the promissory note or loan agreement.
f. An acceleration clause under which the unpaid balance of the promissory note or loan agreement not yet matured or any part thereof may be declared due and payable because the licensee or subsequent holder deems himself to be insecure.
##### **§ 17:11C-80** Prohibited actions relative to secondary mortgage loan; exceptions. {#sec-17-11c-80 omnilex-key=us-nj-statutes--title-17--17:11C-80}
30. a. A licensee acting as a residential mortgage lender shall not contract for, charge, receive or collect directly or indirectly, any of the following in connection with a secondary mortgage loan: a broker's or finder's fee; commission; expense; fine; penalty; premium; or any other thing of value other than the charges authorized by this act; except the expenses incurred on actual sale of the real property in foreclosure proceedings or upon the entry of judgment, which are otherwise authorized by law; except that:
(1) The licensee may charge and receive no more than three discount points computed as a percentage of the principal amount of the secondary mortgage loan and may add these discount points to the principal balance of the loan, which discount points shall be fully earned when the loan is made. The annual percentage rate charged to the borrower, including the discount points, if any, shall be subject to N.J.S.2C:21-19. As used in this paragraph, "discount point" means one percent of the principal amount of the loan, and "principal amount of the loan" means the total amount of credit extended, including all loan closing fees, expenses or costs that are financed, but excluding the discount points; and
(2) The licensee may require a borrower to pay a reasonable legal fee at the time of the execution of the secondary mortgage loan, provided that any legal fee shall represent a charge actually incurred in connection with the secondary mortgage loan and shall not be paid to any person other than an attorney authorized to practice law in this State; provided further that the legal fee shall be evidenced by a statement issued to the licensee from the attorney.
b. The licensee shall have authority to collect fees for title examination, abstract of title, survey, title insurance, credit reports, appraisals, and recording fees when those fees are actually paid by the licensee to a third party for those services or purposes, and to include those fees in the amount of the loan principal.
c. The licensee shall also have the authority to charge and collect a returned check fee in an amount not to exceed $20 which the licensee may charge the borrower if a check of the borrower for a secondary mortgage loan is returned to the licensee uncollected due to insufficient funds in the borrower's account. The licensee shall also have the authority to charge and collect a late charge in any amount as may be provided in the promissory note or loan agreement, but no late charge shall exceed 5% of the amount of payment in default. Not more than one late charge shall be assessed on any one payment in arrears.
d. The licensee shall not make any other charge or accept an advance deposit prior to the time a secondary mortgage loan is closed, except that the licensee may charge:
(1) An application fee for the secondary mortgage loan at closing; and
(2) On an open-end loan, an annual fee of $50 or 1% of the line of credit, whichever is less.
e. A promissory note or loan agreement by the licensee may provide for the payment of attorney fees in the event it becomes necessary to refer the promissory note or loan agreement to an attorney for collection; provided, however, that any attorney fees provision shall be void and unenforceable unless:
(1) The promissory note or loan agreement is referred to an attorney authorized to practice law in this State;
(2) The attorney to whom the promissory note or loan agreement is referred is not an officer, director, partner, owner, or employee, whether salaried or commissioned, of the licensee; and
(3) Suit is actually filed by the attorney to whom the promissory note or loan agreement is referred and subsequently decided in favor of the licensee, in which event the attorney fees shall not exceed 15% of the first $500, 10% of the next $500, and 5% of any excess amount due and owing under the promissory note or loan agreement, and provided further that at least 15 days prior to the commencement of the suit, the licensee or his attorney shall send to the borrower, by certified or registered mail, return receipt requested, at the borrower's last known address, a statement of the licensee's intention to sue, which statement shall also specify the amount of principal, interest and any other charge due and owing to the licensee.
##### **§ 17:11C-81** Regulations relative to collection of interest. {#sec-17-11c-81 omnilex-key=us-nj-statutes--title-17--17:11C-81}
31. a. If a residential mortgage lender charges or collects interest, costs or other charges on a secondary mortgage loan in excess of those permitted by this act, the licensee may collect only the principal amount of the loan, and may not collect interest, costs or other charges with respect to the loan. In addition, a licensee who knowingly and willfully violates any provision of this act shall also forfeit to the borrower three times any amount of the interest, costs or other charges collected in excess of that authorized by law.
b. The licensee shall have no liability on a secondary mortgage loan for an unintentional error if within 90 days after discovering the error the licensee notifies the borrower of the error and makes adjustments in the account as necessary to assure that the borrower will not be required to pay any interest, costs or other charges which aggregate in excess of the charges permitted under this act for secondary mortgage loans. The discovery of an unintentional error within the meaning of this section shall include an entry of a judgment by a court of competent jurisdiction, holding that a rule or regulation with which the licensee acted in conformity was invalid or in violation of this act, and the licensee shall have no liability for that unintentional error if the licensee takes the actions required upon discovery of the error pursuant to this section, within the time stated therein following entry of the judgment.
##### **§ 17:11C-82** Required actions relative to secondary mortgage loans. {#sec-17-11c-82 omnilex-key=us-nj-statutes--title-17--17:11C-82}
32. A residential mortgage lender shall, in connection with a secondary mortgage loan:
a. Give to the borrower, without charge, a copy of every instrument, document or other writing the borrower signs, and written evidence of any insurance obtained from the licensee pursuant to section 23 of this act.
b. Give to the borrower, without charge, at the time the loan is made, if a closed-end loan, and at the time of the first advance, if an open-end loan, a closing statement which itemizes the individual amounts disbursed to or on behalf of the borrower, including, but not limited to, the premium for insurance, if any, the total amount of funds so disbursed, the amount of the interest charge, total amount of the loan, the amount, number and due date of the installment payments and the interest charge expressed as an annual percentage rate, as applicable.
c. In the event a borrower's application for the secondary mortgage loan is denied, notify the borrower, in writing, of that denial. The name of the denied borrower or a list of denied borrowers shall not be referred by the licensee, in any manner whatsoever, to any other lender, retail seller of personal property or services, or to any other person, whether in this State or any other state.
d. If the secondary mortgage loan is not consummated, return all documents executed by or belonging to the borrower.
e. Whenever payment is made in cash on an account of the secondary mortgage loan, give to the borrower, without charge, at the time that payment is actually received, a written receipt which shall show the name and address of the licensee, the name and address of the borrower, account number or other identification mark or symbol, date and amount paid.
f. When the loan, if a closed-end loan, is paid in full, or when the loan, if an open-end loan, is paid in full and the borrower has notified the licensee in writing to discontinue his account with the licensee:
(1) Refund or credit to the borrower, in accordance with regulations promulgated by the commissioner, any unearned portion of the premium for any insurance, if a premium for the insurance was disbursed on behalf of the borrower at the time the secondary mortgage loan was originally made.
(2) Stamp or write on the face of the promissory note or loan agreement evidencing the borrower's secondary mortgage loan indebtedness "Paid in Full" or "Canceled," the date paid and the name and address of the licensee and, within 45 days, return the promissory note or loan agreement to the borrower.
(3) Release any lien on real property and cancel the same of record pursuant to P.L.1975, c.137 (C.46:18-11.2 et seq.), and, at the time the promissory note or loan agreement evidencing the borrower's secondary mortgage loan indebtedness is returned, deliver to the borrower any good and sufficient assignments, releases or any other certificate, instrument or document as may be necessary to vest the borrower with complete evidence of title, insofar as the applicable secondary mortgage loan is concerned, to the real property, except that the licensee may require the borrower to pay any charge imposed upon the licensee by a county recording officer to effect the cancellation or release.
##### **§ 17:11C-83** Additional prohibited practices, violations. {#sec-17-11c-83 omnilex-key=us-nj-statutes--title-17--17:11C-83}
33. In addition to the prohibited practices set forth pursuant to section 25 of this act for any mortgage loan, the following shall be prohibited and a violation of this act with respect to any secondary mortgage loan:
a. No residential mortgage lender shall, consistent with section 17 of this act, engage in any business regulated by this act under any other name or at any other location except that designated in the licensee's license. For the purpose of this subsection, the transaction of business includes, but is not limited to, the signing of any instrument, document or any other form by the borrower, except that a borrower's application for a secondary mortgage loan need not be signed in the office of the licensee and the loan need not be closed at the office of the licensee, so long as it is closed in New Jersey at the office of an attorney admitted to practice in this State, or a licensed title company or producer.
b. No residential mortgage lender or residential mortgage broker shall request that a borrower incorporate in connection with a secondary mortgage loan, or aid or abet a scheme to incorporate a borrower.
c. No residential mortgage lender shall make a secondary mortgage loan which has been referred by a retail seller, who, in connection with that referral, has required the borrower to purchase personal property or services, or has indicated that the purchase is necessary as a condition precedent for the loan.
d. No residential mortgage lender or residential mortgage broker shall require or accept from a borrower any collateral or security for a secondary mortgage loan other than a mortgage, indenture or any other similar instrument or document which creates a lien upon any real property or an interest in real property including, but not limited to, shares of stock in a cooperative corporation.
##### **§ 17:11C-84** Investigation by commissioner. {#sec-17-11c-84 omnilex-key=us-nj-statutes--title-17--17:11C-84}
34. a. The commissioner may investigate or examine any residential mortgage lender, residential mortgage broker, mortgage loan originator, or other person as the commissioner deems necessary to determine compliance with this act and the orders, rules and regulations issued hereunder. For these purposes, the commissioner may examine the books, accounts, records and other documents or matters of any licensee, maintained pursuant to section 21 of this act, or other person. Each licensee shall be subject to an examination by the commissioner, not more than once in any 9-month period, unless the commissioner has reason to believe that the licensee is not complying with the provisions of this act or any rule or regulation promulgated hereunder, or is not transacting business in accordance with law, in which case the commissioner may conduct an examination at any time. The commissioner shall have the power to compel by subpoena the production of all relevant books, accounts, records and other documents and materials relative to an examination or investigation. Examinations conducted under the provisions of this act shall be confidential; notwithstanding this confidentiality, the examinations shall be subject to: (1) reporting and sharing procedures established by the Nationwide Mortgage Licensing System and Registry pursuant to subsection b. of section 12 of this act; and (2) public disclosure as required in the administration, enforcement and prosecution of violations under this act or pursuant to court order. The cost of any investigation or examination shall be borne by the licensee.
b. The commissioner or the commissioner's designee shall have power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, accounts, records and other evidence before him in any matter over which he has jurisdiction pursuant to this act, and to administer oaths and affirmations to any person.
c. If any person shall refuse to obey a subpoena, or to give testimony or to produce evidence as required thereby, the commissioner may apply ex parte to any court having jurisdiction over that person for an order compelling the appearance of the witness before the commissioner to give testimony or to produce evidence as required thereby, or both.
##### **§ 17:11C-85** Reporting requirements. {#sec-17-11c-85 omnilex-key=us-nj-statutes--title-17--17:11C-85}
35. a. (1) Every residential mortgage lender and residential mortgage broker shall annually file a report with the commissioner, which shall set forth any information as the commissioner shall require concerning the business conducted as a licensee during the preceding calendar year. The report shall be under oath and in a form and within the time specified by the commissioner by regulation.
(2) Every residential mortgage lender and broker shall additionally submit to the Nationwide Mortgage Licensing System and Registry a mortgage call report of condition, in the form and manner, and with any information, at any time as may be required by that nationwide system and registry, and any other report to, or through, the nationwide system and registry pursuant to an arrangement for reporting and sharing information as set forth in subsection b. of section 12 of this act.
b. Any negligently made false statement or knowing omission of material fact in connection with any report or supporting information filed with the commissioner, the nationwide mortgage licensing system and registry, or through that nationwide mortgage licensing system and registry with any federal or state agency, shall be deemed a violation of this act.
c. A licensee that fails to make and file its annual report with the commissioner, or any report with or through the nationwide system and registry, in the form and within the time provided in this section, shall be subject to a penalty payable to the commissioner of not more than $100 for each day's failure concerning the annual report, and any penalty for a failure concerning a report to be filed with or through the nationwide system and registry, payable to the nationwide system and registry, and the commissioner, as authorized pursuant to section 20 of this act, may revoke or suspend the licensee's authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:11C-86** Agreements unenforceable, void. {#sec-17-11c-86 omnilex-key=us-nj-statutes--title-17--17:11C-86}
36. Any agreement to waive any provision of this act shall be unenforceable and void.
##### **§ 17:11C-87** Applicability to mortgage loans. {#sec-17-11c-87 omnilex-key=us-nj-statutes--title-17--17:11C-87}
37. The provisions of this act shall apply to any mortgage loan:
a. Advertised, caused to be advertised, solicited, negotiated, offered, or otherwise transacted within this State, in whole or in part, whether by the ultimate residential mortgage lender or any other person;
b. Made or executed within this State; or
c. Which is secured by residential real estate located in this State, notwithstanding the place of execution.
##### **§ 17:11C-88** Noncompliance, effect on validity, enforcement of mortgage loans. {#sec-17-11c-88 omnilex-key=us-nj-statutes--title-17--17:11C-88}
38. The failure of any person to comply with the provisions of this act shall not affect the validity or enforceability of any mortgage loan, and no person acquiring a mortgage loan shall be required to ascertain if a residential mortgage lender has made the loan in compliance with the provisions of this act.
##### **§ 17:11C-89** Rules, regulations. {#sec-17-11c-89 omnilex-key=us-nj-statutes--title-17--17:11C-89}
39. The commissioner may issue and promulgate rules and regulations, in accordance with the "Administrative Procedure Act," P.L.1968, c. 410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
## **Chapter 11D** {#struct-chapter-11d}
##### **§ 17:11D-1** Definitions relative to tax preparation services. {#sec-17-11d-1 omnilex-key=us-nj-statutes--title-17--17:11D-1}
1. As used in this act:
"Client" means an individual who engages the services of a tax preparer.
"Commissioner" means the Commissioner of Banking and Insurance.
"Refund anticipation check" means a check, stored value card, or other payment mechanism representing the actual or anticipated proceeds of the client's federal or State income tax refund which was issued by a depository institution, tax preparer, or other person that received or anticipates receipt of a direct deposit of the client's federal or State income tax refund and for which the client has paid a fee or other consideration for such payment mechanism.
"Refund anticipation loan" means a loan that is secured by, or that the tax preparer anticipates from, a client's federal or State income tax refund.
"Tax preparation services" means services provided for a fee or other consideration to a client to:
(1) assist with preparing or filing State or federal individual income tax returns;
(2) assume final responsibility for completed work on an individual income tax return on which preliminary work has been completed by another; or
(3) offer, facilitate, or make refund anticipation loans or checks.
"Tax preparer" means an individual, corporation, partnership, limited liability company, association, trustee or other entity who provides tax preparation services.
##### **§ 17:11D-2** Actions prohibited to tax preparer. {#sec-17-11d-2 omnilex-key=us-nj-statutes--title-17--17:11D-2}
2. No tax preparer shall:
a. Without reasonable cause, fail to promptly, diligently and without unreasonable delay complete a client's tax return;
b. Obtain the signature of a client to a tax return or authorizing document containing blank entries to be completed after the document has been signed;
c. Fail to sign a client's tax return as the tax preparer;
d. Fail or refuse to give a client a copy of any document requiring the client's signature within a reasonable time after the client signs the document;
e. Fail to retain for at least four years a copy of individual income tax returns;
f. Fail to maintain a confidential relationship with a client or former client;
g. Fail to take reasonable measures to maintain the confidentiality of information or documents provided by the client;
h. Produce, authorize, publish, disseminate, circulate, or cause to make any false, deceptive, or misleading statement or representation relating to or in connection with the offering or provision of tax preparation services;
i. Require a client to enter into a refund anticipation loan or refund anticipation check agreement in order to complete a tax return;
j. Claim, or make representations to a client concerning, credits or deductions for which the tax preparer knows or reasonably should know the client does not qualify;
k. Charge, offer to accept, or accept a fee based on a percentage of an anticipated refund in exchange for tax preparation services;
l. Withhold or decline to return to a client documentation provided by the client for use in preparing a client's tax return; or
m. Provide, offer, or advertise refund anticipation loan or check services using terms such as "free," "no cost," "no fee," or other language that would lead a client to reasonably believe that the refund anticipation loan or refund anticipation check is provided at no cost to the client if the issuance of a refund anticipation loan or refund anticipation check results in, or is predicated upon, the assessment of higher or additional fees for other tax preparation or other services than are charged to clients who do not receive refund anticipation loan or refund anticipation check services.
##### **§ 17:11D-3** Refund anticipation loans, compliance, disclosures required. {#sec-17-11d-3 omnilex-key=us-nj-statutes--title-17--17:11D-3}
3. a. Any tax preparer offering, facilitating, or making refund anticipation loans shall comply with the provisions of the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.), N.J.S.2C:21-19, and R.S.31:1-1 et seq. The interest rate for any loan shall include any rate, fee, charge, consideration, or other thing of value received or retained by, or credited to, the lender, directly or indirectly, for the loan or forbearance.
b. At the time a tax preparer offers or facilitates a refund anticipation loan to the client, the tax preparer shall provide, and verbally explain, to the client the following statement, to be printed in at least 14-point type:
NOTICE TO BORROWER
THIS IS A LOAN. THE ANNUAL PERCENTAGE RATE (APR), BASED ON THE ESTIMATED PAYMENT PERIOD IS (fill in estimated APR). YOUR TAX REFUND WILL BE USED TO REPAY THE LOAN. AS A RESULT, THE AMOUNT OF YOUR REFUND WILL BE REDUCED BY (fill in the dollar amount) FOR FEES, INTEREST AND OTHER CHARGES.
AS AN ALTERNATIVE TO THIS LOAN, YOU CAN RECEIVE YOUR FULL REFUND IN APPROXIMATELY TWO WEEKS IF YOU FILE YOUR RETURN ELECTRONICALLY AND THE INTERNAL REVENUE SERVICE WILL SEND YOUR FULL REFUND TO YOUR BANK ACCOUNT.
c. If, under the terms of the refund anticipation loan, the client is subject to additional interest when a refund is delayed, the following statement shall also be included in the notice:
IF YOU CHOOSE TO TAKE THIS LOAN AND YOUR REFUND IS DELAYED, YOU MAY HAVE TO PAY ADDITIONAL INTEREST.
d. A tax preparer may use an alternative disclosure in lieu of the disclosure set forth in subsections b. and c. provided that:
(1) the information provided to the taxpayer in the alternative disclosure includes information substantially equivalent in scope and content to the specific language set forth in subsections b. and c.;
(2) the alternative disclosure includes a chart listing examples of the refund anticipation loan fees and Annual Percentage Rates, calculated using the guidelines established under the federal Truth in Lending Act, title I of Pub.L.90-321 (15 U.S.C.s.1601 et seq.), for loans of at least three different representative loan amounts; and
(3) the alternative disclosure includes a chart listing the estimated timelines for the delivery of funds to the taxpayer under various delivery methods, including Internal Revenue Service mailed check, Internal Revenue Service direct deposit into a taxpayer's preexisting bank account, and through a refund anticipation loan.
##### **§ 17:11D-4** Itemized statement of service charges. {#sec-17-11d-4 omnilex-key=us-nj-statutes--title-17--17:11D-4}
4. A tax preparer shall provide an itemized statement of all service charges and fees to the client, including, but not limited to, charges and fees for each of the following:
a. tax return preparation;
b. electronic filing of a tax return;
c. providing or facilitating a refund anticipation loan or refund anticipation check; and
d. (1) any interest, including the estimated amount of interest in the event a refund is delayed, under the terms and conditions of a refund anticipation loan; and (2) any amounts to be paid to the tax preparer in the event a refund is delayed, under the terms and conditions of a refund anticipation check.
##### **§ 17:11D-5** Additional penalties. {#sec-17-11d-5 omnilex-key=us-nj-statutes--title-17--17:11D-5}
5. In addition to any sanctions provided by N.J.S.2C:21-19, R.S.31:1-1 et seq., or any other provision of law, a tax preparer who violates any provision of this act shall be liable to a civil administrative penalty not exceeding $1,000 for each violation, to be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
##### **§ 17:11D-5.1** Violations, tax preparer. {#sec-17-11d-5.1 omnilex-key=us-nj-statutes--title-17--17:11D-5.1}
4. It shall be an unlawful practice and violation of P.L.1960, c.39 (C.56:8-1 et seq.) for a tax preparer to violate any provision of P.L.2007, c.258 (C.17:11D-1 et seq.).
##### **§ 17:11D-6** Inapplicability of act. {#sec-17-11d-6 omnilex-key=us-nj-statutes--title-17--17:11D-6}
6. The provisions of this act shall not apply to:
a. a tax preparer providing tax preparation services to less than six clients per calendar year;
b. an individual providing tax preparation services for a spouse, parent, grandparent, child or sibling;
c. an employee who, as part of the regular clerical duties of his or her employment, prepares an employer's income, sales or payroll tax returns;
d. any fiduciary, or the regular employee of a fiduciary, while acting on behalf of the fiduciary estate, the testator, trustor, grantor, or their beneficiaries;
e. an attorney admitted to practice law in New Jersey;
f. a certified public accountant or public accountant qualified to practice in New Jersey;
g. an enrolled agent who has passed the special enrollment examination administered by the Internal Revenue Service; or
h. the Internal Revenue Service's Volunteer Income Tax Assistance (VITA) Program, provided that it receives no compensation for or in connection with any services performed for or products purchased by the taxpayer.
##### **§ 17:11D-7** Rules, regulations. {#sec-17-11d-7 omnilex-key=us-nj-statutes--title-17--17:11D-7}
7. The commissioner shall promulgate rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to carry out the provisions of this act.
## **Chapter 12B** {#struct-chapter-12b}
##### **§ 17:12B-1** Construction as revision of prior laws {#sec-17-12b-1 omnilex-key=us-nj-statutes--title-17--17:12B-1}
This act shall be construed as a revision of, and shall supersede, all provisions of the "Savings and Loan Act," approved April 4, 1946 (P.L.1946, c. 56), including all amendments thereof and supplements thereto.
##### **§ 17:12B-2** Citation {#sec-17-12b-2 omnilex-key=us-nj-statutes--title-17--17:12B-2}
This act shall be known and may be cited as the "Savings and Loan Act (1963)."
##### **§ 17:12B-3** Application of act {#sec-17-12b-3 omnilex-key=us-nj-statutes--title-17--17:12B-3}
No State association shall hereafter be incorporated for the purposes stated in this act, except pursuant to the provisions of this act. The provisions of this act shall apply to all associations in existence and operating under the provisions of chapter 12 of Title 17 of the Revised Statutes and the "Savings and Loan Act," approved April 4, 1946 (P.L.1946, c. 56) at the date of the enactment of this act and where specifically set forth to all Federal associations having their principal offices in this State.
##### **§ 17:12B-3.1** Contracts with association supervisors of other states {#sec-17-12b-3.1 omnilex-key=us-nj-statutes--title-17--17:12B-3.1}
101.The Commissioner is authorized to enter into contracts with association supervisors of other states for the purpose of establishing effective and efficient supervisory and regulatory structures and practices with respect to the provisions of sections 87 through 100 of this 1996 amendatory and supplementary act.
##### **§ 17:12B-4** Determination of members' rights and liabilities {#sec-17-12b-4 omnilex-key=us-nj-statutes--title-17--17:12B-4}
The rights and liabilities of each member of an association, shall be determined by and shall be subject to the provisions of this act and all amendments thereof and supplements thereto, and to the provisions of the association's by-laws, and all changes which shall be made in such by-laws from time to time.
##### **§ 17:12B-5** Definitions {#sec-17-12b-5 omnilex-key=us-nj-statutes--title-17--17:12B-5}
5. The following words and phrases as used in this act, unless a different meaning is plainly required by the context, shall have the following meaning:
(1) "State association" shall mean any savings and loan association, building and loan association, or any corporation, however named, now or hereafter operating pursuant to the provisions of this act.
(2) "Federal association" shall mean a savings and loan association organized pursuant to an Act of Congress approved June 30, 1933, entitled "Home Owners' Loan Act of 1933" or any subsequent Act of Congress.
(3) "Association" shall mean a State association , a federal association having its principal office or a branch office in this State, and an out-of-State association having a branch office in this State.
(4) "Insured association" shall mean an association whose savings members' accounts or savings deposits are insured by the Federal Deposit Insurance Corporation.
(5) "Board" shall mean the board of directors of any association.
(6) "Commissioner" shall mean the Commissioner of Banking of the State of New Jersey, or such other official as may hereafter be charged by State law with the supervision of State associations.
(7) "Member" shall mean a person who holds an account or a savings deposit in a mutual association as a savings member or as a borrowing member.
(8) "Savings member" shall mean a member who holds an account or a savings deposit representing savings in an association.
(9) "Borrowing member" shall mean a member to whom money of the association is loaned or one who is the owner of property upon which the association holds a mortgage.
(10) "Account" shall mean the record of the financial transactions of a member or depositor as shown on the books of the association.
(11) "Direct reduction loan" shall mean a loan the principal of which is repayable in periodical installments.
(12) "Sinking fund loan" shall mean a loan, the principal of which is contracted to be repaid with the participation value of an installment account pledged as collateral security for the payment of the loan.
(13) "Straight mortgage loan" shall mean a loan, the principal of which is repayable upon a fixed day and upon which no interim amortization is required.
(14) "Account loan" shall mean a loan secured by the pledge of an account and the shares, if any, issued in connection therewith.
(15) "Capital" of a mutual State association shall mean the aggregate participation value of all savings members' accounts. It shall not be limited and shall be accumulated only by payments by savings members, plus dividends credited to their accounts.
(16) "Participation value" of an account shall mean the amount paid by a savings member on such account, plus dividends or interest credited thereto, less payments of withdrawals and retirements therefrom and any other amounts lawfully deductible therefrom.
(17) "Withdrawal value" of an account shall mean the participation value of such an account, at the time application for withdrawal of the account is filed, less such part, if any, of the dividends or interest then credited to such account as the association is authorized to retain upon withdrawal.
(18) "Gross income" shall have the meaning ascribed to it in section 6 of this act.
(19) "Net income" shall have the meaning ascribed to it in section 7 of this act.
(20) "Federal Savings and Loan Insurance Corporation" shall mean the corporation so named, organized pursuant to an Act of Congress, or any federal corporation, instrumentality or agency which succeeds to the powers and functions of the Federal Savings and Loan Insurance Corporation or undertakes to discharge the purposes for which said corporation was created.
(21) "Federal Home Loan Bank Board" shall mean the board so named, organized pursuant to an Act of Congress, or any federal corporation, instrumentality or agency which succeeds to the powers and functions of the Federal Home Loan Bank Board, or which is formed to carry out the purposes for which such board was created.
(22) "Change in the bylaws" includes new bylaws and revisions, amendments, supplements and repealers of existing bylaws.
(23) "Principal office," "branch office" and "auxiliary office" shall have the meanings ascribed to them in section 8 of this act.
(24) "Agency" shall have the meaning ascribed to it in section 9 of this act.
(25) "Per capita assets" shall have the meaning ascribed to it in section 10 of this act.
(26) "Population." Where in this act the population of a municipality, a county, or the State is mentioned, the population figure shall be the last current population estimate as furnished to the commissioner by any official agency of the State or federal government.
(27) "Municipality." The word municipality shall include cities, towns, townships, villages and boroughs.
(28) "First lien" shall have the meaning ascribed to it in section 11 of this act.
(29) "Foreign association" shall mean any association or corporation conducting the business of a savings and loan association, however designated, except an association.
(30) "Department" shall mean the Department of Banking of New Jersey.
(31) "Mutual association" shall mean any State association organized pursuant to the provisions of this act without capital stock.
(32) "Capital stock association" shall have the meaning ascribed to it in section 15 of P.L.1974, c.137 (C.17:12B-244).
(33) "Capital stock" shall have the meaning ascribed to it in section 15 of P.L.1974, c.137 (C.17:12B-244).
(34) "Stockholder" shall have the meaning ascribed to it in section 15 of P.L.1974, c.137 (C.17:12B-244).
(35) "Secondary mortgage loan" means a loan made to an individual, association, joint venture, partnership, limited partnership association, or any other group of individuals however organized, except a corporation, which is secured in whole or in part by a lien upon any interest in real property created by a security agreement, including a mortgage, indenture, or any other similar instrument or document, which real property is subject to one or more prior mortgage liens and which is used as a dwelling, including a dual purpose or combination type dwelling which is also used as a business or commercial establishment, and has accommodations for not more than six families, except that a loan which: (a) is to be repaid in 90 days or less; (b) is taken as security for a home repair contract executed in accordance with the provisions of P.L.1960, c.41 (C.17:16C-62 et seq.); or (c) is the result of the private sale of a dwelling if title to the dwelling is in the name of the seller and the seller has resided in said dwelling for at least one year if the buyer is purchasing said dwelling for his own residence and, as part of the purchase price, executes a secondary mortgage in favor of the seller, shall not be included within the definition of "secondary mortgage loan."
(36) "Federal Deposit Insurance Corporation" means the corporation so named, organized pursuant to an Act of Congress, or any federal corporation, instrumentality or agency which succeeds to the powers and functions of the Federal Deposit Insurance Corporation or undertakes to discharge the purposes for which said corporation was created.
(37) "Home state" with respect to an out-of-State association means the state by which the association is chartered. "Home state" with respect to a federal association means the state in which the principal office is located.
(38) "Out-of-State association" means a savings and loan association or building and loan association insured by the Federal Deposit Insurance Corporation and chartered under the laws of a state other than New Jersey, but not a bank as defined in 12 U.S.C. 1813(a)(2).
(39) "State" means any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands.
(40) "Resulting association" means a state or federally chartered association that has resulted from an interstate merger transaction pursuant to P.L.1963, c.144 (C.17:12B-1 et seq.).
##### **§ 17:12B-6** Gross income {#sec-17-12b-6 omnilex-key=us-nj-statutes--title-17--17:12B-6}
"Gross income" shall mean the sum, for an accounting period, of the following:
(a) Operating income.
(b) Real estate income.
(c) All profits actually received during such accounting period from the sale or transfer of securities, real estate or other property unless credited directly to reserve accounts.
(d) Any nonrecurring income unless credited directly to reserve accounts.
##### **§ 17:12B-7** Net income {#sec-17-12b-7 omnilex-key=us-nj-statutes--title-17--17:12B-7}
"Net income" shall mean gross income, for an accounting period, less the aggregate of the following:
(a) Operating expenses.
(b) Real estate expenses.
(c) All losses actually sustained during such accounting period from the sale of securities, real estate or other property as shall not have been charged to reserves.
(d) All interest paid, or due but unpaid, on borrowed money.
(e) Any nonrecurring charges.
##### **§ 17:12B-8** Principal office; branch office; auxiliary office; remote service unit {#sec-17-12b-8 omnilex-key=us-nj-statutes--title-17--17:12B-8}
(a) "Principal office" shall mean the legally established office of an association for the transaction of its business, other than a branch office, auxiliary office, agency, or a remote service unit of the association.
(b) "Branch office" shall mean a legally established office of an association, other than the principal office, an auxiliary office, agency, or a remote service unit of the association, at which such operations as may be authorized by the board not inconsistent with the limitations of this act may be conducted.
(c) "Auxiliary office" shall mean a place of business other than the principal office, a branch office, agency, or a remote service unit of an association wherein operations of an association may be conducted within the limitations set forth in this act relating to auxiliary offices.
(d) (Deleted by amendment.)
(e) "Remote service unit" shall mean an information processing device, including associated equipment, structures and systems, by which information relating to financial services rendered to the public is stored and transmitted to a financial institution. The term includes, without limitation, both "on-line" computer terminals and "off-line" cash dispensing machines. It excludes automated teller machines or devices on the premises of an association, unless shared with other financial institutions.
##### **§ 17:12B-9** Agency {#sec-17-12b-9 omnilex-key=us-nj-statutes--title-17--17:12B-9}
"Agency" shall mean a place of business other than the principal office, a branch office, auxiliary office, or a remote service unit of an association, at which an agent or agents of the association may receive payments on savings accounts, payments on loans or any obligations to the association for the purpose of transmission thereof to the principal office or to a branch office of the association. At such agency, an agent or agents may perform such other duties not inconsistent with the limitations of this act as may be authorized from time to time by the board.
##### **§ 17:12B-10** Per capita assets {#sec-17-12b-10 omnilex-key=us-nj-statutes--title-17--17:12B-10}
"Per capita assets" shall mean the total savings and loan assets divided by the population.
(a) Per capita assets for the State shall be the total assets of the associations having their principal offices in the State as of the last preceding December 31, divided by the population of the State.
(b) Per capita assets for a county shall be the total assets of the associations and their branch offices operating within such county as of the last preceding December 31, divided by the population of the county.
(c) Per capita assets for a municipality shall be the total assets of the associations and their branch offices operating within such municipality as of the last preceding December 31, divided by the population of the municipality.
(d) Where an association maintains offices in more than one municipality, the per capita assets of such association for the municipality in which there is a branch office application pending shall be computed by taking that percentage of the total assets of the association as the total savings account balances actually held in the office or offices physically located within such municipality bear to the total savings account balances held by the association. In all cases, assets and savings account balances shall be taken as of the last preceding December 31.
##### **§ 17:12B-11** Mortgage deemed first lien. {#sec-17-12b-11 omnilex-key=us-nj-statutes--title-17--17:12B-11}
11. A mortgage upon real property or a mortgage upon a lease of the fee of real property shall be deemed a first lien as follows:
(a) A mortgage upon real property shall be deemed a first lien notwithstanding the existence of (i) a prior mortgage or mortgages held by the association, (ii) a lien of a condominium association for up to six months of customary condominium assessments pursuant to section 21 of P.L.1969, c.257 (C.46:8B-21), or (iii) building restrictions or other restrictive covenants or conditions, leases or tenancies whereby rents or profits are reserved to the owner, joint driveways, sewer rights, rights in walls, rights-of-way or other easements, or encroachments which do not materially affect the security for the mortgage loan. Nothing herein shall alter or affect the status or priority of municipal liens under R.S.54:5-1 et seq.
(b) A mortgage upon a lease of the fee of real property shall be deemed a first lien not subject to any prior lien, except for municipal liens, notwithstanding the existence of building restrictions or other restrictive covenants or conditions, joint driveways, sewer rights, rights in walls, rights-of-way or other easements, or encroachments which do not materially affect the security for the mortgage loan. Nothing herein shall alter or affect the status or priority of municipal liens under R.S.54:5-1 et seq.
(c) A mortgage upon an apartment which is part of a horizontal property regime, established under the "Horizontal Property Act," P.L.1963, c.168 (C.46:8A-1 et seq.) or upon a unit which is part of a condominium established pursuant to the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.) shall be deemed a first lien notwithstanding the existence of other proportionate undivided interests in the "general common elements" or "common elements" of such horizontal property regime or condominium, as the case may be, as the same are defined in the "Horizontal Property Act," and the "Condominium Act," respectively, and notwithstanding the indivisibility of such common elements or the existence of a prior mortgage or mortgages held by the association upon such apartment or unit or the existence of a prior mortgage or mortgages on other apartments or units within the particular horizontal property regime or condominium, as the case may be, regardless of whether such prior mortgages are held by the association or any other mortgagee and notwithstanding the existence of building restrictions or other restrictive covenants or conditions, leases or tenancies whereby rents or profits are reserved to the owner, or other easements or encroachments which do not materially affect the security for the mortgage loan. Nothing herein shall alter or affect the status or priority of municipal liens under R.S.54:5-1 et seq.
(d) Every mortgage shall be certified to be a first lien by an attorney at law of the state in which the real property is located, or certified or guaranteed to be a first lien by a corporation authorized to guarantee titles to real property in such state.
##### **§ 17:12B-12** Purposes {#sec-17-12b-12 omnilex-key=us-nj-statutes--title-17--17:12B-12}
The purposes of associations operating under the provisions of this act shall be promoting thrift, home ownership and housing or otherwise investing funds in accordance with the provisions of this act.
##### **§ 17:12B-13** Persons who may form corporation {#sec-17-12b-13 omnilex-key=us-nj-statutes--title-17--17:12B-13}
Any 9 or more persons, domiciled in this State, and citizens of the United States, hereinafter referred to as incorporators, may associate to form a corporation for the purposes specified in this act, by complying with the terms, conditions and procedure herein stated.
##### **§ 17:12B-14** Contents of certificate of incorporation of a mutual association {#sec-17-12b-14 omnilex-key=us-nj-statutes--title-17--17:12B-14}
Contents of certificate of incorporation of a mutual association. The incorporators shall personally sign a certificate of incorporation, which shall state:
(1) The name of the State association, which shall contain the words "savings and loan association" or "savings bank S.L. A." The name shall not be one already in use by another association in this State, nor one so similar thereto as to deceive the public or lead to uncertainty or confusion and this provision shall be subject to any law otherwise restricting or prohibiting the use of the word "bank" or "banker" or "banking"; provided, however, that any association organized under this act may make representations describing its powers, services or functions provided for in this act.
(2) The street, street number, if any, and the municipality in this State in which the State association is to be located.
(3) That it is incorporated to operate as a mutual association pursuant to this act for the purposes herein stated.
(4) The name, residence (including street and number, if any) post office address and occupation of each incorporator.
(5) The amount which each incorporator agrees to subscribe for and pay into the guaranty account of the State association.
##### **§ 17:12B-15** Original by-laws {#sec-17-12b-15 omnilex-key=us-nj-statutes--title-17--17:12B-15}
The incorporators shall adopt the original by-laws of the association.
##### **§ 17:12B-16** Application to commissioner for approval {#sec-17-12b-16 omnilex-key=us-nj-statutes--title-17--17:12B-16}
The certificate of incorporation and the by-laws shall be submitted to the commissioner for his approval. Within 10 days thereafter, the commissioner shall give written notice to each incorporator, of the time and place designated by him for a hearing, by mailing the same to each incorporator at the post-office address stated in the certificate of incorporation. The time designated for such hearing shall be not less than 6 weeks nor more than 8 weeks after the date upon which the commissioner mails such notice.
##### **§ 17:12B-17** Notice of application and hearing thereon {#sec-17-12b-17 omnilex-key=us-nj-statutes--title-17--17:12B-17}
The incorporators shall give public notice of such application and of the time and place designated by the commissioner for the hearing thereon, by publishing the same prior to the time of hearing at least once a week for 4 weeks in at least 1 newspaper published and circulating in the municipality where the principal office of the State association will be located. If there is no newspaper published in such municipality, the notice shall be published in a newspaper, to be designated by the commissioner, circulating in said municipality.
Said notice shall also state the proposed name of the State association, the name of the municipality where the principal office of the State association will be located, the names and addresses, both residence and post office, of the incorporators, and the aggregate amount which they have agreed to invest in the State association before it commences business.
The incorporators shall also mail or cause to be mailed, at least 3 weeks prior to the time designated for said hearing, a copy of such notice to all associations, having principal or branch offices within the county where the principal office of the proposed State association is to be located.
Upon the request of the incorporators, the commissioner shall furnish a written list showing the names and street addresses of all State associations to which such notice must be sent.
##### **§ 17:12B-18** Guaranty account {#sec-17-12b-18 omnilex-key=us-nj-statutes--title-17--17:12B-18}
In the case of an application for the incorporation of a mutual association, and as a condition precedent to the approval of any such application, the incorporators shall execute an agreement to subscribe to, and upon the commencement of business pay into, an account of the State association to be known as the "guaranty account" the aggregate sum of $50,000.00 in accordance with such terms as shall be approved by the commissioner. Such guaranty account shall be subordinate to the accounts of saving members. It shall be used as a guaranty against the impairment of the capital of the State association and to the extent that it may be necessary for that purpose, losses and expenses of the State association shall be charged to it. The account shall not be released to the owners thereof, in less than 3 years from the date upon which payment was made into the account. If, thereafter, the commissioner finds that the reserves established to absorb losses and the undivided profits account of the State association plus the amount remaining in the guaranty account exceeds $50,000.00, or an amount equal to 5% of the capital of the State association, whichever is greater, he shall permit the excess to be released to the owners thereof, as hereinafter provided, proportionate to their respective interests in said guaranty account.
The amount paid in by each subscriber to the guaranty account, shall be recorded on the books of the State association in his name, and shall be evidenced by a certificate in a form approved by the commissioner. The amount standing to the credit of any person in such account, may be transferred to another person subject to the conditions of the account. Dividends may be declared upon the amounts standing to the credit of each owner of a proportionate interest in such account in accordance with the terms of the aforementioned agreement, but not in excess of the maximum rate of dividends declared to savings accounts in the State association for the same period. Each owner of a proportionate interest in such guaranty account shall have the same voting rights, restrictions and limitations as set forth in the bylaws of the association in accordance with section 126 of this act, at any annual or special meeting of the mutual association. Upon release, the amount released shall be transferred to a savings account in the State association, in the name of the owner, who shall thereupon be entitled to all of the rights and privileges and shall be subject to all of the duties and liabilities of membership.
##### **§ 17:12B-19** Hearing {#sec-17-12b-19 omnilex-key=us-nj-statutes--title-17--17:12B-19}
At such hearing or at any adjournment thereof which may be granted by the commissioner, there shall be afforded an opportunity to be heard to anyone desiring it. The commissioner shall also make such independent examination or investigation of such application as the circumstances shall require.
##### **§ 17:12B-20** Commissioner's findings as to mutual association application {#sec-17-12b-20 omnilex-key=us-nj-statutes--title-17--17:12B-20}
If the commissioner shall find that:
(a) the establishment of such State association is in the public interest; and
(b) will be of benefit to the area proposed to be served; and
(c) may be established without undue injury to any other association in the area in which it is proposed to locate such State association; and
(d) the State association will have a reasonable prospect of success; and
(e) the character, responsibility and general fitness of the incorporators are such as to command confidence and warrant belief that the business of the State association will be honestly and efficiently conducted; and
(f) the agreement with respect to the guaranty account has been executed in accordance with law, and that compliance therewith is guaranteed to his satisfaction; and
(g) the name proposed for the State association conforms with the requirements of this act and that the proposed bylaws are proper; and
(h) the State association has filed proofs as to the mailing of notice and publication required by the act, he shall approve such application and issue a certificate of approval which shall be endorsed upon or annexed to such certificate of incorporation.
##### **§ 17:12B-21** Commissioner's decision {#sec-17-12b-21 omnilex-key=us-nj-statutes--title-17--17:12B-21}
Within 30 days after the close of the hearing, the commissioner shall announce his decision upon such application and file in his office, a written memorandum stating the reasons therefor which shall be open to public inspection; and he shall forthwith thereafter give written notice thereof to the incorporators.
##### **§ 17:12B-22** Certificate to be filed {#sec-17-12b-22 omnilex-key=us-nj-statutes--title-17--17:12B-22}
The certificate of incorporation with the commissioner's approval endorsed thereon or annexed thereto, shall be recorded within 30 days after such approval, in the office of the clerk of the county where the office of the State association is to be located and after being so recorded shall be filed in the Department of Banking and Insurance of the State of New Jersey. Said certificate or a copy thereof duly certified by the commissioner or by the clerk of the county where the same is recorded shall be evidence in all courts and places. Upon the recording and filing of such certificate, the persons so associated, their successors and assigns shall from the date of the filings be a corporation by the name set forth in the certificate with all of the powers mentioned in this act.
##### **§ 17:12B-23** Time limit for commencing business {#sec-17-12b-23 omnilex-key=us-nj-statutes--title-17--17:12B-23}
If the incorporators fail to complete the organization of a State association and to cause it to commence business within 6 months from the date when authority is granted to them to do so, the said certificate of incorporation shall ipso facto become null and void; except that, for good cause shown, the commissioner may, in his discretion, on application of the State association extend for additional periods, not in excess of 6 months each, the time within which such State association may complete its organization and commence business provided that the initial application shall be made before the expiration of 6 months from the date authority is granted to commence business and any subsequent application shall be made before the expiration of any subsequent period for which permission to extend has been granted by the commissioner.
##### **§ 17:12B-24** Establishment, operation of branch offices by State association {#sec-17-12b-24 omnilex-key=us-nj-statutes--title-17--17:12B-24}
24. A. No State association shall hereafter establish or operate a branch office or offices, other than as provided by law without the prior written approval of the commissioner; provided, however, that any association operating an authorized branch office at the effective date of this act may continue to do so.
(1) An association operating a branch office approved prior to the effective date of this act with conditions or restrictions imposed on its operation may upgrade such office by notifying the commissioner at least 30 days before such upgrading. A branch office is considered upgraded if the association is relieved of any of the conditions or restrictions imposed on operation of the office when it opened. If within 30 days of receipt of the notice, the commissioner does not notify the association of his objection which would require the association to submit an application or additional information before upgrading, the association may upgrade the office.
(2) An approved, but unopened branch office as of the effective date of this amendatory act may open and operate in the same manner as a branch office approved subsequent to the effective date of this amendatory act.
(3) Any application which deals with offices of a State association filed with the commissioner prior to the effective date of this amendatory act shall continue to be processed as any application filed subsequent to the effective date of this amendatory act; however, the commissioner may request such additional information as may be necessary to comply with the requirements of this amendatory act.
B. An association may apply for a branch office regardless of the number of branch applications it has pending before the commissioner. Within 90 days after receipt of a branch application, the commissioner shall announce his decision upon such application.
C. The commissioner shall approve the application if the commissioner finds that:
(1) the State association's capital equals or exceeds the minimum capital established by the commissioner by regulation;
(2) the interests of the public will be served to advantage by the establishment of the full branch office;
(3) conditions in the locality in which the proposed full branch office is to be established afford reasonable promise of successful operation. To determine if an applicant meets this requirement, the commissioner shall consider only the costs of purchasing, constructing, leasing or otherwise establishing the proposed office, including the costs for staffing, furniture and equipment needed therefor and the effect of these costs on the operations of the applying institution as a whole. The applicant need not demonstrate an ability to operate the proposed office at a profit within a definable period of time based on the generation of new deposits from the market area to be entered except to the extent that losses suffered at the proposed office could affect the safety and soundness of the applicant's overall operations; and
(4) that the applicant has achieved sufficient compliance as defined by the commissioner by regulation with the provisions of the "Community Reinvestment Act of 1977," 12 U.S.C. s.2901 et seq.
D. (Deleted by amendment, P.L.1996, c.17.)
E. The commissioner shall conduct such investigation or hearing, or both, as the commissioner may deem advisable. The commissioner may adopt, amend, alter or rescind regulations prescribing the form of protest to applications and the procedures to be followed in the event that the commissioner elects to hold a hearing in connection with an application for a branch office, and such other regulations as the commissioner may deem necessary with respect to the provisions of this section.
F. (1) In lieu of the procedures set forth in subsections A through C and E of this section, section 89 of P.L.1996, c.17 (C.17:12B-24.1), paragraph (2) of section 28 of P.L.1963, c.144 (C.17:12B-28), or paragraph (2) of section 40 of P.L.1963, c.144 (C.17:12B-40), a State association which, directly or through a predecessor association by merger or other reorganization, has been in business for at least three years, and which is well capitalized, adequately managed, and, if applicable, has received in its most recent examination under the "Community Reinvestment Act of 1977," 12 U.S.C.s.2901 et seq., a rating of not less than "satisfactory record of meeting community credit needs," or its equivalent, may apply for expedited branch office approval pursuant to this subsection. The State association shall file written application of the proposed establishment with the commissioner and with those other persons designated by the commissioner by rule or regulation. The application shall be accompanied by or be in the form of a certification that (a) all applicable provisions of this subsection have been met, (b) the applicant requests expedited processing under this subsection, and (c) contains that other information, if any, as the commissioner may require by rule or regulation to confirm that an establishment of the branch will not adversely affect the safety and soundness of the State association or the public interest.
(2) An application shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing.
(3) For purposes of this subsection, the term "well capitalized" has the meaning given the term in 12 U.S.C. s.1831o and "well managed" means, unless otherwise determined in writing by the commissioner, (a) the achievement of a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System or an equivalent rating system in connection with the most recent examination or subsequent review of the State association, and (b) at least a rating of 2 for management, if such rating is given. Nothing in this subsection shall be construed to affect the confidentiality of any such rating under applicable law or regulation.
##### **§ 17:12B-24.1** Change of location of office of State association {#sec-17-12b-24.1 omnilex-key=us-nj-statutes--title-17--17:12B-24.1}
89.a. Upon filing an application therefor in the department, and upon obtaining the approval of the commissioner thereto a State association may change the location of its principal office or of a branch office located in this State to another location in this State. Upon filing an application therefor in the department, and upon obtaining the approval of the commissioner thereto, an out-of-State association with a branch office located in this State may change the location of a branch office in this State to another location in this State, and an association with a branch office located outside this State may change the location of a branch office to another location in that State.
b. If it shall appear from the application, or if the commissioner shall find from such proof as the commissioner may require, or from such investigation as the commissioner may cause to be made, that the area which would be served by the principal or branch office after its change in location would not be substantially different from the area theretofore served by that office, the commissioner shall approve the application.
c. If it shall appear to the commissioner, from the application, or from such proof as the commissioner may require, or from such investigation as the commissioner may cause to be made, that the proposed location will be so far removed from the place then occupied by the principal office or by the branch office that the area which would be served by that office after its change in location would be substantially different from the area theretofore served by it, the commissioner shall not approve the application unless, after an investigation or hearing, or both, as the commissioner may determine to be advisable, the commissioner shall find that the interests of the public will be served to advantage by the change in location, and that conditions in the locality to which removal is proposed afford reasonable promise of successful operation.
d. The failure to open and operate a relocated office within 12 months after the commissioner approves the application therefor, shall automatically terminate the right to open the relocated office, except that, for good cause shown, the commissioner may, at the commissioner's discretion, extend for additional periods, not to exceed 12 months each time, the time within which the relocated office may be opened, provided that the initial application shall be made before the expiration of 12 months from the date authority is granted to relocate the principal office and any subsequent application shall be made before the expiration of any subsequent period for which permission to extend has been granted by the commissioner.
##### **§ 17:12B-24.2** Powers of out-of-State, State association {#sec-17-12b-24.2 omnilex-key=us-nj-statutes--title-17--17:12B-24.2}
93. a. An out-of-State association that opens, occupies or maintains a branch office in this State shall have in this State only the powers a State association has in this State.
b. A State association that owns, occupies or maintains a branch office outside this State shall have in that state such additional powers as permitted to associations chartered in the state in which the branch is located.
##### **§ 17:12B-27.2** Time limit for opening branch office; discontinuance of branch office {#sec-17-12b-27.2 omnilex-key=us-nj-statutes--title-17--17:12B-27.2}
The failure of a State association to open and operate a branch office within 12 months after the commissioner approves the application therefor, shall automatically terminate the right of the State association to open a branch office, except that, for good cause shown, the commissioner may, in his discretion, on application of the State association extend for additional periods, not in excess of 12 months each, the time within which such branch office may be opened, provided the initial application shall be made before the expiration of 12 months from the date that the commissioner approves the application and any subsequent application for extension shall be made before the expiration of any subsequent period for which permission to extend is granted by the commissioner. A State association may discontinue a branch office upon resolution of its board. Upon adoption of such a resolution, the State association shall file a certificate with the commissioner specifying the location of the branch office to be discontinued, and the date upon which the discontinuance shall be effective.
##### **§ 17:12B-28** Interchange of principal and branch offices {#sec-17-12b-28 omnilex-key=us-nj-statutes--title-17--17:12B-28}
A State association may change the location of its principal office to a location then occupied by a branch office operated by it, subject to the requirements herein set forth:
(1) If the interchange results in the new location of the principal office remaining in the same municipality as the previous location, the State association shall file a certificate of such change with the commissioner within 1 week from the date such change is made.
The State association may, in such case, operate its principal office at the location previously occupied by its branch office and may operate a branch office at the location previously occupied by its principal office without further requirement.
(2) If the interchange results in the principal office being removed from one municipality to another, the State association shall apply to the commissioner for written approval of such change of location in accordance with the provisions of section 40 of this act. Upon approval of the commissioner, in accordance with section 40 of this act, the association may operate its principal office at the previous location of its branch office and may operate a branch office at the previous location of its principal office without further requirement.
The failure of a State association to complete such interchange within 12 months after filing the certificate or after approval by the commissioner, as the case may be, shall automatically terminate the rights of the State association to effect such interchange, except that, for good cause shown, the commissioner may in his discretion on application of the State association, extend for additional periods, not in excess of 12 months each, the time within which such interchange may be effected, provided the initial application shall be made before the expiration of 12 months from the date that the commissioner approves the application and any subsequent application for extension shall be made before the expiration of any subsequent period for which permission to extend is granted by the commissioner.
##### **§ 17:12B-29** Auxiliary offices {#sec-17-12b-29 omnilex-key=us-nj-statutes--title-17--17:12B-29}
A State association may, pursuant to resolution of its board, establish and operate not more than one auxiliary office, as defined in section 8 of this act, as an adjunct to its principal office, and not more than one auxiliary office as an adjunct to each branch office now operated by it, or hereafter established and operated by it.
##### **§ 17:12B-30** Auxiliary office, establishment, location {#sec-17-12b-30 omnilex-key=us-nj-statutes--title-17--17:12B-30}
30. No auxiliary office shall be established or operated at a location which is outside this State or more than one mile from the office of the State association to which such auxiliary office is an adjunct; nor shall any such auxiliary office be established within 1,000 feet of the principal office or a branch office of another association, without the written consent of such association. Such consent, once given, shall thereafter be irrevocable, regardless whether it was given gratuitously or for a valuable consideration. No State association shall be required to discontinue an auxiliary office for the reason that, after its establishment pursuant to this act, another association has established its principal office or a branch office within 1,000 feet of such auxiliary office.
##### **§ 17:12B-31** Auxiliary office, permitted business transactions {#sec-17-12b-31 omnilex-key=us-nj-statutes--title-17--17:12B-31}
31. No business shall be transacted at an auxiliary office other than
(a) the receipt of payments, deposits of currency, checks and other items;
(b) the payment of withdrawals;
(c) the cashing of checks, drafts and other items; and
(d) the issuance of money orders or travelers' checks.
##### **§ 17:12B-32** Business to be transacted only with persons outside structure {#sec-17-12b-32 omnilex-key=us-nj-statutes--title-17--17:12B-32}
The business authorized by section 31 of this act shall be transacted only with persons who, while such business is being transacted, remain outside the structure which houses an auxiliary office.
##### **§ 17:12B-33** Property to be used for auxiliary office; parking facilities {#sec-17-12b-33 omnilex-key=us-nj-statutes--title-17--17:12B-33}
An association may, for the purpose of establishing an auxiliary office or offices, purchase or lease real property, or it may use real property heretofore purchased or leased by it. As an incident to the conduct of its business at an auxiliary office, an association may provide motor vehicle parking facilities for its customers.
##### **§ 17:12B-34** Auxiliary office not deemed branch or limited facility branch office {#sec-17-12b-34 omnilex-key=us-nj-statutes--title-17--17:12B-34}
An auxiliary office shall not be deemed a branch office or limited facility branch office within the meaning of section 24 of this act. Each auxiliary office shall be deemed to be an integral part of the office to which it is an adjunct, and all business transacted at such auxiliary office shall be deemed to be transacted at the office to which it is an adjunct.
##### **§ 17:12B-35** Other powers not affected {#sec-17-12b-35 omnilex-key=us-nj-statutes--title-17--17:12B-35}
Nothing in sections 29 through 34 of this act shall impair the powers of an association to purchase, hold, lease or convey real property or any interest therein pursuant to sections 48 and 166 of this act nor shall anything in sections 29 through 34 of this act apply to or impair any other power which an association may exercise under this act, including the power to provide facilities commonly known as drive-in or walk-up offices which are physically attached to the principal office or a branch office of an association, and which are accessible to such principal office or branch office by a means which is within the sole control of the association.
##### **§ 17:12B-36** Measurement of distances {#sec-17-12b-36 omnilex-key=us-nj-statutes--title-17--17:12B-36}
For the purposes of this act, distances shall be measured along a straight line drawn between the center point of the main entrance of the principal office or branch office of an association and the center point of the main entrance of the auxiliary office.
##### **§ 17:12B-37** Agencies {#sec-17-12b-37 omnilex-key=us-nj-statutes--title-17--17:12B-37}
a. Any State association shall have the right to make written application to the commissioner for permission to establish and operate an agency or agencies as defined in section 9 of this act subject to the following requirements:
(1) The State association may, pursuant to resolution of its board, establish and operate an agency or agencies on written application to the commissioner.
(2) The commissioner shall determine the conditions under which he shall permit the establishment of the agency or agencies.
(3) No agency shall be established in a municipality whose population at the time of the establishment of such agency exceeds 3,500.
(4) No agency shall be established in a municipality wherein there is located the principal or branch office of an insured association.
(5) No business shall be transacted at an agency other than the following:
(a) The receipt of payments on savings accounts,
(b) The receipt of payments on loans, and
(c) The receipt of payments on other obligations to the State association.
(6) An agency shall not be deemed a branch office or an auxiliary office within the meaning of sections 24 and 29 of this act.
b. Notwithstanding the provisions of subsection a. of this section, any State association may, without approval of the commissioner, to the extent authorized by its board of directors, establish or maintain, within the same state as the principal office of the association, agencies which only service and originate, but do not approve, loans and contracts or which manage or sell real estate owned by the association, or both. Except for payment of savings accounts and loan approval services, offering of any services not listed in this subsection may be approved by the commissioner.
##### **§ 17:12B-37.1** Remote service units; establishment or use; sharing; regulations {#sec-17-12b-37.1 omnilex-key=us-nj-statutes--title-17--17:12B-37.1}
A State association may establish or use remote service units as defined in section 8 of P.L.1963, c. 144 (C. 17:12B-8). The commissioner may require the sharing of such remote service units with other financial institutions. The commissioner may adopt, amend, alter, or rescind regulations governing the establishment and operation of remote service units. Such regulations shall be in substantial conformity with similar rules and regulations promulgated by the Federal Home Loan Bank Board.
##### **§ 17:12B-38** By-laws {#sec-17-12b-38 omnilex-key=us-nj-statutes--title-17--17:12B-38}
Each State association shall adopt such by-laws as may be required by the provisions of this act and as it may deem necessary or desirable for the regulation of its business and affairs and for the attainment of its purposes, consistent with the provisions of this act, and may change the same from time to time. Copies of the by-laws and changes therein shall be made available to each member. The original by-laws of any State association hereafter incorporated shall be adopted by the incorporators. Changes in the by-laws may be adopted by the board or by the members as may be provided in the by-laws. The term "constitution" as used by any State association heretofore incorporated, shall be construed to be synonymous with the term "by-laws" as used in this act.
##### **§ 17:12B-38.1** Association official immunity {#sec-17-12b-38.1 omnilex-key=us-nj-statutes--title-17--17:12B-38.1}
An association may with the approval of the commissioner, amend its certificate of incorporation or bylaws, by a two-thirds vote of its board present and voting at a duly convened regular or special meeting, to provide that a director or officer shall not be personally liable, or shall be liable only to the extent therein provided, to the association or its members for damages for breach of any duty owed to the association or its members, except that the provision shall not relieve a director or officer from liability for an act or omission: a. in breach of that person's duty of loyalty to the association or its members; b. not in good faith or involving a knowing violation of law; or c. resulting in receipt by that person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the association or its members in connection with a matter in which he has a material conflict of interest.
The commissioner shall approve the amendment unless he finds that it unreasonably affects the interest of the members.
This section shall be applicable to federal associations, in addition to State associations, to the extent permitted by federal law.
##### **§ 17:12B-39** Commissioner's approval required {#sec-17-12b-39 omnilex-key=us-nj-statutes--title-17--17:12B-39}
No by-law nor any change in the by-laws shall become effective until it shall have been submitted in writing to the commissioner and he shall either have approved it in writing, or have failed to take any action thereon for a period of 30 days after it shall have been submitted to him. Approval shall not be withheld by the commissioner unless a proposed by-law or any change in the by-laws is in conflict with the provisions of this act.
##### **§ 17:12B-40** Change of office location {#sec-17-12b-40 omnilex-key=us-nj-statutes--title-17--17:12B-40}
A State association may change the location of its principal office to a new location subject to the following requirements:
(1) If the new location of its principal office is in the same municipality, the State association shall file a certificate of such change with the commissioner within 1 week from the date such change is made.
(2) Where the principal office is to be removed from one municipality to another, such change or removal shall take place only after receipt of written approval of the commissioner in accordance with the procedures established in section 24 of this act, except that the State association shall publish the required notice of application in the State association's home office municipality, the municipality to be served by the new office, and the municipality where the office is to be closed or the principal office is to be designated as a branch. In addition, the State association shall post notice of the application for 17 days from the date of first publication in a prominent location in the office to be closed.
##### **§ 17:12B-40.1** Failure to open and operate relocated principal office; effect {#sec-17-12b-40.1 omnilex-key=us-nj-statutes--title-17--17:12B-40.1}
The failure of a State association to open and operate a relocated principal office within 12 months after the commissioner approves the application therefor, shall automatically terminate the right of the State association to open such relocated principal office, except that, for good cause shown, the commissioner may, in his discretion, on application of the State association, extend for additional periods, not in excess of 12 months each, the time within which such relocated principal office may be opened, provided that the initial application shall be made before the expiration of 12 months from the date authority is granted to relocate such principal office and any subsequent application shall be made before the expiration of any subsequent period for which permission to extend has been granted by the commissioner.
##### **§ 17:12B-45** Failure to open and operate relocated principal office; effect {#sec-17-12b-45 omnilex-key=us-nj-statutes--title-17--17:12B-45}
The failure of a State association to open and operate a relocated principal office within 6 months after the commissioner approves the application therefor, shall automatically terminate the right of the State association to open such relocated principal office, except that, for good cause shown, the commissioner may, in his discretion, on application of the State association, extend for additional periods, not in excess of 6 months each, the time within which such relocated principal office may be opened, provided that the initial application shall be made before the expiration of 6 months from the date authority is granted to relocate such principal office and any subsequent application shall be made before the expiration of any subsequent period for which permission to extend has been granted by the commissioner.
##### **§ 17:12B-46** Change of name {#sec-17-12b-46 omnilex-key=us-nj-statutes--title-17--17:12B-46}
A State association may with the approval of the commissioner, change its name by a 2/3 vote of its board present and voting at a duly convened regular or special meeting. A certificate, signed by the president and secretary setting forth the former name and the new name and that it was so adopted, specifying the date of the meeting, bearing the endorsement of approval by the commissioner, shall be recorded in the office of the clerk of the county wherein the State association is located, and thereafter the same shall be filed with the commissioner. The name so certified shall from the time of such filing with the commissioner be the corporate title of the State association.
##### **§ 17:12B-46.1** Definitions relative to emergency closings {#sec-17-12b-46.1 omnilex-key=us-nj-statutes--title-17--17:12B-46.1}
1. A. The following words as used in this act, unless a different meaning is plainly required by the context, shall have the following meaning:
(1) "Commissioner" means the Commissioner of Banking or any other person lawfully exercising the powers of such commissioner;
(2) "Association" means any State savings and loan association operating pursuant to the "Savings and Loan Act (1963)" P.L.1963, c.144 (C.17:12B-1 et seq.) and any out-of-State association with a branch office in this State;
(3) "Officers" means the person or persons designated by the board of directors of an association to act for the association in carrying out the provisions of this act;
(4) "Emergency" means any condition which makes the transaction of business, at one or more or all of the offices of an association or associations, contrary to the welfare and security of such office or offices or contrary to the health, safety or security of persons working in or making use of such office or offices. Without limiting the generality of the foregoing, an emergency may arise when any condition poses an imminent or existing threat to the welfare, safety or security of persons or property or both, such as any one or more of the following: forces of the natural elements, fire, explosions, epidemics, power failures, labor disputes, transportation failures, war, riots, civil commotions, and other acts of lawlessness or violence;
(5) "Office" means any place at which an association transacts business or conducts operations related to the transaction of business;
(6) "Person" includes natural persons, corporations, partnerships and associations.
B. This act shall apply to federal savings and loan associations having their principal offices or a branch office in this State to the extent that the provisions of this act are not inconsistent with and do not infringe upon federal laws, rules or regulations.
##### **§ 17:12B-46.2** Proclamation of emergency {#sec-17-12b-46.2 omnilex-key=us-nj-statutes--title-17--17:12B-46.2}
Whenever the commissioner is of the opinion that an emergency exists in this State or in any part or parts of this State he shall, by proclamation, authorize those associations which are directly or indirectly affected by such emergency to close one or more or all of their offices.
##### **§ 17:12B-46.3** Action by officers after proclamation of emergency {#sec-17-12b-46.3 omnilex-key=us-nj-statutes--title-17--17:12B-46.3}
The officers of any association directly or indirectly affected by the emergency proclaimed by the commissioner shall have the authority to determine whether one or more or all of the offices of such association shall be closed, and they may, but need not, provide that any business normally transacted at a closed office may be transacted at another of the association's offices, for the duration of the emergency.
##### **§ 17:12B-46.4** Duration of emergency {#sec-17-12b-46.4 omnilex-key=us-nj-statutes--title-17--17:12B-46.4}
Any office closed pursuant to section 3 of this act shall remain closed until the commissioner proclaims that the emergency has ended, or until the officers of such association determine that one or more or all the association's offices should be reopened; whichever first occurs.
##### **§ 17:12B-46.5** Action by officers when no emergency proclaimed {#sec-17-12b-46.5 omnilex-key=us-nj-statutes--title-17--17:12B-46.5}
Whenever the officers of an association are of the opinion that an emergency, as defined in section 1 of this act, exists which directly or indirectly affects one or more or all of the association's offices they shall have the same authority given to officers under section 3 of this act even though the commissioner has not issued and does not issue a proclamation of emergency. Any office or offices closed pursuant to this section shall remain closed until the officers of the association shall determine that such office or offices shall be reopened.
##### **§ 17:12B-46.6** Responsibility of officers {#sec-17-12b-46.6 omnilex-key=us-nj-statutes--title-17--17:12B-46.6}
Any officer acting in good faith under the provisions of this act shall be deemed to have exercised the discretion herein specifically conferred upon him to protect the property of the association and the welfare of the people involved in its operation.
##### **§ 17:12B-46.7** Notice to commissioner {#sec-17-12b-46.7 omnilex-key=us-nj-statutes--title-17--17:12B-46.7}
An association closing an office or offices or reopening an office or offices, pursuant to any provision of this act, shall give as prompt notice to the commissioner of its action as conditions will permit.
##### **§ 17:12B-46.8** Effect of emergency closing {#sec-17-12b-46.8 omnilex-key=us-nj-statutes--title-17--17:12B-46.8}
No association shall be liable to any person for any direct or indirect loss suffered by such person by reason of the association's closing one or more or all of its offices pursuant to the provisions of this act. Where an obligation becomes payable to an association through an office closed as herein provided, or where an association is required to pay an obligation through an office which has been closed as herein provided, such obligation shall be deemed to be payable to or by the association on the day upon which the association reopens such office. An association may, however, designate another of its offices to transact business normally transacted at a closed office until such time as the closed office is reopened.
##### **§ 17:12B-46.9** Associations to be saved harmless {#sec-17-12b-46.9 omnilex-key=us-nj-statutes--title-17--17:12B-46.9}
An association which closes one or more or all of its offices pursuant to this act shall be saved harmless from all liability to any person and from all actions and claims brought or asserted against the association for its failure to have its office or offices open during its usual business hours. Nor shall any association be liable to any person by reason of its failure to perform, or its delay in performing, any contractual, statutory or other duty assumed by or imposed upon the association when such failure or delay is caused by an emergency as defined in this act.
##### **§ 17:12B-46.10** Regulations of the commissioner {#sec-17-12b-46.10 omnilex-key=us-nj-statutes--title-17--17:12B-46.10}
The commissioner may make such orders and regulations, not inconsistent with this act, as he shall deem necessary to provide for the uninterrupted continuance of business by associations during an emergency to the extent consistent with the safety and security of persons and of property.
##### **§ 17:12B-46.11** Construction of act {#sec-17-12b-46.11 omnilex-key=us-nj-statutes--title-17--17:12B-46.11}
The provisions of this act shall be construed and applied as being in addition to, and not in substitution of, any other law of this State or of the United States excusing delays by associations in the performance of duties or obligations or authorizing the closing of associations because of emergencies or conditions beyond the association's control, or otherwise.
##### **§ 17:12B-46.12** Short title {#sec-17-12b-46.12 omnilex-key=us-nj-statutes--title-17--17:12B-46.12}
This act may be cited as the "Savings and Loan Emergency Closing Act."
##### **§ 17:12B-47** General powers {#sec-17-12b-47 omnilex-key=us-nj-statutes--title-17--17:12B-47}
Every association shall have all of the powers conferred by this act, both expressed and implied, and such others as are incidental thereto, and incidental or necessary to the operation of its business and the attainment of its purpose. Such powers shall be exercised in conformity with the provisions contained in this act.
##### **§ 17:12B-48** Powers of association {#sec-17-12b-48 omnilex-key=us-nj-statutes--title-17--17:12B-48}
48. Without limiting the generality of the foregoing, every association shall have power to:
(1) Have succession by its corporate name for the period limited in its charter or certificate of incorporation, and when no period is limited, perpetually.
(2) Sue and be sued in any court.
(3) Adopt and use a corporate seal and alter the same.
(4) Purchase and otherwise acquire, hold, mortgage, pledge, lease, exchange, sell, convey and otherwise dispose of, any real and personal property, necessary or incidental to its operations and consistent with its powers and purposes.
(5) Insure its members' accounts with the Federal Deposit Insurance Corporation, and comply with conditions necessary to obtain and maintain such insurance.
(6) Become a member of or stockholder in a Federal Home Loan Bank and to that end to comply with all conditions of membership therein.
(7) Act as agent for the United States or the State of New Jersey or any instrumentality of either of them, when designated for that purpose, and perform such reasonable duties as such agent as may be required of it.
(8) Join any cooperative league organized for the purpose of protecting and promoting the welfare of associations and their members and comply with all conditions of membership therein.
(9) Borrow money from any source in or out of the State, on the note, bond and mortgage or other obligation of the association upon such terms and conditions as the board may from time to time prescribe by resolution adopted by at least a majority of all the members of the board and duly recorded on the minutes and to pledge, assign or transfer mortgages, owned by the association and the obligations secured by such mortgages, together with the shares, if any, pledged as collateral security therefor, or any real or other personal property, as security for the repayment of money so borrowed. No association shall borrow money if by doing so the aggregate of its indebtedness for borrowed money other than to the Federal Home Loan Bank will exceed 20% of its capital, except with the approval of the commissioner.
(10) (Deleted by amendment.)
(11) Require an advance payment of interest for a period of one month on any loan; and accept advance payments of interest, if made at the option of the debtor, for any period on any loan. None of such payments shall be deemed usurious.
(12) Where shares are issued, charge an admission fee, not to exceed $0.25 per share, which shall include the cost of membership or share certificate and account book.
(13) Impose charges upon a member for failure to make any payment to the association when due, but only as provided in this paragraph. Where the association issues installment share accounts it may impose such charge upon any member holding such an account or any borrower upon a sinking fund mortgage not in excess of 1% a month upon the amount in arrears, except for the first month's arrearage or the amount by which such first month's arrearage may be increased by subsequent arrearage, in which case a charge not in excess of 5% may be imposed. Such charges shall be subject to the further limitations that no such charge shall be deducted from any amount actually paid by a member upon an account nor shall the total of any such charges against any account in any fiscal year exceed the amount that may be charged for failure to make any payments for a six-month period nor shall any charge for default be made on a charge for default. Otherwise an association may impose a charge for failure to make any required payment to it when due upon any loan or contract for the resale of real estate to a member, not to exceed 4% of the amount of each payment in arrears, but no more than one such charge may be made with respect to any one payment in arrears. An association may impose a reasonable service charge against any member who tenders to such association, for collection or as payment, a check or other instrument of any type which subsequently is not honored by the institution or person upon which such check or other instrument is drawn. None of such charges shall be deemed usurious.
(14) Compute interest upon any direct reduction loan, on designated payment dates, and add the same to the unpaid balance of such loan.
(15) Act as agent for any person where such agency will further the interests of the association and its members, subject to such limitations as may be prescribed by the commissioner.
(16) Upon application to and approval by the commissioner, to act as custodian or trustee within the contemplation of the Federal Self-Employed Individuals Tax Retirement Act of 1962, as amended and supplemented, and the Employee Retirement Income Security Act of 1974 as amended and supplemented, and as custodian, trustee or manager of any such investment fund the authorized investments of which include, but need not be limited to, savings accounts or real estate loans, and the beneficial interests in which may be represented by transferable shares or certificates. Associations exercising the powers authorized by this subsection shall segregate all funds held in such fiduciary capacities from the general assets of the association and shall keep a separate set of books and records showing in detail all transactions made under authority of this subsection. If individual records are kept for each self-employed individual's retirement plan and each such investment fund, then all such funds held in such fiduciary capacities by an association may be commingled for appropriate purposes of investment. No funds held in such fiduciary capacities shall be used by an association in the conduct of its business; however, such funds may be invested in savings accounts of the association in the event that the custodial, trust or other plan does not prohibit such investment. In granting or refusing the association's application the commissioner shall take into consideration the investment policies, amount, type and adequacy of reserves, fidelity bonds and any legally required deposits of the applicant and other pertinent facts and circumstances.
(17) Upon compliance with subsection (5) of this section, accept from its members accounts to be repaid upon such terms, not inconsistent with this act, as are approved by the Commissioner of Banking and Insurance, by regulation or otherwise, provided that no account shall exceed the limitations established by section 78 of P.L.1963, c.144 (C.17:12B-78), and provided further that no account shall be accepted or issued in the name of any corporation, association or partnership or in the name of any individual for use in trade or business. An association issuing such accounts may honor demands for withdrawal of such accounts in the form of negotiable checks, drafts or orders in the form of electronic fund transfers and may become a member of a clearing facility and satisfy reasonable conditions required for its qualification and pay reasonable expenses therefor. Such accounts may be either interest-bearing or noninterest-bearing; provided, however, that the payment of interest on such accounts be permitted by federal law. An association accepting accounts pursuant to this subsection shall, at all times, maintain reserves against such accounts as shall be prescribed in regulations issued by the commissioner in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) but such reserves shall be equal in nature and amount to those required of savings banks in this State against similar accounts. Such reserves shall be maintained in cash or deposits in one or more reserve depositories as authorized by the Commissioner of Banking and Insurance. Regulations of the commissioner may also provide that associations issuing such type of accounts maintain a general reserve account, federal insurance reserve account and undivided profits of specified minimum amounts and provide for minimum standards of office facilities in connection therewith. An insured association may impose a reasonable service charge for providing and maintaining such accounts for the benefit of its members.
(18) Issue credit cards, extend credit in connection therewith, and otherwise engage in or participate in credit card operations subject to such regulations as the commissioner may prescribe. Any such regulations shall be in substantial conformity with similar rules and regulations of the Office of Thrift Supervision.
(19) (a) Apply to the commissioner for permission to act as trustee, executor, administrator, guardian, or in any other fiduciary capacity in which federal savings and loan associations doing business in this State are permitted to act. Associations exercising any or all of the powers enumerated in this section shall segregate all assets held in any fiduciary capacity from the general assets of the association and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of this section. No association shall receive in its trust department deposits of current funds subject to check or the deposit of checks, drafts, bills of exchange, or other items for collection or exchange purposes. Funds deposited or held in trust by the association awaiting investment shall be carried in a separate account and shall not be used by the association in the conduct of its business unless it shall first set aside in the trust department United States bonds or other securities approved by the commissioner. In the event of the failure of such association, the owners of the funds held in trust for investment shall have a lien on the bonds or other securities so set apart, in addition to their claim against the estate of the association. Whenever the laws of this State require corporations acting in a fiduciary capacity to deposit securities with the State authorities for the protection of private or court trusts, associations so acting shall be required to make similar deposits and securities so deposited shall be held for the protection of private or court trusts, as provided by New Jersey law. Associations in such cases shall not be required to execute the bond usually required of individuals if New Jersey corporations under similar circumstances are exempt from this requirement. Associations shall have power to execute such bond when so required by the laws of New Jersey. In any case in which the laws of this State require that a corporation acting as trustee, executor, administrator, or in any capacity specified in this section shall take an oath or make an affidavit, any officer, as defined in section 65 of P.L.1963, c.144 (C.17:12B-65), of such association may take the necessary oath or execute the necessary affidavit. It shall be unlawful for any association to lend any officer, director, or employee any funds held in trust under the powers conferred by this section. Any officer, director, or employee making such loan, or to whom such loan is made, may be fined not more than $5,000.00, or imprisoned not more than five years, or may be both fined and imprisoned, in the discretion of the court. In passing upon applications for permission to exercise the powers enumerated in this section, the commissioner may take into consideration the amount of capital and surplus of the applying association, whether or not such capital and surplus is sufficient under the circumstances of the case, the needs of the community to be served, and any other facts and circumstances that seem to him proper, and may grant or refuse the application accordingly, except that approval shall not be granted to any association having a capital and surplus less than the capital and surplus required by New Jersey law of State banks, trust companies, and corporations exercising such powers.
(b) Any association desiring to surrender its right to exercise the powers granted under this section, in order to relieve itself of the necessity of complying with the requirements of this section, or to have returned to it any securities which it may have deposited with the State authorities for the protection of private or court trusts, or for any other purpose, may file with the commissioner a certified copy of a resolution of its board of directors signifying such desire. Upon receipt of such resolution, the commissioner, after satisfying himself that such association has been relieved in accordance with State law of all duties as trustee, executor, administrator, guardian or other fiduciary, under court, private or other appointments previously accepted under authority of this section, may, in its discretion, issue to such association a certificate certifying that such association is no longer authorized to exercise the powers granted by this section. Upon the issuance of such a certificate by the commissioner, such association (i) shall no longer be subject to the provisions of this section or the regulations of the commissioner made pursuant thereto, (ii) shall be entitled to have returned to it any securities which it may have deposited with the State authorities for the protection of private or court trusts, and (iii) shall not exercise thereafter any of the powers granted by this section without first applying for and obtaining approval to exercise such powers pursuant to the provisions of this section.
(c) The commissioner is authorized and empowered to promulgate such regulations as he may deem necessary to enforce compliance with the provisions of this section and the proper exercise of the trust powers granted by this section. Any such regulations shall be in substantial conformity with similar rules and regulations of the Office of Thrift Supervision. (20) In accordance with rules and regulations promulgated by the commissioner, issue and sell directly to subscribers or through underwriters mutual capital certificates. Such certificates shall constitute part of the general reserve and net worth of the issuing association. Such certificates--
(a) Shall be subordinate to all savings accounts, savings certificates, and debt obligations;
(b) Shall constitute a claim in liquidation on the general reserves, surplus, and undivided profits of the association remaining after the payment in full of all savings accounts, savings certificates, and debt obligations;
(c) Shall be entitled to the payment of dividends; and
(d) May have a fixed or variable dividend rate.
The commissioner is authorized and empowered to promulgate such regulations as he may deem necessary with respect to the powers granted by this section. Any such regulations shall be in substantial conformity with similar rules and regulations of the Office of Thrift Supervision. The commissioner shall provide in his regulations for charging losses to the mutual capital certificates, reserves, and other net worth accounts.
(21) Notwithstanding the provisions of P.L.1963, c.144 (C.17:12B-1 et seq.) or any other law, exercise those powers, rights, benefits or privileges now or hereafter authorized for national or out-of-State banks or for federal or out-of-State savings banks or savings associations either directly or through a financial subsidiary or other subsidiary, to the same extent and subject to the same limitations as national or out-of-State banks or federal or out-of-State savings banks or savings associations may exercise those powers, rights, benefits or privileges, provided that before exercising any power, right, benefit or privilege of any out-of-State bank or out-of-State savings bank or savings association, the commissioner has adopted a regulation approving an exercise of that power, right, benefit or privilege by State associations generally or the State association provides notice to the commissioner and on a case-by-case basis the commissioner either approves the activity or does not provide notice before the expiration of 45 days that such power, right, benefit or privilege is not appropriate for the State association on grounds of safety and soundness or on other grounds designated by the commissioner by regulation. The commissioner shall have the authority to adopt rules and regulations pursuant to this section, which rules and regulations shall have as their objective the placing of State associations on a substantial competitive parity with national and out-of-State banks and federal and out-of-State savings banks and savings associations.
(22) Exercise any powers and activities that have been or are hereafter approved by regulation of the Board of Governors of the Federal Reserve System as being (i) financial in nature or incidental to such financial activity, (ii) complementary to a financial activity and not posing a substantial risk to the safety or soundness of depository institutions or the financial system generally, or (iii) so closely related to banking or managing or controlling savings associations as to be a proper activity for a bank holding company or financial holding company pursuant to the "Bank Holding Company Act of 1956," 70 Stat. 133 (12 U.S.C. s. 1841 et seq.) and regulations thereunder, to the extent that federal law does not prohibit savings associations from exercising those powers or activities.
(23) Apply to the commissioner for authority, and if granted, to exercise any power or activity that has been or is hereafter deemed to be (i) financial in nature or incidental to such financial activity, (ii) complementary to a financial activity and not posing a substantial risk to the safety or soundness of depository institutions or the financial system generally, or (iii) closely related to banking under the "Bank Holding Company Act of 1956," 70 Stat. 133 (12 U.S.C. s. 1841 et seq.) and which has been permitted on an individual basis by order of the Board of Governors of the Federal Reserve System.
##### **§ 17:12B-49** Rental and maintenance of safe deposit boxes {#sec-17-12b-49 omnilex-key=us-nj-statutes--title-17--17:12B-49}
An insured association shall have power to keep, maintain and rent out for hire, at the location occupied by its principal office or any branch office, safe deposit boxes or other receptacles for the safe keeping of personal property. In exercising the powers authorized by this paragraph, the insured association shall have, but shall not be confined to, the same rights and remedies conferred upon safe deposit companies.
##### **§ 17:12B-50** Pension plans {#sec-17-12b-50 omnilex-key=us-nj-statutes--title-17--17:12B-50}
Every association shall have power to adopt, alter, contract for or rescind a plan or plans providing for the payment of pensions to its officers and employees and for the payment to them for life or for a period certain of such pension payments within the limits prescribed by sections 50 through 60 of this act as may be set forth in a plan or plans adopted by the board.
(a) If such a plan provides for the payment of such benefits for a period certain, it may also provide that if such officer or employee shall die before the expiration of such period, the benefits shall be paid for the remainder of such period to the beneficiary designated by such officer or employee in the manner provided by such plan or plans.
(b) Any pension plan or plans adopted shall provide that upon the termination of employment for any cause prior to the commencement of pension payments pursuant to such plan or plans or upon death prior to such commencement of pension payments the officer or employee or the beneficiary designated by him shall be entitled to receive all of the incidents of ownership thereof which have been purchased by his contributions.
(c) Any pension plan or plans adopted may, but need not, provide that upon the termination of employment for any cause, specified in such plan or plans, prior to the commencement of pension payments pursuant to such plan or plans or upon death prior to such commencement of pension payments, the officer or employee or the beneficiary designated by him shall be entitled to receive all or part of the incidents of ownership thereof which have been purchased by the State association for the benefit of the officer or employee which shall be paid to him or his beneficiary as provided in such plan or plans.
##### **§ 17:12B-51** Provisions of pension plan {#sec-17-12b-51 omnilex-key=us-nj-statutes--title-17--17:12B-51}
Without limiting the generality of the type of pension plan or plans a State association may adopt, a pension plan adopted may provide for:
(a) a fund accumulated from income of the State association or set aside from the undivided profits account of the State association, out of which pension payments may be paid directly or which may be used in whole or in part for the purchase of annuity or insurance contracts, or both; and to which officers and employees may make contributions; or
(b) the purchase of group annuity or group insurance contracts, or both, the premiums upon which may be paid in full by the State association, or in part by the State association and in part by its officers and employees, as the board may from time to time determine; or
(c) a trust fund or funds accumulated or set aside and administered by trustees designated by the State association out of which pension payments may be paid directly or which may be used to purchase annuity or insurance contracts in whole or in part. A plan providing for such a trust fund or funds may also provide for the purchase of life insurance contracts providing death benefits for participants in the plan subject to the limitations of this act; or
(d) such other plan or plans as may be approved by the commissioner, subject to the limitations and conditions set forth in this act. Such plan or plans must provide that the total obligation or liability of the State association as to each participant:
(1) is stated in said plan, or is determinable from said plan,
(2) is fully funded at the commencement of said plan or plans, or is funded as it accrues, or
(3) is limited to the amount funded.
In the case of an insured association, that portion of the total obligation or liability of such association to each participant, which has not been fully funded, shall automatically terminate in the event of default as defined in Title IV of the National Housing Act.
##### **§ 17:12B-52** Eligibility for pension payments {#sec-17-12b-52 omnilex-key=us-nj-statutes--title-17--17:12B-52}
An officer or employee shall be eligible to begin to receive pension payments at such age and following such period of service as shall be specified in the pension plan of the association.
##### **§ 17:12B-53** Determination of amount; specification in pension plan {#sec-17-12b-53 omnilex-key=us-nj-statutes--title-17--17:12B-53}
No State association shall pay or contract for the payment or adopt a plan providing for the payment of any annual pension payment unless the method of determining the amount of the pension payment is specified in the pension plan.
##### **§ 17:12B-54** Excess payments; employee contributions {#sec-17-12b-54 omnilex-key=us-nj-statutes--title-17--17:12B-54}
Nothing in this act shall prevent the payment of greater benefits as set forth in the plan if the officer or employee contributes the premium or other charges for the purchase or return of benefits in excess of the maximum set forth in the plan.
##### **§ 17:12B-55** Death benefits {#sec-17-12b-55 omnilex-key=us-nj-statutes--title-17--17:12B-55}
Where a plan or plans provide for death benefits, said death benefits shall not exceed an amount equal to 100 times the monthly pension benefit provided under the plan or plans, or the cash surrender value of any insurance or annuity contracts as provided for under the plan or plans, whichever is greater. The provision for death benefits or for a period certain shall not serve to reduce the maximum pension amount as set forth in this act.
##### **§ 17:12B-56** Appropriation for payments; merger of associations {#sec-17-12b-56 omnilex-key=us-nj-statutes--title-17--17:12B-56}
Any payments required to establish a pension fund out of which benefits may be paid directly or to provide for prior service credits under the pension plan or for any proper purpose in connection with the establishment or maintenance of a pension plan, may with the approval of the commissioner be appropriated from the undivided profits account and shall not be subject to the provisions of section 72 of this act. In the event of a merger of 2 or more associations, any pension plan in effect in a merging association may with the approval of the commissioner and the board of the receiving State association be assumed by the receiving State association, and for purposes of the pension, persons serving under the merging association shall be considered to have served such employment under the receiving State association.
##### **§ 17:12B-57** Submission of pension plan for approval of commissioner {#sec-17-12b-57 omnilex-key=us-nj-statutes--title-17--17:12B-57}
Every pension plan adopted or altered for a State association shall before it is placed in operation, be submitted to the commissioner for his approval. The commissioner shall approve such plan or alterations thereof unless he shall find:
(a) it does not conform to law, or
(b) its adoption or alteration would be hazardous to the State association, or
(c) its provisions are unfair or inequitable.
##### **§ 17:12B-58** Plans sponsored by federal home loan banks {#sec-17-12b-58 omnilex-key=us-nj-statutes--title-17--17:12B-58}
Notwithstanding any other provisions of this act, a State association, with the approval of the commissioner, may adopt any plan for retirement or disability benefits for its officers or employees in accordance with any plan sponsored by any Federal Home Loan Bank of which it is a member.
##### **§ 17:12B-59** Contracts for pension payments to retired officers and employees {#sec-17-12b-59 omnilex-key=us-nj-statutes--title-17--17:12B-59}
In addition to the powers to adopt pension plans as set forth in this act, a State association may subject to the approval of the commissioner, contract to make pension payments to retired officers and employees; provided, however, that said officers or employees have been employed by the State association for the minimum time periods as set forth in this act for eligibility to receive pension payments.
Without limiting the generality of the type of contract, every such contract adopted by a State association shall contain the following provisions:
(a) That in no event shall payments provided for under a contract exceed the maximum payments as limited for officers or employees covered under a pension plan or plans in operation in the association, unless said payments under such plan are, in the opinion of the board of directors, determined to be inadequate.
(b) That the amount of the payments, provided for under said contract, shall be subject to reduction in the event said payments exceed that portion of the net income of the State association, which said payments bore to the average net income of the State association for the 3 years immediately preceding the commencement of said payments; such reduction in said payments shall be proportionate to the decrease in net income. Net income for this purpose shall mean net income as defined in section 7 of this act, less any amounts required to be placed in reserve accounts under the provisions of this act.
(c) That the board may terminate such payments at any time.
(d) That where the contracting State association is an insured association such payments shall automatically terminate in the event of a default as defined in Title IV of the National Housing Act.
##### **§ 17:12B-60** Discontinuance of participation in pension plan {#sec-17-12b-60 omnilex-key=us-nj-statutes--title-17--17:12B-60}
Any State association may at any time discontinue its participation in a pension plan and terminate any and all prospective liability in connection therewith, by giving at least 30 days' written notice of its intention so to do to the officers and employees who will be affected thereby.
##### **§ 17:12B-61** Transmission of money; money orders; travel checks {#sec-17-12b-61 omnilex-key=us-nj-statutes--title-17--17:12B-61}
Any association may receive money for transmission and may transmit such money through the Federal Home Loan Bank of New York, or through any bank or trust company, and may sell money orders and travel checks as agent for any person empowered to sell such instruments through an agent within the State of New Jersey.
##### **§ 17:12B-62** Directors, number, powers. {#sec-17-12b-62 omnilex-key=us-nj-statutes--title-17--17:12B-62}
62. Directors, number, powers. The business and affairs of every State association shall be managed and directed by a board of directors. The board shall consist of such number as the bylaws provide, but not less than five. Each director shall be a citizen of the United States and shall be either a member of the mutual association or a stockholder of the capital stock association, as the case may be. He shall have such other qualifications and meet such eligibility requirements, as this act and the bylaws provide. The board may exercise any and all powers of a State association not expressly reserved to the members of the mutual association or the stockholders of the capital stock association by the provisions of this act and the bylaws. All checks, notes and drafts of the State association shall be executed in a manner and form determined by resolution of the board of the State association. If the bylaws so provide, the board may delegate any of its powers to any committee composed of members of the board.
##### **§ 17:12B-62.1** Association deemed in compliance with prohibition on interlocking relationships {#sec-17-12b-62.1 omnilex-key=us-nj-statutes--title-17--17:12B-62.1}
27. Any association that is in compliance with the federal "Depository Institution Management Interlocks Act," 12 U.S.C. s.3201 et seq. and the federal regulations effectuating that act, 12 C.F.R. s.348, is deemed to be in compliance with the provisions of sections 1 through 6 of P.L.1975, c.265 (C.17:16E-1 et seq.).
##### **§ 17:12B-63** Director's election; vacancies {#sec-17-12b-63 omnilex-key=us-nj-statutes--title-17--17:12B-63}
The directors shall be elected by the members of a mutual association or the stockholders of a capital stock association, as the case may be, by ballot at the annual meeting, for such term, not exceeding 3 years, as the bylaws provide. Where the term is more than 1 year, the bylaws shall establish terms of office so that an equal number of directors, so far as possible, shall be elected each year. A vacancy in the board may be filled by the board until the next annual meeting of the association, when it shall be filled by the members or stockholders of the association for the remainder of the unexpired term. Each director shall hold office for the term for which he is elected and until his successor shall be chosen and qualified.
##### **§ 17:12B-64** Attorneys; employees {#sec-17-12b-64 omnilex-key=us-nj-statutes--title-17--17:12B-64}
The board may retain or employ one or more attorneys-at-law or firm of attorneys-at-law of this State for a term not longer than 1 year. The board may employ, or authorize any officer to employ, any persons necessary for the conduct of the business of the State association.
##### **§ 17:12B-65** Officers {#sec-17-12b-65 omnilex-key=us-nj-statutes--title-17--17:12B-65}
65. The officers of every State association shall be a president, one or more vice presidents, a secretary and a treasurer and may include a chairman of the board if the bylaws so provide, together with such other officers as provided by the bylaws or as determined by the board to be necessary for the conduct of the State association's business. All officers shall be savings members or savings depositors, as the case may be, of the State association. They shall be elected by the board or may be appointed by the president if the authority to appoint officers other than the president or chairman of the board has been delegated to the president by the bylaws or by resolution of the board, unless the bylaws provide for their election by the members or stockholders of the State association. Each officer shall be elected or appointed for a term of not more than one year, but shall continue in office until the election or appointment and qualification of his successor. Any two offices, except the offices of president and vice president, may be held by one person. No officer shall act as attorney or conveyancer of his State association. A vacancy in any office may be filled by the board for the unexpired term. The board may appoint or employ or authorize any officer to appoint or employ assistant officers or assistants to officers subject to the confirmation of the board or approval of the president; provided, however, that assistants to officers shall not be considered as officers, but as employees.
##### **§ 17:12B-66** Officers' powers {#sec-17-12b-66 omnilex-key=us-nj-statutes--title-17--17:12B-66}
Each officer in addition to such powers and duties as usually pertain to his office shall have such powers and duties as the by-laws may provide and as may be delegated to him by the board.
##### **§ 17:12B-67** Oath of office of directors and officers {#sec-17-12b-67 omnilex-key=us-nj-statutes--title-17--17:12B-67}
Each officer and director shall, before entering upon the duties of his office, take and subscribe to the following oath or affirmation of office:
OATH OR AFFIRMATION OF OFFICE
State of New Jersey County of ss.:
of full age, being duly sworn on his oath or affirmation according to law, deposes and says:
1. I reside at ; am a member or stockholder and/or depositor, as the case may be, of the association; hereby accept the office of , to which I have been elected or appointed; will diligently and honestly administer the affairs of said association within the scope of my powers and duties; and not knowingly violate, or permit to be violated, the provisions of the Savings and Loan Act (1963), and the association's bylaws.
Subscribed and sworn to or affirmed before me this day of , 19
All oaths or affirmations of office shall be filed with the secretary. If any officer or director shall fail within a reasonable time after his election to take and subscribe the oath or affirmation required by this section, the board may declare his office vacant. If any officer or director shall violate the provisions of his oath, or affirmation of the board, after affording him an opportunity to be heard, may declare his office vacant by a vote of two-thirds of the directors present at any meeting of the board, of which meeting notice shall have been given to each director.
##### **§ 17:12B-67.1** Disqualification of officers, directors or employees; conviction of crime; pendency of appeal {#sec-17-12b-67.1 omnilex-key=us-nj-statutes--title-17--17:12B-67.1}
Except with the written consent of the commissioner, no person who has been convicted, or who is hereafter convicted, of any crime involving dishonesty or a breach of trust, shall thereafter serve as an officer, director or employee of an association; provided, however, the pendency of an appeal from said conviction shall stay the operation of the prohibition until the appeal is decided or dismissed.
##### **§ 17:12B-67.2** Penalty {#sec-17-12b-67.2 omnilex-key=us-nj-statutes--title-17--17:12B-67.2}
For each willful violation of this prohibition, the association shall be liable to a penalty of not more than $100.00 a day, for each day this prohibition is violated.
##### **§ 17:12B-68** Minimum account requirements for directors {#sec-17-12b-68 omnilex-key=us-nj-statutes--title-17--17:12B-68}
Each director shall at all times own, in his own name, an account in his State association having an unencumbered balance as hereinafter set forth:
(a) In a State association having assets of less than $500,000.00, an unencumbered balance of at least $200.00;
(b) In a State association having assets of $500,000.00 or more, but less than $5,000,000.00, an unencumbered balance of at least $500.00;
(c) In a State association having assets of $5,000,000.00 or more, an unencumbered balance of at least $1,000.00.
A director may pledge his account as security for a loan, but the term "unencumbered balance," as used herein, shall mean the withdrawal value of the account, less the amount of any loan secured by said account, plus accrued interest, and the account shall not otherwise be pledged or encumbered.
In lieu of these requirements a director may hold an account upon which he shall pay at least $5.00 per month, without default, until the minimum unencumbered balance is attained, which minimum shall thereafter be maintained; provided, however, that this section shall not disqualify any director of a State association which issues installment shares exclusively and where the unencumbered balance of his account is reduced to less than the required minimum due to the maturity of shares; provided, however, that he resubscribes to an account upon which payments of at least $5.00 per month are made, without default, until the minimum required unencumbered balance is again attained. If any director shall fail for more than 3 months to maintain the minimum requirements of his account, his office shall thereupon automatically become vacated and he shall not become eligible to such office again until after the expiration of his then existing term of office.
##### **§ 17:12B-69** Loans to officers, directors, attorneys or employees {#sec-17-12b-69 omnilex-key=us-nj-statutes--title-17--17:12B-69}
In accordance with rules and regulations promulgated by the Federal Savings and Loan Insurance Corporation, a State association may make or purchase any loan which it is otherwise authorized by law to make or purchase to or from any officer, director, attorney, employee, or any affiliated person of such State association.
##### **§ 17:12B-70** Default by directors and officers {#sec-17-12b-70 omnilex-key=us-nj-statutes--title-17--17:12B-70}
No person who is in default for a period of more than 3 months in the payment of any obligation to an association, shall be elected as an officer or director of such association. If any officer or director defaults for a period of more than 3 months in the payment of any obligation to his association, his office shall thereupon automatically become vacant and he shall not become eligible to any office again until after the expiration of his then existing term of such office.
##### **§ 17:12B-71** Restriction upon purchase of accounts {#sec-17-12b-71 omnilex-key=us-nj-statutes--title-17--17:12B-71}
No officer, director, attorney or firm of attorneys or employee of any State association shall purchase any savings account or shares in such State association from any other person, directly or indirectly, for less than the withdrawal value thereof.
##### **§ 17:12B-72** Limitation of expenses {#sec-17-12b-72 omnilex-key=us-nj-statutes--title-17--17:12B-72}
The aggregate amount of an association's expenses in any fiscal year for the compensation of officers, employees and directors and for premiums, contributions, or other expenditures made in connection with retirement, life insurance, disability, hospitalization or other like benefits for officers and employees and rent for the association's office, shall not exceed 2% of the association's assets at the end of its last preceding fiscal year. This section shall not apply to an association whose assets were less than $100,000.00 at the end of its last preceding fiscal year.
##### **§ 17:12B-73** Bonds required; indemnification of officers, directors and employees {#sec-17-12b-73 omnilex-key=us-nj-statutes--title-17--17:12B-73}
A. Bonds required
The board shall require the secretary, treasurer, attorney, conveyancer and every other officer, director, employee, or agent handling or having the custody or charge of money, securities, books or records belonging to the association, before entering upon his duties, to be bonded in adequate amount and with good and sufficient surety, which shall be a surety company authorized to transact business in this State, and such bonds shall be approved by the board. The board shall examine annually all the bonds and pass on their sufficiency, and, if insufficient, immediately require new or additional bonds. The failure of any person to furnish, or qualify for, such bond shall be ground for his summary removal by the board. The commissioner may at any time order the bond of any such person to be increased. In lieu of such individual bonds, the board may procure a blanket bond providing the same protection to the association. The association may pay the premiums on any and all such bonds. No bonds shall be deemed to comply with the requirements of this section unless such bond contains a provision that it shall not be cancelable for any cause unless notice of intention to cancel is filed in the Department of Banking at least 5 days before the day upon which cancellation shall take effect.
B. Indemnification of officers, directors and employees
Any person shall be indemnified or reimbursed by the association for reasonable expenses, including, but not limited to, attorney fees, actually incurred by him in connection with any action, suit or proceeding, instituted or threatened, judicial or administrative, civil or criminal, to which he is made a party by reason of his being or having been a director, officer or employee of an association; provided, however, that no person shall be so indemnified or reimbursed, nor shall he retain any advancement or allowance for indemnification which may have been made by the association in advance of final disposition in relation to such action, suit or proceeding in which, and to the extent that, he finally shall be adjudicated to have been guilty of a breach of good faith, to have been negligent in the performance of his duties or to have committed an action or failed to perform a duty for which there is a common law or statutory liability; and, provided further, that a person may, with the approval of the commissioner, be so indemnified or reimbursed for:
(1) Amounts paid in compromise or settlement of any action, suit or proceeding, including reasonable expenses incurred in connection therewith; or
(2) Reasonable expenses, including fines and penalties, incurred in connection with a criminal or civil action, suit or proceeding in which such person has been adjudicated guilty, negligent or liable, if it shall be determined by the board of directors and by the commissioner that such person was acting in good faith and in what he believed to be the best interests of the association and without knowledge that the action was illegal, and if such indemnification or reimbursement is approved at an annual or special meeting of the members or stockholders by a majority of the votes eligible to be cast. Amounts paid to the association, whether pursuant to judgment or settlement, by any person within the meaning of this section shall not be indemnified or reimbursed in any case.
##### **§ 17:12B-74** Membership generally {#sec-17-12b-74 omnilex-key=us-nj-statutes--title-17--17:12B-74}
The members of a State association shall be those in whose names accounts are established either as savings members or as borrowing members. Except as limited by the provisions of this act, or the by-laws of a State association, or its board, any person may become a member of a State association.
##### **§ 17:12B-75** Plans {#sec-17-12b-75 omnilex-key=us-nj-statutes--title-17--17:12B-75}
Each mutual association shall operate upon one of the plans set forth in this section; and the bylaws of each mutual association shall designate under which of said plans it shall operate.
Plan 1. The nonshare plan described in section 76.
Plan 2. The share plan described in section 77.
Plan 3. The plan upon which it was operating on April 4, 1946, providing it has been continually operating on that plan.
Plan 4. Any insured mutual association may, at any time, elect to raise its capital by accepting savings deposits, provided that:
(1) The bylaws of the association so permit; and
(2) Such bylaws shall be approved at a regular or special meeting of the members of the association as provided in sections 114, 115 and 116 of this act.
Holders of savings deposits shall be creditors of the association and shall have equal priority with other ordinary general creditors in the event of the dissolution and liquidation of the association, and the bylaws shall so provide.
Savings members at the time of the adoption of Plan 4 who do not transfer such accounts to savings deposits shall, nevertheless, have equal rights with those who hold savings deposits.
The bylaws shall contain such other provisions as may be required by the commissioner and by the Federal Savings and Loan Insurance Corporation.
Where, under the provisions of this act or of any law of this State, the word "account" is used to describe a savings account in a savings and loan association, it shall be deemed to be inclusive of a "savings deposit."
Any mutual association may, at any time hereafter, change from the plan upon which it shall then be operating to Plan 1 or 2 and may make such change in plan applicable only to those memberships established after such change, continuing, concurrently, to operate upon the plan upon which it previously operated with respect to those memberships established prior to such change.
##### **§ 17:12B-76** Nonshare plan {#sec-17-12b-76 omnilex-key=us-nj-statutes--title-17--17:12B-76}
A State association operating pursuant to the nonshare plan shall issue to each savings member an account book or, in lieu thereof, any other evidence of the account which may be approved by the commissioner. Any such State association may also issue to each member, at its option, a membership certificate. Payments by savings members may be made at their option subject to the by-laws of the State association, or to any regulations of the State association adopted in accordance with the provisions of this act. The same rate of dividend shall be declared to all savings members' accounts; except as may otherwise be provided by this act. No such State association shall impose any charge against any savings member, nor retain any of the dividends credited to any member's account in the event of withdrawal of such account, except as may be permitted by regulations issued by the commissioner.
##### **§ 17:12B-77** Share plan {#sec-17-12b-77 omnilex-key=us-nj-statutes--title-17--17:12B-77}
Membership in a State association operating pursuant to the share plan shall be evidenced by a share certificate, account book, or, in lieu thereof any other evidence of the account which may be approved by the commissioner, provided, however, the membership of a borrowing member may be evidenced only by a membership certificate.
Such State associations may issue the following types of shares, all of which shall be common shares:
(1) Installment shares, which shall be issued in connection with accounts upon which payments are made periodically in regular amounts as required by the by-laws. The by-laws shall specify the maturity value of such accounts. All such accounts shall have the same maturity value, but the by-laws may be amended to provide that accounts thereafter issued shall have a different maturity value from those theretofore issued.
Upon the maturity of an installment share account so much of its participation value as remains after payment of any obligation for which it may have been pledged, shall be disposed of in one of the following ways:
(a) The State association may pay the same to the member under the same terms and conditions which apply to the payment of withdrawals.
(b) The State association may transfer the same to any other type of account in said State association to the credit of the member, giving him immediate written notice thereof, personally or by mail.
(c) The member may withdraw the same in accordance with the same terms and conditions which apply to other withdrawals.
(2) Savings shares, which shall be issued in connection with accounts upon which payments may be made at the option of the member.
(3) Income shares, which shall be issued in connection with accounts requiring the investment of fixed amounts in units of $100.00 or multiples thereof, upon which dividends are paid in cash.
##### **§ 17:12B-78** Limitation upon accounts {#sec-17-12b-78 omnilex-key=us-nj-statutes--title-17--17:12B-78}
No savings member shall hold an account or accounts in any one State association with an aggregate participation value exceeding $20,000.00 or 1% of the capital of the State association, whichever is greater; provided, however, that such limitation shall not apply to--
(a) An account or deposit held as provided in section 80 or section 241 of this act; or
(b) An account or deposit which is pledged as security for the repayment of money due such State association; or
(c) An installment share account, or any account opened as the result of the maturity of an installment share account; or
(d) An account, or deposit other than an installment share account, which exceeds the aforesaid limitation at the time of the enactment of this statute, but no additions other than dividends or interest shall be made thereto; or
(e) Where such excess results from the addition of dividends or interest to any such account, or from the acquisition of an account by gift, will or inheritance; or from the acquisition of an account or deposit previously held as collateral security for the payment of an obligation; or from the acquisition by one State association of the assets of another association; or
(f) Where such excess results from a reduction in the capital of the association.
The board may provide for any lesser limitation than set forth in this section, and any person or persons authorized by it, may refuse to accept any account and may limit the amount of payments which may be received on any account.
##### **§ 17:12B-79** Forms of certificate {#sec-17-12b-79 omnilex-key=us-nj-statutes--title-17--17:12B-79}
Forms of certificate. The following form of membership certificate is hereby prescribed.
This certifies that ..................... is a
savings
borrowing .................................. member of the undersigned and holds a membership account therein subject to the Savings and Loan Act (1963) and the by-laws of the undersigned.
Date ................................ Association
Association's Seal By ...........................................
(Title of Officer or Officers)
The following form of share certificate is hereby prescribed.
This certifies that ....................................... is a member of the undersigned and holds .................... (insert number and type of shares) ........ shares therein subject to the Savings and Loan Act (1963) and the by-laws of the undersigned.
Date ................................ Association
Association's Seal By ...........................................
(Title of Officer or Officers)
Participation Value $..........................................
(To be added if account book is not issued)
Said membership certificates and share certificates shall be signed by such officer or officers as the board of each association shall direct.
##### **§ 17:12B-80** Governmental agencies may be members {#sec-17-12b-80 omnilex-key=us-nj-statutes--title-17--17:12B-80}
The United States of America, the State of New Jersey, or any agency or instrumentality of either of them, or any corporation incorporated under the laws of the United States, in the stock of which the Secretary of the Treasury of the United State may be authorized by an Act of Congress to invest, may be a member of any association and hold one or more accounts therein without limit as to amount. Any association may make an agreement with any such member, deferring or postponing the right to withdraw all or any part of such member's account, but such member shall not be entitled to any withdrawal preferences or priorities as against any other member, and shall otherwise be entitled to all rights and privileges and subject to all obligations and limitations of membership in such association.
##### **§ 17:12B-81** Minors {#sec-17-12b-81 omnilex-key=us-nj-statutes--title-17--17:12B-81}
Minors may be members and shall be entitled to all of the rights and privileges and subject to all of the duties and liabilities of membership to the same extent as persons over the age of 21 years.
A minor may endorse for credit to his account with an association checks and other instruments for the payment of money which are payable to him or to his order. The association shall pay any moneys to the credit of such an account, from time to time to, or pursuant to the order of, such minor. In all transactions with respect to such an account the minor shall, as between himself and the association, be deemed to be the absolute owner and to be of full age and legal capacity. A minor shall also be permitted to obtain a loan from an association secured by a pledge of his account. In all transactions with respect to such an account loan, as defined in section 5 of this act, the minor shall, as between himself and the association, be deemed to be the absolute owner and to be of full age and legal capacity.
No minor shall be entitled to vote until he shall have attained the age of 16 years. This section shall also apply to all Federal associations having their principal offices in this State to the extent that the section is not in conflict with Federal laws, rules and regulation.
##### **§ 17:12B-82** Membership trust accounts {#sec-17-12b-82 omnilex-key=us-nj-statutes--title-17--17:12B-82}
When a membership trust account is opened in the manner provided in the "Multiple-party Deposit Account Act" , and,
a. Where a trustee's death terminates the trust under the provisions of section 5c(2) of the "Multiple-party Deposit Account Act" and where the named beneficiary or all of the beneficiaries so named are 16 years of age or over at the time of termination of such trust, the association shall pay the moneys to the credit of the trust, less all proper set-offs and charges, to the named beneficiary or beneficiaries or upon his or their order, and such payment by the association shall be valid, notwithstanding any lack of legal age of the named beneficiary or beneficiaries;
b. If the named beneficiary or all of the beneficiaries so named are under 16 years of age at the time of termination of such trust, the association shall pay the moneys to the credit of the trust, less all proper set-offs and charges,
(1) When or after the named beneficiary becomes 16 years of age, to the named beneficiary or upon his order, or
(2) When more than one beneficiary is named, the association shall pay to the beneficiary so named his proportionate interest in such account as he becomes 16 years of age, or
(3) To the legal guardian of the named beneficiary wherever appointed, or where more than one beneficiary is named, the association shall pay such beneficiary's proportionate interest in such account to his legal guardian wherever and whenever appointed, or
(4) If a certificate of appointment of a legal guardian is not filed with the association to a person authorized to receive such moneys or proportionate interest thereof pursuant to sections 3A:6-31 and 3A:6-32 of the New Jersey Statutes.
c. Where a trustee's death terminates the trust under the provisions of section 5c(2) of the "Multiple-party Deposit Account Act" and where one or more of the named beneficiaries are under 16 years of age and the remainder of the named beneficiaries are 16 years of age or over, the association shall pay the moneys to the credit of the trust, less all proper set-offs and charges to:
(1) The named beneficiaries 16 years of age or over at the time of termination of said trust pursuant to subsection a of this section, and
(2) The named beneficiaries under 16 years of age at the time of termination of said trust pursuant to subsection b of this section.
##### **§ 17:12B-83** Applicability to moneys paid to account by trustee under will, other fiduciary instrument, court order or decree {#sec-17-12b-83 omnilex-key=us-nj-statutes--title-17--17:12B-83}
Section 82 of this act shall not apply to the moneys paid to an account by a trustee acting under a will, other fiduciary instrument, court order or decree.
##### **§ 17:12B-84** Release from claims of fiduciaries, beneficiaries or legal representatives {#sec-17-12b-84 omnilex-key=us-nj-statutes--title-17--17:12B-84}
An association which makes any payment pursuant to section 82 of this act prior to service upon the association of an order of court restraining such payment shall, to the extent of each payment so made, be released from all claims of the fiduciary, the named beneficiary, their legal representatives, and all others claiming under or through them.
##### **§ 17:12B-85** Rights of beneficiary on death of fiduciary; effect of laws requiring valid testamentary disposition {#sec-17-12b-85 omnilex-key=us-nj-statutes--title-17--17:12B-85}
When an account is maintained in a form described in section 82 of this act the right of the named beneficiary to be vested with sole and indefeasible title to the moneys, to the credit of the account on the death of the fiduciary, shall not be denied, abridged, or in anywise affected because such right has not been created by a writing executed in accordance with the laws of this State prescribing the requirements to effect a valid testamentary disposition of property.
##### **§ 17:12B-86** Applicability to federal associations having principal offices in state {#sec-17-12b-86 omnilex-key=us-nj-statutes--title-17--17:12B-86}
The provisions of section 82 of this act shall also apply to all Federal associations having their principal offices in this State, where such procedures are not in conflict with any Federal laws, rules and regulations.
##### **§ 17:12B-87** Authority of attorney to manage or make withdrawals from account {#sec-17-12b-87 omnilex-key=us-nj-statutes--title-17--17:12B-87}
An association may continue to recognize the authority of any attorney authorized in writing to manage or to make withdrawals either in whole or in part from the savings account of a member until it receives written notice or is on actual notice of the revocation of his authority. For the purposes of this section, written notice of the death or adjudication of incompetency of such member shall constitute written notice of revocation of the authority of his attorney. No association shall be liable for damages, penalties or tax by reason of any payment made pursuant to this section.
##### **§ 17:12B-89** Payment to credit of account of beneficiaries or their order {#sec-17-12b-89 omnilex-key=us-nj-statutes--title-17--17:12B-89}
When a membership account is opened by a person or persons payable on death to a beneficiary or beneficiaries in the manner provided in the "Multiple-party Deposit Account Act" , and the account is terminated as provided in section 5b(2) of said act, and if the named beneficiary or one of the beneficiaries so named survive the death of the person or persons opening such an account and the beneficiary or all of the beneficiaries so named are 16 years of age or over at the death of the person or persons opening such an account, the association shall pay the moneys to the credit of the account, less all proper set-offs and charges, to the named beneficiary or beneficiaries or upon his or their order, and such payment by the association shall be valid, notwithstanding any lack of legal age of the named beneficiary or beneficiaries.
##### **§ 17:12B-90** Payment to credit of account when beneficiaries under 16 years of age {#sec-17-12b-90 omnilex-key=us-nj-statutes--title-17--17:12B-90}
When a membership account is opened by a person or persons payable on death to a beneficiary or beneficiaries in the manner provided in the "Multiple-party Deposit Account Act," and the account is terminated as provided in section 5b(2) of said act, and if the named beneficiary or all of the beneficiaries so named survive the death of the person or persons opening such an account and are under 16 years of age at such time, the association shall pay the moneys to the credit of the account, less all proper set-offs and charges.
a. When or after the named beneficiary becomes 16 years of age, to the named beneficiary or upon his order, or
b. When more than one beneficiary is named, the association shall pay to the beneficiary so named his proportionate interest in such account as he becomes 16 years of age, or
c. To the legal guardian of the named beneficiary, wherever appointed, or where more than one beneficiary is named, the association shall pay such beneficiary's proportionate interest in such account to his legal guardian wherever and whenever appointed, or
d. If a certificate of appointment of a legal guardian is not filed with the association, to a person authorized to receive such moneys, or proportionate interest thereof, pursuant to sections 3A:6-31 and 3A:6-32 of the New Jersey Statutes.
##### **§ 17:12B-91** Payment when account terminated and one or more beneficiaries under, and one or more beneficiaries over, 16 years of age {#sec-17-12b-91 omnilex-key=us-nj-statutes--title-17--17:12B-91}
When a membership account is opened by a person or persons payable on death to a beneficiary or beneficiaries in the manner provided in the "Multiple-party Deposit Account Act," and the amount is terminated as provided in section 5b(2) of said act,
and where one or more of the named beneficiaries are under 16 years of age and the remainder of the named beneficiaries are 16 years of age or over, the associations shall pay the moneys to the credit of the trust, less all proper set-offs and charges to:
a. The named beneficiaries 16 years of age or over at the time of termination of said account shall be paid pursuant to section 89 of this act, and
b. The named beneficiaries under 16 years of age at the time of termination of said account shall be paid pursuant to section 90 of this act.
##### **§ 17:12B-103** Pledge of account to association {#sec-17-12b-103 omnilex-key=us-nj-statutes--title-17--17:12B-103}
The pledge to any association of such an account, signed by that person or those persons who are authorized in writing to make withdrawals from the account shall be a valid pledge and transfer to the association of the account, and shall not operate to sever or terminate the joint and survivorship ownership of the account.
##### **§ 17:12B-106** Acceptance of accounts in name of one or more administrators, custodians, executors, guardians, trustees or other fiduciaries in trust for named beneficiary {#sec-17-12b-106 omnilex-key=us-nj-statutes--title-17--17:12B-106}
Any association may accept accounts in the name of one or more administrators, custodians, executors, guardians, trustees, or other fiduciaries in trust for a named beneficiary or beneficiaries.
(1) Any such fiduciary shall have such voting rights as are provided in section 126 of this act.
(2) Any such fiduciary shall have power to open such an account and to make a payment or payments to, and to withdraw from any such account in whole or in part.
(3) Unless the will or other instrument, or the court order or decree under which such fiduciary is acting, provides otherwise, the withdrawal value of any such account, and dividends thereon, or other rights relating thereto may be paid or delivered, in whole or in part, to such fiduciary so long as such fiduciary is living. The payment or delivery to any such fiduciary or a receipt or acquittance signed by any such fiduciary to whom any such payment or any such delivery of rights is made shall be a valid and sufficient release and discharge of an association for the payment or delivery so made.
(4) Whenever a person holding an account in such a fiduciary capacity dies and no written notice of the revocation or termination of the fiduciary relationship shall have been given to an association and the association has no notice of any other disposition of the beneficial estate, the withdrawal value of such account, and dividends thereon, or other rights relating thereto may, at the option of the association, be paid or delivered, in whole or in part, to the beneficiary or beneficiaries.
(5) Where such an account is opened or subsequently held by more than one fiduciary the association may accept payments made to such account and may pay any moneys to the credit of such account from time to time to, or pursuant to the order of any one or more of such cofiduciaries who shall be authorized in writing by all the cofiduciaries to make such payments or withdrawals, unless the will or other instrument or the court order or decree under which such cofiduciaries are acting otherwise provides.
##### **§ 17:12B-109** Necessity for actual notice of death or incompetency of savings member {#sec-17-12b-109 omnilex-key=us-nj-statutes--title-17--17:12B-109}
In the absence of actual notice of death or incompetency of a savings member received by an association at the office at which the member's account is maintained, the association may, notwithstanding such death or incompetency, pay any requests for payment authorized in writing.
##### **§ 17:12B-110** Transfer of membership {#sec-17-12b-110 omnilex-key=us-nj-statutes--title-17--17:12B-110}
A member may transfer, absolutely or conditionally, his membership to any other person, subject to the provisions of this act, by a written assignment accompanied by delivery of the evidence of the account. The evidence of the account shall mean the membership certificate, share certificate, account book or any other evidence of the amount which may have been issued in connection with such membership. Every such transfer of membership shall be deemed to include the account and the evidence of the account issued in connection therewith. The provisions of chapter 8 of Title 14 of the Revised Statutes and the provisions of the Uniform Commercial Code and the amendments thereof and supplements thereto shall not apply to such transfers. No such absolute transfer shall be effective against an association until such written assignment and the accompanying evidence of the account shall be delivered to the association with a request that it complete such transfer upon its records. No such conditional transfer shall be effective against an association unless and until it actually receives notice thereof in writing.
##### **§ 17:12B-111** Lost certificates and account books {#sec-17-12b-111 omnilex-key=us-nj-statutes--title-17--17:12B-111}
Upon filing with an association by a member of record, or his legal representative, of an affidavit showing that his account book has been lost, stolen or destroyed, and whether, and to whom the same has been pledged or assigned in whole or in part, such association may issue a duplicate account book marked on the face thereof "A Duplicate;" provided, however, that the board of such association may, in its discretion, require such member or his legal representative to furnish a bond to the association in such amount, and with such security as it may deem necessary, to indemnify such association against any loss which might result from the issuance of such duplicate account book. Payment made by an association to the owner of record of a duplicate account book issued in accordance with this section shall release the association from all liability to any person claiming any interest in the original account book and the duplicate thereof. The term "account book" as used in this section shall be deemed to include any evidence of the account which may have been issued in lieu of an account book.
##### **§ 17:12B-112** Termination of membership {#sec-17-12b-112 omnilex-key=us-nj-statutes--title-17--17:12B-112}
The membership of a savings member shall terminate when the amount of his account has been paid to him in full or when the transfer of his membership to another person has been recorded on the books of the association, or when his account has been retired as provided in this act. The membership of a borrowing member shall terminate when his status as a borrower from the association terminates or when his membership is transferred to another person and such transfer is recorded on the books of the association.
##### **§ 17:12B-112.1** Savings promotion conducted by savings and loan association. {#sec-17-12b-112.1 omnilex-key=us-nj-statutes--title-17--17:12B-112.1}
2. a. A State savings and loan association may conduct a savings promotion provided that the association:
(1) conducts the promotion in a manner so as to ensure that each entry has an equal chance of winning the designated prize;
(2) fully discloses the terms and conditions of the promotion to each of its account holders;
(3) maintains records sufficient to facilitate an audit of the promotion;
(4) ensures that only account holders 18 years of age and older are permitted to participate in the promotion;
(5) does not require any consideration, other than the requirement that the participant deposit money into a savings account or other savings program to obtain entries in the promotion, to participate in the promotion; and
(6) offers an interest rate and charges fees on any qualifying account that are approximately the same as those on a comparable non-qualifying account.
b. For the purposes of this section, "savings promotion" means a raffle in which the sole consideration required for a chance of winning designated prizes is the deposit of a minimum specified amount of money in a savings account or other savings program.
##### **§ 17:12B-113** Notice to members {#sec-17-12b-113 omnilex-key=us-nj-statutes--title-17--17:12B-113}
Except where this act expressly provides otherwise, all notices, statements, reports or other documents required to be given to any member, shall be given to him either personally or by mail, postage prepaid, addressed to him at his last address which appears on the records of the association. Service by mail shall be complete upon posting.
##### **§ 17:12B-114** Meeting place. {#sec-17-12b-114 omnilex-key=us-nj-statutes--title-17--17:12B-114}
114. a. Subject to subsection b. of this section, members' meetings shall be held at the State association's principal office or at such other place within a radius of 5 miles thereof as the board shall designate.
b. Any meeting of members may be held solely or in part by means of remote communication to the extent the board authorizes and adopts guidelines and procedures governing such a meeting.
(1) One or more members may participate in a meeting of members by means of remote communication to the extent the board authorizes that participation, including the authorization of a meeting of members held solely by means of remote participation. Members' meetings conducted in part or solely by means of remote communication and any member's remote participation in those meetings shall be subject to those guidelines and procedures as the board adopts, and shall be in conformity with this subsection.
(2) A member participating in a meeting of members by means of remote communication in reliance upon paragraph (1) of this subsection shall be deemed present in person and shall be entitled to vote at the meeting. In any meeting conducted in part or solely by means of remote communication in reliance upon paragraph (1) of this subsection, the association shall implement reasonable measures to:
(a) verify that each person participating remotely is a member or a proxy of a member;
(b) provide each member participating remotely with a reasonable opportunity to participate in the meeting, including an opportunity to vote on matters submitted to the members, and to read or hear the proceedings of the meeting substantially concurrently with those proceedings; and
(c) record and maintain a record of any votes or other actions taken by remote communication at the meeting.
##### **§ 17:12B-115** Meetings {#sec-17-12b-115 omnilex-key=us-nj-statutes--title-17--17:12B-115}
(1) Annual. The members shall meet at least once in each year, as the by-laws shall provide, upon not less than 10 days' written notice which shall be given by mail or publication in a newspaper published or circulating in the municipality in which the principal office of the State association is located, for the election of directors and the transaction of any other business which may properly be brought before such meeting. The polls at every such election shall be open for such period of time, not less than 1/2 hour, between the hours of 9 ante meridian and 9 post meridian at the time the by-laws shall designate.
(2) Special. Special meetings of the members may be called as provided in the by-laws, but upon not less than 10 days' written notice by mail or publication in a newspaper published or circulating in the municipality in which the State association is located and the notice of such meeting shall state the purposes for which it is called.
##### **§ 17:12B-116** Quorum {#sec-17-12b-116 omnilex-key=us-nj-statutes--title-17--17:12B-116}
The by-laws may prescribe the number of members which shall constitute a quorum at a meeting. In the absence of any provision in the by-laws, any number of members present at any meeting shall constitute a quorum.
##### **§ 17:12B-117** Confidential relationship of an association to its members {#sec-17-12b-117 omnilex-key=us-nj-statutes--title-17--17:12B-117}
The relationship of an association to each of its members constitutes a confidential relationship and no association or any of its directors, officers or employees shall disclose or be required to disclose a list of the members of the association, in whole or in part to any person; provided, however, every member of an association shall have the right to inspect the records of such association which pertain solely to his own accounts.
##### **§ 17:12B-118** Procedure to obtain information or communicate with members {#sec-17-12b-118 omnilex-key=us-nj-statutes--title-17--17:12B-118}
(1) Any member desiring information from his State association or desiring to communicate with other members of his State association may file with such State association an application therefor, in writing, which shall state:
(a) His full name and address.
(b) The amount of the participation value of his accounts in the State association at the time such application is made.
(c) A statement specifying in detail the information he requests; or that he desires to communicate with the other members of the State association. If the application is to enable the member to communicate with other members, such application shall be accompanied by a complete copy of the proposed communication or communications.
(d) The reasons for and the purposes of his requests.
##### **§ 17:12B-119** Costs and expenses incidental to application for information; payment by applicant {#sec-17-12b-119 omnilex-key=us-nj-statutes--title-17--17:12B-119}
If the application is for information, and if the State association grants the application, the State association may require the applicant to pay the costs and expenses, if any, involved in compiling such information before the same is delivered to the applicant.
##### **§ 17:12B-120** Application for communication with other members; preparation and mailing of copies of communication; payment of costs and expenses by applicant {#sec-17-12b-120 omnilex-key=us-nj-statutes--title-17--17:12B-120}
If the application is to enable the member to communicate with other members of the State association, and if the State association grants the application, the State association shall prepare and mail copies of the communication or communications, submitted with such application, to all of its members as soon as the applicant has paid to the State association all of the costs and expenses involved in such preparation and mailing.
##### **§ 17:12B-121** Application for order requiring state association to grant application for information or to communicate with members {#sec-17-12b-121 omnilex-key=us-nj-statutes--title-17--17:12B-121}
(1) If the State association fails to grant any application submitted pursuant to the provisions of section 118 of this act within 10 days after receipt by it of said application, the applicant may, within an additional 10-day period, apply to the commissioner for an order requiring the State association to do so.
(2) The application to the commissioner shall be in writing. It shall contain, or have attached thereto, a true copy of the application which was filed with the State association and shall state the date of such filing. Within 5 days after presenting said application to the commissioner, the applicant shall serve a true copy thereof upon the State association.
##### **§ 17:12B-122** Hearing before commissioner; designation of time and place; notice; adjournments {#sec-17-12b-122 omnilex-key=us-nj-statutes--title-17--17:12B-122}
The commissioner shall, within 30 days from the date such application is presented to him, designate a time and place for a hearing upon such application, and give at least 10 days' written notice thereof, which may be sent by certified mail, to the State association and the applicant. The commissioner may grant reasonable adjournments of such hearing.
##### **§ 17:12B-123** Merits of application; determinations by commissioner {#sec-17-12b-123 omnilex-key=us-nj-statutes--title-17--17:12B-123}
At such hearing, or such independent examination or investigation as the commissioner may make, the commissioner shall examine into the merits of the application and if he determines that the application is made in good faith and to grant the application would not be detrimental to the best interests of the State association and its members; then the commissioner shall:
(a) If the application is for information, grant the application in whole or in part, and impose such terms and conditions as he shall deem necessary or proper to protect the best interest of the State association and its members, or
(b) If the application is to enable the applicant to communicate with other members of the State association, order the State association to prepare and mail the communication or communications, in whole or in part, on the condition that the applicant shall first pay to the State association all of the costs and expenses of such preparation and mailing.
Nothing herein shall be construed to give the commissioner the power to order a State association to disclose a list of its members to any applicant.
##### **§ 17:12B-124** Decision of commissioner; filing memorandum; notice {#sec-17-12b-124 omnilex-key=us-nj-statutes--title-17--17:12B-124}
Within 30 days after the close of the hearing, the commissioner shall announce his approval (in whole or in part) or denial of such application and file in his office a written memorandum stating the reasons therefor which shall be open to public inspection; and he shall forthwith thereafter give written notice thereof to the State association and the applicant.
##### **§ 17:12B-125** Exclusive procedure; review of commissioner's action; effect of failure to act {#sec-17-12b-125 omnilex-key=us-nj-statutes--title-17--17:12B-125}
The procedure, set forth in sections 118 through 124 of this act, for obtaining information by a member or enabling a member to communicate with other members of a State association shall be exclusive; but the action of the commissioner shall be subject to review in the Superior Court in a proceeding in lieu of prerogative writ. The commissioner's failure to act within the periods limited by this section shall be deemed to be a final order denying the application.
##### **§ 17:12B-125.1** Application of sections 118 through 124 to federal associations {#sec-17-12b-125.1 omnilex-key=us-nj-statutes--title-17--17:12B-125.1}
Insofar as the provisions of sections 118 through 124 of this act regarding obtaining information by a member or enabling a member to communicate with other members are not inconsistent with Federal law, the provisions of sections 118 through 124 shall apply to Federal associations whose principal offices are located in this State and to the members thereof, except that the applications provided for shall be tendered to the Federal Home Loan Bank Board, Washington, D. C., in the case of a Federal association and forwarded only upon that board's certificate and direction.
##### **§ 17:12B-126** Voting rights of members {#sec-17-12b-126 omnilex-key=us-nj-statutes--title-17--17:12B-126}
126. Voting of rights members. Each member 16 years of age, or over, shall be entitled to vote at any meeting of a mutual association.
Each mutual association shall set forth in its bylaws the voting rights of its members, which shall be in accordance with subsection (a) or subsection (b) of this section:
(a) Each member entitled to vote shall have one vote at any meeting of the mutual association regardless of the number of shares or accounts standing in his name; or
(b) Each savings member entitled to vote shall have one vote for each $100.00, or fraction thereof, of the participation value of his savings account; each borrowing member entitled to vote under this subsection shall be entitled to have one vote; but in no event shall the maximum number of votes permitted to any member under this subsection be greater than 1,000 votes regardless of the number or types of shares or accounts or the value of such shares or accounts held by such member.
Under either subsection (a) or subsection (b) of this section members may vote by written proxy if the bylaws so provide and the bylaws may prohibit voting by persons who have become members within 60 days of the date when the vote is cast.
Under either subsection (a) or subsection (b) of this section the trustee or fiduciary of a fiduciary account shall be entitled to cast the vote or votes permitted under said subsections.
Under subsection (a) of this section only one vote shall be allowed in connection with any account held by two or more persons, jointly; under subsection (b) of this section no more than the maximum number of 1,000 votes, provided for in that subsection shall be allowed in connection with an account held by two or more persons, jointly.
Under subsection (a) or subsection (b) of this section when accounts or shares are pledged, the pledgor may vote thereon.
##### **§ 17:12B-127** Determination of net income {#sec-17-12b-127 omnilex-key=us-nj-statutes--title-17--17:12B-127}
At the end of each accounting period and at least annually the board of each State association shall determine the amount of net income, if any, earned during the accounting period. To aid the board in making such determination there shall be submitted to it, a financial statement including a statement of gross income and net income and a statement of its operations during such accounting period and such additional data, if any, as the board may require, certified to be correct by an officer or by a competent accountant designated by the board.
##### **§ 17:12B-128** General reserve, bad debt reserves and Federal insurance reserve accounts {#sec-17-12b-128 omnilex-key=us-nj-statutes--title-17--17:12B-128}
(a) A general reserve account shall mean a reserve account established and maintained for the purpose of absorbing losses. Each State association shall establish such a general reserve account.
(b) A bad debt reserve account shall mean a reserve account established for the purpose of absorbing losses due to bad debts, which may be established by each State association in addition to the general reserve account defined in subsection (a) of this section, but the establishment of such bad debt reserve account shall not prohibit a State association from charging losses due to bad debts to the general reserve account or any other available reserve account or the undivided profits account.
(c) "Federal insurance reserve account" shall mean a reserve account established and maintained by an insured association in accordance with the requirements of the Federal Savings and Loan Insurance Corporation. Any insured association may maintain such reserve account separately or may designate its general reserve account or the bad debt reserve account, or both, as its Federal insurance reserve account.
(d) At the end of each accounting period and before the declaration of any dividends, each State association shall transfer to the general reserve account an amount equal to 5% of the State association's net income for such accounting period, less any amounts transferred for such period to the bad debt reserve account; provided, however, that the provisions of this subsection shall not apply to any insured association, as defined in section 5 of this act.
(e) Any State association may at any time, in the discretion of its board, transfer additional amounts beyond those required by the provisions of this section, to any of the reserve accounts hereinbefore mentioned, provided, that any amount transferred to the general reserve account in excess of the minimum amount set forth in this section may be used for the purposes of meeting the requirements of paragraph (d) of this section in subsequent accounting periods within 5 calendar years from the year such excess amount was transferred to the State association's reserve accounts; provided, however, if the State association is an insured association, as defined in section 5 of this act, the time within which such excess amounts may be used to meet the requirements of subsection (d) of this section shall be the time permitted for such purposes under the regulations promulgated by the Federal Savings and Loan Insurance Corporation.
(f) Additions to any of the reserve accounts hereinbefore mentioned, whether required or discretionary, may be made by transfer from the net income of the period for which such transfer is made, from the undivided profits account or from any other unapportioned profits.
(g) No transfer to the general reserve account, required by subsection (d) of this section, shall be required to be made so long as either:
(1) the amount held in all reserve accounts of the State association plus the undivided profits account, equals or exceeds an amount equal to 6% of the State association's capital; or
(2) the State association is an insured association, as defined in section 5 of this act, and has complied with the reserve requirements promulgated by the Federal Savings and Loan Insurance Corporation for such accounting period.
(h) The board of a State association may, in its discretion, authorize transfers, in whole or in part, from the bad debt reserve account to the general reserve account or to the Federal insurance reserve account and in addition the board may from time to time, in its discretion, authorize the transfer of all or a part of the general reserve account to the Federal insurance reserve account and, provided further, that when the amount held in the general reserve account exceeds 6% of the State association's capital because of a decline in capital, the board of the State association, with the approval of the commissioner, may authorize the transfer of amounts in excess of 6% of capital to the undivided profits account.
##### **§ 17:12B-129** Special reserve accounts {#sec-17-12b-129 omnilex-key=us-nj-statutes--title-17--17:12B-129}
Each State association shall establish and maintain such special reserve accounts as are required by the provisions of this act and may establish and maintain such other reserve accounts as in the judgment of its board are necessary or desirable. Such reserve accounts may be established and maintained by transfers thereto from net income, the undivided profits account or any other unapportioned profits. Any amount remaining in any reserve account established in accordance with this section which is no longer needed for the purpose for which such reserve account was established may be transferred to the undivided profits account or to the reserve accounts established under the provisions of section 128 of this act.
##### **§ 17:12B-130** Dividend participation; exceptions {#sec-17-12b-130 omnilex-key=us-nj-statutes--title-17--17:12B-130}
(a) At least annually and after determination of the net income for the accounting period and the establishment of reserves required or permitted by this act, the board of each State association shall determine by resolution, the rate or rates of dividend, if any, which shall be declared for each class of account. Such dividends shall be taken only from the net income or from the undivided profits account. Dividends shall be apportioned to members' accounts upon a compound interest plan. Dividends shall be made available to members by adding the same to their accounts, except where otherwise provided by this act, but in no event shall dividends be made available to the members earlier than the eighth calendar day prior to the closing of the period for which said dividends are paid.
Notwithstanding any other provision of this act, the board of any State association, may by resolution, authorize the payment of dividends on amounts withdrawn from savings accounts between the dates as of which such association regularly distributes earnings on savings accounts provided that dividends paid on any amount so withdrawn, shall not be paid for any greater portion of the dividend period than that during which such amount remains in such association, nor at a rate in excess of the rate at which earnings, exclusive of any reward profit, are distributed on savings accounts for the dividend period in which such amount is so withdrawn.
(b) State associations issuing installment share accounts may declare dividends to accounts of other classes at a rate less than, but no more than, the rate declared to installment share accounts for the same period, unless the board has adopted a reward profit plan in which event all dividends, except those provided for under the reward profit plan, shall be declared at the same rate. Notwithstanding any other provisions of this act, a State association may apportion dividends to installment share accounts at other than a regular dividend period for the purpose of maturing such accounts; provided, however, that the amount of dividends so apportioned shall be no greater than the pro rata share of income for the current period applicable for dividend purposes to such accounts.
(c) Notwithstanding any other provisions of this act, a State association may, if its by-laws so provide, exclude from dividends, either or both of the following classes of accounts:
(1) Those having a participation value of less than $50.00. Such accounts may be placed in, or transferred to, an account designated as a "nondividend account;" provided, however, that the State association shall maintain a list of the names of the savings members and the amounts credited to such savings members in such "nondividend account."
(2) Those which are issued under a plan whereby they will be withdrawn within 24 months from the date upon which they are issued, or it may credit dividends to such accounts according to a schedule which it may establish, provided that such schedule shall not result in the crediting of dividends to any of such accounts at a rate greater than that applicable to any class of accounts, other than those described in subsection (c) of this section.
##### **§ 17:12B-131** Undivided profits account {#sec-17-12b-131 omnilex-key=us-nj-statutes--title-17--17:12B-131}
Any net income or any other available profits which remain after reserve and dividend requirements have been met, may be maintained in an undivided profits account.
##### **§ 17:12B-132** Restrictions upon reserves and undivided profits account {#sec-17-12b-132 omnilex-key=us-nj-statutes--title-17--17:12B-132}
The aggregate amount of all reserve and undivided profits accounts of any association shall not be increased so long as the aggregate amount of such accounts exceeds an amount equal to 25% of an association's assets, except with the approval of the commissioner. If at any time the amount of the general reserve account of an association exceeds 25% of its assets, the excess may, with the approval of the commissioner, be transferred to the undivided profits account.
##### **§ 17:12B-133** Reward profit or bonus plan {#sec-17-12b-133 omnilex-key=us-nj-statutes--title-17--17:12B-133}
Any association which may have adopted a reward profit or bonus plan under previous law or regulations of the commissioner may continue such plan, except if it adopts a plan otherwise permitted by law or regulations of the commissioner and approved by its board of directors, in which case the previously adopted plan shall be discontinued as to any new accounts, but may be continued as to those accounts participating therein at the date of adoption of the new plan.
The board of an association may classify savings deposits and savings accounts as to notice, amount and term, and may determine to pay different rates of earnings with respect to savings deposits and savings accounts in different classes. All accounts of the same type and class shall be paid the same rate of earnings. Such earnings of dividends may be described as interest.
##### **§ 17:12B-134** Application for withdrawal {#sec-17-12b-134 omnilex-key=us-nj-statutes--title-17--17:12B-134}
Any member may, at any time, file with his State association a written application for payment of all or any part of the withdrawal value of any account standing in his name, whether or not such account has matured.
##### **§ 17:12B-135** Cancellation of withdrawal application {#sec-17-12b-135 omnilex-key=us-nj-statutes--title-17--17:12B-135}
Any withdrawal application may be canceled, in whole or in part, at the written request of the withdrawing member, with the consent of the State association, upon such reasonable terms as such State association may impose.
##### **§ 17:12B-136** Association operating under Plan 1; payment on presentation of withdrawal application or other notice {#sec-17-12b-136 omnilex-key=us-nj-statutes--title-17--17:12B-136}
A State association operating pursuant to Plan 1 or Plan 4 as set forth in section 75 of this act, may pay the amount requested in the withdrawal application, when the same is presented, or may require notice, prior to the payment of any withdrawal application, of not more than 90 calendar days, provided that associations classifying accounts as to notice shall, with respect to such accounts, only pay withdrawals in accordance with the notice agreement set forth in the evidence of account issued to the member, notwithstanding any other requirements or limitations of this section. Any such State association requiring notice prior to the payment of any withdrawal application, shall immediately notify the commissioner of its action.
When such State association requires notice from an account holder, it shall require the same notice from any account holder who subsequently presents a withdrawal application, until all applications for which notice has been required, have been paid in full.
Every withdrawal application not paid when presented, shall be numbered, dated and filed, by any such State association, in the order of its actual receipt, and shall be paid in such order.
##### **§ 17:12B-137** Association operating under other than Plan I; payment on presentation of withdrawal application; other procedure {#sec-17-12b-137 omnilex-key=us-nj-statutes--title-17--17:12B-137}
Any State association operating on any plan other than Plan I, as defined in section 76 of this act, may pay the amount requested in the withdrawal application when presented, or may pay such withdrawals in the manner provided in sections 138 and 139 of this act.
##### **§ 17:12B-138** Funds required for withdrawals {#sec-17-12b-138 omnilex-key=us-nj-statutes--title-17--17:12B-138}
Within the first 10 days of each fiscal month, each State association operating on a plan other than Plan I shall apply to the payment of withdrawal applications which shall have been filed with it on or before the first day of its preceding fiscal month, a sum equal to at least 50% of its net receipts during such preceding fiscal month, or so much thereof as shall be necessary. Any such State association may apply a larger percentage of such receipts or other available funds for such purpose, but shall not obligate itself to do so. Net receipts, as used in this section, means all money received by such State association, except borrowed money, less operating expenses, amounts due and paid or payable on creditor obligations, and amounts paid, appropriated or reserved for the conservation, preservation, or protection of any property or asset of such State association.
##### **§ 17:12B-139** Rotation plan {#sec-17-12b-139 omnilex-key=us-nj-statutes--title-17--17:12B-139}
If any State association operating under any plan other than Plan I, as defined in section 76 of this act, shall find that within the first 10 days of any fiscal month, the funds of such State association, available for the payment of withdrawals, in accordance with the provisions of section 138 of this act, shall be insufficient to pay in full all withdrawal applications which shall have been filed with it on or before the first day of its preceding fiscal month, each such withdrawal application shall be paid in the order in which it was filed, $50.00 on account, or the balance due thereon, whichever is less; and, if the available funds are sufficient to make more than one such payment upon each such application, such rotating payment process shall be repeated until the available funds are exhausted. Each month thereafter the rotation payments shall begin with the application next following the one upon which the last preceding rotation payment was made. So long as such State association is operating upon the rotation payment plan, no member shall have more than one withdrawal application on file at a time. Any State association operating under the provisions of this section shall immediately notify the commissioner of such operation.
##### **§ 17:12B-140** Payment of withdrawals on other plans and purchase of accounts prohibited; authority of commissioner {#sec-17-12b-140 omnilex-key=us-nj-statutes--title-17--17:12B-140}
No State association shall obligate itself to pay withdrawals on any other plan than that provided in this act, nor shall any State association purchase an account from any member; provided, however, the commissioner may, whenever in his judgment the circumstances so warrant, direct any State association to suspend the payment of withdrawals or to pay withdrawals under any plan or plans the commissioner is authorized to impose under the provisions of sections 179, 180 and 182 of this act.
##### **§ 17:12B-141** Application of withdrawal value to indebtedness {#sec-17-12b-141 omnilex-key=us-nj-statutes--title-17--17:12B-141}
A State association may apply and credit the full withdrawal value of any account pledged with it as security for the payment of any debt, toward the payment of such debt; except that no State association shall apply and credit the withdrawal value of any such account so pledged where the State association requires notice from any account holder prior to the payment of any withdrawal application; except where the State association is paying withdrawals as directed by the commissioner as provided in section 140 of this act and the commissioner's direction permits the application of the withdrawal value so pledged, to be credited against a debt due such State association.
##### **§ 17:12B-142** Dividend retention {#sec-17-12b-142 omnilex-key=us-nj-statutes--title-17--17:12B-142}
Any State association, except one which operates under the nonshare plan described in section 76 of this act, may, upon the withdrawal of an account prior to its maturity, retain such portion of the dividends credited to such account as its by-laws may prescribe, not exceeding however, 50% thereof if the withdrawal application is filed within 2 years from the date when such account was opened, and at least 5% less for each succeeding year, if the withdrawal application is filed before the end of the third or any succeeding year; provided, however, 5% of the dividends may be retained upon any withdrawal regardless of the time when the withdrawal application may be filed; and provided further, that any State association may continue to apply its profit retention schedule which was in existence on April 4, 1946, insofar as it is reasonable, but such changes, if any, as may hereafter be made therein, shall conform with the limitations of this section.
##### **§ 17:12B-143** Restrictions on actions {#sec-17-12b-143 omnilex-key=us-nj-statutes--title-17--17:12B-143}
No person shall institute or prosecute any action against an association to recover the value of any account or any part thereof, until an application for the withdrawal thereof has been filed, and not then, so long as such association pays withdrawals as provided in this act. At least 30 days' written notice of the intention to institute such action shall be served upon the association and upon the commissioner. Recovery in any such action shall be limited to the amount which the claimant would have received up to the date of the entry of judgment, if payment had been made to him in accordance with the provisions of this act.
##### **§ 17:12B-144** Retirement {#sec-17-12b-144 omnilex-key=us-nj-statutes--title-17--17:12B-144}
If funds are on hand for the purpose, any State association may, by resolution of its board, retire any account by giving at least 30 days' written notice of its intention so to do, which may be sent by certified mail addressed to the member owning such account at his address appearing on the records of the State association. Such notice shall identify the account; state the retirement date and the retirement value, and include a statement that said account will not participate in any dividend declared after such retirement date and that no interest or other income will accrue thereon. From and after such retirement date, the member owning such account shall cease to be a member and shall have no further rights or liabilities of membership with respect to such account.
In the case of the retirement of an installment share account upon which the required payments are in arrears for 6 successive months, the retirement value shall be the withdrawal value as of the date of the passage of such resolution. In the case of the retirement of any other account, the retirement date shall be some date upon which dividends are credited and the retirement value shall be the participation value, including the dividend credited to such account on the retirement date.
The member owning such an account shall be entitled to receive full payment of such retirement value by demanding the same on such retirement date or at any time thereafter by surrendering to the State association his account book, membership certificate, share certificate or such other evidence of the account as may have been issued. A State association may pay such retirement value without awaiting a demand for payment. No State association shall retire any account when it has applications for withdrawal which are unpaid in whole or in part. No State association shall retire an account of any of its officers or directors where such retirement shall operate to disqualify such officer or director from holding his office in the State association.
If such retirement value is not paid or demanded within 30 days after such retirement date, it shall be transferred to a retirement account and there remain to the credit of the person owning such account subject to his right to demand payment thereof, and to the State association's right to pay the same, in accordance with the provisions of this section.
##### **§ 17:12B-145** Investments authorized {#sec-17-12b-145 omnilex-key=us-nj-statutes--title-17--17:12B-145}
The funds of every association shall be invested in accordance with the provisions of this act.
##### **§ 17:12B-145.1** Origination, acquisition of mortgage loans by association {#sec-17-12b-145.1 omnilex-key=us-nj-statutes--title-17--17:12B-145.1}
26. An association may originate or acquire mortgage loans secured by a mortgage constituting a lien upon real property or upon a lease of the fee of real property, so long as the association observes prudent lending practices, including amortization of the loans. The value of any mortgage loan shall not exceed 90 per cent of the appraised value of the mortgaged property, except for a mortgage loan that is less than $100,000 or as permitted by the Commissioner of Banking and Insurance by regulation. An association shall obtain an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices.
##### **§ 17:12B-155** Procedure for making other loans {#sec-17-12b-155 omnilex-key=us-nj-statutes--title-17--17:12B-155}
155. Other loans may be made as follows:
A. Account loans. Loans secured by a pledge of a member's savings account. No such loan shall exceed the withdrawal value of the pledged account. Interest on such loans shall not be charged at a rate in excess of the maximum permitted under the provisions of R.S.31:1-1 unless a higher rate is required by any applicable federal regulation that establishes minimum rates that must be charged on loans secured by savings accounts; in which event, the interest charged shall not be greater than that specified by such federal regulation.
B. Purchase of loans. An association may purchase any mortgage loan, property repair, alteration, improvement or rehabilitation loan, or any other loan which an association is authorized to make.
C. (Deleted by amendment, P.L.1997, c.33.)
D. (Deleted by amendment, P.L.1997, c.33.)
E. Loans otherwise authorized. An association may make any other loan which it may be authorized to make by any law of this State.
F. (Deleted by amendment, P.L.1997, c.33.)
G. Educational loans. In addition to the authority otherwise granted by law for an association to make loans guaranteed or insured in whole or in part by the United States of America or the State of New Jersey, or any instrumentality or agency of either of them, or for which a commitment to so guarantee or insure has been made, an association may make any loans so guaranteed or insured or for which a commitment to so guarantee or insure has been made where such loans are made for the purposes of financing the expenses of higher education. Such loans may be made in accordance with the terms and conditions permitted by the guaranteeing or insuring authority, notwithstanding any other provisions of law limiting interest or other charges or prescribing other terms and conditions.
H. (Deleted by amendment, P.L.1997, c.33.)
I. Secondary mortgage loans. Secondary mortgage loans made pursuant to section 26 of P.L.1997, c.33 (C.17:12B-145.1) shall be repayable in installments under the same terms and conditions as provided for secondary mortgage loan licensees under the "Secondary Mortgage Loan Act," P.L.1970, c.205 (C.17:11A-34 et seq.) only with respect to maximum annual percentage rate of interest. The Commissioner of Banking and Insurance shall have the power, in relation to a "secondary mortgage loan," to adopt, amend, alter or rescind regulations, the requirements of which, in the commissioner's judgment, are necessary for the implementation of this subsection.
J. Mobile homes. An association may invest in mobile or manufactured home chattel paper by making or by buying loans or installment sales contracts on mobile or manufactured homes.
K. Consumer loans.
(1) An association may invest in or make installment loans upon the same terms and conditions prescribed for banks in accordance with Article 12 of the "Banking Act of 1948," P.L.1948, c.67 (C.17:9A-53 et seq.), subject to the limitation established in subsection M. of this section.
(2) In addition, subject to the limitation established in subsection M. of this section, an association may invest in or make secured or unsecured loans for personal, family, or household purposes to the extent and under the conditions permitted by the rules and regulations adopted by the commissioner from time to time. The rate of interest on such loans shall not be in excess of the rate of interest provided for in section 160 of P.L.1963, c.144 (C.17:12B-160) or in excess of any rate of interest for such loans as may be otherwise authorized by law. The commissioner shall promulgate such rules and regulations in substantial conformity with similar rules and regulations of the Federal Home Loan Bank Board.
L. Advance loans. An association may make advance loans upon the same terms and conditions prescribed for banks in accordance with "The Advance Loan Law of 1968," P.L.1959, c.91 (C.17:9A-59.1 et seq.).
M. Limitations on loans and investments. Loans or investments in the following subsections shall not exceed, in the aggregate for each subsection, 20% of the assets of the association, provided that the commissioner may, by regulation, establish an amount in excess of 20% for each subsection if such excess amount is in conformity with federal law or rule or regulation of the Federal Home Loan Bank Board:
(1) (Deleted by amendment, P.L.1997, c.33.)
(2) Secured or unsecured loans for personal, family, or household purposes, and commercial paper and corporate debt securities; provided, however, that no percentage of assets limitation shall apply to the issuance of credit cards or the extension of credit therewith, the investment in property improvement loans as defined in section 158 of P.L.1963, c.144 (C.17:12B-158), or the investment in advance loans as defined in subsection L. of this section.
##### **§ 17:12B-156** Investments in additional loans {#sec-17-12b-156 omnilex-key=us-nj-statutes--title-17--17:12B-156}
156. Investments in additional loans.
A. An association may make additional loans or advances for any purpose expressly or impliedly reserved or provided for in any bond, mortgage or other obligation held by or hereafter acquired by any such association subject to the provisions of subsection D of this section, otherwise;
B. An association may make additional loans to borrowing members for the purpose of repairs, alterations, or improvements already made or to be made upon real estate owned by such borrowing member, subject to the conditions and limitations of subsection D of this section.
C. An association may make additional loans to borrowing members for the purpose of paying the cost of insurance upon the life of such borrowing member. Such policy of insurance may also include health, accident or disability features. The proceeds of such a policy of insurance shall be applied in accordance with the terms and conditions contained therein; provided, however, the amount of such insurance shall not exceed the amount loaned on the mortgage lien held by the association. Any additional loan made under this subsection shall be made pursuant to the conditions and limitations contained in subsection D of this section.
D. Any additional loan to borrowing members made pursuant to the provisions of this section shall be made subject to the following conditions and limitations:
(1) The real estate securing such an additional loan shall be real estate upon which the association already holds a mortgage lien.
(2) (Deleted by amendment, P.L.1997, c.33.)
(3) (Deleted by amendment, P.L.1997, c.33.)
(4) (Deleted by amendment, P.L.1997, c.33.)
(5) Each such additional loan shall be evidenced by an obligation which shall state the terms on which such loan is made, and the amount thereof shall be added to the amount due on the association's mortgage against such real estate.
(6) The payment of such additional loan shall be secured by the mortgage the association already holds on such real estate.
(7) No search or examination of the title to the mortgage real estate shall be required.
All persons who acquire any rights in, or liens upon, the mortgaged real estate, subsequent to the recording of any association's mortgage, shall hold such rights and liens subject to the association's right to make such additional loans.
##### **§ 17:12B-157** Property improvement loans without mortgage liens {#sec-17-12b-157 omnilex-key=us-nj-statutes--title-17--17:12B-157}
Investments in loans for the purpose of repair, alteration, improvement, construction, adding to, modernizing, equipping or rehabilitation of real estate upon which an association shall not be required to hold a mortgage lien. Such a loan shall be known as a "property improvement loan." Any association may make loans subject to the limitations set forth in sections 159 through 164 (C. 17:12B-159 through C. 17:12B-164) of this act for the repair, alteration, improvement, construction, adding to, modernizing, equipping or rehabilitation of real estate, which is used wholly or partially for dwelling purposes, including loans for restoration, rehabilitation, rebuilding and replacement of properties which have been damaged or destroyed by fire, hurricane, flood, cyclone, tornado or other catastrophe.
##### **§ 17:12B-158** Definitions as used in sections 159 through 164 (C. 17:12B-159 through C. 17:12B-164) of this act {#sec-17-12b-158 omnilex-key=us-nj-statutes--title-17--17:12B-158}
The following words and phrases as used in sections 159 through 164 (C. 17:12B-159 through C. 17:12B-164) of this act, unless a different meaning is plainly required by the context, shall have the following meanings:
(1) "Property improvement loan" means a loan, secured or unsecured, the purpose of which, as represented to the association by the borrower, is to enable the borrower to pay the cost in whole or in part of repairing, altering, improving, constructing, adding to, modernizing, equipping or rehabilitating real estate used wholly or partially for dwelling purposes and in connection with which the borrower files with the association, at the time when the loan is made, a statement, that the proceeds of the loan will be used to pay the cost, in whole or in part, of modernizing, rehabilitating, altering, constructing, adding to, repairing, equipping or improving such real property, as the case may be.
(2) (Deleted by amendment.)
(3) "Net proceeds" means the difference between the face amount of the note evidencing such loan and that part of such face amount which represents precomputed interest.
(4) "Loan for equipping" means a loan, the proceeds of which are used to finance those items usually and customarily used by the borrower in connection with a residential dwelling, whether or not affixed to the realty. The Commissioner of Banking shall in relation to a "loan for equipping," adopt, amend, alter or rescind regulations, the requirements of which, in his judgment, are necessary to establish appropriate safeguards. The commissioner, when issuing such regulations, shall, to the extent feasible and after giving consideration to the financial and economic circumstances and the public welfare, endeavor to promulgate such rules and regulations in substantial conformity with similar rules and regulations of the Federal Home Loan Bank Board as applied to Federal associations.
(5) "Precomputed interest" means an amount equal to the whole amount of the interest payable on a loan as defined in this section for the period from the making of the loan to the date scheduled by the terms of the loan for the payment of the final installment.
(6) "Person" means an individual, a partnership, a business, a corporation and an association.
(7) "Actuarial method" means the method of applying payments made on a debt between principal and interest pursuant to which a payment is applied first to accumulated interest on the principal amount of the loan and the remainder is applied to the unpaid principal balance of the loan in reduction thereof.
(8) "Precomputed loan" means an installment loan which is evidenced by a note the face amount of which consists of the aggregate of the principal amount of the loan so evidenced, and the precomputed interest thereon.
(9) "Nonprecomputed loan" means an installment loan which is evidenced by a note the face amount of which consists solely of the principal amount of the loan so evidenced.
##### **§ 17:12B-159** Limitations on such loans {#sec-17-12b-159 omnilex-key=us-nj-statutes--title-17--17:12B-159}
(1) (Deleted by amendment.)
(2) Each such loan shall be evidenced by one or more notes, bonds or other written evidence of indebtedness, and no security other than an interest in tangible personal property, or a mortgage upon the real property shall be taken directly or indirectly to secure the same prior to default. An interest in real property taken as security for a property improvement loan shall not be deemed to be a mortgage loan within the meaning of Article X of this act and shall not be subject to the provisions of that article.
(3) (Deleted by amendment.)
(4) Each loan as defined in section 158 of this act (C. 17:12B-158) shall be repayable in regular installments payable at least quarterly over a period not exceeding 20 years and 32 days subsequent to the making of such loan. The amount of any installment shall not be greater or less than any other installment, except that the first installment or last installment, or first and last installments may be in an amount other than that of a regular installment, but any such installment shall not be less than one-half of, nor more than one and one-half times the amount of the regular installment. An association which makes a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158) shall not require that more than one installment be payable in any one payment period, except that the last two installments may be payable in the same payment period. Every such loan shall provide for payment periods of equal duration measured in terms of weeks or months, except that the period scheduled to elapse between the making of the loan and the date when the first installment is scheduled to be paid, hereinafter in this paragraph referred to as "the initial payment period" may be longer than any other payment period, but may not exceed 120 days. Any such loan may provide for the omission of installments during any period not exceeding 120 days in any one 12-month period. When the period during which installments are so omitted falls within or coincides with the initial payment period as hereinabove defined, the initial payment period may be longer than any other payment period, but may not exceed 120 days.
(5) Nothing in this section shall prevent an association from making a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158), the proceeds of which will be applied in whole or in part to the repayment at or before final maturity of a loan theretofore made under the provisions of this section.
(6) An association which makes a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158) may,
(a) When the payment of such loan is secured, and provision is made by law for the filing or recording to the instrument of security or notice or abstract thereof, require compliance with such provision and retain the cost of such recording or filing out of the proceeds of the loan but shall make no other charges in connection with the preparation of such mortgage or other security instruments; and
(b) When the maturity of the unpaid balance of the loan is accelerated, in accordance with the terms of the instrument evidencing the obligation, charge interest at a rate not exceeding the rate charged on the loan, from the date such acceleration takes place, upon the difference between the amount of the unpaid principal balance of the loan, and the amount of credit given pursuant to section 163 (C. 17:12B-163).
No association shall make any further interest or charge or demand, in connection with such loan, other than those expressly authorized by sections 159 through 164 (C. 17:12B-159 through C. 17:12B-164) of this act, except an association may charge interest at a rate not exceeding the rate charged on the loan upon each installment in arrears for the period from the date that default in the payment of such installment occurs to the date that payment of such installment is made; or, if the maturity of the unpaid balance of the loan is accelerated, as provided in this section, to the date upon which such acceleration takes place. In lieu of providing for interest pursuant to this paragraph (b), such instrument may provide that on any installment in arrears for more than 15 days, the association may make a late charge which shall not exceed 5% of such installment, or $5.00 whichever is the lesser; provided that only one such late charge shall be made on any one installment and that no such late charge shall be made upon any installment scheduled, by the terms of such instrument, to fall due upon a date subsequent to the date upon which the maturity of the unpaid balance of the loan is accelerated as provided by this section.
(c) No person who is a party to the instrument evidencing the loan shall be released or discharged from liability to the association by reason of the association's extending the time for the payment of an installment or installments owing or due upon such loan, or by reason of the association's waiver of any term or condition of the instrument evidencing such loan, or of the instrument intended to secure payment thereof.
(d) All parties to the instrument evidencing the loan may waive presentation for payment, demand for payment, protest and notice of protest, nonpayment, dishonor, and the association's election to accelerate the maturity of the unpaid balance of the loan.
For the purposes of this section,
(i) "Unpaid principal balance" of a loan means the face amount of the note evidencing such loan, less the aggregate of all installments paid thereon, plus the cost of any insurance paid for by the association pursuant to paragraph (f) of subsection (6) of this section, after crediting against such cost the amount of the return premium, if any, received by the association on cancellation of prior insurance paid for by the borrower or the cost of which was retained out of the proceeds of the loan;
(ii) "Unpaid balance" of a loan means the unpaid principal balance of such loan, plus unpaid interest and late charges, if any.
(e) Require one or more comakers or endorsers of the instrument evidencing a loan, or one or more guarantors of payment of the loan;
(f) When the payment of such loan is secured, require that such security be insured for the benefit of the association against such loss or damage as the association may require, and may retain out of the proceeds of such loan the premium for such insurance. If such insurance expires, lapses, or is canceled and other insurance by insurers and in amounts satisfactory to the association is not furnished to the association without lapse of coverage, the association may, but shall be under no duty to, obtain insurance upon such security, and the cost thereof, less the amount of the return premium, if any, received by the association on cancellation of prior insurance paid for by the borrower, or the cost of which was retained out of the proceeds of the loan, shall be added to and become part of the principal of such loan, payable upon demand with interest at the legal rate; and, in default of such payment within 30 days after such demand, the entire unpaid balance of the loan shall, at the election of the association become immediately due and payable;
(g) Upon institution of a suit for the collection of a loan in default, charge a collection fee, in addition to court costs allowable by law, equal to 10% of the unpaid balance of the loan, but in no case shall such collection fee exceed $100.00;
(h) Extend the scheduled due date of any loan and defer the scheduled due date of any or all installment payments, or reduce the amount of any or all installments and may, as a consideration therefor, make a total additional charge not to exceed the amount ascertained under the provisions of section 160 (C. 17:12B-160).
##### **§ 17:12B-160** Charges on such loans {#sec-17-12b-160 omnilex-key=us-nj-statutes--title-17--17:12B-160}
Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, the maximum charge which an association may contract for and receive on loans as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158) shall not exceed an amount calculated according to the actuarial method at a rate or rates agreed to by the association and the borrower. The evidence of indebtedness may provide for an increase, or may provide for a decrease, or both, in the rate of interest applicable to the loan. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12 month period. The lender shall not be obligated to decrease the interest rate more than 6% over the term of the loan, nor more than 3% per annum during any 12-month period. If a rate increase is applied to the loan, the lender shall also be obligated to adopt and implement uniform standards for decreasing the rate. If the evidence of indebtedness provides for the possibility of an increase or decrease, or both, in the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the evidence of indebtedness. No rate increase shall take effect during the first 3 years of the term of the loan, or thereafter, (a) unless at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes such increase, and (b) unless at least 365 days have elapsed without any increase in the rate. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period. Where the evidence of indebtedness provides for an increase or decrease in the rate of interest, the provision of subsection (4) of section 159 of P.L.1963, c. 144 (C. 17:12B-159(4)) requiring that the amount of any installment shall not be greater or less than any other installment shall not apply. If the evidence of indebtedness does provide that the interest rate may be increased then, notwithstanding the provisions of section 163 of P.L.1963, c. 144 (C. 17:12B-163), when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the association shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, an association may charge a prepayment penalty of not more than (a) $20.00 on any loan up to and including $2,000.00; (b) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any loan exceeding $5,000.00. Effective on the first day of the twelfth month following the effective date of this act, notwithstanding the provisions of section 163 of P.L.1963, c. 144 (C. 17:12B-163), when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the association shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, an association may charge a prepayment penalty of not more than (a) $20.00 on any loan up to and including $2,000.00; (b) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any loan exceeding $5,000.00. In the case of a precomputed loan, the interest may be computed on the assumption that all scheduled payments will be made when due, and all scheduled installment payments made on a precomputed loan may be applied as if they were received on their scheduled due dates. In the case of nonprecomputed loans, all installment payments shall be applied no later than the next day, other than a public holiday, after the date of receipt, and a day shall be counted as one three-hundred-sixty-fifth of a year.
##### **§ 17:12B-162** Schedules of charges {#sec-17-12b-162 omnilex-key=us-nj-statutes--title-17--17:12B-162}
The Commissioner of Banking may prepare and distribute to such associations as shall make a request therefor, a schedule or schedules to be used in ascertaining precomputed interest, or he may approve a subsisting schedule or schedules, and interest taken pursuant to such schedule or schedules shall constitute a complete compliance with the provisions of section 160 of P.L.1963, c. 144 (C. 17:12B-160). A copy of such schedule or schedules, certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:12B-163** Rebates on prepayment {#sec-17-12b-163 omnilex-key=us-nj-statutes--title-17--17:12B-163}
When the unpaid balance owing upon a loan as defined in section 158 of P.L.1963, c. 144 (C. 17:12B-158) is repaid in full or the maturity of the unpaid loan is accelerated before the date scheduled for the payment of the final installment, the association shall allow a credit on account of the precomputed interest, the amount of which shall not be less than the amount determined by the application of the formula
AN C = in which D
"C" represents the amount of the credit to be given; "A" represents the amount of precomputed interest; "D" is determined by ascribing to each payment period included in the period for which interest was precomputed, reckoning from the day upon which the loan was made, the cardinal number descriptive of the number of payment periods scheduled, by the terms of the loan, to elapse from the beginning of each such payment period, to the date to which interest was precomputed, and the total of all the cardinal numbers so ascribed constitutes the quantity "D" ; and "N" represents the difference between the quantity "D" and the total of all the cardinal numbers ascribed to the payment periods which have elapsed, in whole or in part, from the making of the loan, to the day upon which such repayment is made, or to the day upon which the maturity of the unpaid balance of such loan is accelerated, as the case may be.
The commissioner may prepare and distribute to such associations as shall make a request therefor, a schedule or schedules based upon the formula specified in this section for use in determining the credit to be allowed pursuant to this section, and allowance of interest made as provided in such schedule shall constitute a complete compliance with this section. A copy of such schedule, duly certified by the commissioner, shall be evidenced in all courts and places.
This section shall not apply where the amount of the credit to be allowed is less than $1.00. The unpaid balance of a nonprecomputed loan may be paid in whole or in part at any time.
If an association knowingly violates any provision of sections 159 through 164 of this act (C. 17:12B-159 through C. 17:12B-164), the association shall forfeit the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon, and the borrower, or his legal representatives, may recover back, in an action against the association, twice the amount of interest received by the association on such loan, provided such action is commenced within 2 years from the date such violation occurred. The amount of any interest credit allowed pursuant to section 163 of this act, shall not be deemed to be interest received by the association for the purposes of this section.
##### **§ 17:12B-164** Other charges in connection with loans {#sec-17-12b-164 omnilex-key=us-nj-statutes--title-17--17:12B-164}
Any Federal association may charge in connection with any loan, as interest, discount, premium, late charge or any other charge, any amount which may be permitted by law to be charged by a State association or may be permitted to be charged by Federal laws, rules or regulations applying to such Federal association, and any such charge shall not be deemed to be usurious.
##### **§ 17:12B-165** Other investments, securities {#sec-17-12b-165 omnilex-key=us-nj-statutes--title-17--17:12B-165}
A State association may invest as follows:
(1) Obligations of the United States. In obligations of or guaranteed as to principal and interest by the United States of America.
(2) Federal Home Loan Bank Stock. In stock of the Federal Home Loan Bank, of which it is eligible to be a member; and in other obligations of any Federal Home Loan Bank or banks or of the Federal Home Loan Bank System.
(3) Participation in mortgage loans.
In the investment in participating interests in mortgage loans. The mortgage which secures payment of any such participating interest shall be a lien upon real estate and shall conform with the limitations, conditions and requirements set forth in this article regulating direct reduction mortgage and straight mortgage loans, with respect to priority of lien, the percentage of such loan to be the appraised value of the mortgaged property, and the terms of repayment of such loan or in conformity with the limitations, conditions and requirements set forth in rules and regulations of the Federal Savings and Loan Insurance Corporation. Such participating interest shall entitle the State association to share all money and other benefits derived from such mortgage loan, or incidental thereto, pro rata with, or with preference and priority over, the holder of any other participating interest therein.
(4) Accounts of other associations. In accounts of any insured State association of this State and of any Federal association whose principal office is located in this State; provided, that no such investment shall be made in excess of the amount for which such amount is insured by the Federal Savings and Loan Insurance Corporation.
(5) Savings banks' investments. In any investment in which savings banks of New Jersey are or shall be authorized to invest by any law of this State, other than investments which are, or which hereafter shall be, specifically designated and regulated by this act; provided, however, no funds may be invested pursuant to this subsection which are required for authorized loans to members.
(6) Loans on securities. In loans upon obligations secured by the pledge of any security designated in subsections (1) and (5) of this section; provided, that any loan made on an obligation designated in subsection (1) of this section shall not exceed the market value of the obligation pledged as collateral and any loan made on the security designated in subsection (5) of this section, shall not exceed 80% of the market value of the security pledged as collateral and provided further, that no funds may be invested pursuant to this subsection which are required for other authorized loans to members.
(7) Central and other service corporations.
(a) In the capital stock, securities, debentures or other obligations of a single corporation organized under the laws of the State of New Jersey, the entire capital stock of which corporation shall be open to, subscribed for, and issued to State associations of this State and such Federal associations that have their principal offices in this State; provided, however, that the original capital stock of such corporation shall aggregate at least $200,000.00 from subscriptions and payments by at least 10 of the aforementioned associations; and provided further, that no association, aforementioned, may invest its funds under this subsection in an amount exceeding 5% of its assets at the time of such subscription, payment or investment, except with the approval of the commissioner.
(b) In the capital stock, securities, debentures or other obligations of any corporation organized under the laws of the State of New Jersey, if the entire capital stock of such corporation is available for purchase only by State associations of this State and such Federal associations that have their principal offices in this State; provided, however, that no association aforementioned may make any investment under this subsection in an amount exceeding 3% of its assets, except with the approval of the commissioner.
(8) Federal corporations. In the capital stock, securities, debentures or other obligations of any corporation created by Act of Congress in which such investment may be open to associations and which shall afford advantages or safeguards to associations.
(9) In any other investment in which an association is, or shall be, authorized to invest by any law of this State.
(10) Participation in loans or investments. In a participating interest in any loan or investment which an association is authorized to make.
(11) State securities. Investments in the general obligations of any State or any political subdivision thereof.
(12) Loans to financial institutions, brokers and dealers. Loans to financial institutions with respect to which the United States or any agency or instrumentality thereof has any function of examination or supervision, or to any broker or dealer registered with the Securities and Exchange Commission, secured by loans, obligations, or investments in which the association has the statutory authority to invest directly.
(13) Investment companies. An association may invest in, redeem, or hold shares of certificates in any open-end management investment company which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio of which is restricted by such management company's investment policy, changeable only if authorized by shareholder vote, solely to any such investments as an association by law or regulation may, without limitation as to percentage of assets, invest in, sell, redeem, hold, or otherwise deal with. The commissioner may prescribe rules and regulations to implement the provisions of this subsection and shall promulgate such rules and regulations in substantial conformity with similar rules and regulations of the Federal Home Loan Bank Board.
(14) Commercial paper and corporate debt securities. Subject to the limitation of subsection M. of section 155 of P.L.1963, c. 144 (C. 17:12B-155), an association may invest in, sell or hold commercial paper and corporate debt securities, as defined and approved pursuant to rules and regulations promulgated by the commissioner. The commissioner shall promulgate such rules and regulations in substantial conformity with similar rules and regulations of the Federal Home Loan Bank Board.
##### **§ 17:12B-166** Real estate {#sec-17-12b-166 omnilex-key=us-nj-statutes--title-17--17:12B-166}
Investments may be made in real estate as follows:
(1) Office building for transaction of State association's business.
In the purchase of improved or unimproved real estate and in the erection or improvement of buildings thereon for the purpose of providing offices for the transaction of a State association's business. Such buildings may also include space for rental purposes. The cost to the State association of such lands and buildings shall not exceed 50% of the sum of such State association's reserves, as established under the provisions of section 128 of this act, and the undivided profits account at the time such investment is made, unless the commissioner shall, for good cause shown, on application therefor approve an amount in excess of said 50%.
(2) Property purchased for resale to members.
In the purchase of improved or unimproved real estate in this State and in the construction or improvement of buildings thereon, for resale to members, when the contracts for resale are executed concurrently with, or prior to, such purchase. The member with whom such contract for resale is made shall pay to the State association upon the making of such contract, at least 20% of the purchase price therein designated and shall pay the balance thereof, together with the interest thereon, in periodical installments over a period not exceeding 25 years. All such properties shall be used wholly or partially for dwelling purposes and all such properties shall be subject to the appraisal requirements as set forth in section 167 of this act which appraisal shall be made prior to the purchase of said real estate.
##### **§ 17:12B-168** Limitations on amounts of real estate loans and investments {#sec-17-12b-168 omnilex-key=us-nj-statutes--title-17--17:12B-168}
168. Limitations on amounts of real estate loans and investments.
No State association shall make loans or extensions of credit in an amount greater than that permitted for banks and savings banks pursuant to sections 60 through 63 of P.L.1948, c.67 (C.17:9A-60 through 17:9A-63).
Notwithstanding the above limits, the commissioner may adopt, amend, alter or rescind regulations permitting associations to make loans for a greater amount or to increase the percentage limitation hereinabove set forth. The commissioner may give consideration to the size of the association, its reserves and current economic conditions in issuing such regulations. Any loans or investments legally made under the provisions of regulations adopted under the authority granted by this section shall be legal loans or investments if they conform with the regulations in effect at the date of closing or purchase of said loan or investment, notwithstanding the subsequent amendments, alterations, rescissions or repeals of the regulations in effect at the date of such closing or purchase.
##### **§ 17:12B-169** Restrictions on investments {#sec-17-12b-169 omnilex-key=us-nj-statutes--title-17--17:12B-169}
(1) No uninsured State association shall make any of the investments authorized by this act, except investments in account loans, obligations of or guaranteed as to principal and interest by the United States of America, stock of the Federal Home Loan Bank Board of which it is eligible to be a member; and any other obligations of any Federal Home Loan Bank Board System or obligations of any agency or instrumentality of the United States of America, if and so long as, the sum of its cash on hand in the banks and the value of its investments in obligations of the United States of America and of agencies and instrumentalities of the United States of America, is less than 5% of its capital.
(2) No State association shall make any of the investments authorized by this act, except investments in obligations of, or guaranteed as to principal and interest by the United States of America, stock of the Federal Home Loan Bank of which it is eligible to be a member; and in other obligations of any Federal Home Loan Bank or banks, or the Federal Home Loan Bank System, or obligations of any agency or instrumentality of the United States of America, at any time when any application for withdrawal remains unpaid in whole or in part, 90 days after the date of the filing thereof.
##### **§ 17:12B-170** Report of financial condition available to members {#sec-17-12b-170 omnilex-key=us-nj-statutes--title-17--17:12B-170}
170. Every State association shall make available to its members annually, upon request, a report of its financial condition as of the end of its fiscal year.
##### **§ 17:12B-171** Reports to commissioner; violations, penalties. {#sec-17-12b-171 omnilex-key=us-nj-statutes--title-17--17:12B-171}
171. Every State association shall, within 60 days after the close of each fiscal year, file in the department, on blanks to be provided by the commissioner, a report of its transactions, affairs and financial condition as of the end of its fiscal year. The report shall state the names and addresses of its directors, officers, attorneys, agents and other employees, and the compensation, if any, paid to each, and shall be verified by the oaths or affirmations of such officers as the commissioner shall designate. The commissioner may call for additional reports when he deems it expedient, but not more often than once in every 3 months.
If any State association fails to file its annual report within the time herein specified, or any additional report within such reasonable period as the commissioner fixes, the association shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The commissioner may, for sufficient cause, extend the time for filing any reports for not more than 10 days. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:12B-172** Examination, inspection, supervision of associations. {#sec-17-12b-172 omnilex-key=us-nj-statutes--title-17--17:12B-172}
172. Every State association and every out-of-State association with a branch office in this State shall be subject to the examination, inspection and supervision of the department. When deemed advisable, the examiner shall verify the liabilities of the State association to its members by an inspection and verification of their accounts. The commissioner shall promptly communicate the result of every examination to the president of the State association examined, who shall present the same to the board at the next regular meeting, or a special meeting, if deemed advisable, or if so directed by the commissioner. The action taken thereon by the board shall thereupon be promptly communicated by the president to the commissioner.
Every report and copy of a report of examination of a State association and out-of-State association made by or under the supervision of the commissioner, shall be confidential, and shall not be made public by any officer, director or employee of a State association or out-of-State association, and shall not be subject to subpoena or to admission into evidence in any action or proceeding in any court, except pursuant to an order of the court made upon notice to the commissioner an opportunity to advise the court of reasons for excluding from evidence such report or any portion thereof. The court shall order the issuance of a subpoena for the production or admission into evidence of any such report or portion thereof, only if it is satisfied that (1) it is material and relevant to the issues in the proceedings, and (2) the ends of justice and public advantage will be subserved thereby. This section shall not apply to any action or proceeding instituted by the commissioner or Attorney General pursuant to any law of this State.
For State associations or out-of-State associations with branch offices in this State and also in one or more other states, the commissioner may contract with the state regulator in the other state or states where branch offices are located to conduct cooperative examinations. Pursuant to those agreements, examiners of the department may examine branch offices of State associations and out-of-State associations in New Jersey and in other states, and examiners of other state regulators may examine branch offices of State associations and out-of-State associations in New Jersey and other states. The fees for these examinations may be shared pursuant to a contract or agreement among the regulators.
##### **§ 17:12B-173** Exhibition of books, papers, securities, oaths; subpoena {#sec-17-12b-173 omnilex-key=us-nj-statutes--title-17--17:12B-173}
173. The officers, directors and employees of the State association or an out-of-State association shall exhibit its books, papers and securities to the commissioner or the person appointed by him to conduct the examination, and otherwise facilitate the same so far as it may be in their power so to do. The commissioner and every examiner may administer an oath or affirmation to any person whose testimony is required on any examination, and compel the appearance of any person for the purpose of examination, and the production of books, papers and documents, by subpoena.
If any person shall fail to obey the subpoena, give testimony, answer questions or produce any books, papers or documents as required, the Superior Court may, upon ex parte application, make an order compelling him to do so.
##### **§ 17:12B-174** False testimony; perjury {#sec-17-12b-174 omnilex-key=us-nj-statutes--title-17--17:12B-174}
A person who shall willfully and corruptly testify falsely to a material matter, upon oath or affirmation administered by the commissioner or examiner upon such investigation or inquiry, or in regard to a report made to the commissioner, shall be guilty of perjury and be punished accordingly.
##### **§ 17:12B-175** Immunity to violator testifying {#sec-17-12b-175 omnilex-key=us-nj-statutes--title-17--17:12B-175}
Any person violating this act shall be a competent witness and compellable to testify in any proceeding under sections 172 and 173 of this act against any other person charged with so offending, but the testimony of the former person given in any such case shall not be used in any prosecution, civil or criminal, against the person so testifying except for perjury committed by him while so testifying.
##### **§ 17:12B-176** Audits {#sec-17-12b-176 omnilex-key=us-nj-statutes--title-17--17:12B-176}
(1) The board of every such State association, other than an insured State association, shall cause a thorough audit of the condition of the State association to be made at least once in each calendar year in a manner and form approved by the commissioner. The audit shall be made by a competent accountant, not an officer, director, or employee of the State association, or by the commissioner at the request of the board. Each such audit shall include a verification of at least 20% in number of the members' accounts. A written report of the result of each such audit shall be made and certified or sworn to by the person who shall make such audit and one copy of such report shall be retained by the State association and another copy thereof shall be filed with the commissioner within 90 days after the commencement of such audit, except that, for good cause shown, the commissioner may, in his discretion, on application of the State association made before expiration of such 90 day period, extend for an additional period, not to exceed 30 days, the time when such a report must be submitted. If the board shall fail to provide for the making of a proper audit, by a person or agency herein designated, or if the required audit is not properly made, prepared or filed, the commissioner shall make such audit or cause the same to be made.
(2) The board of every insured State association shall comply with the audit requirements of the Federal Savings and Loan Insurance Corporation, subject to the approval of the commissioner. If the board shall fail to provide for the making of a proper audit as required by this subsection, or if the required audit is not properly made, prepared or filed, the commissioner shall make such audit or cause the same to be made.
(3) Every State association which operates a continuous audit shall submit a copy of the audit at a specific time during the year to the commissioner. The commissioner shall determine the specific time when such report is to be submitted.
##### **§ 17:12B-177** Commissioner's additional powers {#sec-17-12b-177 omnilex-key=us-nj-statutes--title-17--17:12B-177}
The commissioner's powers and duties conferred and imposed by this article shall be in addition to those conferred and imposed by the other provisions of this act.
##### **§ 17:12B-178** Order to continue illegal, unsafe practices; violations, penalty {#sec-17-12b-178 omnilex-key=us-nj-statutes--title-17--17:12B-178}
178. If it shall appear to the commissioner that a State association or an out-of-State association has violated any law of this State or of its home state, or any of its bylaws, or is conducting its business in an unsafe or unauthorized manner, he may order it in writing to discontinue its illegal or unsafe practices. Such order shall be sent to the State association's president, who shall present it to the board at its next regular meeting, or at a special meeting, if he deems it advisable, or if the commissioner so directs. The board's action thereon shall be promptly communicated by the president to the commissioner.
A State association or out-of-State association which fails or refuses to comply with an order of the commissioner issued pursuant to this section within the time limited in such order, shall be liable to a penalty of $500.00 to be recovered with costs by the State in any court of competent jurisdiction in a civil action prosecuted by the Attorney General.
##### **§ 17:12B-179** Grounds for action by commissioner {#sec-17-12b-179 omnilex-key=us-nj-statutes--title-17--17:12B-179}
Revocation of authority to transact business. If it shall appear to the commissioner that the interests of the creditors or members of a State association are being jeopardized because the State association has violated any law of this State or any of its by-laws, or because it is conducting its business in an unsafe or unauthorized manner; or if the State association refuses to submit its books, papers and concerns to the inspection of the commissioner, or an examiner appointed by him; or if an officer or director refuses to be examined on oath or affirmation regarding the affairs of a State association; or if a State association suspends payment of its creditor obligations; or if any application for withdrawal shall remain unpaid in whole or in part for a period of more than 90 days after it shall have been filed; or if, as a result of any examination or from any report made to him, the commissioner has reason to conclude that the State association is in an unsound or unsafe condition to transact business; or that its capital is impaired; or that it is unsafe or inexpedient for it to continue business; or if it neglects or refuses to comply with any order issued by the commissioner pursuant to section 178 of this act, the commissioner may proceed in the manner provided in sections 180, 181 and 182 of this act, or any one or more of said sections.
##### **§ 17:12B-180** Conservation orders {#sec-17-12b-180 omnilex-key=us-nj-statutes--title-17--17:12B-180}
For the purpose of conserving the assets of a State association and of protecting the interests of its members and the public, the commissioner may require any State association, by an order in writing effective for a period of 90 days, to apply money received by it in the manner provided in section 187 of this act; to postpone the payment of all, or any portion of its applications for withdrawals and maturities as he may deem necessary and expedient, to be determined by him according to the ability of the State association to pay withdrawals and maturities so long as such payment does not result in any discrimination against the interest of the other members of the State association and to restrict or limit investments thereafter made. Such order may also prohibit all persons, including members, from instituting suit on any claim against said State association during said period. The commissioner may continue the effectiveness of any such order for additional 90-day periods from time to time but not for a total period longer than 1 year from the date of the issuance of the original order. He may also modify any such order from time to time within said 1-year period. The making of any such order, or modification thereof, shall not prohibit the commissioner from proceeding in accordance with the provisions of sections 181 and 182 of this act.
##### **§ 17:12B-181** Action for relief {#sec-17-12b-181 omnilex-key=us-nj-statutes--title-17--17:12B-181}
The commissioner may institute an action in the Superior Court to restrain the State association from transacting further business, or from transferring or disposing of any of its property in any manner, or from paying excessive expenses of management, or for the removal of any attorney, conveyancer, officer, director, employee or agent of the State association, or for such other relief as the case may require. The court may proceed in the action in a summary manner or otherwise and may make such orders or enter such judgments as shall be equitable and just. In such an action the court may enter a temporary restraining order or preliminary injunction without notice to the association. Without limiting the generality of its powers, the court may, upon application by the commissioner, appoint a receiver, with power to take possession, manage and dispose of all of the association's real and personal property, books and records and to hold and dispose of the proceeds thereof, as the court shall direct.
##### **§ 17:12B-182** Commissioner's authority {#sec-17-12b-182 omnilex-key=us-nj-statutes--title-17--17:12B-182}
The commissioner may forthwith take charge of the State association and possession of all its real and personal property, books and records, and continue the operation of its business until such possession and management shall be returned to its board, or until such State association shall merge, reorganize, dissolve and commence liquidation, or go into receivership.
##### **§ 17:12B-183** Purpose of possession and operation by commissioner {#sec-17-12b-183 omnilex-key=us-nj-statutes--title-17--17:12B-183}
The purpose of the commissioner's management of a State association and operation of its business and possession of its assets shall be to enable him to determine, within 1 year from the date when he undertakes such management, whether it is for the best interests of its creditors, members and the public that the State association should be continued as a going concern, or should be merged, reorganized or dissolved and liquidated.
##### **§ 17:12B-184** Return of management and possession {#sec-17-12b-184 omnilex-key=us-nj-statutes--title-17--17:12B-184}
The commissioner may return the management of a State association to its board and the possession of its property to the State association at any time after he has taken charge and possession thereof, upon such terms and conditions, if any, as he may prescribe.
##### **§ 17:12B-185** Powers of commissioner in possession {#sec-17-12b-185 omnilex-key=us-nj-statutes--title-17--17:12B-185}
The commissioner shall have full and complete powers necessary to enable him to determine promptly and efficiently whether it is for the best interests of the State association's creditors, members and the public that it be continued as a going concern or that it be merged, reorganized or dissolved and liquidated. Without limiting the generality of his powers, he shall have power to:
(a) Continue the operation of the State association's business.
(b) Conserve its assets and business.
(c) Pay its debts and operating expenses.
(d) Collect moneys due to it.
(e) Compromise and settle claims by and against it.
(f) Exercise any power conferred by this chapter on the State association or its board.
(g) Call meetings of its members.
(h) Declare the association closed under State law or take whatever other action he deems necessary to assist the Federal Home Loan Bank Board or the Federal Savings and Loan Insurance Corporation to exercise their powers under Federal law.
##### **§ 17:12B-186** Appointment and compensation of counsel and assistants {#sec-17-12b-186 omnilex-key=us-nj-statutes--title-17--17:12B-186}
The commissioner may, from time to time appoint one or more special assistant deputy commissioners of banking and insurance, who may or may not be employees in the department as the commissioner shall determine, as agent or agents, to assist him in administering the business and affairs of any State association of which he has taken possession, and he may, from time to time, hire such employees and assistants as he shall deem necessary to the proper administration of the business and affairs of such State association, including officers and employees of the State association. He may further, notwithstanding any other provision of law, appoint an attorney or a counsellor-at-law of this State, who need not be a member or an employee of the department of law of this State, to represent and advise him and to act as counsel in the administration of the business and property of the State association. He may further, at the expense of the State association, obtain such security for the faithful performance of the duties of such assistant deputy commissioners, counsel, and other employees as he shall deem necessary. Appointments of special assistant deputy commissioners and counsel made pursuant to this subsection shall be evidenced by a writing signed by the commissioner and filed in the department.
The compensation of the special assistant deputy commissioners, counsel, and of all other persons engaged in the administration of the business and affairs of such State association, shall be fixed by the commissioner, subject to the approval of the Superior Court as hereinafter provided, and shall, upon the certificate of the commissioner, be paid out of the funds of the State association.
##### **§ 17:12B-187** Segregation and application of money paid after commissioner takes possession {#sec-17-12b-187 omnilex-key=us-nj-statutes--title-17--17:12B-187}
(a) All moneys, which shall be paid on any unpledged account or shares of a State association after the commissioner has taken charge of such State association and possession of its assets, shall be segregated from all other receipts, and held in trust, until the property and business of the State association shall be returned to the management of its board, or until it shall merge, reorganize, or dissolve. Upon the happening of any of such events, such money shall, without any impairment whatever and at the option of each person who shall have paid the same either be repaid to him or credited to his account.
(b) All moneys, which shall be paid on any indebtedness due to the State association, or on any account which shall be pledged for the payment of any such indebtedness, after the commissioner has taken charge of such State association and possession of its assets, shall be applied without impairment directly to the payment of such indebtedness.
##### **§ 17:12B-188** Effect of commissioner's possession on rights of third persons {#sec-17-12b-188 omnilex-key=us-nj-statutes--title-17--17:12B-188}
Upon taking charge of a State association and possession of its property, the commissioner shall give notice thereof forthwith to all persons holding or having possession of any assets of the State association. No person having knowledge or notice that the commissioner has taken charge of a State association shall thereafter acquire any lien upon any of the State association's assets for any payment advanced, or clearance thereafter made. Upon taking charge of a State association by the commissioner, all judgments, levies and executions against such State association's property shall be stayed, unless otherwise ordered by the Superior Court.
##### **§ 17:12B-189** Financial statements by commissioner {#sec-17-12b-189 omnilex-key=us-nj-statutes--title-17--17:12B-189}
At least annually, and upon the termination of his possession of the assets of a State association, the commissioner shall submit a financial statement and report of the affairs of each State association in his possession, or in liquidation by him to each of the members thereof. Such statement and report shall include a statement of assets and liabilities, a statement of operations, including an itemized statement of all fees and salaries paid to each special assistant deputy commissioner, agent and counsel of such State association, and a statement showing the extent of the liquidation of its assets and the application of the proceeds thereof. The first such report shall be submitted to the members not later than 1 year from the date when the commissioner takes possession, or in the case of a State association in possession of the commissioner, when this act takes effect, not later than 1 year from such effective date.
##### **§ 17:12B-190** Dissolution; Liquidation; Action by members {#sec-17-12b-190 omnilex-key=us-nj-statutes--title-17--17:12B-190}
If the commissioner determines that it is for the best interest of the members and the public that the State association be dissolved and liquidated, he shall,
(a) If the State association is an insured association proceed pursuant to the provisions of section 218 of this act, or
(b) If the State association is not an insured association, after paying all claims which have been proved and allowed against the State association, call a meeting of the members on 10 days' notice, stating the object thereof, at which the members shall determine whether the affairs of the State association shall be managed and directed, during the liquidating period, by the commissioner or by 3 trustees, who shall be members and who shall be elected at such members' meeting. All questions submitted to the members at such meeting shall be decided by a majority of the votes cast, in person or by proxy.
Upon the adoption of such resolution by the members, the State association shall be deemed to be dissolved and it shall be liquidated in accordance with the provisions of Article XVIII.
The commissioner or the trustees, as the case may be, shall have all the powers and duties conferred and imposed upon trustees by the provisions of Article XVIII, and subject to such restrictions as may therein be contained.
##### **§ 17:12B-191** Relief in court from commissioner's action {#sec-17-12b-191 omnilex-key=us-nj-statutes--title-17--17:12B-191}
If a State association, of whose property and business the commissioner has taken possession as aforesaid, or any member thereof, deems itself or himself aggrieved by any act of the commissioner, or any failure of the commissioner to act, while he is in charge of the affairs of the State association and in possession of its assets, the State association or such member, may in an action in the Superior Court apply for appropriate relief. The court, upon notice to the commissioner, may proceed in the action in a summary manner or otherwise and enjoin or compel further proceedings or action by the commissioner, and make such other order or enter such judgment as shall be equitable and just.
##### **§ 17:12B-192** Disposition of unclaimed funds due to members and creditors {#sec-17-12b-192 omnilex-key=us-nj-statutes--title-17--17:12B-192}
If any liquidating dividend due to any member or any amount due to any creditor, remains in the hands of the commissioner for a period of 6 months after the date of the order for final distribution, such moneys shall be paid by the commissioner into the Superior Court with a statement reciting the name, the last known address and the amount due to each member or creditor who has failed to take payment of the distributive share due him, and to be there held for the benefit of those entitled thereto, or otherwise disposed of by order of that court.
##### **§ 17:12B-193** Liquidation and accounting by commissioner {#sec-17-12b-193 omnilex-key=us-nj-statutes--title-17--17:12B-193}
On making application to the court for approval of expenses of administration as provided by section 186 of this act, the commissioner shall file in the said court an accounting of the administration of the State association's affairs from the date upon which possession thereof was taken, including an accounting of the administration of the State association's affairs by the commissioner's predecessor or predecessors in office, where such possession was initially taken by such predecessor. Accountings subsequent to the first accounting filed pursuant hereto, shall be only for the period elapsed since the last prior accounting filed in the said court, but shall include a summary of the administration of the State association's affairs for the period covered by prior accountings. In any such proceeding with respect to such expenses and accounting, notice to members and claimants may be given by notices mailed to each at his address as it appears on the State association's records. The court shall have jurisdiction to hear and determine in a summary manner or otherwise all matters arising therein, and shall enter such judgment therein as shall be equitable and just. Upon making complete distribution of the proceeds of the liquidation of any State association, directed in a judgment of the court, made pursuant to the provisions of this section, the commissioner shall file in the court a statement of such distribution, and shall file in the department a certificate that such statement has been filed, specifying the date of such filing. Upon the date of the filing of said certificate in the department, the rights, privileges and franchises of said State association shall be terminated. A copy of the certificate, certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:12B-194** Action upon commissioner's refusal to act {#sec-17-12b-194 omnilex-key=us-nj-statutes--title-17--17:12B-194}
If the capital of a State association becomes impaired, or if it suspends its ordinary business for want of funds to carry it on, and the commissioner refuses for a period of 30 days after demand is made upon him by a creditor or member, to take charge of its operations and possession of its property, as hereinbefore provided, the Attorney General, or any creditor or member of such State association, may institute an action in the Superior Court for appropriate relief. The commissioner shall be made a party defendant to said action. The court may proceed in the action in a summary manner or otherwise and upon being satisfied that the capital of the State association is impaired and that it cannot continue or resume the operation of its business in a short time thereafter with safety to its creditors and the public and advantage to its members, may enjoin the State association, its officers and agents from exercising any of its privileges or any of its franchises and from collecting or receiving any money due to it and from paying out any of its money and from selling, assigning, transferring, or otherwise disposing of any of its assets, except to a receiver appointed by the court, and make such other orders and judgments as may be equitable and just. If the court appoints a receiver, he shall have the same powers and duties of a receiver appointed under the provisions of chapter 14 of Title 14 of the Revised Statutes.
For the purposes of this section the words "creditor" or "member" shall be inclusive of the Federal Savings and Loan Insurance Corporation, where such association is an insured association.
##### **§ 17:12B-195** Proceedings before commissioner {#sec-17-12b-195 omnilex-key=us-nj-statutes--title-17--17:12B-195}
(1) Review of commissioner's determination. Except as herein otherwise provided, any State association or member aggrieved by any determination, decision or order of the commissioner or by any failure of the commissioner to make any such determination, decision or order, may, within 30 days thereafter, institute an action in the Superior Court for a review thereof. The court may proceed in the action in a summary manner or otherwise. It shall determine de novo all questions, both of fact and of law, touching upon the legality and the reasonableness of such determination, decision or order, and render such judgment and make such orders as shall be equitable and just.
(2) Appearances before commissioner. Any person, who is required or permitted to appear before the commissioner as a party in any proceeding, shall appear in person, or by an attorney-at-law of this State.
(3) Evidence in proceedings before commissioner.
(a) Subpoenas. The commissioner shall have power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, records and other evidence, before him, or any deputy appointed to act for him, in any matter over which he has jurisdiction, control, or supervision. The commissioner, or any such deputy, shall have the power to administer oaths or affirmation to any person whose testimony is required.
If any person shall fail to obey the subpoena, give testimony, or produce evidence as required thereby, the Superior Court may upon ex parte application make an order compelling him to do so. The court shall have power to enforce obedience by a fine, not exceeding $100.00 or by imprisonment in the county jail, or by both fine and imprisonment, and to compel such witness to pay the taxed costs of such proceeding.
(b) Perjury. Any person who, upon oath or affirmation, shall willfully testify falsely in any proceeding before the commissioner, or any such deputy, shall be guilty of perjury.
(c) Witness fees and mileage. Witnesses subpoenaed to appear before the commissioner, or any such deputy, shall receive the same fees and mileage as witnesses in civil actions.
##### **§ 17:12B-196** Applications for commissioner's approval {#sec-17-12b-196 omnilex-key=us-nj-statutes--title-17--17:12B-196}
In all cases where the commissioner's approval is required and no procedure for obtaining the same is specified, application therefor shall be made in writing and the commissioner shall, within 30 days after receipt of such application, give written notice to the State association either approving such application, when the same may be properly disposed of ex parte, or designating a time and place when and where the commissioner will afford, to the State association and to any party in interest who requests it, an opportunity to be heard. The commissioner may grant reasonable adjournments of such hearing. Within 30 days after such hearing, or after the date designated therefor, if no one appears to be heard, the commissioner shall give written notice to the State association of his determination, which notice shall state the reasons therefor, if the application is denied.
If the commissioner fails to give any such notice within the time prescribed therefor, such failure shall be construed as his approval of such application.
##### **§ 17:12B-197** Bookkeeping methods and accounting practices; destruction of books, records, et cetera {#sec-17-12b-197 omnilex-key=us-nj-statutes--title-17--17:12B-197}
The commissioner may adopt rules and regulations with respect to bookkeeping methods and accounting practices designed to produce safety of operation and each State association and its officers and employees shall comply therewith. The commissioner may also adopt rules and regulations permitting the destruction of books, records, certificates, documents, reports, correspondence and other instruments, papers and writings of a State association, which, because of age or other reasons, need not be preserved; provided, however, that any association may make a photographic copy of any of its documents and records relating to the accounts of its members and the operation of its business, other than its notes, bonds, mortgages and other securities and investments, and may substitute the photographic copy for the original thereof. Thereafter the photographic copy or a positive print thereof, if the same be a negative, shall be deemed for any and all purposes to be an original counterpart of the original thereof and the association may destroy or otherwise dispose of the original.
Any photographic copy herein described or any positive print thereof, if the same be a negative, may be of the same or a different size than the original thereof, and may be a detached copy thereof, or may be combined in the same film with copies of other documents or records of the said association.
##### **§ 17:12B-198** Authority {#sec-17-12b-198 omnilex-key=us-nj-statutes--title-17--17:12B-198}
Any two or more State associations may merge into a single State association, under the terms and procedure hereinafter set forth. Any State association may merge into a Federal Association upon the approval of the commissioner and subject to such terms and conditions as he may specify.
##### **§ 17:12B-198.1** Merger between State, out-of-State associations {#sec-17-12b-198.1 omnilex-key=us-nj-statutes--title-17--17:12B-198.1}
98. a. One or more State associations may, with the approval of the commissioner, merge with an out-of-State association or associations, or with a federal association or associations, each with their principal office outside of this State, pursuant to sections 198 through 212 of P.L.1963, c.144 (C.17:12B-198 through 17:12B-212).
b. The commissioner may not permit a merger involving an association and an out-of-State association or federal association unless the home state of each out-of-State association and federal association involved in the transaction has in effect, as of the date of the approval of such transaction, a law that permits interstate merger transactions with associations whose home state is this State.
c. A resulting association that is an out-of-State association shall file with the commissioner in a manner which is consistent with regulations adopted by the commissioner for this purpose.
##### **§ 17:12B-199** Procedure; notice; approval on expedited basis {#sec-17-12b-199 omnilex-key=us-nj-statutes--title-17--17:12B-199}
The boards of the State associations desiring to merge, shall each pass a resolution indicating such desire by at least a 2/3 vote of each of the respective boards. The directors of the merging associations shall then have the power to process the proposed merger. The directors of the merging associations shall then file their resolutions with the commissioner for his approval. Simultaneously with the submission of the resolutions to the commissioner, the boards of the merging State associations may submit their resolutions to the members of their respective State associations by mailing a copy of the same to their members at their addresses appearing on the books of the State associations and they may, within 10 days of filing said resolutions with the commissioner, publish notice of such action in form approved by the commissioner, in a newspaper or newspapers published in the municipalities where the principal office and branches of each merging association are located or if there be no such newspaper then in a newspaper published in the county having a substantial circulation in said municipalities. Notice of such action shall also be posted in a prominent place in each office of the merging associations.
Any member shall have the right to file his objection to the proposed merger with the commissioner within 15 days from the date such resolution is filed with the commissioner and mailed to them, or if newspaper publication is utilized within 15 days from the date of such publication, and this right of the members shall be made part of whatever notice method is used. Not less than 30 days nor more than 45 days, after the resolutions are filed with the commissioner or newspaper publication is accomplished, the commissioner shall approve or disapprove the application. The commissioner shall give due consideration to any objections filed by members of the merging State associations and he shall determine whether the proposed merger is in the interest of the public and of the members of the merging State associations in reaching his decision. The commissioner shall mail a written copy of his opinion, approving or disapproving any applications submitted under this section, to the applying State associations.
Notwithstanding any of the above requirements, upon finding that the interests of the public and the members of the merging institutions will be served by expedited approval of a plan of merger, the commissioner may approve the proposed plan of merger on such an expedited basis. If approval is reached by the commissioner on such an expedited basis, notice to members of the merged institutions shall be given in a manner specified by the commissioner.
##### **§ 17:12B-200** Terms {#sec-17-12b-200 omnilex-key=us-nj-statutes--title-17--17:12B-200}
The terms of merger shall be those which have been agreed upon by at least 2/3 's of the board of each association. Such terms may include provisions for the exchange of accounts in the State association or State associations so merged for accounts of the same or a different class of the State association into which the State association or State associations shall be merged. In the case of any State association whose property and business are in the possession of the commissioner, the terms of merger shall be designated by the commissioner.
##### **§ 17:12B-201** Recording of agreement {#sec-17-12b-201 omnilex-key=us-nj-statutes--title-17--17:12B-201}
Before a merger shall become effective the State associations shall jointly certify to the commissioner that they have complied with all of the requirements of this act. The certificate shall be under the hands of the respective presidents and secretaries of the State associations, except that the commissioner shall execute the certificate for any State association whose property and business are in his possession. The approval of the commissioner of any merger shall be endorsed upon the certificate, which shall be recorded by the clerk of each county where the State associations are located and filed with the department. Thereupon the merger shall take effect according to its terms and shall be binding upon all members of the State associations so merging.
##### **§ 17:12B-202** Application for establishment of section 27 branch office or offices {#sec-17-12b-202 omnilex-key=us-nj-statutes--title-17--17:12B-202}
Simultaneously with the submission of the resolution required by section 199 of this act, any State association, into which another State association or State associations are merging, may submit its application to the commissioner for the establishment of a section 27 branch office or offices as provided in section 27 of this act.
##### **§ 17:12B-203** Effect of merger {#sec-17-12b-203 omnilex-key=us-nj-statutes--title-17--17:12B-203}
Upon the merger of any State association into another:
(a) Its corporate existence shall be merged into that of the other State association, and all its rights, privileges and franchises, and its right, title and interest in and to all property of whatever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest or asset of value or benefit then existing which would inure to it under an unmerged existence, shall be transferred to and vested in the State association into which it has merged, without further act or deed and without any right or reversion. The last mentioned State association shall have and hold the same in its own right as fully as the same was possessed and held by the merged State association;
(b) Its rights, liabilities, obligations and relations to any person shall remain unimpaired, and the State association into which it has been merged shall, by the merger, succeed to all the relations, obligations and liabilities, as though it had itself assumed or incurred the same. No obligation or liability of a member in a State association a party to the merger shall be affected by the merger, but the obligations and liabilities shall continue as they existed before the merger;
(c) A pending action or other judicial proceeding to which a merged State association is a party shall not abate or be discontinued by reason of the merger, but may be prosecuted to final judgment order or decree as if the merger has not been effected, or the State association into which the other State association has been merged may be substituted as a party to the action or proceeding, and any judgment order or decree may be rendered for or against it that might have been rendered for or against the other State association if the merger had not occurred.
##### **§ 17:12B-204** Bulk transfers {#sec-17-12b-204 omnilex-key=us-nj-statutes--title-17--17:12B-204}
(1) Bulk transfers authorized
Any State association may with the written approval of the commissioner, transfer, sell, or exchange in bulk and not in the regular and usual course of its business, all or any part of its assets, including its name and good will, to any other association; and accept as consideration therefor, cash, capital stock and accounts or any of them, of the purchasing association upon such terms as may be determined by the vote of a majority of the board of such State association and by a majority of the votes cast by the members or stockholders, as the case may be, of such State association, present in person or by proxy, at any annual meeting or at any special meeting called for that purpose. At least 10 days' notice of any such meeting shall be mailed to each member or stockholder, as the case may be, and shall state the matter to be acted upon. The consideration received for such bulk transfer, sale or exchange shall be applied to the payment of the association's debts and the discharge of its liabilities and the balance thereof shall be distributed to its members or stockholders, as the case may be, pro rata.
(2) Liquidation following bulk transfer
If such bulk transfer, sale or exchange shall include all or substantially all of the assets of a State association, or all or substantially all of its mortgage assets, the State association shall thereupon be dissolved and shall liquidate. The State association shall be managed and directed during liquidation, by its board in accordance with the provisions of section 205 of this act.
(3) Transfer to Federal associations
Any State association may transfer, sell or exchange in bulk, all or part of its assets to any Federal association having its principal office in this State, by compliance with the provisions of this section and by compliance with applicable Federal law and regulation; provided, however, that this subsection shall only be operative in the event that any Federal association having its principal office in this State may transfer, sell or exchange, all or part of its assets in bulk, to any association of this State, in accordance with Federal law and regulation which is substantially equivalent to the provisions of this section.
(4) Application for establishment of section 27 branch office
Simultaneously with the submission of the written application required by subsection (1) of this section, any State association which is purchasing all or substantially all of the assets of another association may, subject to the conditions and limitations of section 27 of this act, submit its application to the commissioner for the establishment of a section 27 branch office or offices.
##### **§ 17:12B-205** Certificate of transfer of assets; resultant liquidating corporation {#sec-17-12b-205 omnilex-key=us-nj-statutes--title-17--17:12B-205}
Whenever any assets of a State association are to be liquidated by the board of an association, as provided in section 204 of this act, the State association shall, within 10 days after the transfer of assets has been made, make a certificate which shall state:
(a) That such transfer of assets has been made.
(b) The name of the State association which made the transfer. The name by which the transferring association shall thereafter be known, which may be the same as that of the transferring association, with the addition of the words "liquidating corporation."
(c) The name of the association to which the assets were transferred.
(d) The address, including street and number, of the principal office of the transferring association and the name of the agent in charge thereof upon whom process may be served.
Such certificate, executed and acknowledged, or proved in the manner required for deeds to real property, shall be recorded in the office of the clerk of the county, in which the transferring association has its principal office, and a copy thereof shall be filed with the commissioner and thereupon the association shall become a liquidating corporation for the sole purpose of liquidating promptly and in an orderly manner, all its remaining assets and of distributing the proceeds thereof.
The board may act under the by-laws of the association except where they are inconsistent with the purposes of the corporation and otherwise the corporation and its directors shall have the powers and duties and be subject to the requirements of sections 207 through 212 of this act.
##### **§ 17:12B-206** Purchase of assets; inapplicability of Article X {#sec-17-12b-206 omnilex-key=us-nj-statutes--title-17--17:12B-206}
Any association may purchase assets from another association which sells all or a part of its assets in accordance with section 204 of this act and the provisions of Article X of this act shall not apply to such transactions.
##### **§ 17:12B-207** Liquidating corporations {#sec-17-12b-207 omnilex-key=us-nj-statutes--title-17--17:12B-207}
Each liquidating corporation created pursuant to the provisions of section 205 of this act shall be a corporation for the sole purpose of liquidating, promptly and in an orderly manner, all assets which it owns and distributing the proceeds thereof.
Each such liquidating corporation shall have all powers necessary to accomplish such liquidation and distribution including, but not by way of limitation, those specified in sections 232, 233, 235, 236, 237 and 238 of this act.
##### **§ 17:12B-208** Creditors; claims barred {#sec-17-12b-208 omnilex-key=us-nj-statutes--title-17--17:12B-208}
The liquidating corporation shall give public notice that all persons having claims against any association whose assets have been transferred shall present such claims under oath at the corporation's office within 3 months of the date of such notice or be barred, forever after, from any action therefor.
Such notice shall be advertised at least once each week for 12 successive weeks in at least 2 newspapers published in the county in which each such association has its principal office and shall bear the date of the day of the first publication.
Within 10 days after date of such notice, a copy thereof shall be mailed to each creditor or other person who is known to have any claim against such association, addressed to his last known post-office address. Proof of such publication and mailing shall be filed with the commissioner.
##### **§ 17:12B-209** Notice of dispute; limitation of action {#sec-17-12b-209 omnilex-key=us-nj-statutes--title-17--17:12B-209}
If the corporation disputes all or any part of any claim which is duly presented to it, and gives written notice of such dispute to the claimant, his attorney, or agent, such claimant shall institute an action thereon within 30 days from the receipt of such notice or his claim shall thereafter be barred.
##### **§ 17:12B-210** Applicability of sections 17:12B-208, 17:12B-209 to indebtedness on loan to enable association to effect sale of assets {#sec-17-12b-210 omnilex-key=us-nj-statutes--title-17--17:12B-210}
The provisions of sections 208 and 209 of this act shall not be applicable to or in any way affect any indebtedness on account of any loan made to an association to enable it to effect a sale of its assets, and any such indebtedness shall become and be an indebtedness of such corporation; and any obligation evidencing such indebtedness, any mortgage, assignment of mortgage or other document securing such obligation and any agreement with respect to any such indebtedness shall become and be binding upon such corporation and upon its assets with like force and effect as if originally incurred by such corporation.
##### **§ 17:12B-211** Jurisdiction of Superior Court {#sec-17-12b-211 omnilex-key=us-nj-statutes--title-17--17:12B-211}
Each such corporation or its board may institute an action in the Superior Court for instructions with respect to any matter pertaining to the liquidation of its assets, the distribution of the proceeds thereof, and the settlement of its affairs. The court may proceed in a summary manner or otherwise to hear and determine the matters presented to it and make such order or enter such judgment as shall be equitable and just. No such action for instructions shall confer upon the court general jurisdiction over the affairs of such corporation.
##### **§ 17:12B-212** Termination of corporate existence {#sec-17-12b-212 omnilex-key=us-nj-statutes--title-17--17:12B-212}
Within 90 days after the affairs of each such corporation shall have been fully settled and its assets liquidated and the proceeds thereof distributed, or within such further time as the commissioner may allow, it shall file with the commissioner a certificate, verified by at least 2 of its officers, that the affairs of said corporation have been finally settled and its assets liquidated and distributed, and if the commissioner as a result of an examination or otherwise, is satisfied that the contents of the certificate are true, he shall so endorse the said certificate, and thereupon the said corporation shall be dissolved and its corporate existence terminated.
##### **§ 17:12B-213** "Foreign association" defined {#sec-17-12b-213 omnilex-key=us-nj-statutes--title-17--17:12B-213}
For the purposes of this article the words "foreign association" shall not be deemed to include an association, as defined in section 5 of P.L.1963, c.144 (C.17:12B-5).
##### **§ 17:12B-214** Business prohibited within State, exceptions {#sec-17-12b-214 omnilex-key=us-nj-statutes--title-17--17:12B-214}
214. a. Foreign associations shall not transact the business of a savings and loan association within this State, or maintain an office within this State, except as authorized pursuant to subsection b. of this section, for the purpose of transacting such business. It shall be unlawful for any person to transact business within this State on behalf of such associations; provided, however, the purchase, acquisition, holding, sale, assignment, transfer, servicing, collecting and enforcement of obligations or any interest therein secured by real estate mortgages or other instruments in the nature of a mortgage, covering real property located in this State, or the foreclosure of such instruments, or the acquisition of title to such property by foreclosure, or otherwise, as a result of default under such instruments, or the holding, protection, rental, maintenance and operation of said property so acquired, or the disposition thereof by a foreign association, or back office operations shall not be considered as transacting business within the meaning of this article.
b. A foreign association may maintain one or more service facilities in this State, provided that the foreign association performs only back office operations at the service facility and does not transact business with its customers or the public at the service facility. Prior to opening a service facility in this State, a foreign association shall register the service facility with the commissioner, which registration shall include the address of the proposed service facility and the name and address of the foreign association's agent in this State for service of process. Each service facility shall comply with the requirements and pay the fees that the commissioner establishes by regulation. Each service facility shall be subject to examination by the department to determine whether the foreign association has operated the service facility in accordance with the provisions of this subsection, the costs of which examination shall be paid by the foreign association at the department's per diem rate for examinations of depository institutions. The commissioner may, upon notice and a hearing, order a foreign association to close any service facility operated in violation of the provisions of this subsection or of any other law. An entity which is affiliated, either directly or indirectly, with a foreign association and intends to engage in back office operations in this State shall register and be regulated pursuant to this subsection as if it were a foreign association.
c. For the purposes of this section, the term "transact business" shall not include back office operations and the term "back office operations" shall include the following activities: data processing, record-keeping, accounting, check and deposit sorting and posting, computation and posting of interest, other similar clerical and statistical functions, producing and mailing correspondence or documents and such other activities as the commissioner approves.
d. For the purposes of this section, a foreign association shall not be deemed to transact business or maintain an office in this State based solely on the activities of an agent in this State.
##### **§ 17:12B-215** Violation; penalty {#sec-17-12b-215 omnilex-key=us-nj-statutes--title-17--17:12B-215}
Any natural person who shall violate the prohibitions of this article shall be guilty of a misdemeanor, and, upon conviction thereof, shall be subject to imprisonment for a period not exceeding 1 year, or a fine not exceeding $1,000.00, or both. He shall also be subject to a further fine equal to any moneys received by him within this State in violation of this section. The association which such individual represents shall be guilty of a misdemeanor, and, upon conviction thereof, shall be subject to a fine of $5,000.00; such association shall be subject to a further fine equal to the amount of any moneys received by such association or by its agent in violation of this article.
##### **§ 17:12B-216** Filing copy of application and statement of acceptance or rejection {#sec-17-12b-216 omnilex-key=us-nj-statutes--title-17--17:12B-216}
Each State association which applies for the insurance of its accounts by the Federal Savings and Loan Insurance Corporation shall file with the commissioner within 1 week after its adoption, a certified copy of the resolution applying for such insurance adopted by its board or its members, and shall, further, within 1 week of the receipt by it of notice of acceptance or rejection by such corporation of such application file a statement of such acceptance or rejection in the office of the commissioner.
##### **§ 17:12B-217** Terminating insurance {#sec-17-12b-217 omnilex-key=us-nj-statutes--title-17--17:12B-217}
No such State association shall terminate such insurance except after 30 days' prior written notice thereof to the commissioner, unless the commissioner shall have waived such notice in writing.
##### **§ 17:12B-218** Powers of commissioner not impaired {#sec-17-12b-218 omnilex-key=us-nj-statutes--title-17--17:12B-218}
Nothing contained in this article shall be construed as repealing, modifying or impairing any powers, duties, rights or responsibilities of the commissioner in respect to any association organized under or subject to the provisions of this act; provided, however, that whenever the commissioner shall, pursuant to any of the provisions of this act, take possession of the property and business of a State association whose accounts or investments are insured by the Federal Savings and Loan Insurance Corporation, he shall forthwith give notice thereof in writing to the Federal Savings and Loan Insurance Corporation in Washington, D.C., by certified mail, and file a copy of such notice, with the original receipt of such mailing attached thereto, in the department. At any time after such taking of possession, but not later than 10 days after the date of the mailing of such notice, the Federal Savings and Loan Insurance Corporation may file in the department its election in writing to assume and exercise or to decline the powers vested in it pursuant to the provisions of this article, and in default of its filing such election, it shall be deemed to have waived and declined to assume and exercise such powers.
##### **§ 17:12B-219** Joint powers with insurance corporation {#sec-17-12b-219 omnilex-key=us-nj-statutes--title-17--17:12B-219}
Upon its filing such election to assume and exercise such powers, the Federal Savings and Loan Insurance Corporation and the commissioner shall be vested jointly with the exercise of all of the powers, duties and authority conferred and imposed upon the commissioner pursuant to section 182 of this act. All acts done by the commissioner in administering the affairs of such State association before the filing of such election by the Federal Savings and Loan Insurance Corporation shall be binding upon the Federal Savings and Loan Insurance Corporation; provided, however, that any exercise of the powers conferred by section 182 of this act, any appointment, employment, hiring, retention, or compensation of legal or other personnel or assistance except as to service performed entirely before the filing of such election, and, except in the regular and ordinary course of business any sale or other disposition of assets and any compromise or release, shall require the approval of the Federal Savings and Loan Insurance Corporation to be effective, unless the Federal Savings and Loan Insurance Corporation shall decline to assume and exercise the powers conferred by this section. All notices, citations, pleadings or other documents, which under the provisions of said sections are authorized or required to be filed with or served on the commissioner, need only be filed with or served on the commissioner, but he shall promptly furnish the Federal Savings and Loan Insurance Corporation with a copy of each such notice, citation, pleading, or document filed with or served upon him, except where the Federal Savings and Loan Insurance Corporation shall waive or shall have waived, in writing, the furnishing of such copy; provided, however, that failure of the commissioner to furnish such copy shall not affect the validity of such filing or service.
##### **§ 17:12B-220** Powers of insurance corporation {#sec-17-12b-220 omnilex-key=us-nj-statutes--title-17--17:12B-220}
The Federal Savings and Loan Insurance Corporation shall have all the rights, privileges and powers conferred upon it by the Federal statutes now or hereafter enacted, and may make loans on the security of, or purchase at public or private sale, or at any receiver's sale, and, when purchased, may liquidate or sell, any part of the assets of the State association, and, in the event of the purchase of any of such assets, it shall bid for and pay a fair and reasonable price. Whether or not the Federal Savings and Loan Insurance Corporation shall serve as aforesaid, whenever it shall pay or make available for payment the liabilities of any such insured State association in liquidation which are insured by it, it shall be subrogated upon the surrender and transfer to it of any account insured by it, with respect to such account, but such surrender and transfer of such account shall not affect any right which the transferor thereof may have in any portion of such account which is uninsured or any right to participate in the distribution of the net proceeds remaining from the disposition of the assets of such insured State association; provided, that the rights of the investors in, and creditors of, such insured State association shall be determined in accordance with the applicable provisions of the laws of this State.
##### **§ 17:12B-221** Voting rights {#sec-17-12b-221 omnilex-key=us-nj-statutes--title-17--17:12B-221}
Notwithstanding any other provision or provisions of the law granting, governing, defining or limiting the powers or right of members to vote upon any question or issue whatsoever requiring the consent or approval of the members of the State association by the vote of the majority or otherwise, the Federal Savings and Loan Insurance Corporation, shall be entitled, at any meeting or meetings of the State association held after the commissioner takes possession of the business and property of the State association, to cast 1 vote for each member of the State association whose account is insured and who is not entitled by way of withdrawal or maturity rights to a sum greater than the maximum amount for which a single member may be insured by the corporation, and whose account has been paid, or made available for payment. The right to vote herein conferred shall be exercised by the corporation by any of its officers, or by such person or persons as its board of trustees may designate. All votes so cast by the corporation shall have the same effect and shall be considered for all purposes whatsoever as if severally and individually cast by the members of the State association whose account, or accounts are insured as aforesaid, and who are severally entitled to a sum not greater than the maximum amount for which a single member may be insured by the corporation.
##### **§ 17:12B-222** Procedure {#sec-17-12b-222 omnilex-key=us-nj-statutes--title-17--17:12B-222}
Any association which is a member of a Federal Home Loan Bank may convert itself into a Federal association with the same force and effect as though originally incorporated as a Federal association.
(a) When, in the judgment of the board of such association, it shall be deemed advisable and for the interests of its members that the same shall be converted into a Federal association, as provided in this section, the board shall adopt a resolution to that effect.
(b) After the adoption of such resolution, a meeting of the members of the association shall be held upon not less than 10 days' written notice to the members by mail, postage prepaid, directed to their addresses appearing on the books of the association, which notice shall contain a statement of the time, place and purpose for which such meeting is called. Proof by affidavit of mailing of such notice shall be filed in the office of the commissioner before the time of such meeting.
(c) At a meeting of the members of any such association held as provided in paragraph (b) of this section, such members may by the affirmative vote of 2/3 of the members of the association present, either in person or by proxy, declare by resolution the determination to convert the association into a Federal association. A copy of the minutes of the proceedings, of such meeting of the members, verified by the affidavit of the president or vice-president, and the secretary of the meeting, shall be filed in the office of the commissioner within 20 days after the date of such meeting.
(d) Within 3 months after the date of such meeting, the association shall take such action, in the manner prescribed or authorized by the laws of the United States as shall make it a Federal association, and there shall be filed in the office of the commissioner a copy of the charter issued to such Federal association by the Federal Home Loan Bank Board or a certificate showing the organization of such association as a Federal association, certified by the secretary or an assistant secretary of the Federal Home Loan Bank Board. Upon the granting to any association of a charter by the Federal Home Loan Bank Board the association receiving such charter shall cease to be an association operating pursuant to this act and shall no longer be subject to the supervision and control of the commissioner.
##### **§ 17:12B-223** Corporate existence continued upon conversion {#sec-17-12b-223 omnilex-key=us-nj-statutes--title-17--17:12B-223}
Upon the conversion of any association into a Federal association, the corporate existence of such association shall not terminate, but such Federal association shall be deemed to be a continuation of the entity of the association so converted and all the property of the converted association, including all its right, title and interest in and to all property of whatsoever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest and asset of any conceivable value or benefit then existing, belonging or pertaining to it or which would inure to it, shall immediately, by operation of law and without any conveyance or transfer and without any further act or deed, remain and be vested in and continue and be the property of the Federal association into which the State association has converted itself, and such Federal association shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the converting association; and such Federal association, as of the time of taking effect of such conversion, shall continue to have and succeed to all the rights, obligations and relations of the converting association. Pending actions, and other judicial proceedings to which the converting State association is a party shall not be deemed to have abated or to have been discontinued by reason of such conversion, but may be prosecuted to final judgment in the same manner as if such conversion into such Federal association had not been made, and such Federal association resulting from such conversion may continue such action or other judicial proceeding in its corporate name as a Federal association, and any judgment or order may be made for or against it, which might have been made for or against the converting State association theretofore involved in such judicial proceedings.
##### **§ 17:12B-224** Conversion from Federal to State charter; procedure {#sec-17-12b-224 omnilex-key=us-nj-statutes--title-17--17:12B-224}
Conversion from Federal to State charter; procedure.
Any federal association may convert itself into an association of this State with the same force and effect as though originally incorporated under this act, and the proceedings to effect such conversion shall be as follows:
(a) When in the judgment of the board of such federal association it shall be deemed advisable and for the interests of its members that the same shall be converted into an association of this State, the board of directors shall adopt a resolution to that effect.
(b) After the adoption of such resolution, a meeting of the members of the association shall be held upon not less than 10 days' written notice to the members by mail, postage prepaid, directed to their addresses appearing on the books of the association, which notice shall contain a statement of the time, place and purpose for which such meeting is called. Proof by affidavit of mailing of such notice shall be mailed to the Federal Home Loan Bank Board before the time of such meeting.
(c) At a meeting of the members of any such federal association held as provided in paragraph (b) of this section, such members may by the affirmative vote of 2/3 of the members present either in person or by proxy, declare by resolution the determination to convert the association into an association of this State. A copy of the minutes of the proceedings of such meeting of the members, verified by the affidavit of the president or vice-president, and the secretary of the meeting, shall be filed in the office of the commissioner and mailed to the Federal Home Loan Bank Board, within 10 days after the date of such meeting.
(d) Within 30 days after the date of the meeting held as provided in paragraphs (b) and (c) of this section, a majority of the board of such federal association shall subscribe, acknowledge and deposit with the commissioner in duplicate, a certificate which shall contain:
1. The name of the association, which shall not be so nearly like that of any other association as to deceive the public, and the words "savings and loan association" or "savings bank S.L.A." shall form a part thereof;
2. The municipality where it is to be located and its business transacted, which shall be within this State;
3. A statement that it is to operate as an association pursuant to this act for the purposes stated herein;
4. The name, residence, occupation and post office address of each officer and director;
5. Application for the approval of the commissioner to the conversion of said association into an association of this State.
##### **§ 17:12B-225** Approval by commissioner; filing of certificate; corporate existence continued {#sec-17-12b-225 omnilex-key=us-nj-statutes--title-17--17:12B-225}
Upon the filing with the commissioner of the certificate as provided in paragraph (d) of section 224 of this act and before approving the conversion of any Federal association into an association of this State the commissioner shall determine, as a result of an examination or otherwise, that the assets of such association have a sound value at least equal to the capital of the association, plus all creditor obligations; that such association will function normally after conversion and that it will earn and be able to pay regularly a reasonable dividend; and upon such determination, and upon compliance by the association with such requirements or conditions as the commissioner, may prescribe, and not later than 3 months from the date of the members' meeting held as provided in paragraphs (b) and (c) of section 224 of this act, the commissioner shall endorse his consent to the conversion of such Federal association into an association upon the certificates filed in accordance with paragraph (d) of section 224 of this act, one of which certificates shall remain on file in the office of the commissioner and the other shall be recorded by the clerk of the county where the association is located. Within 10 days thereafter, a copy of said certificate certified by the commissioner, shall be mailed to the Federal Home Loan Bank Board. Upon the filing of such certificate in the office of the commissioner the association shall cease to be a Federal association and shall no longer be subject to the supervision and control of the Federal Home Loan Bank Board.
Upon the conversion of any Federal association into an association of this State, the corporate existence of such association shall not terminate, but such association of this State shall be deemed to be a continuation of the entity of the association so converted, and all property of the converted association, including its right, title and interest in and to all property of whatsoever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest and asset of any conceivable value or benefit then existing belonging or pertaining to it or which would inure to it, shall immediately by operation of law and without any conveyance or transfer and without any further act or deed, remain and be vested in and continue and be the property of such association of this State into which the Federal association has converted itself, and such association of this State shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the converting association, and such association of this State as of the time of the taking effect of such conversion, shall continue to have and succeed to all the rights, obligations and relations of the converting association. Pending actions and other judicial proceedings to which the converting Federal association is a party shall not be deemed to have abated or to have been discontinued by reason of such conversion, but may be prosecuted to final judgment, in the same manner as if such conversion into such association of this State had not been made and such association of this State resulting from such conversion may continue such action in its corporate name as an association of this State and any judgment or order may be made for or against it, which might have been made for or against the converting Federal association theretofore involved in such judicial proceedings.
Where the certificate provided for under section 224 of this act shall state that the purpose of the conversion is to facilitate the merger of a Federal association with a State association, the commissioner need not make the findings and determinations as set forth in this section.
##### **§ 17:12B-226** Fees, charges {#sec-17-12b-226 omnilex-key=us-nj-statutes--title-17--17:12B-226}
226. A. Every State association shall pay to the commissioner for the use of the State a fee, to be prescribed by the commissioner by regulation in an amount not less than or not more than, the following minimum and maximum amounts:
Minimum Maximum
(1) Annual report or
certificates where required $50.00 $100.00
(2) Dissolution proceedings 250.00 1,500.00
(3) Any new corporation filing:
(a) mutual association 5,000.00 10,000.00
(b) stock association 10,000.00 20,000.00
(4) Any proceeding under section 204
of P.L.1963, c.144 (C.17:12B-204),
pertaining to bulk sales 500.00 1,500.00
(5) Any proceeding under section 198
of P.L.1963,c.144 (C.17:12B-198),
pertaining to mergers, per association 1,500.00 4,000.00
(6) Any application for a branch office,
except that no fee shall be paid under
this paragraph with respect to a branch office
acquired as a result of a merger
or bulk purchase 1,000.00 3,000.00
(7) Application to interchange
a principal and branch office
when such interchange involves
two separate municipalities 500.00 1,500.00
(8) Application for change of name 50.00 250.00
(9) Certifications by the commissioner,
of papers or records on file with the
department, plus $2.00 per page for
each certification 25.00 100.00
(10) Application to interchange
a principal and a branch office
within the same municipality 250.00 1,000.00
(11) Application to change
location of principal office
pursuant to subsection (2) of
section 40 of P.L.1963, c.144
(C.17:12B-40) 500.00 2,000.00
(12) Application to change
location of branch office beyond
1,500 feet and in same municipality
pursuant to subsection (1) of
section 4 of P.L.1965, c.127
(C.17:12B-27.1) 250.00 1,000.00
(13) Application to change
location of branch office
pursuant to subsection (2) of
section 4 of P.L.1965, c.127
(C.17:12B-27.1) 500.00 2,000.00
(14) Conversions 3,500.00 10,000.00
(15) Sharing Facilities 100.00 500.00
(16) Application for approval
of savings and loan holding
company 2,000.00 5,000.00
(17) Filing of any other
certificate 50.00 250.00
(18) For issuance of any other
approval by the commissioner,
plus a per diem 100.00 250.00
(19) For filing plans of
acquisition, stock, savings and
loan and existing holding
companies.
(20) In addition to the above
fees, a per diem charge may be
assessed when a special investigation
of a filing is required.
B. Every State association shall defray all expenses incurred in making an examination of its affairs as provided in this act, and the commissioner may maintain an action, in the name of the State, against the association, for the recovery of such expenses, in a court of competent jurisdiction.
C. The commissioner may by rule or regulation adopted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) impose other fees and charges, including assessments and fees for applications and examinations, on out-of-State associations establishing and operating a branch office in this State.
##### **§ 17:12B-227** Payment of commissioner's expenses {#sec-17-12b-227 omnilex-key=us-nj-statutes--title-17--17:12B-227}
The necessary expenses incurred by the commissioner in carrying out the provisions of this act, when not otherwise provided for, shall be paid out of the fees collected as herein provided.
##### **§ 17:12B-228** Dissolution {#sec-17-12b-228 omnilex-key=us-nj-statutes--title-17--17:12B-228}
Action by the board and the members. Trustees. Commissioner's approval. Any association may be dissolved as follows: Its board may adopt a resolution declaring that in its opinion it is advisable and for the best interests of its members that it be dissolved, its business and affairs wound up and its assets liquidated and distributed. Such resolution shall fix the time and place for a meeting of the members to take action thereon. Notice of the adoption of such resolution, and of the time, place and object of such members' meeting shall be mailed to each member at least 10 days prior to the date fixed for such meeting. The meeting may be adjourned from time to time. If 2/3 in interest of the members present at the members' meeting shall favor dissolution and liquidation, the members shall then elect, at said meeting, 3 trustees to manage and direct the affairs of the association during liquidation. Said trustees may exercise, in the name of the association, any and all of its powers except those which may be expressly reserved to its members by the provisions of its by-laws or this act. More than 3 trustees may be elected if the commissioner consents thereto in writing. The candidates receiving the highest number of votes shall be declared elected. No person who has served as an officer, director, attorney or employee of such association prior to the date of the election of the trustees, shall be elected a trustee unless prior to such election there shall have been filed with the association the approval by the commissioner of such person's candidacy for trustee. No person who is indebted to the association shall be eligible for election as trustee. Each trustee shall be a member of the association. Members may vote at such meeting in person or by proxy.
Within 5 days after such members' meeting, the association shall file with the commissioner, a certificate signed by its president and secretary which shall state the name of the association; the dates upon which its board and its members met and acted with respect to dissolution and liquidation; the names and addresses of the persons who were elected as trustees; and that attached thereto are true copies of the resolutions adopted at said meetings of the board and of the members respectively, with respect to dissolution and liquidation, and of the notice mailed to members, together with proof of mailing thereof.
Within 5 days after said certificate and the documents required to be attached thereto shall have been filed with the commissioner, he shall determine whether the proceedings certified to therein have been taken in accordance with the provisions of this section, and if he is satisfied that they have, he shall forthwith date and issue to the association a certificate of dissolution and thereupon the association shall be dissolved and proceed to liquidate as herein provided.
##### **§ 17:12B-229** Definition of liquidation {#sec-17-12b-229 omnilex-key=us-nj-statutes--title-17--17:12B-229}
As used in this act, liquidation shall include the winding up and settlement of the business and affairs of an association, the liquidation of its assets, the payment and satisfaction of its debts and obligations and the expenses of its liquidation, the distribution of its surplus assets to its members pro rata and the management and direction of its affairs during the liquidating period.
##### **§ 17:12B-230** Continuation of corporate existence {#sec-17-12b-230 omnilex-key=us-nj-statutes--title-17--17:12B-230}
After dissolution, an association shall continue to be a body corporate and retain title to all its real and personal property for the purpose of liquidation but not for the transaction of further business as a going concern.
##### **§ 17:12B-231** Trustees; bonds; removal; successors; action by majority {#sec-17-12b-231 omnilex-key=us-nj-statutes--title-17--17:12B-231}
Each trustee before entering upon his duties, shall file with the commissioner a bond to the association in such sum as the commissioner shall fix, conditioned for the faithful performance of his duties.
The Superior Court may remove any trustee for cause, upon the application of the commissioner, and may appoint a trustee to serve in the place of any trustee who fails to qualify or whose office as trustee becomes vacant. No person, other than a member of the association, shall be appointed as a trustee for such association unless it appears to the court that no member, qualified to act, will do so. In the event that a trustee is removed, dies or fails to qualify after election as such, the acts of the remaining trustees shall be valid and effectual until the vacancy is filled.
The trustees shall act by a majority vote and the signatures of a majority of them to any deed or other document shall suffice.
The trustees shall apply to the Superior Court for approval of any account filed by them and for their compensation and discharge. They shall have the powers of receivers as provided in sections 14:14-11 and 14:14-12 of the Revised Statutes. The provisions of section 14:14-11 of the Revised Statutes shall apply to persons refusing to be sworn, to answer questions, or to declare the whole truth.
##### **§ 17:12B-232** Liquidation period; extension {#sec-17-12b-232 omnilex-key=us-nj-statutes--title-17--17:12B-232}
All liquidation proceedings hereafter commenced shall be completed within 5 years from the date of dissolution or within such further time as may be allowed by the Superior Court or by the members at any meeting which shall be called for that purpose upon at least 10 days' notice to every member.
##### **§ 17:12B-233** Powers {#sec-17-12b-233 omnilex-key=us-nj-statutes--title-17--17:12B-233}
Every dissolved association shall have all powers necessary to accomplish its liquidation promptly, efficiently and completely, including, but not by way of limitation, the following:
(a) To employ, retain, and reasonably compensate agents, employees and attorneys.
(b) To sue and be sued.
(c) To acquire title in any manner to any real or personal property in which it has any interest, or in settlement, satisfaction or payment in whole or in part, of any claim.
(d) To enforce all lawful claims, demands, rights, remedies, and liens against persons and property.
(e) To collect all money due to it.
(f) To compromise and settle all claims by or against it.
(g) To sell or otherwise dispose of any asset upon any reasonable terms and conditions.
(h) To rent, manage, conserve and protect any asset.
(i) To accept any member's account in such association, at such value as the trustees may place thereon, in payment of not more than 25% of the purchase price of any real estate. A higher percentage of the purchase price may be paid in such manner with the approval of the Superior Court.
(j) To execute all contracts, deeds, leases, mortgages, assignments, or other documents or writings necessary or incidental to the exercise of any of its powers.
(k) To borrow money and pledge any asset as security for the repayment thereof. No service charge or bonus for procuring any such loan shall be paid, but this prohibition shall not apply to ordinary and reasonable legal and search fees.
( l ) To apply to the Superior Court for instructions with respect to any of its powers and duties, but, without obligation to do so.
##### **§ 17:12B-234** Creditors; claims barred {#sec-17-12b-234 omnilex-key=us-nj-statutes--title-17--17:12B-234}
The association shall give public notice that all persons having claims against it, shall present them under oath, at the association's office, within 3 months from the date of such notice, or be barred, forever after, from any action therefor. Such notice shall be advertised at least once each week for 12 successive weeks, in at least 2 newspapers published in the county in which the association has its principal office, and shall bear the date of the day of the first publication. Within 10 days after the date of such notice a copy thereof shall be mailed to each of the association's creditors addressed to his last known post-office address. Proof of such publication and mailing shall be filed with the commissioner.
If the association disputes all or any part of any claim which is duly presented to it, and gives written notice to such dispute to the claimant, his attorney, or agent, such claimant shall institute suit thereon within 30 days from the receipt of such notice or be barred forever after, from any action therefor.
##### **§ 17:12B-235** Application of participation value to indebtedness {#sec-17-12b-235 omnilex-key=us-nj-statutes--title-17--17:12B-235}
The participation value, at the date of dissolution of an association, of any account in such association which is pledged as security for the payment of any indebtedness to such association, shall be applied to the payment of such indebtedness.
##### **§ 17:12B-236** Sinking fund mortgages; extension of time for payment {#sec-17-12b-236 omnilex-key=us-nj-statutes--title-17--17:12B-236}
Any owner of land, which is subject to a sinking fund mortgage held by an association which has been dissolved, may apply in writing to such association, within 90 days after the date of its dissolution, for an extension of time, not exceeding 5 years from the date of said dissolution, within which the amount due upon such mortgage, and the obligation accompanying the same, shall be paid. The association shall grant such request, provided that:
(a) There shall be no existing default in the performance of the terms and conditions of said mortgage and obligation; and
(b) The applicant shall agree to perform all of the other terms and agreements of said mortgage and obligation; and
(c) The applicant shall agree to pay monthly, in reduction of the principal sum due on said mortgage and obligation, such amount as the association shall require, not exceeding, however, 1% of the amount of the original loan secured by said mortgage. Such amount shall be applied first to the payment of interest and other lawful charges, and the surplus to the reduction of the principal. Nothing herein contained shall prevent the association and the applicant from agreeing upon the payment of larger monthly payments.
If, at the date of said dissolution, any default has existed for more than 2 months in the performance of any of the terms and conditions of said mortgage and obligation, the application for extension of time may be refused, or granted upon such terms as the association may prescribe.
The provisions of this section shall not be construed to prevent an association in liquidation from making any compromise which it is otherwise authorized to make.
##### **§ 17:12B-237** Notice to sinking fund mortgagors {#sec-17-12b-237 omnilex-key=us-nj-statutes--title-17--17:12B-237}
Within 30 days after the date of its dissolution, the association shall mail to each owner of land, which is subject to a sinking fund mortgage held by such association, a notice stating that the association has dissolved and will liquidate; the date of its dissolution; and that applications for the extension of the time for payment of such mortgage loans may be made in accordance with the provisions of section 236 of this act. A copy of section 236 shall be enclosed with each such notice.
##### **§ 17:12B-238** Commissioner's jurisdiction {#sec-17-12b-238 omnilex-key=us-nj-statutes--title-17--17:12B-238}
Each association in liquidation shall remain subject to the jurisdiction and supervision of the commissioner.
##### **§ 17:12B-239** Accounting by trustees; examination by commissioner; report to members; notice to creditors {#sec-17-12b-239 omnilex-key=us-nj-statutes--title-17--17:12B-239}
At least annually, unless the commissioner, for good cause, extends the time therefor, and at such other times as the commissioner may require, the trustees of an association in liquidation shall file in the Superior Court a true report and account of their administration of the assets and affairs of the association and simultaneously therewith, shall file a copy thereof with the commissioner. The commissioner shall, personally, or by one or more examiners designated by him, audit each such report and account and make such examination of the affairs of the association, including a verification of members' accounts, as shall be required in such audit. If, as a result of such audit and examination the commissioner shall find that such report and account is correct, he shall report accordingly to the court and the court may thereupon, without further inquiry or verification, approve and allow such report and account. If the commissioner shall find, by such audit and examination or in any other manner, that said report and account or either of them is incorrect, or that the trustees have violated any provision of this act, or that the affairs of the association have been mismanaged, he shall report accordingly to the court, and the court shall thereupon, upon motion of the commissioner or upon its own motion, make such inquiry and order in the interest of the members and creditors of the association as shall be equitable and just. The commissioner shall receive for all services performed by him pursuant to the provisions of this article, the fees which are fixed by law for like services performed by him in connection with associations not in dissolution and liquidation.
At least 10 days before the filing of each trustees' report and account, a report of the operations of the association for the period of the accounting in the form which is provided for associations not in dissolution, shall be mailed to each member. Said report shall state the time and place when and where the report and account will be filed and the amount of the allowances for compensation which the trustees will apply for. Proof of the mailing of said report to members shall be filed in the Superior Court simultaneously with the filing of said report and account. No other notice to members need be given of any proceeding for the approval and disposition of any report and account or of any matter which may be presented to the court in connection therewith or incidental thereto. Such notice, if any, as the court may prescribe, of the filing of the report and account and the application for allowances shall be given to the creditors of the association.
##### **§ 17:12B-240** Jurisdiction of Superior Court; trustees; compensation {#sec-17-12b-240 omnilex-key=us-nj-statutes--title-17--17:12B-240}
The Superior Court shall have full and complete jurisdiction of associations in liquidation and their trustees, and of all matters and questions arising or growing out of liquidation, and may make such orders and judgments with respect thereto as shall be equitable and just. The court may allow reasonable compensation to the trustees for their services and costs and expenses of the administration of the trust.
##### **§ 17:12B-241** Insured accounts eligible investment for trust and public funds, and savings banks and as security {#sec-17-12b-241 omnilex-key=us-nj-statutes--title-17--17:12B-241}
All public funds, including those of the State of New Jersey, or any county or municipality or other political subdivision of New Jersey, and those in the control or possession of any public board or official, and all trust funds of every character in the control or possession of any fiduciary or other person or corporation, may, without any order of any court, be invested in one or more accounts in any insured association whose principal office is located in New Jersey in any amounts up to, but not exceeding, the amounts for which such accounts are insured, or 25% of the total reserves and undivided profits of the association, whichever is greater. Any savings bank may invest in one or more accounts in any such association in any amounts up to, but not exceeding, the amounts for which such accounts are insured, or 25% of the total reserves and undivided profits of the association, whichever is greater.
Any such account, in any amount up to, but not exceeding, the amount for which it is insured, or 25% of the total reserves and undivided profits of the association, whichever is greater, shall be eligible for acceptance as security, whenever security is required by any law of this State.
##### **§ 17:12B-242** Separability; partial invalidity {#sec-17-12b-242 omnilex-key=us-nj-statutes--title-17--17:12B-242}
If any provision of this act, or the application thereof to any person, is held invalid, the remaining provisions of this act, and the application of such provision to any other person, shall not be invalidated or affected thereby.
##### **§ 17:12B-243** Effective date {#sec-17-12b-243 omnilex-key=us-nj-statutes--title-17--17:12B-243}
This act shall take effect 90 days after its approval.
##### **§ 17:12B-244** Definitions applicable to capital stock associations {#sec-17-12b-244 omnilex-key=us-nj-statutes--title-17--17:12B-244}
The following words and phrases as used in this act, unless a different meaning is plainly required by the context, shall have the following meaning:
a. "Capital stock association" shall mean any insured State association organized pursuant to the provisions of this act having for its purposes the encouragement of thrift, home ownership and housing and the accumulation of funds through the issuance and sale of its stock, the acceptance of deposits and such other accounts as may be authorized for mutual associations plus such other purposes as are set forth in section 12 (C. 17:12B-12) of this act and the loaning of funds so accumulated in accordance with the powers conveyed by this act to mutual associations. A capital stock association shall issue a class or classes of stock known as capital stock.
b. "Capital Stock" or shares of capital stock shall mean the units into which the proprietary interests in a capital stock association are divided. A portion of the consideration received for any such capital stock or shares of capital stock shall be set aside and shall represent the fixed and permanent capital of the capital stock association, subordinate to all liabilities, including the aggregate of depositors' accounts. Capital stock shall have a par value per share or shall be without par value as stated in the certificate of incorporation and approved by the commissioner.
c. "Capital surplus" means the entire surplus of a capital stock association other than its earned surplus.
d. "Earned surplus" means the portion of the surplus that represents the net earnings, gains and profits, after deduction of all losses, that have not been distributed to the stockholders as dividends or transferred to stated capital or capital surplus, or applied to other purposes permitted by law.
e. "Stated capital" means at any particular time the sum of
(1) the par value of all shares of stock of the capital stock association having a par value that have been issued;
(2) the amount of the consideration received by the capital stock association for all shares of stock of the capital stock association without par value that have been issued, except such part of the consideration therefor as may have been allocated to surplus in a manner permitted by law; and
(3) such amounts not included in paragraphs (1) and (2) as have been transferred to stated capital of the capital stock association, whether upon the issuance of shares of stock as a stock dividend or otherwise, minus all reductions from such sum as have been effected in a manner permitted by law.
f. "Surplus" means the total of the reserves of a capital stock association, other than those reserves required to be established by law, and specific and valuation reserves and undivided profits.
g. "Stockholder" shall mean the holder of record of one or more shares of the capital stock of a capital stock association.
h. "Depositor" shall mean a person who holds an account or a savings deposit representing savings in a capital stock association.
##### **§ 17:12B-245** Persons who may incorporate a capital stock association {#sec-17-12b-245 omnilex-key=us-nj-statutes--title-17--17:12B-245}
Any number of persons, not less than nine, domiciled in this State and citizens of the United States, hereinafter referred to as incorporators, may incorporate a capital stock association for the purposes specified in this act, by complying with the terms, conditions and procedures herein stated.
##### **§ 17:12B-246** Contents of certificate of incorporation of a capital stock association {#sec-17-12b-246 omnilex-key=us-nj-statutes--title-17--17:12B-246}
The incorporators shall personally sign a certificate of incorporation which shall state:
a. The name of the State association and the location of its principal place of business, which shall comply with subsection (1) of section 14 (C. 17:12B-14) of this act.
b. That it is incorporated to operate as a capital stock association, pursuant to this act for the purposes herein stated.
c. The name, residence (including street and number, if any), post-office address and occupation of each incorporator.
d. The aggregate number of shares of capital stock which the capital stock association shall have authority to issue; if such shares are to consist of one class only, the par value of each of such shares, or a statement that all of such shares are without par value; if the shares are divided into classes, or into classes and series, the designation of each class and series, the number of shares of capital stock in each class or series, and a statement of the relative rights, preferences and limitations of the shares of capital stock of each class and series to the extent that such designations, numbers, relative rights, preferences and limitations have been determined; if the shares of capital stock are or are to be, divided into classes, or into classes or series, a statement of any authority vested in the board to divide the shares into classes or series or both, and to determine or change for any class or series its designation, number of shares, relative rights, preferences and limitations.
e. The number of directors constituting the first board to serve until the first annual meeting of the association and the names and addresses of the persons who are to serve as such directors.
f. The number of shares subscribed for by each incorporator and the total amount of capital stock subscribed for as of the date of the certificate of incorporation.
##### **§ 17:12B-247** Filing of certificate of incorporation of capital stock association {#sec-17-12b-247 omnilex-key=us-nj-statutes--title-17--17:12B-247}
The certificate of incorporation shall be filed in accordance with the provisions of sections 16 (C. 17:12B-16) and 17 (C. 17:12B-17) of this act.
##### **§ 17:12B-248** Capital stock and surplus {#sec-17-12b-248 omnilex-key=us-nj-statutes--title-17--17:12B-248}
In the case of an application for the incorporation of a capital stock association, the proceeds from the sale of the capital stock having par value shall be set apart to the extent of the par value and shall be maintained as the stated capital of the association. The proceeds from the sale of capital stock without par value shall be set apart to the extent provided in the certificate of incorporation as approved by the commissioner and shall be maintained as the stated capital of the association. No loan shall be made by a capital stock association secured in any manner by its stock.
The commissioner shall determine the minimum amount to be set apart from the proceeds of stock to be subscribed and maintained as the stated capital of the capital stock association, with provision made for full payment therefor in cash. In addition, a capital surplus account shall be established for such association in an amount satisfactory to the commissioner, provided however, that in no event shall the aggregate of stated capital and capital surplus be less than $500,000.00. Such stated capital and capital surplus shall not be available for dividends or other distributions to stockholders, except upon prior written authorization of the commissioner or in the event of dissolution and final liquidation, provided, however, that the board of such association, by appropriate action, may apply all or any part of capital surplus to the reduction or write-off of any deficit arising from losses or diminution in value of its assets, or may transfer to or designate as part of the accounts authorized or required by paragraphs (a), (b) and (c) of section 128 (C. 17:12B-128) of this act, all or any part of any capital surplus.
All shares of capital stock shall be transferable by the holders thereof in accordance with the bylaws of such association.
##### **§ 17:12B-249** Commissioner's findings as to a capital stock association {#sec-17-12b-249 omnilex-key=us-nj-statutes--title-17--17:12B-249}
If the commissioner shall find that:
a. The establishment of such capital stock association is in the public interest;
b. Will be of benefit to the area proposed to be served;
c. May be established without undue injury to any other association in the area in which it is proposed to locate such capital stock association;
d. The capital stock association will have a reasonable prospect of success;
e. The character, responsibility and general fitness of the incorporators are such as to command confidence and warrant belief that the business of the capital stock association will be honestly and efficiently conducted;
f. The name proposed for the capital stock association conforms with the requirements of the act and that the proposed bylaws are proper;
g. The capital stock association has filed proofs as to the mailing of notice and publication required by the act; and
h. The provisions of section 19 of this amendatory and supplementary act dealing with capital stock and capital surplus requirements have been complied with to his satisfaction, and it is qualified as a member of the Federal Savings and Loan Insurance Corporation;
he shall approve such application and issue a certificate of approval which shall be endorsed upon or annexed to such certificate of incorporation.
##### **§ 17:12B-250** Powers available to capital stock association {#sec-17-12b-250 omnilex-key=us-nj-statutes--title-17--17:12B-250}
21. The powers contained in section 47 (C.17:12B-47), section 48 (C.17:12B-48) and section 130 (C.17:12B-130) of this act shall be available to capital stock associations (but the term "member" as used therein shall be deemed to refer to "depositor" or "borrower," and the term "dividends" shall be deemed to refer to "interest" as may be appropriate in the context), and in addition every capital stock association shall have the power to:
a. Amend its certificate of incorporation in the following manner:
(1) The board shall approve the proposed amendment and direct that it be submitted to a vote at a meeting of the stockholders.
(2) Written notice setting forth the proposed amendment or a summary of the changes to be effected thereby shall be given to each stockholder of record entitled to vote thereon within the time and in the manner provided in this act for the giving of notice of meetings of stockholders.
(3) At such meeting a vote of the stockholders entitled to vote thereon shall be taken on the proposed amendment. The proposed amendment shall be adopted upon receiving the affirmative vote of a majority of the votes cast in person or by proxy by the stockholders.
(4) No amendment shall become effective until it shall have been submitted to the commissioner and he shall either have approved it in writing or failed to take action thereon for a period of 30 days after it shall have been submitted to him. Approval shall not be withheld by the commissioner unless an amendment is in conflict with the provisions of this act.
b. Subject to amendment of its certificate of incorporation, authorize issuance of additional capital stock for:
(1) Payment of a consideration other than cash in connection with mergers with or purchase of assets of another association.
(2) The purpose of increasing the amount of its stated capital by sale of such additional capital stock.
(3) Capital stock options, the aggregate of which shall not exceed 10% of the amount of authorized capital stock at the time of the granting of such options and the establishment of one or more capital stock purchase plans for officers and employees of the capital stock association, which plan or plans may include provisions for partial contribution by the association.
c. Declare and distribute stock dividends without the necessity of an amendment to its certificate of incorporation, notwithstanding that the payment of such dividends will effect an increase in the capital stock of the capital stock association. In such a case, dividends may be paid from time to time on the stock of the capital stock association, at the discretion of the board, provided that prior to the date of the payment of any such dividend, a certificate shall be filed with the commissioner for the approval of the commissioner, stating:
(1) The date upon which the dividend is to be paid;
(2) The amount of such dividend; and
(3) The amount of the capital stock and the paid-in or contributed surplus of the capital stock association after giving effect to the payment of such dividend.
A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or disapproved earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment. A certificate filed in the department pursuant to this subsection shall be deemed for all purposes to be an amendment to the certificate of incorporation of the capital stock association with the same effect as if it had been authorized, executed, approved and filed in the department pursuant to subsection a. of this section.
A split-up or division of the issued shares of any class or series into a greater number of shares of the same class or series without increasing the amount of a capital stock association's stated capital shall not be construed to be a stock dividend within the meaning of this subsection and may be accomplished by amendment of the certificate of incorporation as provided in this act.
d. Fix a record date for the purpose of determining the stockholders entitled to notice of, or to vote, at any meetings of stockholders or any adjournment thereof, or to express consent to, or dissent from, any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or electment of any right, or for the purpose of any other action, the bylaws may provide for fixing, or in the absence of such provision, the board may fix, in advance, a date as the record date for any such determination of stockholders. Such date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action.
e. Borrow money provided that the aggregate indebtedness for borrowed money, other than to the Federal Home Loan Bank, will not exceed 20% of its depositors' accounts, except with the approval of the commissioner.
##### **§ 17:12B-250.1** Capital stock association official immunity {#sec-17-12b-250.1 omnilex-key=us-nj-statutes--title-17--17:12B-250.1}
A capital stock association may with the approval of the commissioner, amend its certificate of incorporation or bylaws, by a two-thirds vote of its board present and voting at a duly convened regular or special meeting, to provide that a director or officer shall not be personally liable, or shall be liable only to the extent therein provided, to the association or its stockholders for damages for breach of any duty owed to the association or its stockholders, except that the provision shall not relieve a director or officer from liability for an act or omission: a. in breach of that person's duty of loyalty to the association or its stockholders; b. not in good faith or involving a knowing violation of law; or c. resulting in receipt by that person of an improper personal benefit. As used in this section, an act or omission in breach of a person's duty of loyalty means an act or omission which that person knows or believes to be contrary to the best interests of the association or its stockholders in connection with a matter in which he has a material conflict of interest.
The commissioner shall approve the amendment unless he finds that it unreasonably affects the interest of the stockholders.
This section shall be applicable to federal associations, in addition to State associations, to the extent permitted by federal law.
##### **§ 17:12B-251** Directors' election, vacancies {#sec-17-12b-251 omnilex-key=us-nj-statutes--title-17--17:12B-251}
The directors shall be elected by the stock holders of a capital stock association by ballot at the annual meeting for such term, not exceeding 3 years, as the bylaws provide. Where the term is more than 1 year, the bylaws shall establish terms of office so that an equal number of directors, so far as possible, shall be elected each year. A vacancy in the board may be filled by the board until the next annual meeting of the association, when it shall be filled by the stockholders of the association for the remainder of the unexpired term. Each director shall hold office for the term for which he is elected and until his successor shall be chosen and qualified.
##### **§ 17:12B-252** Liability of stockholders {#sec-17-12b-252 omnilex-key=us-nj-statutes--title-17--17:12B-252}
Stockholders, after their stock has been fully paid, are not liable to creditors or for assessments upon their stock. Stock shall be considered fully paid when the consideration for the issuance of any shares of capital stock has been paid, in whole, in cash.
##### **§ 17:12B-253** Notice to stockholders {#sec-17-12b-253 omnilex-key=us-nj-statutes--title-17--17:12B-253}
Except where this act or regulations promulgated hereunder expressly provide otherwise, all notices, statements, reports or other documents required to be given to any stockholder may be given to him either personally or by mail, postage prepaid, addressed to him at his last address which appears on the records of the association. Service by mail shall be complete upon posting.
##### **§ 17:12B-254** Meeting place. {#sec-17-12b-254 omnilex-key=us-nj-statutes--title-17--17:12B-254}
25. a. Subject to subsection b. of this section, stockholders' meetings shall be held at the capital stock association's principal office or at such other place within the State of New Jersey as the board shall designate.
b. Any meeting of stockholders may be held solely or in part by means of remote communication to the extent the board authorizes and adopts guidelines and procedures governing such a meeting.
(1) One or more stockholders may participate in a meeting of stockholders by means of remote communication to the extent the board authorizes that participation, including the authorization of a meeting of stockholders held solely by means of remote participation. Stockholder meetings conducted in part or solely by means of remote communication and any stockholder's remote participation in those meetings shall be subject to those guidelines and procedures as the board adopts, and shall be in conformity with this subsection.
(2) A stockholder participating in a meeting of stockholders by means of remote communication in reliance upon paragraph (1) of this subsection shall be deemed present in person and shall be entitled to vote at the meeting. In any meeting conducted in part or solely by means of remote communication in reliance upon paragraph (1) of this subsection, the association shall implement reasonable measures to:
(a) verify that each person participating remotely is a stockholder or a proxy of a stockholder;
(b) provide each stockholder participating remotely with a reasonable opportunity to participate in the meeting, including an opportunity to vote on matters submitted to the stockholders, and to read or hear the proceedings of the meeting substantially concurrently with those proceedings; and
(c) record and maintain a record of any votes or other actions taken by remote communication at the meeting.
##### **§ 17:12B-255** Meetings of stockholders {#sec-17-12b-255 omnilex-key=us-nj-statutes--title-17--17:12B-255}
a. Annual. The stockholders shall meet at least once in each year, as the bylaws shall provide, upon not less than 10 days' written notice, which shall be given by mail for the election of directors and the transaction of any other business which may properly be brought before such meeting.
b. Special meetings of the stockholders may be called as provided in the bylaws, but upon not less than 10 days' written notice by mail, and the notice of such meeting shall state the purposes for which it is called.
##### **§ 17:12B-256** Quorum for stockholders' meetings {#sec-17-12b-256 omnilex-key=us-nj-statutes--title-17--17:12B-256}
The bylaws shall prescribe the number of stockholders which shall constitute a quorum at a meeting.
##### **§ 17:12B-257** Voting rights of stockholders {#sec-17-12b-257 omnilex-key=us-nj-statutes--title-17--17:12B-257}
a. Each stockholder owning shares of capital stock with voting rights shall be entitled to vote at any meeting of the capital stock association. Each capital stock association shall set forth in its bylaws the voting rights of its stockholders. Each holder of shares of capital stock shall be entitled to one vote for each voting share on each matter submitted to a vote at a meeting of stockholders.
b. Stockholders may vote by written proxy if the bylaws so provide and the bylaws may prohibit voting by persons who have become stockholders within 60 days of the date when the vote is cast.
c. Each share of stock held jointly shall be allowed one vote.
##### **§ 17:12B-258** Reports to stockholders {#sec-17-12b-258 omnilex-key=us-nj-statutes--title-17--17:12B-258}
Every capital stock association shall make available to its stockholders annually, a report of its financial condition as of the end of the fiscal year, either
a. By mailing to each stockholder of record a statement of assets and liabilities, and a statement of operations; or
b. By publishing a statement of its assets and liabilities at least once in a newspaper published or circulating in the municipality in which the principal office of the capital stock association is located and by furnishing to any stockholder upon request, a statement of assets and liabilities, and a statement of operations; or
c. By reporting in such manner and form as may be required by regulations promulgated by the commissioner.
##### **§ 17:12B-259** Dividends on capital stock {#sec-17-12b-259 omnilex-key=us-nj-statutes--title-17--17:12B-259}
The directors of a capital stock association, after payment of interest to depositors may declare dividends on capital stock from net income, earned surplus or undivided profits in accordance with the provisions of this act and the bylaws of such association, provided that before and following the declaration of any such dividend, a capital stock association shall have reserve required by this act, including reserves and net worth which are in compliance with the regulations of the Federal Savings and Loan Insurance Corporation.
##### **§ 17:12B-260** Books and records of capital stock associations; right of inspection {#sec-17-12b-260 omnilex-key=us-nj-statutes--title-17--17:12B-260}
a. Each capital stock association shall keep books and minutes of the proceedings of its stockholders, board and executive committee, if any. The capital stock association shall keep at its principal office a record or records containing the names and addresses of all stockholders, the number, class and series of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. A capital stock association shall convert into written form without charge any such records in any such form upon the written request of any person entitled to inspect them. In the case of shares of stock of a capital stock association, the records of the holders of such shares may be kept at the office of the capital stock association's transfer agent within or without this State.
b. Any person who shall have been a stockholder of record of a capital stock association for at least 6 months immediately preceding his demand and holding at least 5% of the outstanding shares of any class, upon at least 5 days' written demand shall have the right for any proper purpose to examine in person or by agent or attorney, during usual business hours, the minutes of the proceedings of its stockholders and records of stockholders and to make extracts therefrom, at the places where the same are kept pursuant to subsection a. of this section.
c. Nothing herein contained shall impair the power of the commissioner, upon proof by a stockholder of proper purpose, irrespective of the period of time during which said stockholder shall have been a stockholder of record, and irrespective of the number of shares held by him, to compel the production for examination by such stockholder of the books, minutes and records of stockholders of a capital stock association.
##### **§ 17:12B-261** Conversion of mutual association to capital stock association {#sec-17-12b-261 omnilex-key=us-nj-statutes--title-17--17:12B-261}
A mutual association which is a member of the Federal Savings and Loan Insurance Corporation, organized pursuant to the provisions of this act, may convert itself into a capital stock association with the same force and effect as though originally incorporated as a capital stock association.
a. When, in the judgment of the board of such association, it shall be deemed advisable and in the best interests of its members that the same shall be converted into a capital stock association, as provided in this section, the board shall adopt a resolution to that effect, and follow such procedures as may be required by regulations promulgated by the commissioner;
b. Upon compliance with the requirements of subsection a. of this section, a meeting of the members of the association shall be held upon not less than 30 days' written notice to each member by mailing, postage prepaid, directed to his last address as shown on the books of the association, which notice shall contain a statement of the time, place and purpose for which such meeting is called. Such notice shall be accompanied by a proxy statement and proxy form in accordance with regulations promulgated by the commissioner;
c. At the meeting of the members of any such association held as provided in subsection b. of this section, such members may, by the affirmative vote of at least a majority of the votes of the members of the mutual association present, either in person or by proxy, declare by resolution the determination to convert the association into a capital stock association. A copy of the minutes of the proceedings of such meeting of the members shall be filed in the office of the commissioner within such time and in such form and manner as set forth in regulations promulgated by the commissioner;
d. At the meeting at which the conversion is voted upon, the members of the association shall also vote upon the directors who shall be the directors of the capital stock association after the effective date of the conversion. The directors so elected shall be the incorporators and execute and file with the commissioner a certificate of incorporation as provided for in section 18 of this amendatory and supplementary act, together with an application for conversion which shall contain the plan of conversion pursuant to the provisions of this act. Upon a finding by the commissioner that (1) the plan of conversion has been adopted and approved by the mutual association in compliance with the provisions of this act, (2) is fair and equitable to all members, and (3) sufficient provision has been made to protect the interest of the depositors of the prospective capital stock association, he shall issue a certificate of approval of the conversion which shall be endorsed upon or annexed to the certificate of incorporation. The certificate of incorporation with the commissioner's approval endorsed thereon or annexed thereto, shall be recorded within 30 days after such approval in the same manner and places as required by section 22 (C. 17:12B-22) of this act, upon the approval by the commissioner and the filing of the certificate of incorporation as aforesaid, the association shall cease to be a mutual association and thereafter shall operate as a capital stock association. Upon the conversion of the mutual association, the legal existence of the association shall not terminate but the capital stock association shall be a continuation of the entity of the mutual association and all property of the mutual association, including its right, title and interest in and to all property of whatsoever kind and nature, whether real, personal or mixed and things, and choses in action, and every right, privilege, interest and asset of every conceivable value or benefit then existing or pertaining to it, or which would inure to it, immediately by operation of law and without the necessity of any conveyance or transfer and without any further act or deed shall vest in the capital stock association into which the mutual association has converted itself. The capital stock association shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the mutual association. The capital stock association as of the time and the taking effect of the conversion shall continue to have and succeed to all the rights, obligations and relations of the mutual association. All pending actions and other judicial or administrative proceedings to which the mutual association was a party shall not be discontinued by reason of the conversion, but may be prosecuted to final judgment or order in the same manner as if the conversion had not been made and the capital stock association resulting from the conversion may continue such actions in its corporate name notwithstanding such conversion. Any judgment or order may be rendered for or against it which might have been rendered for or against the mutual association theretofore involved in the judicial proceedings.
##### **§ 17:12B-262** Plan of conversion {#sec-17-12b-262 omnilex-key=us-nj-statutes--title-17--17:12B-262}
The conversion of a mutual association into a capital stock association shall be effected in accordance with the plan of conversion adopted by the members, and approved by the commissioner, pursuant to the provisions of this act and consistent with the provisions of this section. The plan shall provide:
a. Each savings member in the mutual association shall receive an equivalent account in the capital stock association equal in amount to his account in the mutual association;
b. A record date for determining the respective interests of savings members in the mutual association, which date shall be established and published by the commissioner from time to time in his discretion, but not less often than annually, and may coincide, in the commissioner's discretion, with a record date if the same is established and published by the Federal Home Loan Bank Board. Such record date shall apply to the entire State;
c. Participation in the initial issuance of capital stock by officers, directors and employees of the association and their associates shall be in accordance with the regulations promulgated by the commissioner. The term "associate" of a person shall mean parents, spouse, sisters, brothers, children or anyone married to one of the foregoing persons; any corporation of which the person is an officer, director or owner of more than 10% of the outstanding voting stock; any trust of which such person is a trustee or substantial beneficiary; and any partnership of which such person is a general or limited partner;
d. The interests of directors, officers, employees and associates, as that word is defined in subsection c. of this section, shall be disclosed in the application for conversion filed with the commissioner and in the notice to members of the meeting called to adopt the plan of conversion;
e. Each savings member as of the record date shall receive such rights with respect to the capital stock of the capital stock association as shall be set forth in regulations promulgated by the commissioner;
f. A date upon which the association will advise qualified savings members of their rights and elections with respect to the conversion. Such notice shall be in accordance with regulations promulgated by the commissioner.
##### **§ 17:12B-263** Adequate reserve and capital requirements {#sec-17-12b-263 omnilex-key=us-nj-statutes--title-17--17:12B-263}
After reorganization or conversion pursuant to the provisions of this act, each capital stock association shall maintain an adequate capital structure appropriate for the conduct of its business and the protection of its depositors. The adequacy of the capital of a capital stock association shall be determined by the commissioner after a valuation of the character of management, the liquidity of assets, history of earnings and the retention thereof, the potential volatility of the account or deposit structure and with due regard to the association's capacity to furnish the broadest services to the public. The reserves required by this act and the capital of a capital stock association resulting from the conversion of a mutual association shall not be less than 5% of its savings accounts or deposits.
##### **§ 17:12B-264** Power to create, issue capital stock; provision for authorized but unissued stock; certificate of amendment {#sec-17-12b-264 omnilex-key=us-nj-statutes--title-17--17:12B-264}
35. a. Each capital stock association shall have power to create and issue the number of shares of capital stock stated in its certificate of incorporation. Such shares may consist of one class or may be divided into two or more classes and any class may be divided into one or more series. Each class and series may have such designation and such relative dividend, liquidation and other rights, preferences and limitations as shall be stated in the certificate of incorporation, except that all shares of the same class shall be either without par value or shall have the same par value. Each class and series shall be designated so as to distinguish its shares from every other class and series.
b. A capital stock association may, in its original or amended certificate of incorporation, make provision for authorized but unissued stock. Such stock may, with the approval of the commissioner as hereinafter provided, be issued for such purposes, in addition to the purposes expressly authorized by law, and for such consideration as the board of directors may determine. So long as such stock remains unissued, it shall not constitute capital stock for the purposes of P.L.1963, c.144 (C.17:12B-1 et seq.).
c. Prior to the time when authorized or unissued shares are issued by a capital stock association, a certificate of amendment made by two officers of the capital stock association, one of whom shall be the president or a vice-president, shall be filed in the Department of Banking and Insurance. The certificate of amendment shall state (1) the amount of the authorized but unissued stock which will be issued; (2) the consideration which will be received by the capital stock association on the issuance of such stock; (3) the date upon which the stock will be issued; and (4) the amount of the capital stock association's capital stock which will be outstanding, and the amount of its surplus after giving effect to such issue. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or disapproved earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment. The commissioner may disapprove a filing if the commissioner finds that the issuance of the stock will be in violation of law or contrary to the public interest or that the capital stock association's original or amended certificate of incorporation does not provide for authorized but unissued stock. A certificate filed in the department pursuant to this section shall be deemed for all purposes to be an amendment of the capital stock association's certificate of incorporation with the same effect as if it had been authorized, executed, approved and filed in the department pursuant to article 19 of P.L.1963, c.144 (C.17:12B-1 et seq.).
##### **§ 17:12B-265** Supervision of capital stock associations {#sec-17-12b-265 omnilex-key=us-nj-statutes--title-17--17:12B-265}
In the case of a capital stock association, with regard to the provisions of Article XII, the word "member" shall be either inclusive of stockholders of the capital stock association or shall be construed to mean stockholder wherever appropriate to the context.
##### **§ 17:12B-266** Merger of capital stock associations {#sec-17-12b-266 omnilex-key=us-nj-statutes--title-17--17:12B-266}
In the case of the merger of any two or more capital stock associations, the procedure to merge shall be as provided in Article XIII of this act except that the word "member" shall be either inclusive of stockholders of the capital stock association or shall be construed to mean stockholder wherever appropriate to the context.
##### **§ 17:12B-267** Conversion of a capital stock association into a Federal association {#sec-17-12b-267 omnilex-key=us-nj-statutes--title-17--17:12B-267}
In the case of a capital stock association, the procedure to convert itself into a Federal association shall be as provided in section 222 (C. 17:12B-222) of this act except that all references to members shall be construed to mean stockholders wherever appropriate to the context. All of the provisions regarding property, rights, privileges and obligations as contained in section 223 (C. 17:12B-223) of this act shall apply to the conversion of a capital stock association into a Federal association so that the Federal association shall be a continuation of the converting capital stock association and continue to have all of its property, rights, privileges and obligations as more fully set forth in said section 223.
##### **§ 17:12B-268** Conversion of a Federal association into a capital stock association {#sec-17-12b-268 omnilex-key=us-nj-statutes--title-17--17:12B-268}
In the case of a Federal association the procedure to convert itself into a capital stock association shall be as provided in section 224 (C. 17:12B-224) and section 225 (C. 17:12B-225) of this act and section 32 of this amendatory and supplementary act.
##### **§ 17:12B-269** Commencement of business of capital stock association {#sec-17-12b-269 omnilex-key=us-nj-statutes--title-17--17:12B-269}
Capital stock associations shall not commence business until its accounts have been accepted for Federal Savings and Loan Insurance.
##### **§ 17:12B-270** Dissolution and liquidation of capital stock association {#sec-17-12b-270 omnilex-key=us-nj-statutes--title-17--17:12B-270}
In the case of the dissolution and liquidation of a capital stock association, the procedure shall be as set forth in Article XVIII of this act, except that the word "member" shall be either inclusive of stockholders of a capital stock association or shall be construed to mean stockholder wherever appropriate to the context. In the event of the dissolution and liquidation of a capital stock association, no liquidating dividend to the stockholders of the capital stock association shall be made until all liabilities of the capital stock association, including the withdrawal value of all accounts and deposits, have been satisfied in full.
##### **§ 17:12B-271** Construction of inconsistent provisions {#sec-17-12b-271 omnilex-key=us-nj-statutes--title-17--17:12B-271}
In the event of inconsistency between the provisions of this Article XXI and other provisions of this act, such other provisions to the extent of the inconsistency shall be construed to be applicable to mutual associations only and not to capital stock associations.
##### **§ 17:12B-272** Rules and regulations {#sec-17-12b-272 omnilex-key=us-nj-statutes--title-17--17:12B-272}
The commissioner shall have power to implement and carry out the provisions and purposes of this Article XXI by the promulgation and issuance of rules and regulations from time to time. The commissioner, when issuing such rules and regulations, shall, to the extent feasible, promulgate such rules and regulations in substantial conformity with applicable rules and regulations of the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation.
##### **§ 17:12B-277** Separability; partial invalidity {#sec-17-12b-277 omnilex-key=us-nj-statutes--title-17--17:12B-277}
If any provision of this act, or the application thereof to any person, is held invalid, the remaining provisions of this act, and the application of such provision to any other person, shall not be invalidated or affected thereby.
##### **§ 17:12B-278** Definitions {#sec-17-12b-278 omnilex-key=us-nj-statutes--title-17--17:12B-278}
As used in this act:
a. "Insured institution," "savings and loan holding company," and "control" shall have the respective meanings set forth in section 408(a) of the "National Housing Act," as amended (12 U.S.C. s. 1730a). "Insured institution" shall also include federal savings banks, whose accounts are insured by the Federal Savings and Loan Insurance Corporation, as defined in 12 CFR 561.1.
b. "Savings and loan subsidiary" means an insured institution or savings and loan holding company, more than 50% of the voting shares or members' rights of which are owned or controlled, directly or indirectly, by a savings and loan holding company.
c. "Central-Atlantic Region" means the states of New Jersey, Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, Missouri, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, Wisconsin and the District of Columbia.
d. "Insured institution deposits" means the total domestic deposits in insured institutions in each state according to the most recent available statistics of the Federal Savings and Loan Insurance Corporation or the Federal Home Loan Bank System or, if those statistics are not available, from sources designated by the commissioner.
e. "Commissioner" means the Commissioner of Banking.
f. "Eligible state" means any state which meets either or both of the following conditions:
(1) Any state in the Central-Atlantic Region, when at least two of those states, in addition to this State, each of which has at least $20,000,000,000.00 in insured institution deposits, have reciprocal legislation in effect; and
(2) Any state or territory of the United States, when at least 13 states in addition to this State (for this purpose the District of Columbia is included as a state, but all other territories are excluded), at least four, other than this State, of which are among the 10 states, other than this State, with the largest amount of insured institution deposits, have reciprocal legislation in effect.
g. "Eligible insured institution" means an insured institution:
(1) Located in an eligible state which has reciprocal legislation in effect, other than this State;
(2) Which is not directly or indirectly controlled by an insured institution or a savings and loan holding company which is not located in an eligible state; and
(3) Which has at least 75% of the total aggregate deposits of the insured institution and the savings and loan subsidiaries of any savings and loan holding company directly or indirectly controlling the insured institution, if any, in an eligible state or states.
h. "Eligible savings and loan holding company" means a savings and loan holding company:
(1) Located in an eligible state which has reciprocal legislation in effect, other than this State;
(2) Which is not directly or indirectly controlled by a savings and loan holding company which is not located in an eligible state; and
(3) Which has at least 75% of the total aggregate deposits of its saving sand loan subsidiaries in savings and loan subsidiaries located in an eligible state or states.
i. "Location" or "located," when referring to an insured institution, means the state in which the amount of aggregate deposits of all of its offices in that state is greater than the amount of aggregate deposits of all its offices in any one other state or foreign jurisdiction; when referring to a savings and loan holding company, "location" or "located" means the state in which the amount of aggregate deposits of all of its savings and loan subsidiaries in that state is greater than the amount of aggregate deposits of all of its savings and loan subsidiaries in any one other state or foreign jurisdiction.
j. "Reciprocal legislation" means statutory law of a state of the United States, including the District of Columbia, which authorizes or permits an insured institution or a savings and loan holding company, or both, located in this State to acquire insured institutions or savings and loan holding companies, or both, located in that state on terms and conditions substantially the same as the terms and conditions pursuant to which an insured institution or a savings and loan holding company located in that state may acquire insured institutions or holding companies, or both, located in this State. The fact that the law of that other state imposes limitations or restrictions on the acquisition of insured institutions or savings and loan holding companies, or both, located in that state by an insured institution or savings and loan holding company, or both, located in this State shall not necessarily mean that the law of that state is not reciprocal legislation; provided, however, that if the law of the other state limits acquisitions by an insured institution or a savings and loan holding company, or both, located in this State to insured institutions or savings and loan holding companies, or both, which are not in competition with insured institutions or savings and loan holding companies, or both, located in or chartered by that state or to insured institutions or savings and loan holding companies which do not have customary deposit and commercial loan powers, the law of that other state shall not be reciprocal legislation. If the reciprocal legislation of that other state imposes limitations or restrictions on the acquisition or ownership of an insured institution or savings and loan holding company located in that state by an insured institution or savings and loan holding company, or both, located in this State, substantially the same limitations and restrictions shall be applicable to the eligible insured institution or eligible savings and loan holding company, or both, located in that other state with respect to its acquisition of insured institutions or savings and loan holding companies, or both, located in this State.
##### **§ 17:12B-279** Conditions for acquisition; control {#sec-17-12b-279 omnilex-key=us-nj-statutes--title-17--17:12B-279}
a. Notwithstanding the provisions of any other law of this State, an eligible insured institution or eligible savings and loan holding company may acquire and retain control of an insured institution or savings and loan holding company or insured institutions or savings and loan holding companies located in this State providing the following conditions are complied with:
(1) At the time of the acquisition of control of the insured institution or savings and loan holding company or insured institutions or savings and loan holding companies located in this State, the insured institution or savings and loan holding company is an eligible insured institution or eligible savings and loan holding company located in an eligible state which has reciprocal legislation in effect.
(2)(a) The eligible insured institution shall have more than 50% of the total aggregate deposits of the insured institution and the savings and loan subsidiaries of any savings and loan holding company directly or indirectly controlling the insured institution, if any, in insured institutions located in an eligible state or states each of which has reciprocal legislation in effect.
(b) The eligible savings and loan holding company shall have more than 50% of the total aggregate deposits of its savings and loan subsidiaries in savings and loan subsidiaries located in an eligible state or eligible states each of which has reciprocal legislation in effect.
b. It is not the intent of this act, and nothing in this act shall be deemed to permit acquisitions in any form that would result in branching into New Jersey of insured institutions or savings and loan holding companies.
c. Nothing in this act shall be deemed to eliminate, reduce or waive any rights of any savings member, borrowing member or shareholders of the insured institution or savings and loan holding company being acquired pursuant to any applicable law regarding those rights.
d. In the event an eligible insured institution or eligible savings and loan holding company which controls an insured institution or savings and loan holding company or insured institutions or savings and loan holding companies in this State and in one or more eligible states shall cease to be an eligible insured institution or eligible savings and loan holding company (1) as a result of obtaining control of an insured institution or savings and loan holding company or insured institutions or savings and loan holding companies located in a state which is not an eligible state or this State, or (2) as a result of having control of it obtained by an insured institution or savings and loan holding company or insured institutions or savings and loan holding companies which is not an eligible insured institution or eligible savings and loan holding company, the insured institution or savings and loan holding company shall within one year make such divestitures as are necessary to comply with the provisions of this act. The commissioner shall promulgate regulations to provide a procedure for divestiture.
e. Notwithstanding the provisions of this act, an insured institution or savings and loan holding company shall not be required to divest its control of any insured institution or savings and loan holding company as a result of any subsequent change in, or invalidity of, the laws of this State, another state or the United States or as a result of a state ceasing for any other reason to be an eligible state.
##### **§ 17:12B-280** Acquisitions in other states permitted {#sec-17-12b-280 omnilex-key=us-nj-statutes--title-17--17:12B-280}
a. Notwithstanding the provisions of any law of this State, an insured institution or savings and loan holding company located in this State may acquire an insured institution or savings and loan holding company located in any eligible state other than this State.
b. Nothing in this act or in any other law of this State shall be deemed to prohibit or limit an insured institution or savings and loan holding company located in this State from acquiring an insured institution or savings and loan holding company or insured institutions or savings and loan holding companies located in any jurisdiction other than an eligible state, which acquisition is otherwise permitted by applicable law of the United States or any other state, provided that, if the insured institution or savings and loan holding company becomes an insured institution or savings and loan holding company not located in this State, it shall comply with the provisions of this act if it is to continue to control an insured institution or savings and loan holding company or insured institutions or savings and loan holding companies located in this State.
##### **§ 17:12B-281** Definitions {#sec-17-12b-281 omnilex-key=us-nj-statutes--title-17--17:12B-281}
As used in this act:
a. "Insured institution" and "savings and loan holding company" shall have the respective meanings set forth in Title IV, section 408 of the "National Housing Act," as amended (12 U.S.C. s. 1730a).
b. "State association" means any savings and loan association, building and loan association, or any corporation, however named, operating pursuant to the provisions of P.L. 1963, c. 144 (C. 17:12B-1 et seq.). "State association" shall also include a person who controls an association when used in section 4 of this act.
c. "Person" means an individual or company.
d. "Company" means any corporation, partnership, trust, joint-stock company, association or similar organization, but does not include the Federal Savings and Loan Insurance Corporation, any Federal Home Loan Bank, or any company the majority of the shares of which is owned by the United States or any state, or by an officer of the United States or any state in his official capacity, or by an instrumentality of the United States or any state.
e. (1) "Control" of an insured institution or state association means:
(a) Owning, controlling, or having power to vote 25% or more of the outstanding shares of any class of voting securities of an insured institution, directly or indirectly, or acting through one or more persons;
(b) Controlling in any manner the election of a majority of the directors, trustees, general partners, or individuals exercising similar functions of the insured institution; or
(c) Exercising or having the power to exercise directly or indirectly a controlling influence over the management or policies of an insured institution;
(2) A person which is a state association shall not be deemed to control voting securities or assets of a state association acquired: (a) in good faith in a fiduciary capacity, except where those voting securities are held in a trust that constitutes a company; or (b) in the regular course of securing or collecting a debt previously contracted in good faith which securities are disposed of within a period of two years after the date on which they were acquired or after the enactment of this act, whichever is later;
(3) A person is deemed to control voting securities or assets owned, controlled, or held directly or indirectly:
(a) by any subsidiary of the person; or
(b) in a fiduciary capacity, including by pension and profit-sharing trusts, for the benefit of the shareholders, members, employees, or individuals serving in similar capacities, of the person or of any of its subsidiaries; or
(c) in a fiduciary capacity for the benefit of the person or any of its subsidiaries.
f. "Subsidiary" means any person or company which is controlled by another person or company.
g. "Voting securities" means shares of common or preferred stock, general or limited partnership shares or interests or similar interests if the shares or interests, by statute, charter, or in any manner, entitle the holder:
(1) to vote for or to select directors, trustees, partners, or persons exercising similar functions for the issuing company; or
(2) to vote on or to direct the conduct of the operations or other significant policies of the issuing person.
Preferred shares, limited partnership shares or interests, or similar interests are not "voting securities" if:
(1) any voting rights associated with the shares or interests, including the right to select or vote for the selection of directors, trustees, or partners or persons exercising similar functions, are limited solely to the type customarily provided by statute with regard to matters that would significantly and adversely affect the rights or preference of the security or other interest, such as the issuance of additional amounts or classes of senior securities, the modification of the terms of the security or interest, the dissolution of the issuing person, or the payment of dividends by the issuing person when preferred dividends are in arrears, or, entitle the holder thereof to vote for the election of directors, trustees or partners or persons exercising similar functions only as the result of the failure to pay a dividend or to fulfill an obligation or satisfy a condition specified by the terms of the shares or interests; and
(2) the shares or interests represent an essentially passive investment or financing device and do not otherwise provide the holder with control over the issuing person.
h. "Commissioner" means the Commissioner of Banking.
i. "Department" means the Department of Banking.
j. "United States" means the United States and includes any of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, and the Virgin Islands.
##### **§ 17:12B-282** Information to commissioner {#sec-17-12b-282 omnilex-key=us-nj-statutes--title-17--17:12B-282}
a. A savings and loan holding company or an insured institution shall, upon the request of the commissioner, provide to the commissioner a copy of its filings with the Federal Home Loan Bank Board, Federal Savings and Loan Insurance Corporation, or their successors, and the Securities and Exchange Commission.
b. A person, other than a savings and loan holding company, a state of the United States, the United States or a corporation the majority of the shares of which are owned by the United States or by any state, which controls a state association, shall annually provide the following information to the commissioner on or before April 30:
(1) The identity, personal history, business background and experience of the person, including material business activities and affiliations during the past five years, and a description of any material, pending legal or administrative proceedings in which the person is a party and any criminal indictment or conviction of the person issued by a state or federal court;
(2) A statement of the assets and liabilities of the person, for each of five preceding fiscal years, together with related statements of income and source and application of funds for each of those fiscal years, prepared in accordance with generally accepted accounting principles consistently applied; and
(3) Any additional relevant information in that form which the commissioner may require by rule or regulation or by specific request.
c. The commissioner may by rule or regulation or on an individual basis exempt persons from the reporting requirements of this section.
##### **§ 17:12B-283** Examination; report {#sec-17-12b-283 omnilex-key=us-nj-statutes--title-17--17:12B-283}
a. The commissioner shall have the right to examine any savings and loan holding company which controls a state association, the cost of which examination shall be assessed against and paid by the savings and loan holding company in an amount to be set by rule or regulation of the commissioner.
b. The examination authorized by this section shall be conducted jointly, concurrently or in lieu of examinations made by a federal or other state regulatory agency. The commissioner shall use, to the extent deemed feasible, filings and reports made by the savings and loan holding company which controls a state association to federal or other state regulatory authorities.
c. A copy of any examination report prepared by the department may be given to any federal or other state regulatory authority pursuant to a written agreement providing for the exchange of reports of examinations between the department and the federal or other state regulatory authority.
d. Except as provided in subsection c. of this section, every report and copy of a report of examination of a savings and loan holding company made by or under the supervision of the commissioner and every report and copy of a report of examination of a savings and loan holding company which proposes to control or controls a state association made by or under the supervision of any federal or other state regulatory authority shall be confidential, and shall not be made public by any officer, director or employee of the savings and loan holding company or the department. These reports and reports of examination shall not be subject to subpena or to admission into evidence in any action or proceeding in any court, except pursuant to an order of the court made upon notice to the commissioner and after affording the commissioner an opportunity to advise the court of reasons for excluding from evidence the report or any portion thereof. The court shall order the issuance of a subpena for the production or admission into evidence of any report or portion thereof, only if it is satisfied that: (1) it is material and relevant to the issues in the proceedings; and (2) the ends of justice and public advantage will be served thereby. This subsection shall not apply to any action or proceeding instituted by the commissioner or Attorney General pursuant to any law of this State.
##### **§ 17:12B-284** Notice of proposed acquisition to commissioner {#sec-17-12b-284 omnilex-key=us-nj-statutes--title-17--17:12B-284}
a. No person, acting directly or indirectly, or through or in concert with one or more other persons, shall acquire or offer to acquire or exercise control of a state association unless the commissioner has been given 60 days' prior written notice of the proposed acquisition, and has not issued a notice disapproving the proposed acquisition during that period or during an additional 30-day period immediately thereafter. The period for disapproval may be further extended only if the commissioner determines that any acquiring party has not furnished all the information required under subsection f. of this section or that in his judgment any material information submitted is substantially inaccurate. An acquisition may be made prior to expiration of the disapproval period if the commissioner issues written notice of his intent not to disapprove the acquisition.
b. If the commissioner determines that he must act immediately upon notice of a proposed acquisition in order to prevent the probable failure of the state association involved in the proposed acquisition, he may waive the approval process requirements of this section.
c. Within three days after the date of the commissioner's decision to disapprove any proposed acquisition, the commissioner shall notify the acquiring party in writing of the disapproval. The notice shall provide a statement of the basis for the disapproval.
d. Within 10 days of receipt of a notice of disapproval, the acquiring party may ask the commissioner in writing to hold a hearing on the proposed acquisition. The hearing shall be held in accordance with the provisions of the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.) and any rules or regulations adopted thereunder.
e. The commissioner's disapproval of a proposed acquisition following a hearing shall be subject to review by the Appellate Division of the Superior Court.
f. Except as otherwise provided by rule or regulation, a notice of proposed acquisition filed pursuant to this section shall contain the following information:
(1) The identity, personal history, business background and experience of each person by whom or on whose behalf the acquisition is to be made, including material business activities and affiliations during the past five years, and a description of any material, pending legal or administrative proceedings in which the person is a party and any criminal indictment or conviction of the person issued by a state or federal court;
(2) A statement of the assets and liabilities of each person by whom or on whose behalf the acquisition is to be made, as of the end of the fiscal year for each of the five fiscal years immediately preceding the date of the notice, together with related statements of income and source and application of funds for each of those fiscal years, all prepared in accordance with generally accepted accounting principles consistently applied, and an interim statement of the assets and liabilities for each person, together with related statements of income and source and application of funds, as of a date not more than 90 days prior to the date of the filing of the notice;
(3) The terms and conditions of the proposed acquisition and the manner in which the acquisition is to be made;
(4) The identity, source and amount of the funds or other consideration used or to be used in making the acquisition, and if any of these funds or other consideration has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names of the parties, and any arrangements, agreements, or understandings between or among the parties;
(5) Any plans or proposals which any acquiring party making the acquisition may have to liquidate the state association or savings and loan holding company, sell its assets or merge it with any company, or make any other major changes in its business or corporate structure or management;
(6) The identification of any person employed, retained or to be compensated by the acquiring party, or by any person on his behalf, to make solicitations or recommendations to stockholders for the purpose of assisting in the acquisition, and a brief description of the terms of that employment, retainer, or arrangement for compensation;
(7) Copies of all invitations, tenders or advertisements making a tender offer to stockholders for purchase of their stock to be used in connection with the proposed acquisition; and
(8) Any additional relevant information in such form as the commissioner may require by rule or regulation or by specific request in connection with any particular notice.
g. In determining whether to approve a proposed acquisition pursuant to this section, the commissioner may consider the following factors with respect to the applicant:
(1) The financial and the managerial resources and experience of the applicant;
(2) The competence, character, and integrity of the applicant;
(3) The applicant's plans and intentions with respect to the operation of the state association;
(4) Any other factors which the commissioner may deem relevant to the acquisition.
h. In determining whether to approve a proposed acquisition pursuant to this section, the commissioner may consider the following factors with respect to the state association:
(1) The financial condition and prospects of the state association, which shall include consideration as to the sufficiency of current or projected capital positions, as well as the level of indebtedness of the state association, before and after the acquisition;
(2) The convenience and needs of the depositors and the communities served by the state association; and
(3) The effect of the proposed acquisition on the safety and soundness of the state association.
i. The commissioner may disapprove any proposed acquisition if:
(1) The financial condition of any acquiring person is such as might jeopardize the financial stability of the state association or prejudice the interests of the depositors of the state association;
(2) The competence, experience, or integrity of any acquiring person or of any of the proposed management personnel indicates that it would not be in the interest of the depositors of the state association, or in the interest of the public to permit such person to control the state association; or
(3) Any acquiring person neglects, fails, or refuses to furnish all the information required by the commissioner.
j. Whenever any state association makes a loan or loans, secured, or to be secured, by 25% or more of the outstanding voting stock of a state association, the president or other chief executive officer of the lending state association shall promptly report this fact to the department upon obtaining knowledge of the loan or loans, except that no report need be made in those cases where the borrower has been the owner of record of the stock for a period of one year or more or where the stock is that of the newly organized state association prior to its opening.
k. The report required by subsection j. of this section shall contain the information required by subsection f. of this section, and any other relevant information the department may require by rule or regulation or by specific request in connection with any particular report.
l. Within 12 months after a change of control, a state association shall report promptly to the commissioner any change or replacement of its chief executive officer or of any director, and shall include in the report a statement of the past and current business and professional affiliations of any new chief executive officer or director.
m. This section shall not apply to the following transactions:
(1) Any transaction subject to regulation 563.22 of the Federal Home Loan Bank Board's rules governing the Federal Savings and Loan Insurance Corporation (12 CFR 563.22) or the provisions of Article XIII of P.L. 1963, c. 144 (C. 17:12B-198 through 17:12B-212);
(2) The acquisition of additional shares of a class of voting securities of a state association or person by any person who has lawfully acquired and maintained control of 25% or more of that class of voting securities after filing the notice required under this section;
(3) The acquisition of voting securities in good faith in a fiduciary capacity, except that in circumstances described in subparagraph (b) of paragraph (2) of subsection e. of section 1 of this act, the person in control of the voting securities shall within 60 days of acquisition provide the commissioner with a notice containing the information specified in subsection f. of this section and dispose of the voting securities if the commissioner objects to the control, or in situations where the fiduciary has sole discretionary voting authority, provide the commissioner with a notice containing the information specified in subsection f. and dispose of the sole voting power if the commissioner objects to the voting authority;
(4) The acquisition of voting securities, which would otherwise require a notice under this section, in satisfaction of a debt previously contracted in good faith if the commissioner is notified within 60 calendar days after acquisition and the acquiring party provides any relevant information requested by the commissioner;
(5) The acquisition of voting securities through inheritance or a bona fide gift if the commissioner is notified within 60 calendar days after acquisition and the acquiring party provides any relevant information requested by the commissioner;
(6) The acquisition of the power to vote securities through receipt of a revocable proxy in connection with a proxy solicitation for the purposes of conducting business at a regular or special meeting of a state association or person in control of a state association, if the proxy terminates within a reasonable time after the meeting;
(7) The receipt of voting securities through a stock dividend or stock split if the proportional interest of the recipient in a state association or person in control of a state association remains substantially the same;
(8) The acquisition of voting securities acquired in connection with the underwriting of securities if the securities are held only for a period of time as will permit the sale thereof on a reasonable basis;
(9) Acquisition by any corporation the majority of the shares of which are owned by the United States;
(10) Transactions entered into prior to the effective date of this act;
(11) Any transaction for which the approval of the commissioner is required prior to consummation other than pursuant to this section;
(12) Transactions which the commissioner shall determine to be exempt from the application of this section; or
(13) Acquisition by any company which immediately prior to that acquisition could be examined by the commissioner pursuant to section 3 of this act, but in such case the commissioner shall be notified within 30 calendar days after the acquisition.
##### **§ 17:12B-285** Fees {#sec-17-12b-285 omnilex-key=us-nj-statutes--title-17--17:12B-285}
The following fees shall be paid to the commissioner for the use of the State. The fees shall be in the minimum amount indicated or in such amount as provided by regulation of the commissioner, which amount shall not exceed the maximum amount provided below:
Minimum Maximum
a. Filings pursuant to subsection a.
of section 2 of this act, per item filed ...... $50.00 $100.00
b. Filings pursuant to subsection b.
of section 2 of this act, per item filed ...... $50.00 $100.00
c. Notice pursuant to subsection a.
of section 4 of this act ...... $625.00 $2,500.00
d. Request for hearing pursuant to
subsection d. of section 4 of this act ...... $625.00 $2,500.00
e. Report required by subjection j.
of section 4 of this act ...... $50.00 $100.00
f. Additional report required by
subsection k. of section 4 of this act ...... $50.00 $100.00
g. Report required by subsection l.
of section 4 of this act ...... $50.00 $100.00
h. Notice required by paragraph (3)
of subsection m. of section 4 of this act ...... $50.00 100.00
i. Notice required by paragraph (4)
of subsection m. of section 4 of this act ...... $50.00 $100.00
j. Notice required by paragraph (5)
of subsection m. of section 4 of this act ...... $50.00 $100.00
##### **§ 17:12B-286** FSLIC insurance required {#sec-17-12b-286 omnilex-key=us-nj-statutes--title-17--17:12B-286}
It shall be unlawful, on and after the date three years following the effective date of this act, for any state association to operate without insurance of its accounts by the Federal Savings and Loan Insurance Corporation as defined in subsection (20) of section 5 of P.L. 1963, c. 144 (C. 17:12B-5), (hereinafter referred to as "FSLIC insurance").
a. Within one year of the effective date of this act, every state association shall, as a condition to operate in this State, apply for FSLIC insurance.
b. Any state association which has failed to apply for FSLIC insurance within one year of the effective date of this act, or which has been denied a commitment for FSLIC insurance, shall, within 90 days thereafter, begin steps to merge with an insured association, or transfer, sell or exchange in bulk its assets to an insured association, or a banking institution as defined in subsection (2) of section 1 of P.L. 1948, c. 67 (C. 17:9A-1). Liquidation following the transfer, sale or exchange in bulk of its assets shall be managed and directed by the thereupon to be dissolved state association's board of directors in accordance with the provisions of section 205 and sections 207 through 212 of P.L. 1963, c. 144 (C. 17:12B-205 and 17:12B-207 through 17:12B-212).
c. A state association may apply in writing for an extension of time to obtain FSLIC insurance or to consummate a merger or bulk sale. The commissioner may grant one or more 90-day extensions of time, but not exceeding one year, for a state association to obtain FSLIC insurance or cease its operations as provided by this section.
##### **§ 17:12B-287** Management by commissioner {#sec-17-12b-287 omnilex-key=us-nj-statutes--title-17--17:12B-287}
In the event that any state association shall fail to comply with the provisions of this act, the commissioner may take charge of the state association and possession of all its assets, books and records, and continue the operation of its business until the possession and management shall be returned to its board, or until the association shall merge, be dissolved or liquidated. The operation of the state association by the commissioner shall be in accordance with the provisions of Article XII of P.L. 1963, c. 144 (C. 17:12B-177 through 17:12B-197).
##### **§ 17:12B-288** Insurance required for charter {#sec-17-12b-288 omnilex-key=us-nj-statutes--title-17--17:12B-288}
No state association shall be granted a charter by the commissioner on or after the effective date of this act, unless the state association has obtained a commitment for insurance of its accounts by the Federal Savings and Loan Insurance Corporation.
##### **§ 17:12B-289** Rules, regulations {#sec-17-12b-289 omnilex-key=us-nj-statutes--title-17--17:12B-289}
The commissioner shall have the authority to promulgate rules and regulations necessary to carry out the purposes of this act.
##### **§ 17:12B-290** Violations; penalties {#sec-17-12b-290 omnilex-key=us-nj-statutes--title-17--17:12B-290}
Upon a finding by the commissioner, after notice and an opportunity to be heard, of a violation by any person of any provision of this act, or any regulation or order of the commissioner issued pursuant thereto, the commissioner may order the person to cease any violation or to pay a civil penalty not in excess of $1,000.00 per day for each day that the violation continues, or both, the penalty being recoverable in the name of the commissioner in a summary proceeding pursuant to "the penalty enforcement law," N.J.S. 2A:58-1 et seq.
##### **§ 17:12B-291** Approval required for use of word "savings bank S.L.A." {#sec-17-12b-291 omnilex-key=us-nj-statutes--title-17--17:12B-291}
Notwithstanding the provisions of section 14 of P.L. 1963, c. 144 (C. 17:12B-14) or any other law of this State, no state association, including a capital stock association, now or hereafter organized pursuant to P.L. 1963, c. 144 (C. 17:12B-1 et seq.) shall use the words "savings bank S.L.A." in its name, representations or advertisements, without obtaining the commissioner's prior approval as herein provided and subject to other terms and conditions as the commissioner may specify by regulation. The commissioner, upon application of a state association and approval thereof by the commissioner, may authorize a state association to use the words "savings bank S.L.A." in its name, representations or advertisements, if he determines that: a. the use of the words "savings bank S.L.A." by the state association is in the public interest; b. the state association is an insured association; c. the state association is being operated in a safe and sound manner and has adequate capital; d. the state association shall not assume or use a name already in use by a mutual or capital stock savings bank organized pursuant to P.L. 1948, c. 67 (C. 17:9A-1 et seq.), as amended, nor a name so similar thereto as to deceive the public or lead to uncertainty or confusion; provided, however, that the commissioner shall not approve an application filed pursuant to this section if the state association meets one or both of the tests applicable to a supervisory merger or supervisory acquisition as provided in subsections a. and b. of section 2 of P.L. 1982, c. 8 (C. 17:16J-2), except that such application may be approved by the commissioner in the course of an acquisition made pursuant to P.L. 1963, c. 144 (C. 17:12B-1 et seq.) and P.L. 1982, c. 8 (C. 17:16J-1 et seq.).
##### **§ 17:12B-292** Definitions {#sec-17-12b-292 omnilex-key=us-nj-statutes--title-17--17:12B-292}
As used in this act:
a. "Beneficial owner"
(1) Includes any person who, directly or indirectly through any contract, arrangement, understanding, relationship or otherwise, has or shares:
(a) Voting power which includes the power to vote, or to direct the voting of shares; or
(b) Investment power which includes the power to dispose, or to direct the disposition of shares;
(2) Includes any person who directly or indirectly creates or uses a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement or device with the purpose or effect of divesting the person of beneficial ownership of shares or preventing the vesting of such beneficial ownership as part of a plan or scheme to evade this act;
(3) Includes any person who has the right to acquire beneficial ownership of the shares as defined herein within 60 days, including, but not limited to, any right to acquire:
(a) Through the exercise of any option, warrant or right;
(b) Through the conversion of a security;
(c) Pursuant to the power to revoke a trust, discretionary account, or similar arrangement; or
(d) Pursuant to the automatic termination of a trust, discretionary account or similar arrangement; except that, any person who acquires a security or power specified in subparagraph (a), (b), or (c) above, with the purpose or effect of changing or influencing the control of the issuer, or in connection with or as a participation in any transaction having such effect or purpose, immediately upon the acquisition shall be deemed to be the beneficial owner of the shares which may be acquired through the exercise or conversion of such security or power. Any securities not outstanding which are subject to these options, warrants, rights, or conversion privileges shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by the person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class by any other person;
(4) Does not include:
(a) Any member of a national securities exchange who holds shares directly or indirectly on behalf of another person solely because the member is the record holder of the securities and, pursuant to the rules of the exchange, may direct the vote of the shares without instruction on other than contested matters or matters that may affect substantially the rights or privileges of the holders of these shares to be voted, but is otherwise precluded by the rules of the exchange from voting without instruction; or
(b) Any person who in the ordinary course of business is pledgee of securities under a written pledge agreement until the pledgee had taken all formal steps necessary which are required to declare a default and determines that the power to vote or direct a vote or to dispose or to direct the disposition of pledged shares will be exercised, provided that (i) the pledge agreement is bona fide and not entered into with the purpose or the effect of changing or influencing the control of the issuer, or in connection with any transaction having any such purpose or effect including any transaction subject to this act; and (ii) the pledge agreement prior to default does not grant to the pledgee: (A) the power to vote or to direct the vote of the pledged securities; or (B) the power to dispose or to direct the disposition of the pledged securities other than the grant of this power pursuant to a pledged agreement under which credit is extended subject to Regulation T of the Federal Reserve System, 12 C.F.R.220 et seq., and in which the pledgee is a broker or dealer registered under section 15 of the "Securities Exchange Act of 1934," 15 U.S.C. s.78o; or
(c) Any person engaged in business as an underwriter of securities who acquires shares through participation in good faith in a firm commitment underwriting of shares registered under the "Securities Act of 1933," 15 U.S.C. s.77a et seq., or under the "Securities Exchange Act of 1934," 15 U.S.C. s.78a et seq., until the expiration of 40 days after the date of the acquisition;
All securities of the same class beneficially owned by a person, regardless of the forms the beneficial ownership takes, shall be aggregated in calculating the number of shares beneficially owned by the person.
b. "Capital stock state association" means any state association chartered pursuant to the provisions of P.L.1974, c.137 (C.17:12B-244 et seq.).
c. "Capital stock state association holding company" means a state association holding company that has issued or intends to issue voting capital stock; and which controls one or more state associations located in this State or any other state.
d. "Commissioner" means the Commissioner of Banking.
e. "Control of a capital stock state association" includes:
(1) Owning, beneficially or otherwise, controlling, or having power to vote 25% or more of the outstanding shares (not including shares owned by a mutual state association holding company) of any class of voting securities of a capital stock state association, directly or indirectly, or acting through one or more persons;
(2) Controlling in any manner the election of a majority of the directors of a capital stock state association;
(3) Exercising or having the power to exercise directly or indirectly a controlling influence over the management or policies of a capital stock state association; or
(4) Conditioning in any manner the transfer of 25% or more of any class of voting securities (not including shares owned by a mutual state association holding company) of a capital stock state association;
"Control of a capital stock state association" does not include a director or officer of a capital stock state association acting in the capacity of performing his duties or responsibilities of office.
f. "Converted state association" means an organizing mutual state association which has converted to a capital stock state association pursuant to the provisions of P.L.1974, c.137 (C.17:12B-244 et seq.) subsequent to the formation of a mutual state association holding company.
g. "Department" means the Department of Banking.
h. "Insured institution" and "savings and loan holding company" shall have the respective meanings set forth in section 408(a) of the "National Housing Act," 12 U.S.C. s.1730a., except that the terms shall not include any institution that is insured by the Federal Deposit Insurance Corporation (FDIC). "Insured institutions" shall include federal savings banks, whose accounts are insured by the Federal Savings and Loan Insurance Corporation (FSLIC).
i. "Market maker" means any dealer acting in the capacity of a block positioner and any dealer who, with respect to the voting stock of a capital stock state association, holds himself out as being willing to buy and sell such stock for his own account on a regular and continuous basis.
j. "Mutual state association holding company" means a mutual state association holding company which has its principal office of business in this State and which has been formed by an organizing mutual state association pursuant to sections 7 through 27 of this act.
k. "Organizing mutual state association" means a mutual state association which has its principal office of business in this State, the board of directors of which propose to form a mutual state association holding company pursuant to the provisions of this act.
l. "Person" means an individual, bank, corporation, savings bank, state association, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any form of entity.
m. "State association" shall mean any savings and loan association, building and loan association, or any corporation, however named, now or hereafter chartered pursuant to P.L.1963, c.144 (C.17:12B-1 et seq.).
n. "Subsidiary capital stock state association" means a capital stock state association which has been incorporated by the directors of a mutual state association holding company, a majority of the stock of which subsidiary capital stock state association is held by a mutual state association holding company.
o. "Voting power" means that a person has or shares, directly or indirectly, through any option, contract, arrangement, understanding, conversion right or relationship, or by acting jointly or in concert or otherwise, the power to vote, or to direct the voting of voting shares.
##### **§ 17:12B-293** Approval of commissioner needed to acquire more than 25% of voting shares {#sec-17-12b-293 omnilex-key=us-nj-statutes--title-17--17:12B-293}
No person shall, without the prior approval of the commissioner, acting directly or indirectly or through or in concert with one or more persons:
a. Obtain or exercise control of a capital stock state association; or
b. Acquire beneficial ownership or control of any voting shares of a capital stock state association, if, after the acquisition, the person would beneficially own or control more than 25% of the then-outstanding voting share of the capital stock state association.
##### **§ 17:12B-294** Application for approval; hearing; exemption limitations {#sec-17-12b-294 omnilex-key=us-nj-statutes--title-17--17:12B-294}
a. An application by a person for the approval of the commissioner to obtain control of a capital stock state association, or to acquire beneficial ownership or control of more than 25% of the voting shares of a capital stock state association shall be made on a form provided by the commissioner. The commissioner shall give notice to the capital stock state association involved in the proposed transaction and shall send a copy of the application to the capital stock state association within five business days of receiving the application. The notice shall include the hearing date established pursuant to subsection b. of this section.
No later than 10 days after the date upon which a completed application is filed with the commissioner, the applicant shall cause to be published a notice of application for control of a capital stock state association. This publication shall be made in a newspaper of general circulation in the county in which the capital stock state association has its principal office. The notice shall include whatever information the commissioner, by regulation, deems to be necessary and appropriate.
b. The commissioner shall hold a hearing on the application within 60 days of receipt of the completed application, and shall notify the applicant as to the date of the hearing at the time the application is filed. The hearing shall be held in accordance with rules and regulations promulgated by the commissioner.
c. A person who has acquired beneficial ownership, or control or power to vote 25% or more of the voting shares of a capital stock state association is not subject to the prior approval requirements of subsections a. and b. of this section provided that:
(1) The person is a broker or dealer registered under section 15 of the "Securities Exchange Act of 1934," 15 U.S.C. s.78o; and
(2) The person has acquired beneficial ownership, or control or power to vote 25% or more of the stock in the ordinary course of his business as a market maker for the sole purpose of making a market in that stock. This exemption limitation is reduced by the person's beneficial ownership or control of outstanding voting shares of the capital stock state association which are held under the conditions of subsection a. of this section except that they represent less than 25% of the outstanding voting shares of the capital stock state associations; or
(3) The person has acquired beneficial ownership or control or power to vote shares in excess of those percentage amounts approved under the condition of subsection a. of this section but less than 25% of the stock in the ordinary course of his business as a market maker in that stock. This exemption limitation is reduced by the person's beneficial ownership or control of outstanding voting shares of the capital stock state association which are held under the condition of subsection a. of this section.
d. Notwithstanding subsection c. of this section, a person shall within 10 days file an application with the commissioner for approval to retain beneficial ownership or control of the stock if:
(1) The person at the time has beneficial ownership, control or power to vote 25% or more of the outstanding shares of the capital stock state association; and
(2) The person has determined that he no longer has acquired or holds the stock in the ordinary course of his business as a market maker for the sole purpose of making a market in that stock.
e. For the period beginning with the date on which a person becomes obligated to file an application pursuant to subsection d. of this section and ending on the date after the commissioner's approval is obtained, the person shall not:
(1) Vote or direct the voting of the securities which are no longer exempt under subsection c. of this section; or
(2) Acquire an additional beneficial ownership interest in voting stock of the capital stock state association nor of any person controlling the capital stock state association.
##### **§ 17:12B-295** Factors used in determining approval {#sec-17-12b-295 omnilex-key=us-nj-statutes--title-17--17:12B-295}
In determining whether to approve an acquisition of shares pursuant to section 2 of this act, the commissioner shall consider the following factors:
a. With respect to the applicant:
(1) The financial condition and the resources of the applicant;
(2) The competence, character, and banking experience of the applicant, including the applicant's record of compliance with laws and regulations;
(3) Whether the applicant has (i) employed any device, scheme or artifice to defraud; or (ii) obtained or will obtain any money or property by means of any untrue statement of a material fact or any omission of a material fact; or (iii) engaged in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon the capital stock state association, the shareholders of the capital stock state association, the depositors thereof, or the public at large; and
(4) The applicant's plans and intentions with respect to the operation of the capital stock state association.
b. With respect to the capital stock state association:
(1) The financial condition and prospects of the capital stock state association, which shall include consideration as to the sufficiency of current or projected capital positions, as well as the level of indebtedness of the capital stock state association before and after the acquisition;
(2) The convenience and needs of the depositors and the communities served by the capital stock state association; and
(3) The effect of the proposed acquisition on the safety and soundness of the capital stock state association.
c. Whether approval of the application would result in a person owning more shares than are permitted by the capital stock state association's charter or bylaws, in which case the commissioner shall not approve the application; except that this subsection shall not apply to an application for the acquisition of shares of a capital stock state association that the commissioner determines is in an unsafe or unsound condition.
In the event the commissioner grants approval of an acquisition of shares as described in subsection a. of this section, the approval shall apply only to the specific transaction set forth by the applicant in his application, and any subsequent acquisition which would further increase the applicant's beneficial ownership or control of the then-outstanding voting shares of the capital stock state association shall require the commissioner's prior approval in the same manner required under this act.
##### **§ 17:12B-296** Shares acquired in violation not counted; shares to be registered {#sec-17-12b-296 omnilex-key=us-nj-statutes--title-17--17:12B-296}
a. Any shares in excess of 25% of the outstanding voting shares of a capital stock state association which are acquired in violation of sections 2 through 4 of this act shall not be eligible to be voted and shall not be counted in determining the number of shares outstanding for the purpose of determining the number or percent of shares required for shareholder action.
b. All shares of stock in a capital stock state association shall be registered in the name of the true owner of the shares, and if held as nominee or in trust or otherwise for the benefit of any other person, the person listed as registered owner shall disclose to the capital stock state association the names and addresses of all persons who hold a beneficial interest in the shares on written demand by the capital stock state association.
##### **§ 17:12B-297** Cease and desist orders; injunction; penalties {#sec-17-12b-297 omnilex-key=us-nj-statutes--title-17--17:12B-297}
a. Whenever it appears to the commissioner that any person has engaged in or is about to engage in any act or practice which constitutes a violation of sections 2 through 5 of this act or any regulations promulgated pursuant thereto, the commissioner may conduct an investigation and issue cease and desist orders if he deems it necessary. In addition to all other remedies, the commissioner may bring an action in the Superior Court, Law Division, on behalf of the State against any person or persons participating in or about to participate in a violation. In any court proceeding, the commissioner may apply for and shall be entitled to have issued the court's subpoena requiring the appearance of any defendant and defendant's employees or agents, and the production of documents, books and records as may be necessary for the hearing of the action. Upon a proper showing, the court may grant a permanent or preliminary injunction or temporary restraining order or may order the rescission of any sale, tender for sale, purchase or tender for purchase of equity securities determined to be unlawful under sections 2 through 5 of this act.
b. Whenever any person has engaged in or is about to engage in any act or practice which constitutes a violation of sections 2 through 5 of this act or any regulation or order issued thereunder, the capital stock state association or any record or beneficial owner of an equity security of the capital stock state association may bring an action to enjoin the person from continuing or doing any act in violation of this act. Upon a proper showing, the court may grant a permanent or preliminary injunction or temporary restraining order or may order the rescission of any sale, tender for sale, purchase or tender for purchase of equity securities determined to be unlawful under this act or under any regulation or order of the commissioner.
c. (1) In addition to any other penalties herein or otherwise provided by law, the commissioner may, upon notice and hearing, impose a penalty not exceeding $10,000 for any violation of sections 2 through 5 of this act or of any rule or regulation promulgated thereto. The penalty shall be recovered by and in the name of the commissioner in a civil action by a summary proceeding under "the penalty enforcement law," N.J.S. 2A:58-1 et seq., in the Superior Court, Law Division. Where any violation of sections 2 through 5 of this act or of any regulation hereunder is of a continuing nature, each day during which the violation continues shall constitute an additional, separate and distinct offense, except during the time an appeal from the order or notice may be taken or is pending.
(2) Sections 2 through 6 of this act shall apply to all capital stock state associations organized pursuant to P.L.1974, c.137 (C.17:12B-244 et seq.) whether chartered prior to or after the enactment of this act. Any person who prior to the effective date of this act directly or indirectly, beneficially owned or controlled more than 25% of the outstanding voting shares of a capital stock state association may continue such ownership after the effective date of this act without approval of the commissioner. This act shall not be construed to limit the applicability of any law governing the acquisition of securities.
(3) Sections 2 through 6 of this act shall not apply to any merger of a capital stock state association with another capital stock state association or mutual state association. The provisions of P.L.1974, c.137 (C.17:12B-244 et seq.) and Article XIII of P.L.1963, c.144 (C.17:12B-198 et seq.) shall be the exclusive governing provisions.
(4) Notwithstanding any other law of this State, the provisions contained in sections 2 through 6 of this act shall also apply to any acquisition of voting shares of a state association or company which controls a state association by a state association or a state association holding company if, after the acquisition, the state association or state association holding company would beneficially own or control more than 25% of the outstanding voting shares of the state association or company which controls a state association. For the purpose of this paragraph (4), "state association" means any federally or State chartered capital stock association or mutual association having its principal office in this State; "State association holding company" means any company located in this State which controls a state association.
##### **§ 17:12B-298** Formation of mutual state association holding company {#sec-17-12b-298 omnilex-key=us-nj-statutes--title-17--17:12B-298}
a. After the board of directors of an organizing mutual state association has approved the formation of a mutual holding company by a 2/3 vote and adopted a resolution to that effect, the board of directors shall hold a meeting of the members of the mutual state association upon not less than 30 days' written notice to each member by a mailing, postage prepaid, directed to the last address of each member as shown on the books of the association, which notice shall contain a statement of the time, place and purpose for which the meeting is called. The notice shall be accompanied by a proxy statement and proxy form in accordance with regulations promulgated by the commissioner;
b. At the meeting of the members of the organizing mutual state association as provided in subsection a. of this section, the members may, by the affirmative vote of at least a majority of the votes of the members of the organizing mutual state association present, either in person or by proxy, declare by resolution the determination to form a mutual state association holding company. A copy of the minutes of the proceedings of the meeting of the members shall be filed in the office of the commissioner within the time and in the form and manner as set forth in regulations promulgated by the commissioner.
c. After compliance with subsections a. and b. of this section, the board of directors of an organizing mutual state association may apply to the commissioner to form a mutual state association holding company which may be formed in accordance with either paragraph (1), (2), or (3) of this subsection.
(1) The board of directors of an organizing mutual state association may incorporate a mutual state association holding company pursuant to the provisions of section 8 of this act, and subsequently:
(a) Convert to a capital stock state association pursuant to section 26 of this act; or
(b) If the mutual state association holding company has formed a subsidiary capital stock state association pursuant to sections 16 through 24 of this act, either (i) merge with the subsidiary capital stock state association pursuant to section 25 of this act or (ii) sell or transfer its assets and liabilities to the subsidiary capital stock state association and dissolve pursuant to Article XVIII of P.L.1963, c.144 (C.17:12B-228 et seq.); or
(2) The board of directors of an organizing mutual state association may form a mutual state association holding company by:
(a) Incorporating a subsidiary capital stock state association pursuant to sections 16 through 24 of this act; and
(b) Transferring the substantial part of the organizing mutual state association's assets and liabilities, including all of its deposit liabilities, to the subsidiary capital stock state association in return for a majority of the capital stock of the subsidiary capital stock state association in accordance with section 17 of this act. Capital deposits and surplus in an amount approved by the commissioner may be retained by the organizing mutual state association, which shall be deemed a mutual state association holding company, if it follows the procedures set forth in section 27 of this act; or
(3) The board of directors of an organizing mutual state association may form a mutual state association holding company by any other method of reorganization approved by the commissioner.
##### **§ 17:12B-299** Contents of certificate of incorporation {#sec-17-12b-299 omnilex-key=us-nj-statutes--title-17--17:12B-299}
a. The board of directors of the organizing mutual state association shall execute a certificate of incorporation for the mutual state association holding company stating:
(1) The name by which the mutual state association holding company shall be known;
(2) The street, street number, and municipality where the principal office of the mutual state association holding company is to be located;
(3) The names and addresses of the directors of the organizing mutual state association;
(4) The number of directors of the mutual state association holding company;
(5) The names of persons who are to act as directors of the mutual state association holding company, until their successors are elected and qualified;
(6) The amount of capital deposits and surplus which are to be transferred from the organizing mutual state association to the mutual state association holding company; and
(7) Any other provisions as the incorporators of the mutual state association holding company deem necessary, or as are required by the commissioner by regulation.
b. The certificate of incorporation of a mutual state association holding company shall provide for the retention of any interests of the respective members of the organizing mutual state association in the assets of the organizing mutual state association, according to a fair valuation, including assets which are proposed to be transferred from the organizing mutual state association to the mutual state association holding company.
c. The certificate of incorporation of the mutual state association holding company shall also provide that a liquidation account shall be established, on terms established or approved by the commissioner.
##### **§ 17:12B-300** Approval of charter {#sec-17-12b-300 omnilex-key=us-nj-statutes--title-17--17:12B-300}
If the commissioner determines that the establishment of a mutual state association holding company is in the best interests of the members of the organizing mutual state association, that the qualifications, experience and character of the proposed officers and directors of the mutual state association holding company are sufficient to result in the successful operation of the mutual state association holding company, and that the interest of the public will be served by the establishment of a mutual state association holding company, that the mutual state association holding company is adequately capitalized, and that the establishment of the mutual state association holding company otherwise meets the requirements of law, the commissioner may approve the charter.
##### **§ 17:12B-301** Powers of mutual state association holding company {#sec-17-12b-301 omnilex-key=us-nj-statutes--title-17--17:12B-301}
a. The general powers of the mutual state association holding company shall be those powers conferred on corporations pursuant to the provisions of N.J.S.14A:3-1, N.J.S.14A:3-2, N.J.S.14A:3-4, and N.J.S.14A:3-5. Mutual state association holding companies shall be subject to the requirements of chapter 4 of Title 14A of the New Jersey Statutes and Article V of P.L.1963, c.144 (C.17:12B-62 et seq.), to the extent that those requirements do not conflict with the provisions of this act.
b. In addition to other activities authorized by law for a mutual state association holding company, a mutual state association holding company may:
(1) With the prior approval of the commissioner, merge with or into, or consolidate with, another mutual state association holding company or capital stock state association holding company pursuant to this act;
(2) With the prior approval of the commissioner, incorporate a new subsidiary capital stock state association pursuant to the provisions of sections 16 through 24 of this act; except that paragraph (1) of subsection d. of section 17 of this act shall not apply to such subsidiary capital stock state association;
(3) With the prior approval of the commissioner, convert itself into a capital stock state association holding company, pursuant to applicable provisions of this act;
(4) Issue capital debentures, which shall be legal investments for banks, savings banks, savings and loan associations; and
(5) Exercise the powers or engage in the activities authorized for a bank holding company or state association holding company as the commissioner shall by regulation permit.
c. The commissioner may exercise any of the powers vested in him by Article XII of P.L.1963, c.144 (C.17:12B-177 et seq.) with respect to the affairs of the mutual state association holding company. The mutual state association holding company or capital stock state association holding company shall be subject to the requirements of subsection a. of section 2, section 3, and section 5 of P.L.1987, c.225 (C.17:12B-282, 17:12B-283, and 17:12B-285).
##### **§ 17:12B-302** Board of directors {#sec-17-12b-302 omnilex-key=us-nj-statutes--title-17--17:12B-302}
Every mutual state association holding company shall be managed by a board of not less than six nor more than 21 directors. Directors shall be elected by a plurality of the members of the board of directors of the mutual state association holding company at the annual meeting, for a term of up to three years, as provided in the bylaws. Each director shall serve for the term for which he is elected and until his successor is elected and has qualified. A vacancy on the board of directors may be filled by a plurality of the members of the board of directors for the remainder of the unexpired term. If the board fails to fill the vacancy within one year, the commissioner may do so. Elections of directors shall be certified by the board and shall be filed with the department within 15 days.
The board of directors shall hold an annual meeting within the first four months of each fiscal year, and other meetings at such times and so often as they shall deem necessary. The annual meeting shall be held at a location within the State. A majority of a quorum of the board of directors shall be necessary to transact the business of the board.
##### **§ 17:12B-303** Powers of board {#sec-17-12b-303 omnilex-key=us-nj-statutes--title-17--17:12B-303}
a. The board of directors of every mutual state association holding company shall have the power to make, amend and repeal bylaws not inconsistent with this act, providing for:
(1) The management of its property;
(2) The regulation and government of its affairs;
(3) The terms of office, manner of appointment, and the duties and powers of its officers and committees; and
(4) Such other matters as the board from time to time deems advisable.
b. The bylaws may provide for and the board may elect an executive committee of the board, and other committees as the board may deem advisable. The executive committee may exercise all of the powers of the board, except that the executive committee may not:
(1) Exercise its powers while a quorum of the board is actually convened for the conduct of business;
(2) Declare a dividend or approve any other distribution to the parties in interest;
(3) Make, alter, or repeal the bylaws of the holding company;
(4) Elect or appoint any officer or director; or
(5) Exercise any other power which this act specifically provides shall be exercised by at least a majority of all the directors.
The minutes of each meeting of the executive committee shall be presented to the board of directors at its next meeting following the meeting of the executive committee.
##### **§ 17:12B-304** Board officers; compensation {#sec-17-12b-304 omnilex-key=us-nj-statutes--title-17--17:12B-304}
At the first meeting of the board of directors of the mutual state association holding company following each annual meeting, the board may elect a chairman of the board, and shall elect a president, either of whom may be chief executive officer, or another officer whom it may designate to be the chief executive officer, all of whom shall be directors, and a secretary and a Treasurer, neither of whom need be directors. Other officers of the mutual state association holding company may be appointed from time to time by the directors, as provided in the bylaws.
Reasonable compensation may be paid to directors of the mutual state association holding company for attendance at meetings of the board, or for service upon committees, or for other service rendered, and shall be fixed from time to time by a vote of a majority of the board. The commissioner may direct that the amount of compensation paid to directors of any mutual state association holding company be reduced if in his judgment it is excessive.
A mutual state association holding company may pay its officers any reasonable compensation as may be from time to time fixed by the board of directors. The commissioner may direct that the amount of compensation be reduced if in his judgment it is excessive.
##### **§ 17:12B-305** Distribution of surplus {#sec-17-12b-305 omnilex-key=us-nj-statutes--title-17--17:12B-305}
The board of directors of the mutual state association holding company may, from time to time, by a majority vote of the directors, divide equitably any surplus which may be in excess of the amount required for the operations of the mutual state association holding company or to maintain the safety and soundness of the mutual state association holding company, and distribute the same to the respective members of its subsidiary capital stock state association or associations, in the manner prescribed by this act, and with the approval of the commissioner. The commissioner may, if the commissioner deems the surplus held by a mutual state association holding company to be excessive, order such a distribution to be made by the directors.
##### **§ 17:12B-306** Retention of interest in assets {#sec-17-12b-306 omnilex-key=us-nj-statutes--title-17--17:12B-306}
Upon the formation of a mutual state association holding company pursuant to the provisions of this act, the members of the organizing mutual state association shall retain the same interests in the assets of the mutual state association holding company as they had in the organizing mutual state association, and upon the reorganization of an organizing mutual state association into a mutual state association holding company and a subsidiary capital stock state association pursuant to this act, the members of the subsidiary capital stock state association shall retain the same interests in the mutual state association holding company. Any interest in the assets of the mutual state association holding company which are placed in a liquidation account as provided in section 8 of this act shall be for the benefit of the members of the organizing mutual state association, or the members of the subsidiary capital stock state association, as the case may be. Upon the merger or consolidation of a mutual state association holding company or capital stock state association holding company with another mutual state association holding company, the merger or consolidation agreement shall provide for the retention of any interests of the respective members of the subsidiary capital stock state association or state associations in the assets of the merged or consolidated mutual state association holding companies according to a fair valuation, as approved by the commissioner.
A mutual state association or capital stock state association that is a subsidiary of a mutual holding company shall have the power to issue to persons other than its parent holding company, an amount of preferred stock, common stock and securities convertible into common stock which in the aggregate does not exceed 49% of the issued and outstanding stock of the association. For purposes of this 49% limitation, outstanding securities that are convertible into common stock shall be considered as issued and outstanding common stock.
##### **§ 17:12B-307** Certificate of incorporation for subsidiary {#sec-17-12b-307 omnilex-key=us-nj-statutes--title-17--17:12B-307}
The directors of a mutual state association holding company which has been established pursuant to sections 7 through 15 of this act may apply to the commissioner to incorporate a capital stock state association in accordance with this section through section 24 of this act, as a subsidiary of the mutual state association holding company. They shall issue a certificate of incorporation stating:
a. The name by which the subsidiary capital stock state association shall be known;
b. The street, street number and municipality in which the principal office of the subsidiary capital stock state association is to be located;
c. The names and addresses of the directors of the mutual state association holding company who will be the incorporators of the subsidiary capital stock state association;
d. The number of directors on the board of directors;
e. The names of the persons who will serve as directors until their successors are elected and qualified;
f. The amount of capital stock, the number of shares into which it is divided, and the par value of each share, not less than a majority of the total outstanding shares of which shall be held in the name of the mutual state association holding company; and
g. The amount of surplus with which the subsidiary capital stock state association will commence business.
##### **§ 17:12B-308** Certificate of incorporation, affidavit to commissioner; contents of affidavit {#sec-17-12b-308 omnilex-key=us-nj-statutes--title-17--17:12B-308}
The certificate of incorporation of every subsidiary capital stock state association established pursuant to this act shall be submitted to the commissioner within 60 days after its execution, together with an affidavit made by each of its incorporators, setting forth:
a. That no fee, commission, or other compensation has been received, directly or indirectly, by the mutual state association holding company incorporators or by the subsidiary capital stock state association incorporators in the course of organizing the subsidiary capital stock state association, and that no promotion fees or charges have been provided or are contemplated;
b. A complete disclosure of all fees paid or agreed to be paid in the matter of chartering and organizing the proposed subsidiary capital stock state association;
c. That at least a majority of the shares of the authorized stock of the subsidiary capital stock state association is held by the mutual state association holding company; and
d. That the subsidiary capital stock state association proposes to:
(1) Merge with the organizing mutual state association pursuant to section 25 of this act; or
(2) Purchase the assets of the organizing mutual state association pursuant to section 25 of this act; or
(3) Receive the assets and liabilities of the organizing mutual state association pursuant to subparagraph (b) of paragraph (2) of subsection c. of section 7 of this act.
##### **§ 17:12B-309** Charter approval {#sec-17-12b-309 omnilex-key=us-nj-statutes--title-17--17:12B-309}
If the commissioner determines that the qualifications, experience and character of the proposed officers and directors of the subsidiary capital stock state association are sufficient to result in the successful operations of the subsidiary capital stock state association, and that the interests of the public will be served by the establishment of the subsidiary capital stock state association, and that the capital stock of the subsidiary capital stock state association is in accordance with the amount required for state associations pursuant to section 19 of P.L.1974, c.137 (C.17:12B-248), the commissioner may approve the charter.
##### **§ 17:12B-310** Powers of stockholders, board of directors {#sec-17-12b-310 omnilex-key=us-nj-statutes--title-17--17:12B-310}
a. The stockholders of a subsidiary capital stock state association shall have the power to make, alter, and repeal bylaws. The directors of the mutual state association holding company which holds stock in the subsidiary capital stock state association shall vote the shares held by the mutual state association holding company.
b. If the certificate of incorporation of the subsidiary capital stock state association so provides, the directors of the subsidiary capital stock state association may have the power to make, alter and repeal bylaws, but any exercise of this power by the board of directors shall be subject to alteration or repeal by the stockholders. The bylaws may contain any provision not inconsistent with law for the regulation of the affairs of the subsidiary capital stock state association.
c. If a board of directors is empowered by the bylaws to make, alter, and repeal bylaws it may not, however, exercise this power with respect to bylaws:
(1) Fixing the number of directors of the subsidiary capital stock state association or the manner and time of determining this number;
(2) Establishing the requirement for calling a special meeting of the stockholders; or
(3) Setting forth the manner in which the bylaws may be made, altered, or repealed.
##### **§ 17:12B-311** Bylaws {#sec-17-12b-311 omnilex-key=us-nj-statutes--title-17--17:12B-311}
Bylaws shall not be made, altered, or repealed by the stockholders of a subsidiary capital stock state association, except at an annual or special meeting of the stockholders, and by the affirmative vote of the holders of a majority of the capital stock of the subsidiary capital stock state association eligible to vote.
Bylaws shall not be made, altered or repealed by the board of directors of the subsidiary capital stock state association except by the affirmative vote of a majority of the whole board at any regular or special meeting of the board, unless at least two days' prior written notice of the intended action shall have been given to the directors. This notice may be waived by a director at or prior to the meeting.
##### **§ 17:12B-312** Amendment of certificate of incorporation {#sec-17-12b-312 omnilex-key=us-nj-statutes--title-17--17:12B-312}
21. Whenever the board of directors of a subsidiary capital stock state association deems it advisable to amend the certificate of incorporation, it shall adopt a resolution setting forth the proposed amendment, which amendment shall be approved, at a meeting of the stockholders entitled to vote, by at least 2/3 of the capital stock entitled to vote. If the holders of 2/3 of the shares of capital stock entitled to vote approve the amendment, a certificate of this approval shall be attested by two officers of the state association, one of whom shall be the president or vice president, and shall be submitted to the commissioner for approval. A filing shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or denied earlier by the commissioner in writing. Upon approval pursuant to this section, the certificate of incorporation shall thereupon be amended as set forth in the certificate of amendment.
##### **§ 17:12B-313** Governance of subsidiary {#sec-17-12b-313 omnilex-key=us-nj-statutes--title-17--17:12B-313}
The annual meetings, voting rights of stockholders, liability of stockholders and the maintenance of a subsidiary capital stock state association's books and records shall be governed by the provisions of Article XXI of P.L.1974, c.137 (C.17:12B-244 et seq.).
##### **§ 17:12B-314** Dividends {#sec-17-12b-314 omnilex-key=us-nj-statutes--title-17--17:12B-314}
A subsidiary capital stock state association may declare dividends on its capital stock pursuant to the provisions of section 30 of P.L.1974, c.137 (C.17:12B-259).
##### **§ 17:12B-315** Merger {#sec-17-12b-315 omnilex-key=us-nj-statutes--title-17--17:12B-315}
a. All other powers, rights, and privileges of a converted state association or a subsidiary capital stock state association not expressly provided for in this act shall be governed by the laws of this State relating to state associations, including the laws relating to capital stock state associations, but in any case where any power of investment of a mutual state association is limited to a percentage of its capital deposits or surplus, any limitation upon a subsidiary capital stock state association shall be expressed in terms of total capital funds, as defined by the commissioner by regulations.
b. A subsidiary capital stock state association or a converted state association may merge with a mutual state association or with a capital stock state association pursuant to the provisions of Article XIII of P.L.1963, c.144 (C.17:12B-198 et seq.) and section 37 of P.L.1974, c.137 (C.17:12B-266). In the event of the merger of a subsidiary capital stock state association or converted state association with another state association, in which the resulting state association shall be a subsidiary capital stock state association or capital stock state association held by a mutual state association holding company, the plan of merger or consolidation shall provide for the retention of any interest of the members of the merging or consolidating state association in the assets of the resulting state association's parent mutual state association holding company according to a fair valuation.
##### **§ 17:12B-316** Merger or purchase or retention of assets and assumption of liabilities {#sec-17-12b-316 omnilex-key=us-nj-statutes--title-17--17:12B-316}
a. A subsidiary capital stock state association may, pursuant to a plan of merger approved by the commissioner, merge with the organizing mutual state association or, pursuant to a plan of consolidation approved by the commissioner, purchase or retain the assets and assume the liabilities of the organizing mutual state association, whereupon the organizing mutual state association shall dissolve pursuant to the provisions of Article XVIII of P.L.1963, c.144 (C.17:12B-228 et seq.).
b. Upon the merger of the organizing mutual state association with the subsidiary capital stock state association or the purchase and assumption of the liabilities of the organizing mutual state association:
(1) The corporate existence of the organizing mutual state association shall be merged with that of the subsidiary capital stock state association, and the property and rights of the organizing mutual state association shall vest in the subsidiary capital stock state association without further word or deed;
(2) The subsidiary capital stock state association may, upon complying with the minimum surplus requirements established by law or regulation, establish and maintain its principal office and branch offices at the locations specified in the plan of merger or consolidation;
(3) The rights and obligations of the organizing mutual state association shall become the rights and obligations of the subsidiary capital stock state association; and
(4) Any pending action by or against an organizing mutual state association or a subsidiary capital stock state association shall survive the merger or consolidation and the subsidiary capital stock state association shall be substituted as a party for the organizing mutual state association.
c. The plan of merger or consolidation shall provide that each depositor in the organizing mutual state association shall receive an equivalent account in the subsidiary capital stock state association.
##### **§ 17:12B-317** Alternative to formation of subsidiary {#sec-17-12b-317 omnilex-key=us-nj-statutes--title-17--17:12B-317}
As an alternative to the formation of a subsidiary capital stock state association pursuant to the provisions of sections 16 through 24 of this act, an organizing mutual state association which has established a mutual state association holding company pursuant to sections 7 through 15 of this act may, in accordance with a plan approved by the commissioner, convert to a capital stock state association pursuant to the provisions of P.L.1974, c.137 (C.17:12B-244 et seq.), except that:
a. Not less than a majority of the shares of the converted state association shall be held in the name of the mutual state association holding company; and
b. Any Department of Banking regulations promulgated pursuant to P.L.1974, c.137 (C.17:12B-244 et seq.) regarding a liquidation account shall not apply.
##### **§ 17:12B-318** Contents of amended certificate of incorporation {#sec-17-12b-318 omnilex-key=us-nj-statutes--title-17--17:12B-318}
In the event that the board of directors elects to follow the procedures provided in paragraph (2) of subsection c. of section 7 of this act, the directors shall, with the approval of the commissioner:
a. Adopt an amended certificate of incorporation which changes the name of the organizing mutual state association and conforms its organization, governance and powers to those prescribed for a mutual state association holding company by section 8 and sections 10 through 15 of this act.
b. The amended certificate of incorporation adopted pursuant to subsection a. of this section shall state:
(1) The amount of capital deposits and surplus which are to be retained by the organizing mutual state association holding company;
(2) The amount of assets and liabilities of the organizing mutual state association that are to be transferred to the subsidiary capital stock state association; and
(3) A means of retaining any interests of the respective members of the organizing mutual state association in the assets of the organizing mutual state association, according to a fair valuation, including assets which are proposed to be retained by the organizing mutual state association holding company.
##### **§ 17:12B-319** Rules, regulations {#sec-17-12b-319 omnilex-key=us-nj-statutes--title-17--17:12B-319}
The commissioner may promulgate rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), as may be necessary to effectuate the purposes of this act.
## **Chapter 13** {#struct-chapter-13}
##### **§ 17:13-72** Repeal {#sec-17-13-72 omnilex-key=us-nj-statutes--title-17--17:13-72}
Sections 17:13-1 to section 17:13-25 inclusive of the Revised Statutes are hereby repealed and all laws and parts of laws inconsistent with or repugnant to the provisions of this act are hereby repealed.
##### **§ 17:13-73** Corporate central credit union; membership; voting representatives {#sec-17-13-73 omnilex-key=us-nj-statutes--title-17--17:13-73}
A. One hundred or more credit unions operating under provisions of this act, or operating in this State under the provisions of the federal Credit Union Act may organize a nonprofit single corporate central credit union whose membership shall be limited to:
(1) Credit unions operating under the provisions of this act or operating in this State under the provisions of the federal Credit Union Act, and organizations composed of such credit unions;
(2) Employees of the corporate central credit union;
(3) Employees of the New Jersey Credit Union League;
(4) Persons who are members of credit unions in this State which have entered or are about to enter into voluntary or involuntary dissolution or liquidation;
(5) Children of members of any New Jersey credit union which does not provide educational loan services, may, with the approval of such credit union, become members of the corporate central credit union for the sole purpose of securing educational loans which are guaranteed by a State or federal agency, and such membership shall terminate when the educational loan is repaid;
(6) Employees of small business groups defined as having less than 100 people, which groups are located in the State of New Jersey;
(7) Any agency or association organized as a stock company, mutual association or membership corporation, or trade association which is organized to service or assist credit unions;
(8) Central credit unions operating under the provisions of the federal Credit Union Act or under the laws of any state of the United States and credit unions operating in any other state of the United States.
b. Each credit union, credit union organization, or association becoming a member of the corporate central credit union shall designate one member authorized by the board of directors as the voting representative of the credit union. Such voting representative is eligible for office in the corporate central credit union in the same manner as if he were a member thereof.
c. (Deleted by amendment, P.L.1984, c. 171.)
d. (Deleted by amendment, P.L.1984, c. 171.)
e. (Deleted by amendment, P.L. , c. .)
f. (Deleted by amendment, P.L. , c. .)
##### **§ 17:13-73.1** Purposes of corporate central credit union; application of Credit Union Act of 1984 {#sec-17-13-73.1 omnilex-key=us-nj-statutes--title-17--17:13-73.1}
The corporate central credit union shall subject to all parts of "The Credit Union Act of 1984," P.L.1984, c. 171, sections 2 to 46 (C. 17:30-80 to C. 17:13-124) not inconsistent with these amendatory and supplementary sections.
A corporate central credit union shall be a nonprofit association, the purpose of which is:
a. To assist in the management of the liquidity of its member credit unions through interlending and investment and related services;
b. To act as an intermediary for the movement of credit union funds between member credit unions and other corporate credit unions;
c. To obtain funds from other credit union organizations, financial intermediaries, and other sources;
d. To foster and promote, in cooperation with other state, regional, and national central credit unions and credit union organizations or associations, the economic security, growth and development of member credit unions; and
e. To perform any other financial services or benefit to its members which are authorized by the commissioner.
##### **§ 17:13-73.2** Powers {#sec-17-13-73.2 omnilex-key=us-nj-statutes--title-17--17:13-73.2}
The corporate central credit union shall have the power to:
a. Accept shares or deposits from its members, other state, regional or national corporate credit unions, and credit union organizations or associations;
b. Make loans to credit unions, to other state, regional or national corporate credit unions, organizations or associations of credit unions, and to other members;
c. Establish lines of credit for members and participate with other credit unions in making loans to its members under the terms and conditions determined by the board of directors of the corporate central credit union;
d. Invest in the shares of, or make deposits in, credit unions;
e. Buy and sell any form of marketable debt obligations of domestic or foreign corporations or of federal, state or local governments or other instrumentalities;
f. Borrow from any source, without limitation, accept demand deposits from any source, and issue notes or debentures;
g. Acquire or sell the assets and assume the liabilities of a member;
h. Enter into agreements with credit unions to discount or purchase loans made pursuant to government guaranteed loan programs, real estate loans made by members, or any obligations of the United States or any agency thereof held by members; and
i. Exercise any powers or privileges conferred upon a federal corporate credit union, subject to the approval of the commissioner.
##### **§ 17:13-73.3** Agreements; purposes {#sec-17-13-73.3 omnilex-key=us-nj-statutes--title-17--17:13-73.3}
The corporate central union may enter into agreements for the purpose of:
a. Participating in any state or federal central liquidity facility or central financial system for credit unions;
b. Aiding credit unions in establishing concentrated lines of credit with other financial institutions; and
c. Acting as a depositor and transmitter of funds to carry out these agreements.
##### **§ 17:13-73.4** Setoff against accounts of members; lien on accounts; security for loans {#sec-17-13-73.4 omnilex-key=us-nj-statutes--title-17--17:13-73.4}
The corporate central union shall have a right of immediate setoff against the balances of the share and deposit accounts of each member for any amounts due from the member to the corporate central credit union. The corporate central credit union shall have a lien on all share and deposit accounts of each member in the amount of the total indebtedness of the member to the corporate central credit union. The lien created herein shall attach to those accounts and be effective whenever the member is indebted to the corporate central credit union. The lien shall have priority over any interests of all members and unsecured creditors of the member credit unions of the corporate central credit union. The board of directors of the corporate central credit union may require and accept additional security for loans to a member in the form of a pledge, assignment, hypothecation or mortgage of any assets of the member or a guarantor.
##### **§ 17:13-73.5** Meetings {#sec-17-13-73.5 omnilex-key=us-nj-statutes--title-17--17:13-73.5}
a. The board of the corporate central credit union shall meet at least every 30 days as provided in the bylaws.
b. The annual meeting of the members of the corporate central credit union shall be held at such time as prescribed in the bylaws. Each corporate member shall be entitled to one vote irrespective of the number of shares held by the member.
##### **§ 17:13-73.6** Reserve requirements {#sec-17-13-73.6 omnilex-key=us-nj-statutes--title-17--17:13-73.6}
The corporate central credit union shall be exempt from the regular reserve requirements of this act, but shall be required to establish and maintain a reserve to meet losses, in accordance with regulations prescribed by the commissioner.
##### **§ 17:13-73.7** Exemption from insurance requirements of Credit Union Act of 1984 {#sec-17-13-73.7 omnilex-key=us-nj-statutes--title-17--17:13-73.7}
The corporate credit union shall be exempt from the share and deposit insurance requirements of "The Credit Union Act of 1984," P.L.1984, c. 171 sections 2 to 46 (C. 17:13-80 to C. 17:13-124).
##### **§ 17:13-74** Conversion to or from a federal credit union {#sec-17-13-74 omnilex-key=us-nj-statutes--title-17--17:13-74}
A credit union organized under the provisions of this act may convert to operation as a Federal Credit Union, or a Federal Credit Union may convert to a credit union operating under the provisions of this act, without undergoing dissolution or liquidation.
##### **§ 17:13-75** Insurance; exception {#sec-17-13-75 omnilex-key=us-nj-statutes--title-17--17:13-75}
Within 1 year of the effective date of this act, every credit union incorporated under the act to which this act is a supplement shall, as a condition of its authority to do business in this State, apply for insurance on shares and deposits as provided by the National Credit Union Administration under Title II of the Federal Credit Union Act, Pub.L. 91-468 (12 U.S.C. s. 1781 et seq.), or alternatively, a form and amount of comparable insurance approved by the Commissioner of Banking.
This requirement does not apply to a credit union with shares, deposits, debt and equity capital consisting primarily of funds from other credit unions. The commissioner may establish by regulation which credit unions shall qualify for this exception to the requirement for insurance.
##### **§ 17:13-76** Failure to apply or denial of commitment for insurance; extension of time {#sec-17-13-76 omnilex-key=us-nj-statutes--title-17--17:13-76}
A credit union which has failed to apply or which has been denied a commitment for such insurance shall within 60 days of the denial of the commitment or 1 year after the date of enactment, whichever is earlier, commence steps to liquidate, or merge with an insured credit union, or apply in writing to the commissioner for an extension of time to obtain an insurance commitment.
The commissioner may grant one or more extensions of time, but not exceeding 1 year in the aggregate, for the credit union to obtain an insurance commitment if there is satisfactory evidence that the credit union has made or is making a substantial effort to achieve the financial condition necessary to effectuate an issuance of an insurance commitment.
##### **§ 17:13-77** Charter; necessity of insurance {#sec-17-13-77 omnilex-key=us-nj-statutes--title-17--17:13-77}
No credit union shall be granted a charter by the commissioner on or after the effective date of this act, unless the credit union has obtained a commitment for insurance of its member shares and deposit accounts.
##### **§ 17:13-78** Reports of financial condition and examination reports {#sec-17-13-78 omnilex-key=us-nj-statutes--title-17--17:13-78}
The commissioner may make available reports of financial condition and examination reports to the National Credit Union Administration or to any qualified insuring organization and may accept any report of examination made on behalf of such agency or organization. The commissioner may appoint an official of the National Credit Union Administration or any qualified insuring organization as liquidating agent of an insured credit union.
##### **§ 17:13-79** Short title {#sec-17-13-79 omnilex-key=us-nj-statutes--title-17--17:13-79}
Sections 2 through 46 of this act shall be known and may be cited as "The Credit Union Act of 1984."
##### **§ 17:13-80** Definitions {#sec-17-13-80 omnilex-key=us-nj-statutes--title-17--17:13-80}
For the purposes of this act:
a. "Board" means the board of directors of the credit union.
b. "Commissioner" means the Commissioner of Banking.
c. "Credit union" means any organization incorporated under the provisions of this act, or the laws of another state or the "Federal Credit Union Act," 48 Stat. 1216 (12 U.S.C. s. 1751 et seq.), which is a cooperative association organized for the purpose of promoting thrift among its members and creating a fund which will establish a source of credit for them for provident or productive purposes.
d. "Director" means a member of the board of directors.
e. "Member" means an owner of a share, deposit, or certificate in a credit union.
##### **§ 17:13-81** Incorporation of credit union; application; fee; certificate of incorporation. {#sec-17-13-81 omnilex-key=us-nj-statutes--title-17--17:13-81}
3. a. Seven or more natural persons, all of whom are residents of this State, may incorporate a credit union on the terms and conditions provided for in this act. The incorporators shall apply to the Commissioner of Banking and Insurance, on a form supplied by the commissioner, for permission to incorporate a credit union. A certificate of incorporation, executed by the incorporators, shall be submitted with the application, as well as a fee of $50.
b. The certificate shall include:
(1) The proposed name of the credit union, and the street, street number, and name of the municipality in which it is to be located;
(2) The name and street address of its registered agent, where process may be served;
(3) The powers which the credit union proposes to exercise;
(4) Any natural person, group, or organization or combination of natural persons, groups or organizations permitted pursuant to section 14 of P.L.1984, c.171 (C.17:13-92) to which membership will be limited;
(5) The number of directors proposed to serve on the board;
(6) The name and address of each of the proposed members, who shall be at least 30 in number, and the number of shares subscribed by each;
(7) The original par value of the shares of the corporation, which shall not be less than $5.00; and
(8) Any other provision not inconsistent with this act or with the laws of this State for the regulation of the business.
c. (1) The incorporators may provide in the certificate of incorporation that any group, combination of groups, organization, combination of organizations or natural persons permitted to be included in a credit union field of membership pursuant to section 14 of P.L.1984, c.171 (C.17:13-92) may be added to the field of membership of the credit union by amendment to the credit union's bylaws, upon approval of the commissioner;
(2) The members of a credit union may amend the certificate of incorporation to provide that any group, combination of groups, organization or combination of organizations or natural persons permitted to be included in a credit union field of membership pursuant to section 14 of P.L.1984, c.171 (C.17:13-92) may be added to the field of membership of the credit union by amendment to the credit union's bylaws, upon approval of the commissioner.
##### **§ 17:13-82** Disapproval of application; annexation; filing of certificate of approval. {#sec-17-13-82 omnilex-key=us-nj-statutes--title-17--17:13-82}
4. The commissioner shall disapprove the application if the commissioner finds that:
a. The incorporation of the proposed credit union will not be in the public interest;
b. The incorporators do not evidence character, responsibility, and general fitness;
c. The provisions contained in the certificate of incorporation for the regulation of the business and the provisions creating or limiting the powers of the proposed credit union are improper provisions, or will not serve the best interest of the members of the proposed credit union; or
d. The conditions of employment or other conditions prevailing in any group or organization from which the membership is to be drawn are such as to result in financial instability or otherwise render the organization of the credit union inadvisable.
If the application is approved by the commissioner, the commissioner shall annex a certificate of approval, and the application shall be filed in the department.
##### **§ 17:13-83** Organizational meeting; notice {#sec-17-13-83 omnilex-key=us-nj-statutes--title-17--17:13-83}
The organizational meeting of the members of the credit union shall take place within ten days of the filing of the certificate of incorporation. A written notice, signed by a majority of the incorporators, shall be given personally or by mail to each of the members proposed in the certificate of incorporation, designating the time, place, and purpose of the meeting. The notice shall be given at least five days before the date on which the meeting is to be held. At the meeting the members present by majority vote shall elect a board of directors as provided for in section 17 of this act and shall transact any other business as may properly come before them.
##### **§ 17:13-84** Affidavit of incorporators {#sec-17-13-84 omnilex-key=us-nj-statutes--title-17--17:13-84}
Before the commissioner may issue a certificate of authority, two of the incorporators shall submit an affidavit to the commissioner which attests to the following:
a. That the certificate of incorporation has been filed with the commissioner;
b. That the shares of the incorporators and thirty members have been fully paid in cash;
c. That the cash paid in is on deposit in a depository institution in this State without offset, claim or demand against it whatsoever, and that it is subject to withdrawal on demand.
##### **§ 17:13-85** Issuance of certificate of authority; transaction of business {#sec-17-13-85 omnilex-key=us-nj-statutes--title-17--17:13-85}
Within 30 days of receipt of the affidavit required by section 6 of this act, the commissioner shall issue a certificate of authority for the credit union to begin the transaction of business provided for in the certificate of incorporation if:
a. After an examination, he finds that the facts presented in the affidavit are true;
b. The incorporators have received firm commitment of the insurance required by section 9 of this act;
c. The proposed directors and officers of the credit union possess the qualifications, experience, and character required for the duties and responsibilities with which they will be charged.
Upon receipt of the certificate of authority, the credit union may begin transacting business. The commissioner shall file a copy of the certificate of authority with the certificate of incorporation.
##### **§ 17:13-86** Amendment of certificate of incorporation; approval of commissioner {#sec-17-13-86 omnilex-key=us-nj-statutes--title-17--17:13-86}
a. A credit union may amend its certificate of incorporation in the following manner:
(1) The board shall approve the proposed amendment and direct that it be submitted to a vote at a meeting of the members;
(2) The meeting of the members shall be held upon at least 10 days' notice given personally or by mail;
(3) If three-fourths of the members present at the meeting approve the amendment the amendment shall be deemed to be adopted.
b. Upon adoption by the members, a certificate of amendment shall be executed in the name of the credit union by its president or vice president, attested by its secretary, sealed with the corporate seal, and submitted to the commissioner for his approval. If the commissioner does not notify the credit union of his disapproval in writing within 30 days, it shall be deemed approved. If the commissioner finds that the amendment does not meet the standards set forth in this act, he shall disapprove it. Upon the commissioner's approval, the amendment to the certificate shall be filed with the department. No amendment to a certificate of incorporation shall contain any provision which would not, under the terms of this act, be permitted in the original certificate.
##### **§ 17:13-87** Insurance of accounts; financial condition and examination reports {#sec-17-13-87 omnilex-key=us-nj-statutes--title-17--17:13-87}
a. No credit union shall be granted a charter on or after the effective date of this act unless the incorporators have obtained a commitment for the insurance of its accounts from the National Credit Union Administration or another insurer approved by the commissioner.
b. The commissioner may make available reports of financial condition and examination reports to the National Credit Union Administration or to any qualified insurer and may accept any report of examination made on behalf of the insurer or insuring agency. The commissioner may appoint an official of the National Credit Union Administration or any qualified insuring organization as liquidating agent of an insured credit union.
##### **§ 17:13-88** Name of credit union; unauthorized use of words "credit union" in name; penalty {#sec-17-13-88 omnilex-key=us-nj-statutes--title-17--17:13-88}
a. The name of every credit union incorporated under this act shall contain the words "Credit Union." No name shall be adopted by any credit union which is already in use by another existing credit union of this State or be so similar thereto as to lead to uncertainty or confusion.
b. The use by any person, except corporations established under this act or affiliates or associations thereof, or by federal law or by the laws of another state, of a name or title containing the words "credit union" shall be a crime of the fourth degree.
##### **§ 17:13-89** Powers. {#sec-17-13-89 omnilex-key=us-nj-statutes--title-17--17:13-89}
11. A credit union's powers shall include, but not be limited to, the power to:
a. Make contracts;
b. Sue and be sued;
c. Adopt and use a common seal and alter same;
d. Acquire, lease, hold, assign, pledge, hypothecate, sell and otherwise dispose of property, either in whole or in part, necessary or incidental to its operations;
e. Offer its members and other credit unions, shares, share certificates, deposits, deposit certificates, or share drafts as provided in this act;
f. Lend its funds to its members as hereinafter provided;
g. Borrow money from any source, provided that a credit union shall notify the commissioner in writing of its intention to borrow in excess of an aggregate of 50% of its shares and undivided earnings;
h. Discount or sell any of its assets, and purchase the assets of another credit union, subject to the approval of the commissioner;
i. Make deposits and invest in legally chartered banks, savings banks, savings and loan associations, trust companies, and other credit unions, including corporate credit unions, and invest funds as otherwise provided in this act;
j. Hold membership in other credit unions organized under this act, and in associations and organizations controlled by or fostering the interests of credit unions, including a central liquidity facility organized under state or federal law;
k. Act as fiscal agent for and receive payment on shares or deposits, or both, from the federal government, this State, or any agency or political subdivision thereof;
l. Have and exercise all the powers of corporations organized under Title 14A of the New Jersey Statutes which are not inconsistent with this act;
m. Maintain service facilities, including automated terminals at locations other than its principal office upon the approval of the commissioner. The maintenance of these facilities shall be reasonably necessary to furnish service to its members. A credit union may join with one or more financial institutions in the operation of a service facility to meet member needs;
n. Contract with outside vendors to make insurance and group purchasing plans available to its members and receive compensation from the vendors in return for performing administrative functions on their behalf;
o. Participate in loans to credit union members jointly with other credit unions, credit union organizations, or financial institutions, provided that the originating credit union retains an interest of at least 10% of the face amount of the loan;
p. Participate in any guaranteed loan program of the federal or state government;
q. Purchase the conditional sales contracts, notes, and similar instruments of its members;
r. Purchase and maintain insurance on behalf of any person who is an officer, director, employee, or agent of the credit union;
s. Collect, receive and disburse monies in connection with the providing of negotiable checks, money orders, travelers' checks, and similar instruments, and for any other purposes which may provide benefit or convenience to its members, and to charge a reasonable fee for these services;
t. Declare dividends to its members, as provided in the bylaws or by rules and regulations of the commissioner;
u. Participate in government programs designed to alleviate social and economic problems at the community, state, or regional levels; and
v. Act as a public depository pursuant to the provisions of the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.).
##### **§ 17:13-90** Powers of commissioner. {#sec-17-13-90 omnilex-key=us-nj-statutes--title-17--17:13-90}
12. The commissioner shall have the power to make, amend and repeal regulations permitting credit unions to exercise any power, right, benefit, or privilege permitted to federally chartered credit unions.
##### **§ 17:13-91** Change of location of office; facilities for meetings or services {#sec-17-13-91 omnilex-key=us-nj-statutes--title-17--17:13-91}
a. A credit union may change the location of its office by resolution of the board. A copy of the resolution, attested by the secretary, shall be forwarded to the commissioner for his approval. If the resolution is not approved within 30 days by the commissioner, it shall be deemed to be approved. Upon the approval of the commissioner, the resolution shall be filed with the department.
b. Any municipality, school board, county, state department, or any agency or instrumentality thereof may make facilities available for use by a credit union as an office or meeting room.
c. A credit union may maintain service facilities, or may join with one or more financial institutions in the operation of a service facility to meet member needs, including an automated terminal, if these facilities are reasonably necessary to furnish service to its members, at locations other than its principal office, upon the approval of the commissioner.
##### **§ 17:13-92** Membership of credit union; regulations. {#sec-17-13-92 omnilex-key=us-nj-statutes--title-17--17:13-92}
14. a. The membership of a credit union shall be limited to and consist of the incorporators and other persons that are members of any group, combination of groups, organization, combination of organizations or natural persons specified in the certificate of incorporation, or any group, combination of groups, organization, combination of organizations or natural person that has been added to the membership by amendment to the credit union's bylaws, who have paid any required entrance fee or membership fee, or both, have subscribed to one or more shares, have paid the initial installment thereon, and have complied with any other requirements as the certificate of incorporation or bylaws specify.
b. Except as otherwise provided in this section, credit union membership shall be limited to the types of membership described in one of the following categories :
(1) one group which has a common bond of occupation or association; or
(2) more than one group with each group having within that group a common bond of occupation or association and a membership of less than 3,000 members at the time that group is first included within the field of membership of a credit union made up of more than one group; or
(3) persons or organizations, or any combination of organizations within a well-defined neighborhood, local community or rural district; or
(4) any combination of membership fields from paragraphs (1), (2) and (3) of this subsection b., provided, however, that the combining of membership fields pursuant to this paragraph shall only be used with respect to an existing credit union and only if, in the determination of the commissioner, it is found that the combination is necessary to maintain the safety and soundness of that existing credit union and, with respect to any group eligible to be part of a credit union pursuant to paragraph (2) or organization eligible to be part of a credit union pursuant to paragraph (3) of this subsection which is to be combined, the membership of that group or organization shall be subject to the same limitation on the number of members as provided for groups under paragraph (2) of this subsection; and
(5) members of the immediate family of persons in a credit union or in any group or organization which makes up the membership of a credit union.
c. Societies and copartnerships composed primarily of persons who are eligible for membership, and corporations, including cooperative organizations, whose stockholders are composed primarily of persons who are eligible for individual membership, may be admitted to membership. Any entity thus admitted to membership shall not borrow in excess of its shareholdings unless at least 10% of its members are qualified members of the credit union.
d. Members who leave the field of membership may be permitted to retain their memberships in the credit union under reasonable standards established by the board.
e. Members of the credit union shall not be personally or individually liable for the payment of the credit union's debts.
f. (1) The commissioner may, by regulation, provide that a credit union may add to its field of membership any natural person who resides in a primary metropolitan statistical area in which the credit union is located and meets at least one of the following criteria:
(a) is a person of low income as defined pursuant to 42 U.S.C. s.5302(a)(20)(A);
(b) resides in a low median income census tract as defined by the commissioner pursuant to 12 C.F.R. s.228.12; or
(c) has been or is the recipient of State or federally funded public assistance.
(2) The commissioner may require that a natural person meet more than one of the criteria established under paragraph (1) of this subsection f.;
(3) If a natural person who is a member of a credit union has immediate family members living in the same primary metropolitan statistical area as that natural person, a credit union may also add any member of that immediate family to its field of membership;
(4) A credit union may establish areas within a primary metropolitan statistical area for purposes of paragraphs (1) and (3) of this subsection f.
g. (1) For a credit union whose field of membership is described under paragraph (2) of subsection b. of this section, the requirement that a group have a membership of less than 3,000 members shall not apply if the commissioner determines, in writing and in accordance with the guidelines and regulations issued pursuant to paragraph (2) of this subsection, that the group could not feasibly or reasonably establish a new single common-bond credit union pursuant to paragraph (1) of subsection b. of this section, because:
(a) the group lacks sufficient volunteer and other resources to support the efficient and effective operation of a single common-bond credit union;
(b) the group does not meet the criteria that the commissioner has determined to be important for the likelihood of success in establishing and managing a new single common-bond credit union, including the demographic characteristics such as geographical location of members, diversity of ages and income levels, and other factors that may affect the financial viability and stability of a single common-bond credit union; or
(c) the group would be unlikely to operate a safe and sound single common-bond credit union.
(2) The commissioner shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), setting forth the criteria that the commissioner shall apply in determining whether a credit union may be established as provided pursuant to paragraph (2) of subsection b. of this section, which regulations shall be directed at assuring substantial parity between the field of membership standards and requirements of State and federal credit unions.
##### **§ 17:13-92.1** Credit unions approved for inclusion of more than one group; continuation permitted. {#sec-17-13-92.1 omnilex-key=us-nj-statutes--title-17--17:13-92.1}
5. A credit union that has been approved to include more than one group within its field of membership prior to the effective date of this act may continue to operate in accordance with that approval, provided however, that any change to its field of membership after the effective date of this act shall be subject to the provisions of this act.
##### **§ 17:13-93** Meetings; vote of members; quorum {#sec-17-13-93 omnilex-key=us-nj-statutes--title-17--17:13-93}
a. The annual meeting of the members of the credit union shall be held on a date to be designated by the board for the election of directors and committee members and the transaction of any other business as may properly come before the meeting.
b. Regular and special meetings may be held in the manner prescribed in the bylaws.
c. At all of these meetings a member shall have one vote. No member may vote by proxy, but a member may vote by absentee ballot if the bylaws of the credit union so provide.
d. The bylaws shall prescribe the number of members which constitute a quorum, but less than a quorum may adjourn the meeting from time to time.
e. A society, association, copartnership or corporation, having membership in the credit union, may be represented and have its vote cast by one of its members or shareholders, if the person has been so authorized by resolution of the organization's board of directors.
##### **§ 17:13-94** Bylaws; approval of commissioner {#sec-17-13-94 omnilex-key=us-nj-statutes--title-17--17:13-94}
Every credit union shall, by majority vote of its members, adopt bylaws consistent with the laws of this State. The bylaws may be amended from time to time. A copy of the bylaws and all amendments thereto shall be certified by the secretary and forwarded to the commissioner, but shall not become effective until approved by the commissioner. If the commissioner does not approve the bylaws or any amendments thereto within 30 days of their submission, they shall be deemed approved. Upon the commissioner's approval the bylaws or any amendments thereto shall be filed with the department.
##### **§ 17:13-95** Board of directors; membership; vacancy; meetings {#sec-17-13-95 omnilex-key=us-nj-statutes--title-17--17:13-95}
The credit union shall be directed by a board consisting of an odd number of directors, not less than five in number, who shall be members and who shall be elected by ballot of the members at the annual meeting for terms as the bylaws provide, except that the bylaws shall provide for staggered terms.
The directors shall be at least 18 years of age and a majority of the directors shall be residents of this State. Every director shall subscribe to an oath in a form prescribed by the commissioner, and the form shall be filed with the commissioner within five days of its execution. A vacancy on the board shall be filled by the directors until the next annual meeting, when it shall be filled by the members for the unexpired term. The board or the executive committee shall meet at least once a month and upon any other occasions which it deems necessary.
##### **§ 17:13-96** Chairman of board; officers; compensation; bond of officers; duties {#sec-17-13-96 omnilex-key=us-nj-statutes--title-17--17:13-96}
The board of directors or the members, as provided by the bylaws, shall elect a chairman, who shall be a member of the board, a vice chairman, a secretary, and a treasurer, who shall hold their offices at the pleasure of the board or of the members, as the case may be. Officers and members of committees may be compensated for their services as provided for in the bylaws. The commissioner may, at any time, order the compensation reduced if in his judgment it is excessive. The board shall require any officer or employee having custody of or handling funds to give bond with good and sufficient surety in an amount and character to be determined by the board in compliance with regulations prescribed by the commissioner.
The commissioner shall promulgate rules and regulations establishing the duties of directors.
##### **§ 17:13-97** Executive committee of board; powers; limitations; minutes {#sec-17-13-97 omnilex-key=us-nj-statutes--title-17--17:13-97}
a. The board may appoint an executive committee of the board, consisting of not less than three directors, which may be authorized to act for the board, as provided in the bylaws, except that the executive committee may not:
(1) Exercise any powers granted to it while a quorum of the board is actually convened for the conduct of business;
(2) Declare a dividend, or make any other kind of distribution to members;
(3) Make, alter, or repeal the bylaws of the credit union;
(4) Elect or appoint any officer or director; or
(5) Exercise any other power which this act specifically provides shall be exercised by at least a majority of all the directors.
b. The minutes of the proceedings of the executive committee shall be presented to the board at the meeting next following any meeting of the executive committee.
##### **§ 17:13-98** Examining committee; members; audit or examination of credit union {#sec-17-13-98 omnilex-key=us-nj-statutes--title-17--17:13-98}
The members of each credit union shall elect an examining committee, composed of at least three members, none of whom shall be officers, directors, or members of the credit committee. The members of the committee shall be elected for staggered terms, and at least one-third of the membership of the committee shall be elected by the members at the annual meeting each year. Every member of the examining committee shall subscribe to an oath in a form prescribed by the commissioner. The examining committee shall make, or cause to be made, a thorough audit or examination of the condition of the credit union as of December 31 of each year, and a verification of member accounts at least once every year. The report of the examining committee shall be signed and sworn to by the members of the committee and filed with the board on or before March 31 of each year. The examining committee shall perform any other duties as may be provided for in the bylaws of the credit union.
##### **§ 17:13-99** Special meeting called by examining committee; suspension of officer or member {#sec-17-13-99 omnilex-key=us-nj-statutes--title-17--17:13-99}
a. The examining committee may, by a majority vote of its members, call a special meeting of the members to consider any violation of this act, the credit union's charter or bylaws, or any practice of the credit union deemed by the committee to be unsafe or unauthorized.
b. The examining committee may, by a unanimous vote of its members, suspend any officer, member of the board of directors, or member of the credit committee for good cause until a meeting of the members, which shall be held not less than seven nor more than 21 days after the suspension to ratify the action of the examining committee.
c. Subsequent to ratification by the members, the examining committee shall refer the matter to the board for appropriate action.
##### **§ 17:13-100** Credit committee {#sec-17-13-100 omnilex-key=us-nj-statutes--title-17--17:13-100}
22. a. If the bylaws provide for a credit committee, then pursuant to the provisions of the bylaws, the board shall appoint, or the members shall elect a credit committee of not less than three nor more than seven members, who shall serve as set forth in the bylaws. The committee shall approve or deny written applications for loans from members pursuant to and consistent with the general loan policy and rules and regulations established by the board for member loans.
The credit committee shall elect a chairman and a secretary and any other officers which it deems necessary. It shall be the duty of the secretary of the credit committee to keep permanent minutes of all of its meetings.
b. A majority of members of the credit committee shall constitute a quorum. No member loans shall be approved except at meetings of the credit committee, and the approval shall be signed by a majority of those members present.
c. If the bylaws provide for a credit committee, the credit committee may appoint one or more loan officers, to whom it may delegate the power to approve applications for loans from members pursuant to and consistent with the general loan policy and rules and regulations established by the board for member loans. Each loan officer shall submit to the credit committee a record of each application approved or denied by him, at the next meeting of the credit union or within 30 days of the receipt of the loan application, whichever is earlier. All applications denied by a loan officer shall be reviewed by the credit committee. No person shall have the authority to disburse funds for any loan which has been approved by him as loan officer. Not more than one member of the credit committee may be appointed as loan officer.
d. If there is no credit committee, a member shall have the right, upon written request to the board of directors, to review by the board of a loan application which has been denied by a loan officer.
##### **§ 17:13-101** Issuance of shares and certificates; deposits; accounts offered; trustee or custodian of accounts and funds; payment of dividends {#sec-17-13-101 omnilex-key=us-nj-statutes--title-17--17:13-101}
a. A credit union shall issue shares and share certificates, which shall constitute the capital of the credit union. Shares may be subscribed to, paid for and transferred in any manner prescribed by the bylaws. Ownership of shares or share certificates shall confer membership and voting rights.
b. A credit union may accept deposits from and issue deposit certificates to its members and to other credit unions, subject to terms, rates, and conditions prescribed by the board and regulations established by the commissioner.
c. A credit union may offer special purpose share or deposit accounts, including, but not limited to, Christmas club accounts and vacation club accounts, under terms and conditions established by the board.
d. A credit union may offer joint accounts, trust accounts, or pay-on-death accounts, as provided in the "Multiple-party Deposit Account Act," P.L. 1979, c. 491 (C. 17:16I-1 et seq.). These accounts may be held as shares, share certificates, deposits, deposit certificates, or any other form provided by law.
e. A credit union may act as trustee or custodian of (1) individual retirement accounts authorized by State or federal law; (2) pension funds of self-employed individuals or of a company or organization sponsoring the credit union; or (3) other similar retirement or pension plans; or (4) pension and profit-sharing plans.
f. The board may authorize the payment of dividends from the undivided earnings. Dividends may be paid at varying rates with respect to the conditions which pertain to each type of account including, but not limited to, minimum balance, notice and time requirements.
##### **§ 17:13-101.1** Savings promotion conducted by credit union. {#sec-17-13-101.1 omnilex-key=us-nj-statutes--title-17--17:13-101.1}
3. a. A credit union may conduct a savings promotion provided that the credit union:
(1) conducts the promotion in a manner so as to ensure that each entry has an equal chance of winning the designated prize;
(2) fully discloses the terms and conditions of the promotion to each of its account holders;
(3) maintains records sufficient to facilitate an audit of the promotion;
(4) ensures that only account holders 18 years of age and older are permitted to participate in the promotion;
(5) does not require any consideration, other than the requirement that the participant deposit money into a savings account or other savings program to obtain entries in the promotion, to participate in the promotion; and
(6) offers an interest rate and charges fees on any qualifying account that are approximately the same as those on a comparable non-qualifying account.
b. For the purposes of this section, "savings promotion" means a raffle in which the sole consideration required for a chance of winning designated prizes is the deposit of a minimum specified amount of money in a savings account or other savings program, and "credit union" means credit union as defined in section 2 of P.L.1984, c.171 (C.17:13-80).
##### **§ 17:13-102** Minors; transactions; membership privileges {#sec-17-13-102 omnilex-key=us-nj-statutes--title-17--17:13-102}
a. Shares, share certificates, and deposit certificates may be issued to, and deposits received from, a minor who may withdraw the shares and deposits, including the dividends and interest thereon. Deposits and share payments made by a minor and withdrawals thereof by the minor, shall be valid in all respects.
b. No minor may hold office within the credit union until he shall have reached his eighteenth birthday.
c. In exercising his membership privileges with a credit union, a minor may make all contracts which any other of its members may make. Any contract of a member who is a minor shall be binding and enforceable against the member in the same manner as if he were of full age at the time of entering the contract.
##### **§ 17:13-103** Withdrawal of funds for payment; nonmembers; retirement of shares {#sec-17-13-103 omnilex-key=us-nj-statutes--title-17--17:13-103}
a. Shares, share certificates, deposits and deposit certificates of a credit union may be withdrawn for payment to the account holder or to third parties in accordance with procedures established by the board and subject to regulation of the commissioner. The bylaws may provide for members giving written notice of withdrawal, not exceeding 30 days. If the funds available to the credit union are insufficient to pay all withdrawals, then each member seeking withdrawal shall receive a pro rata share of the assets of the credit union which are available for withdrawal.
b. Any non-member who, by assignment, as a legal representative, trustee, or otherwise, acquires title to the shares of a member, may withdraw the shares on the same basis as a member, except that unless he becomes a member, he shall have no other rights attendant to membership.
c. The board shall have the authority to retire the shares of any member or group of members in the manner provided in its bylaws. Shares retired shall be paid in the same manner and subject to the same conditions as withdrawals.
##### **§ 17:13-104** Loans to members; security; interest; fees; lien on accounts {#sec-17-13-104 omnilex-key=us-nj-statutes--title-17--17:13-104}
a. A credit union may make loans to its members, evidenced by a written instrument, upon terms and upon any security, including, but not limited to, the endorsement of a note by a surety, comaker, or guarantor, assignment of an interest in real or personal property, or assignment of shares, as the board may provide. The adequacy of any security shall be determined by the credit committee. No loan shall be made to any member when the aggregate amount of all that member's loans outstanding exceeds 10% of the credit union's total assets. The board, in its discretion, may fix a lower amount.
b. Notwithstanding the provisions of R.S. 31:1-1 to the contrary, a credit union may charge, contract for, and receive interest on loans at a rate or rates agreed to by the credit union and the member. A credit union may charge late fees and lawful fees paid to any public officer for filing, recording, or releasing a document, and may charge collection fees, not to exceed 20% of the principal balance and interest outstanding, which may be added to the principal balance of any loan placed for collection after default thereon.
c. A credit union shall have a lien on the shares, share certificates, deposits, deposit certificates, and accumulated interest or dividends of a member in any individual, joint, or trust account, for any sum past due the credit union from the member or for any loan endorsed by him. The credit union shall have a right of immediate set-off with respect to these accounts.
##### **§ 17:13-105** Manner of payment of loans to members {#sec-17-13-105 omnilex-key=us-nj-statutes--title-17--17:13-105}
Loans made by credit unions may be payable to the members in a lump sum or in installments, of the following types:
a. Loans to be repaid in a lump sum by the member;
b. Loans to be repaid in two or more installments, which installments are approximately equal in amount;
c. A line of credit to be made available to the member by the credit union, whereby funds may be advanced to the member pursuant to the member's written authorization and repaid upon terms as established by the board.
##### **§ 17:13-106** Credit to director, officer, employee, or committee member; participation in determination of question of interest {#sec-17-13-106 omnilex-key=us-nj-statutes--title-17--17:13-106}
a. No credit union may extend credit to any member of the board, any officer, or member of a committee or to any related interest of that person unless the extension of credit is made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions by the credit union with other members, and does not involve more than normal risk of repayment or present other unfavorable features.
b. No director, committee member, officer, agent, or employee of the credit union shall in any manner, directly or indirectly, participate in the deliberation upon or the determination of any question affecting his pecuniary interest or the pecuniary interest of any corporation, partnership, or association other than the credit union, in which he has a direct or indirect interest.
##### **§ 17:13-107** Investment of funds {#sec-17-13-107 omnilex-key=us-nj-statutes--title-17--17:13-107}
Funds not used in loans to members may be invested:
a. In securities, obligations, or other instruments of or issued by or fully guaranteed as to principal and interest by the United States of America or any agency thereof or in any trust or trusts established for investing directly or collectively in the same;
b. In obligations of any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the several territories organized by Congress, or any political subdivision thereof;
c. In certificates of deposit or passbook-type accounts issued by a state or federally chartered bank, savings bank, or savings and loan association;
d. In loans to or in shares or deposits of other credit unions, corporate central credit unions, or a central liquidity facility established under any state or federal law;
e. In shares, stocks, loans or other obligations of any organization, corporation, or association membership or ownership of which is primarily confined or restricted to credit unions, or organizations of credit unions, and the purpose of which is to strengthen or advance the development of credit unions or credit union organizations;
f. In shares of a cooperative society organized under the laws of this State or of the laws of the United States in a total amount not exceeding 10% of the shares, deposits, and surplus of the credit union.
##### **§ 17:13-108** Inactive accounts; special reserve accounts; escheat of funds {#sec-17-13-108 omnilex-key=us-nj-statutes--title-17--17:13-108}
When no transaction has occurred in a member's share or deposit account for 12 months and his whereabouts are unknown, as verified by the return of a certified letter addressed to him at his last known address, all sums due to the member shall be credited to a special reserve account. If the sums are not reclaimed within a five year period, they shall escheat to the State and be forwarded to the Treasurer of the State of New Jersey.
##### **§ 17:13-109** Gross earnings; reserve funds; contributions; regulation of reserve requirements {#sec-17-13-109 omnilex-key=us-nj-statutes--title-17--17:13-109}
a. Immediately before the payment of each dividend, the gross earnings of the credit union shall be determined, and from this amount there shall be set aside, as a regular reserve against contingencies, sums in accordance with the following schedule:
(1) A credit union in operation for more than four years and having assets of $500,000.00 or more shall set aside:
(a) 10% of gross income until the regular reserve shall equal 4% of the total of outstanding loans and risk assets; then
(b) 5% of gross income until the regular reserve shall equal 6% of the total of outstanding loans and risk assets.
(2) A credit union in operation less than four years or having assets of less than $500,000.00 shall set aside:
(a) 10% of gross income until the regular reserve shall equal 7 1/2 % of the total of outstanding loans and risk assets, then
(b) 5% of gross income until the regular reserve shall equal 10% of the total of outstanding loans and risk assets.
(3) Whenever the regular reserve falls below the stated per cent of the total of outstanding loans and risk assets, it shall be replenished by regular contributions in any amounts as may be needed to maintain the stated reserve.
b. The Commissioner of Banking may decrease the reserve requirement set forth in subsection a. of this section when in his opinion a decrease is necessary or desirable. The Commissioner of Banking may also require special reserves to protect the interests of members either by regulation or for an individual credit union in any special case.
##### **§ 17:13-110** Merger of credit unions {#sec-17-13-110 omnilex-key=us-nj-statutes--title-17--17:13-110}
a. Any credit union may, with the approval of the commissioner, merge with another credit union under the existing charter of the continuing credit union, pursuant to any plan agreed upon by the majority of the board of each credit union joining in the merger, approved by the affirmative vote of a majority of the members of the merging credit union present at a meeting of its members duly called for that purpose, and consented to by any government agency or other organization insuring the accounts of the credit union.
b. The commissioner may approve a merger according to the plan agreed upon by the majority of the board of each credit union even if approved by less than a majority of the entire membership, if he finds upon the written and verified application filed by the board that:
(1) Notice of the meeting called to consider the merger was mailed to each member entitled to vote upon the question;
(2) The notice disclosed the purpose of the meeting and properly informed the membership that approval of the merger might be sought pursuant to this section; and
(3) A majority of the votes cast upon the question were in favor of the merger.
c. After agreement by the board and approval by the members of the merging credit union, the chairman and secretary of the credit union shall execute a Certificate of Merger, which shall set forth all of the following:
(1) The time and place of the meeting of the board at which the plan was agreed upon;
(2) The vote in favor of the adoption of the plan;
(3) A copy of the resolution or other action by which the plan was agreed upon;
(4) The time and place of the meeting of the members at which the plan agreed upon was approved; and
(5) The vote by which the plan was approved by the members.
d. The certificate and a copy of the plan of merger agreed upon shall not become effective until approved by the commissioner. If the commissioner has not notified the credit union of his action within sixty days of receipt, the merger shall be deemed to be approved. Upon the commissioner's approval, the Certificate of Merger shall be filed with the department.
e. Upon filing of the Certificate of Merger with the department, all property, property rights, and members' interest of the merged credit union shall vest in the surviving credit union, without deed, endorsement, or other instrument of transfer, and all debts, obligations and liabilities of the merged credit union shall remain in effect;
f. This section shall be construed, whenever possible, to permit a credit union organized under any other act to merge with one incorporated under this act, or to permit one incorporated under this act to merge with one organized under any other act.
##### **§ 17:13-111** Annual report by credit union; violations, penalties. {#sec-17-13-111 omnilex-key=us-nj-statutes--title-17--17:13-111}
33. Every credit union shall submit a report in writing to the commissioner of its condition at the close of business on the 31st day of December. The report shall be submitted to the commissioner in a form and within the time specified by the commissioner by regulation. The report shall be verified by the oath of the president and the treasurer of the credit union, and the statement of assets and liabilities shall be verified by the oath of the examining committee that the statement is a true and correct statement of the condition of the credit union based on the audit or examination made by the examining committee as of the December 31 preceding the report. The credit union shall furnish the commissioner with any other reports as he may deem advisable. Any false statement or oath shall be deemed to be perjury.
A credit union that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:13-112** Supervision and examination by commissioner; exhibition of papers and documents; subpenas; perjury {#sec-17-13-112 omnilex-key=us-nj-statutes--title-17--17:13-112}
34. a. Every credit union shall be subject to the supervision and examination of the commissioner. In lieu of making an examination of a credit union, the commissioner may accept the examination of a certified public accountant who has examined the records of the credit union and who files an opinion of his examination with the commissioner. If an examiner deems it advisable, he may verify the liabilities of the credit union to its members by an inspection and verification of their accounts. The commissioner shall promptly communicate the results of each examination to the president of the credit union examined, who shall present the report to the board at the next regular meeting or a special meeting if the commissioner so directs. The action taken by the board shall be communicated by the president to the commissioner within five days.
b. The officers, directors and employees of the credit union under examination shall exhibit its books, papers, records, documents, and securities to the commissioner or his representative and shall act to facilitate the examination. The commissioner or his representative may administer an oath to any person whose testimony is required on any examination and may compel by subpoena the appearance of any person for the purpose of examination or for the production of books, papers, records, documents and securities. The subpoena may be served by any police officer of the municipality in which the person resides. If any person fails to obey the subpoena, give testimony, answer questions or produce any books, papers, records, documents, securities or other things which may be required by the commissioner, the Superior Court may compel the person to do so.
c. A person who shall willfully testify falsely to a material matter upon an oath administered by the commissioner or his representative upon an investigation or inquiry, or in regard to a report made by the commissioner, shall be guilty of perjury.
##### **§ 17:13-113** Expenses of examination {#sec-17-13-113 omnilex-key=us-nj-statutes--title-17--17:13-113}
Every credit union examined by the commissioner shall pay the actual expenses of the examination, and the commissioner may maintain an action against any credit union to recover the fees and expenses herein provided for.
##### **§ 17:13-114** Discontinuation of illegal activity; order {#sec-17-13-114 omnilex-key=us-nj-statutes--title-17--17:13-114}
If it appears to the commissioner that any credit union has violated its certificate of incorporation, bylaws, or any law of this State, or if he determines that the credit union is conducting its business in an illegal unsafe, or unauthorized manner, he shall direct the credit union to discontinue the illegal, unsafe, or unauthorized conduct of business. The order shall be sent to the president of the credit union. The president shall present the order to the board at its next regular meeting or at a special meeting if a special meeting is ordered by the commissioner. The action taken by the board with respect to the commissioner's order shall be communicated by the president to the commissioner within five days.
##### **§ 17:13-115** Violation of law, unauthorized actions, or refusal to be examined; institution of court action for possession {#sec-17-13-115 omnilex-key=us-nj-statutes--title-17--17:13-115}
Whenever it appears to the commissioner:
a. That a credit union has violated its charter or any law of this State; or
b. That a credit union is conducting its business in an unsafe or unauthorized manner; or
c. That a credit union has refused to submit its books, papers, records, documents, securities, or anything else to the inspection of the commissioner or his representative; or
d. That any officer or director of a credit union has refused to be examined under oath with respect to the affairs of the credit union or has refused to answer questions under oath or to produce any books, papers, records, documents, securities, or any other thing in his possession, custody or control requested by the commissioner; or
e. That a credit union has suspended payment of its obligations; or
f. That an examination or report provided for by this act discloses facts from which the commissioner shall have reason to conclude that a credit union is in an unsound or unsafe condition to transact business or is insolvent or that it is unsafe or that it is inexpedient for it to continue business; or
g. That a credit union has neglected or refused to observe an order of the commissioner issued pursuant to this act;
He shall have the authority to institute an action in the Superior Court or to take possession of the property and business of the credit union.
##### **§ 17:13-116** Injunctions; receivers; other relief or correction {#sec-17-13-116 omnilex-key=us-nj-statutes--title-17--17:13-116}
In any action instituted in the Superior Court pursuant to section 37 of this act, the court may enjoin the credit union from the transaction of any further business or the transfer or disposal of its property in any manner whatsoever, and the court may appoint a receiver with the power to sue for, collect, receive and take into his possession all of the goods and chattels, rights and credits, moneys and effects, lands and tenements, books, papers, choses in action, bills, notes and property of every description belonging to the credit union and to sell, convey and assign the same and hold and dispose of the proceeds thereof under the direction of the court, or the court may enjoin excessive expenses of management, remove one or more of the officers, directors, employees or agents of the credit union and grant other relief or correction as the facts demand. The court may proceed in a summary manner or otherwise.
##### **§ 17:13-117** Possession by commissioner of property and business; dissolution of credit union; trustees in dissolution {#sec-17-13-117 omnilex-key=us-nj-statutes--title-17--17:13-117}
Whenever the commissioner shall take possession of the property and business of a credit union pursuant to section 37 of this act, he shall retain possession until the property and business of the credit union may be returned by him to the management of its board on terms satisfactory to him, except the commissioner shall have the authority to institute an action in the Superior Court as provided by this act while in possession of the property and business of the credit union, in which case he shall retain the possession of the property and business of the credit union until otherwise ordered by the court. The commissioner may, if he deems it advisable and in the best interest of the members, permit the voluntary dissolution of the credit union and surrender to its officers and directors any powers which may be necessary to effect a dissolution as provided in this act, but in this case the trustees in dissolution to be appointed by the members shall be persons satisfactory to the commissioner and the bonds to be given by them shall be approved as to form, sufficiency and amount by the commissioner.
##### **§ 17:13-118** Continuation of business by commissioner; authority and powers {#sec-17-13-118 omnilex-key=us-nj-statutes--title-17--17:13-118}
Upon taking possession of the property and business of a credit union, the commissioner may, pending the return of its property and business to the management of its board or the order or judgment of the Superior Court in an action instituted under sections 37 and 38 of this act or its dissolution as herein provided, continue the operation of the business of the credit union. For that purpose, the commissioner shall have and may exercise every authority and power theretofore conferred by law, by the provisions of its certificate of incorporation and by its bylaws upon its board and committees and upon all and any of its officers, directors and committee members. However, this section shall not be construed to deprive any credit union at any time of title to its property, and all transfers and conveyances of property to the credit union during the commissioner's possession thereof shall be made in its name and all transfers and conveyances of property from the credit union shall be made in the name of the credit union, under its seal or otherwise as the circumstances may require, by the commissioner. Any act or thing done by the credit union, during the commissioner's possession as aforesaid, over the signature of or by order of the commissioner shall be construed to be the act of the credit union and shall be valid and effectual in law if the statutes of this State, the certificate of incorporation of the credit union or its bylaws shall have authorized its board, committees, any director thereof, any committee member thereof or any officer thereof to do or perform any act. The commissioner shall not be obligated to carry on the business of the credit union in possession unless he deems it proper and expedient so to do but may, during his possession thereof, conserve its assets until a time as he shall determine it expedient and proper to continue the business or until otherwise directed by the Superior Court in an action instituted pursuant to sections 39 and 40 of this act or until its dissolution.
##### **§ 17:13-119** Assistant deputy commissioners; employment of counsel and other expert assistance; powers on receivership of commissioner and members {#sec-17-13-119 omnilex-key=us-nj-statutes--title-17--17:13-119}
The commissioner may, under his hand and official seal, appoint one or more special assistant deputy commissioners as agent or agents to assist him in the operation of the business or conservation of the assets of any credit union in his possession; and the commissioner may, from time to time, delegate to any special assistant deputy commissioner the powers conferred on him by this act with respect to the operation of the business or conservation of the assets of the credit union in his possession as he may deem necessary. The commissioner may employ counsel, other expert assistance, or any other persons as shall in his opinion be needed for the continuation of the business or conservation of the assets of any credit union, and the compensations and salaries of all special assistant deputy commissioners, attorneys, expert assistants and other persons together with all other costs and expenses of a continuation of the business or conservation of the assets of the credit union shall be fixed by the commissioner and paid by the credit union and shall, until paid, constitute a prior claim against its assets. The commissioner shall require from special assistant deputy commissioners and other employees any security for the faithful performance of their respective duties as he may deem proper. Upon taking possession of any credit union the commissioner shall have power to terminate the employment of any employee of a credit union and no officer or director shall thereafter and until notified by the commissioner resume the exercise of any power in the management of the business or conduct of the affairs of the credit union. The commissioner shall have authority to call meetings of members for any purpose. The members present at any meeting may, by majority vote, and notwithstanding the provisions of the bylaws or certificate of incorporation of the credit union, and without showing cause, declare vacant the office of any director or committee member of the credit union and appoint a successor to fill the vacancy thus arising.
##### **§ 17:13-120** Notice of possession of business and property by commissioner; stay of levies and executions {#sec-17-13-120 omnilex-key=us-nj-statutes--title-17--17:13-120}
Upon taking possession of the property and business of any credit union, the commission shall give notice of this fact to all banks, trust companies, corporations, associations and individuals holding any assets of the credit union. No bank, trust company, corporation, association or individual who knows of the commissioner's taking possession or who has been notified pursuant to this section shall have a lien or charge for any payment, advance or clearance made thereafter or liability incurred thereafter against any of the assets of the credit union in his possession unless the payment, advance, clearance or liability has been authorized by the commissioner. Upon the commissioner's taking possession of the property and business of the credit union all judgments, decrees, levies and executions against the property of the credit union shall be thereafter stayed until otherwise directed by the Superior Court or until the property and business of the credit union has been returned to the management of its board.
##### **§ 17:13-121** Grievance with action of commissioner; court proceedings for injunction {#sec-17-13-121 omnilex-key=us-nj-statutes--title-17--17:13-121}
Whenever any credit union or a member thereof deems itself or himself aggrieved by the commissioner's taking possession of that credit union, that credit union or member may at any time after the commissioner's taking possession, institute an action in the Superior Court to enjoin further proceedings. The court may proceed in a summary manner or otherwise.
##### **§ 17:13-122** Voluntary dissolution; liquidation; notice to authorities; suspension of activities; approval of members; wind-up of affairs; distribution of assets; certificate of dissolution {#sec-17-13-122 omnilex-key=us-nj-statutes--title-17--17:13-122}
a. A credit union may elect to dissolve voluntarily and liquidate its affairs in the manner prescribed in this section.
b. The board shall adopt a resolution recommending the credit union be dissolved voluntarily, and directing that the question of liquidation be submitted to the members.
c. Within 10 days after the board decides to submit the question of liquidation to the members, the chairman shall notify the commissioner and any government agency or other organization insuring member accounts thereof in writing, setting forth the reasons for the proposed liquidation. Within 10 days after the members act on the question of liquidation, the chairman shall notify the commissioner and any government agency or other organization insuring member accounts, in writing, as to the action of the members on the proposal.
d. As soon as the board decides to submit the question of liquidation to the members, payments on shares, share certificates, deposits, deposit certificates, withdrawal of shares, making any transfer of shares to loans and interest, making investments of any kind, and granting loans shall be suspended pending action by members on the proposal to liquidate. On approval by the members of the proposal, all business transactions shall be permanently discontinued. Necessary expenses of operation shall, however, continue to be paid on authorization of the board or liquidating agent during the period of liquidation.
e. For a credit union to enter voluntary liquidation, approval by a majority of the members in writing or by a two-thirds majority of the members present at a regular or special meeting of the members is required. Where authorization for liquidation is to be obtained at a meeting of the members, notice in writing shall be given to each member, by first class mail at least 10 days prior to the meeting.
f. A liquidating credit union shall continue in existence for the purpose of discharging its debts, collecting on loans and distributing its assets, and doing all acts required in order to wind up its business and may sue and be sued for the purpose of enforcing the debts and obligations until its affairs are fully concluded.
g. The board or the liquidating agent shall use the assets of the credit union to pay: (1) expenses incidental to liquidation including any surety bond that may be required; (2) any liability due nonmembers; and (3) deposits and deposit certificates as provided in this act. Assets then remaining shall be distributed to the members proportionately to the shares held by each member as of the date dissolution was voted.
h. As soon as the board or the liquidating agent determines that all assets from which there is a reasonable expectancy of realization have been liquidated and distributed as set forth in this section, they shall execute a Certificate of Dissolution, on a form prescribed by the commissioner, and file the same, together with all pertinent books and records of the liquidating credit union, with the commissioner, whereupon the credit union shall be dissolved.
##### **§ 17:13-123** Conversion to or from a federal credit union {#sec-17-13-123 omnilex-key=us-nj-statutes--title-17--17:13-123}
A credit union organized under the provisions of this act may convert to operation as a federal Credit Union, or a federal Credit Union may convert to a credit union operating under the provisions of this act, without undergoing dissolution or liquidation.
##### **§ 17:13-124** Credit union advisory council. {#sec-17-13-124 omnilex-key=us-nj-statutes--title-17--17:13-124}
46. a. A Credit Union Advisory Council is created which shall consult with, advise, and make recommendations to the commissioner on matters pertaining to the chartering, operation and supervision of credit unions.
b. The council shall consist of seven persons to be appointed by the Governor, with the advice and consent of the Senate, who are members of the State chartered and federally chartered credit unions within the State, at least two of whom shall be members of federally chartered credit unions within the State and at least four of whom shall be members of State chartered credit unions within the State. Four members of the council shall have had a minimum of three years' experience as a credit union officer or director or a similar management position. Appointments to the council shall be for terms of five years except that four of the initial appointments shall be for terms of four, three, two, and one years respectively, so that in each subsequent year one member shall be appointed to a full term. The two initial members of the federally chartered credit unions shall be appointed for terms of four and three years, respectively.
c. All members shall serve until their successors have been appointed and qualified. In the event a vacancy occurs, the appointment to fill the vacancy for the unexpired term shall be in the manner of the original appointment.
d. The chairman of the council shall be elected annually and from the members thereof.
e. The initial meeting of the council shall be called by the commissioner. Thereafter, regular meetings shall be held at times and places as shall be determined by the chairman, the commissioner, or a majority of the council members. The council may establish its own procedures and practices.
f. Expenses of the council shall be borne by the credit unions.
##### **§ 17:13-125** Rules and regulations {#sec-17-13-125 omnilex-key=us-nj-statutes--title-17--17:13-125}
The commissioner shall promulgate any rules and regulations which he deems necessary to effectuate the purposes of this act.
## **Chapter 13A** {#struct-chapter-13a}
##### **§ 17:13A-1** Application of act {#sec-17-13a-1 omnilex-key=us-nj-statutes--title-17--17:13A-1}
This act applies to advertisements made in connection with loans which are payable in installments and upon which interest is (a) received in advance, or (b) is added to the amount of the loan, so that the amount to be repaid, as stated in the instrument evidencing or securing the loan, equals the amount of the loan plus the interest so added, and (c) the interest so received in advance or so added is at a rate in excess of 6% per annum upon the average balances owing on such loans. It does not apply to advertisements in connection with loans upon which not more than 1 month's interest may lawfully be received in advance.
##### **§ 17:13A-2** Definitions {#sec-17-13a-2 omnilex-key=us-nj-statutes--title-17--17:13A-2}
As used in this act,
(a) "person" means an individual, a corporation, a partnership and every other organized group of persons;
(b) "loan" means a loan of the type referred to in section 1;
(c) "lender" means a person who makes loans; it also includes agents, officers, directors and employees of lenders, and all persons who solicit, arrange for or otherwise participate or assist in the making of loans, or in any way act as an intermediary between a borrower and a lender in effecting loans;
(d) "net loan" means the amount which a borrower contracts to pay to a lender in satisfaction of a loan, less the amount of the interest received in advance on such loan, or added to the amount of such loan;
(e) "average balance owing on a loan" means an amount determined by the application of the formula
A=N (I + 1) / 2I
in which "A" represents the average balance; "N" represents the amount of the net loan; and "I" represents the number of installments scheduled by the terms of such loan to be paid on such loan;
(f) "advertisement" and "advertise" mean notice by a lender that he makes loans. The terms include the giving of such notice (1) in newspapers, magazines and all periodicals and publications of every nature; (2) by signs, billboards, placards, posters and displays of every nature; (3) by radio or television; (4) by direct mail; and (5) by every other medium of communication, oral, written, visual or otherwise, the purpose or effect of which is to call to the attention of persons that the lender named in such notice makes loans;
(g) "interest" means every charge paid to the lender or contracted for by the lender and the borrower in connection with or as an incident of a loan, whether designated as interest or as a finance charge or otherwise, except that the term does not include the following charges when made pursuant to law: late or delinquency charges; attorneys' and collection fees; insurance premiums, including premiums for credit life insurance; recording or filing fees, and all other charges which may lawfully be made on loans in addition to interest or finance charges.
##### **§ 17:13A-3** Requirements {#sec-17-13a-3 omnilex-key=us-nj-statutes--title-17--17:13A-3}
No advertisement made or caused to be made by a lender shall contain any statement making reference to or setting forth a stated rate or percentage of interest charged on a loan made by him, unless such rate or percentage is expressed in terms of simple interest per month or per year on the amount of the average balance owing on such loan. An advertisement which states the rate of interest or the interest charge in terms of dollars and fractions of dollars per $100.00 per year on the net loan, or which presents a table which shows the amount which the borrower is required to pay on such loan, the amount of the net loan, and the amount, number and intervals of the required payments, shall not be deemed to be violative of the provisions of this section.
##### **§ 17:13A-4** Violation {#sec-17-13a-4 omnilex-key=us-nj-statutes--title-17--17:13A-4}
Any lender who willfully violates the provisions of section 3 of this act shall be a disorderly person.
##### **§ 17:13A-5** Citation {#sec-17-13a-5 omnilex-key=us-nj-statutes--title-17--17:13A-5}
This act may be cited as the "Installment Loan Rate Advertising Act."
## **Chapter 13B** {#struct-chapter-13b}
##### **§ 17:13B-1** Short title {#sec-17-13b-1 omnilex-key=us-nj-statutes--title-17--17:13B-1}
This act shall be known as "The State Bank Parity Act" .
##### **§ 17:13B-2** Depository institutions, rate of interest, other charges, fees on loans, authorized. {#sec-17-13b-2 omnilex-key=us-nj-statutes--title-17--17:13B-2}
2. Notwithstanding any provisions of R.S.31:1-1 or any other statute to the contrary, any bank, savings bank, savings and loan association or credit union may charge any periodic percentage rate on the outstanding balance and include any other charges or fees on any class or type of loan as permitted to any other lender by the laws of this State on that class or type of loan. Nothing in this act shall authorize any lender to make any loan it is not authorized by law to make, nor shall anything in this act apply to loans secured by a first lien on real estate on which there is erected or to be erected a structure containing one, two, three, four, five, or six dwelling units, a portion of which structure may also be used for nonresidential purposes.
## **Chapter 14A** {#struct-chapter-14a}
##### **§ 17:14A-1** Definitions {#sec-17-14a-1 omnilex-key=us-nj-statutes--title-17--17:14A-1}
As used in this chapter:
a. "Commissioner" means the Commissioner of Banking of New Jersey;
b. "Department" means the Department of Banking of New Jersey;
c. "Safe Deposit Company" means a corporation organized for the purpose of keeping, maintaining and renting for hire safe deposit boxes for the safekeeping of personal property;
d. "Safe deposit box" means a receptacle for the safekeeping of personal property;
e. "Lessor" means a safe deposit company;
f. "Safe" means a place for the storage and safekeeping of personal property;
g. "Vault" means a room or compartment that is designed for the storage and safekeeping of personal property, including safes and safe deposit boxes and having a size and shape which permits entrance and movement within by one or more persons.
##### **§ 17:14A-2** Applicability of chapter {#sec-17-14a-2 omnilex-key=us-nj-statutes--title-17--17:14A-2}
This chapter shall apply to all corporations organized prior to and after the effective date of this chapter.
##### **§ 17:14A-3** Carrying on safe deposit business {#sec-17-14a-3 omnilex-key=us-nj-statutes--title-17--17:14A-3}
A corporation organized under any law other than this chapter shall not be authorized to carry on a safe deposit business, but this section shall not apply to State or federally chartered banks, savings banks, savings and loan associations or credit unions.
##### **§ 17:14A-4** Use of words "safe deposit" {#sec-17-14a-4 omnilex-key=us-nj-statutes--title-17--17:14A-4}
A corporation organized under any law other than this chapter shall not use the words "safe deposit" as part of its name.
##### **§ 17:14A-5** Reservation of power {#sec-17-14a-5 omnilex-key=us-nj-statutes--title-17--17:14A-5}
This chapter may be supplemented, altered, amended or repealed by the Legislature, and every corporation to which this chapter applies shall be bound thereby.
##### **§ 17:14A-6** Incorporators {#sec-17-14a-6 omnilex-key=us-nj-statutes--title-17--17:14A-6}
Any five or more persons who are residents of this State, hereinafter referred to as incorporators, may associate to form a corporation for the purposes of a safe deposit company upon the terms and conditions set forth in this chapter.
##### **§ 17:14A-7** Certificate of incorporation {#sec-17-14a-7 omnilex-key=us-nj-statutes--title-17--17:14A-7}
The incorporators shall personally sign and prove or acknowledge as is required for deeds of real estate, a certificate of incorporation, which shall state:
a. The name of the corporation, which shall contain the words "safe deposit" , and the name of the corporation shall not be one already in use by another corporation nor so similar thereto as to deceive the public or lead to uncertainty or confusion;
b. The street, street number, if any, and the municipality in this State where its business is to be carried on;
c. Its purposes and objects;
d. The amount of its capital stock, which shall not be less than $200,000.00 and shall be divided into shares having a par value of not less than $2.00 per share and be fully subscribed for in the certificate;
e. The name, residence (including street and number, if any) post office address and occupation of each incorporator;
f. The number of shares subscribed for by each incorporator;
g. The period, if any, limited for the duration of the company; and
h. The certificate may contain any provisions, consistent with the provisions of this chapter, which the incorporators may choose to insert for the regulation of its business, the conduct of its affairs, or for the defining, limiting and regulating the powers of its directors.
##### **§ 17:14A-8** Original bylaws {#sec-17-14a-8 omnilex-key=us-nj-statutes--title-17--17:14A-8}
The original bylaws of the corporation shall be adopted by the incorporators.
##### **§ 17:14A-9** Application to commissioner for approval; notice of hearing {#sec-17-14a-9 omnilex-key=us-nj-statutes--title-17--17:14A-9}
The certificate of incorporation and the bylaws shall be submitted to the commissioner for his approval. Within 10 days thereafter, the commissioner shall give written notice to each incorporator, of the time and place designated by him for a hearing, by mailing the notice to each incorporator at the post-office address stated in the certificate of incorporation. The time designated for the hearing shall be not less than six weeks nor more than eight weeks after the date after receipt by the commissioner of the application.
##### **§ 17:14A-10** Publishing notice of application and hearing by incorporators {#sec-17-14a-10 omnilex-key=us-nj-statutes--title-17--17:14A-10}
The incorporators shall give public notice of the application and of the time and place designated by the commissioner for the hearing thereon, by publishing it prior to the time of hearing at least once a week for four weeks in at least one newspaper published and circulating in the municipality where the principal office of the safe deposit company will be located. If there is no newspaper published in the municipality, the notice shall be published in a newspaper having a general circulation in the municipality.
The notice shall also state the proposed name of the company, the name of the municipality where the principal office of the company will be located, the names and addresses, both residence and post office, of the incorporators, and the aggregate amount which they have agreed to invest in the company before it commences business.
##### **§ 17:14A-11** Mailing copy of notice to other companies; request to commissioner to furnish names {#sec-17-14a-11 omnilex-key=us-nj-statutes--title-17--17:14A-11}
The incorporators shall also mail or cause to be mailed, at least three weeks prior to the time designated for the hearing, a copy of the notice to all safe deposit companies having principal or branch offices within the county where the principal office of the proposed company is to be located.
The commissioner shall, upon the request of the incorporators, furnish a written list showing the names and street addresses of all safe deposit companies to which the notice shall be sent.
##### **§ 17:14A-12** Hearing; examination or investigation by commissioner {#sec-17-14a-12 omnilex-key=us-nj-statutes--title-17--17:14A-12}
At the hearing on the application to approve the certificate of incorporation or at any adjournment granted by the commissioner, anyone desiring to be heard shall be given the opportunity to be heard. The commissioner shall also make an independent examination or investigation of the application as the circumstances shall require. The commissioner may, in writing, waive a hearing on the application to approve the certificate of incorporation.
##### **§ 17:14A-13** Commissioner's findings {#sec-17-14a-13 omnilex-key=us-nj-statutes--title-17--17:14A-13}
The commissioner shall approve the application and issue a certificate of approval which shall be endorsed upon or annexed to the certificate of incorporation if he finds that:
a. The establishment of the company is in the public interest; and
b. Will be of benefit to the area proposed to be served; and
c. The amount of the capital stock appears adequate or if he deems it inadequate the amount of capital stock or other form of capital investment he deems appropriate; and
d. The company will have a reasonable prospect of success; and
e. The character, responsibility and general fitness of the incorporators command confidence and warrant belief that the business of the company will be honestly and efficiently conducted; and
f. The name proposed for the company conforms with the requirements of this chapter and that the proposed bylaws are proper; and
g. The company has filed proofs as to the mailing of notice and publication required by the chapter.
##### **§ 17:14A-14** Commissioner's decision {#sec-17-14a-14 omnilex-key=us-nj-statutes--title-17--17:14A-14}
Within 30 days after the close of the hearing, the commissioner shall announce his decision upon such application and file in his office, a written memorandum stating the reasons therefor which shall be open to public inspection; and he shall forthwith thereafter give written notice thereof to the incorporators.
##### **§ 17:14A-15** Filing certificate of incorporation as evidence {#sec-17-14a-15 omnilex-key=us-nj-statutes--title-17--17:14A-15}
If the application is approved by the commissioner, he shall endorse upon or annex to the certificate of incorporation a certificate of approval and the certificate of incorporation shall be filed in the department. The certificate or a copy thereof duly certified by the commissioner shall be evidence in all courts and places.
##### **§ 17:14A-16** Beginning of corporate existence; transaction of business {#sec-17-14a-16 omnilex-key=us-nj-statutes--title-17--17:14A-16}
Upon the filing of the certificate of incorporation as provided in R.S. 17:14A-15, the subscribers to the certificate, their successors and assigns, shall be a corporation by the name stated in the certificate, subject to the provisions of this chapter, but a safe deposit company shall not transact any business whatsoever, except that relating to its organization, until it has received a certificate of authority from the commissioner to transact business as hereinafter provided.
##### **§ 17:14A-17** Payment of capital; filing proof with commissioner {#sec-17-14a-17 omnilex-key=us-nj-statutes--title-17--17:14A-17}
The full amount of capital shall be paid in, in cash, before a safe deposit company transacts any business, except that which relates to its organization. The payment shall be certified to the commissioner under oath of two of its officers.
##### **§ 17:14A-18** Certificate of authority to transact business {#sec-17-14a-18 omnilex-key=us-nj-statutes--title-17--17:14A-18}
The commissioner shall issue a certificate of authority to a safe deposit company in which it shall be stated that the safe deposit company therein named has complied with the provisions of this chapter and is authorized to begin the transaction of business specified in the certificate of incorporation when he shall have verified by examination that:
a. The certificate of incorporation has been filed as provided in R.S. 17:14A-15;
b. The entire capital stock as stated in the certificate of incorporation has been fully paid in cash, unconditionally and without reservation;
c. The cash paid in or the capital stock is on deposit in a banking institution in this State, without offset, claim or demand whatsoever, and subject to withdrawal upon demand; and
d. Proof to the satisfaction of the commissioner that the proposed officers of the safe deposit company who will have control or supervision of the company's operations possess the qualifications, experience and character required for the duties and responsibilities with which they will be charged.
A copy of the certificate of authority shall be filed in the department.
##### **§ 17:14A-19** Time within which to issue certificate or notify company of refusal {#sec-17-14a-19 omnilex-key=us-nj-statutes--title-17--17:14A-19}
The commissioner shall, within 30 days after receipt of the company's certificate of incorporation and the verified certificate certifying as to the payment of capital, issue the certificate of authority to transact business or notify the safe deposit company in writing of his reasons for refusing it.
##### **§ 17:14A-20** Review of refusal to issue certificate of authority {#sec-17-14a-20 omnilex-key=us-nj-statutes--title-17--17:14A-20}
The commissioner's failure to issue the certificate of authority or to notify the company in writing of his reasons for refusal to issue the certificate of authority within the time specified in R.S. 17:14A-19 shall be subject to review by appeal to the Appellate Division of the Superior Court.
##### **§ 17:14A-21** Dissolution for failure to obtain certificate of authority or commence business {#sec-17-14a-21 omnilex-key=us-nj-statutes--title-17--17:14A-21}
If a safe deposit company shall fail to obtain a certificate of authority within six months from the date of the commissioner's approval of its certificate of incorporation or within the extended time hereinafter provided, or if the safe deposit company shall fail to commence business within six months after the issuance of the certificate of authority or within the extended time hereinafter provided, the commissioner may make an order, to be filed in the department, forfeiting the safe deposit company's rights, powers and privileges as a corporation, and upon the filing of the order the corporate rights, powers and privileges of the safe deposit company shall cease. The commissioner may, upon good cause shown, extend the time to obtain a certificate of authority or commence business. The extension or extensions shall be for a period or periods as the commissioner may specify, not exceeding 12 months in all, and shall be evidenced by a certificate or certificates of the commissioner filed in the department.
##### **§ 17:14A-22** Tolling of time to obtain certificate of authority or commence business {#sec-17-14a-22 omnilex-key=us-nj-statutes--title-17--17:14A-22}
If proceedings are instituted to review the commissioner's approval of an application to file a certificate of incorporation or to review the commissioner's failure to issue a certificate of authority, the period from the date of the commissioner's approval or failure to issue a certificate of authority to the entry of the final judgment in the proceedings shall not be considered in computing any 12 months' period limited in R.S. 17:14A-21.
##### **§ 17:14A-23** Powers {#sec-17-14a-23 omnilex-key=us-nj-statutes--title-17--17:14A-23}
In addition to the powers conferred by Title 14A of the New Jersey Statutes, Corporations, General, so far as they are not inconsistent with the provisions of this chapter, a safe deposit company may, as lessor, lease vaults, safe deposit boxes and other receptacles for the storage and safe keeping of personal property upon terms and conditions as may be prescribed by the safe deposit company with the lessees of the vaults, safe deposit boxes and other receptacles, but a safe deposit company shall not make any loans or advances upon any property left with it for storage nor have the power to transact the business of a bank, savings bank or savings and loan association or any other business except that of a safe deposit company.
##### **§ 17:14A-24** Directors; number; election; term {#sec-17-14a-24 omnilex-key=us-nj-statutes--title-17--17:14A-24}
The affairs of a safe deposit company shall be managed by a board of at least five directors elected by the stockholders of the company at each annual meeting. The persons receiving the greatest number of votes shall be the directors. The directors shall hold office for one year and until their successors are elected and qualified.
##### **§ 17:14A-25** Directors; voting rights of stockholders {#sec-17-14a-25 omnilex-key=us-nj-statutes--title-17--17:14A-25}
At a meeting of stockholders for the election of directors, a stockholder shall be entitled to one vote for each share of stock owned. A stockholder may vote by a proxy in writing signed by him.
##### **§ 17:14A-26** Directors; oath {#sec-17-14a-26 omnilex-key=us-nj-statutes--title-17--17:14A-26}
Each director shall, following his election and before the assumption of any duties as a director, take an oath that he will, so far as the duty devolves upon him, diligently and honestly administer the affairs of the safe deposit company, and that he will not knowingly violate or knowingly permit to be violated any provision of this chapter. The oath subscribed by the director and certified by the officer before whom it is taken shall be transmitted to and filed in the office of the commissioner.
##### **§ 17:14A-27** Bonding of directors, officers and employees {#sec-17-14a-27 omnilex-key=us-nj-statutes--title-17--17:14A-27}
Every safe deposit company shall, at its own expense, cause to be bonded, by a surety company or companies authorized to transact business in New Jersey, each director, all officers and employees of the company in an amount as shall be approved by the board of directors. The bonds may be individual bonds or may be one or more blanket bonds. The board of directors shall annually examine all the bonds, shall pass upon their sufficiency and may require a new bond or bonds or increases in the amounts thereof. The commissioner may from time to time order an increase in the amounts of the bonds. A bond shall not be deemed to comply with this section unless the bond contains a provision that it shall not be cancellable for any cause unless notice of intention to cancel is filed in the office of the commissioner at least five days before the day upon which cancellation is to take effect.
##### **§ 17:14A-28** Bonding of directors, officers and employees; waiver {#sec-17-14a-28 omnilex-key=us-nj-statutes--title-17--17:14A-28}
If a safe deposit company is unable to obtain the bond or bonds required by R.S. 17:14A-27, the commissioner may, in his discretion, waive the requirements of R.S. 17:14A-27 for a period of one year, upon terms as he may deem appropriate, that the company is adequately capitalized and that a waiver will not otherwise endanger the financial condition of the company.
##### **§ 17:14A-29** Branch offices; capital requirements; location {#sec-17-14a-29 omnilex-key=us-nj-statutes--title-17--17:14A-29}
A safe deposit company may, pursuant to a resolution of its board of directors and by an amendment to its certificate of incorporation to increase its capital stock in an amount of at least $100,000.00 for each branch office to be established and maintained, establish and maintain a branch office or offices as hereinafter provided.
##### **§ 17:14A-30** Branch offices; application, approval {#sec-17-14a-30 omnilex-key=us-nj-statutes--title-17--17:14A-30}
Before a branch office shall be established, the safe deposit company shall file a written application in the department for the commissioner's approval. The commissioner shall, within 90 days after the filing of the application, approve the application if he finds, after investigation or hearings or both, that:
a. The safe deposit company has complied with R.S. 17:14A-29;
b. The interests of the public will be served to advantage by the establishment of the branch office; and
c. The conditions in the locality in which the proposed branch is to be established afford reasonable promise of successful operation.
##### **§ 17:14A-31** Branch offices; failure to open and operate {#sec-17-14a-31 omnilex-key=us-nj-statutes--title-17--17:14A-31}
The failure of a safe deposit company to open and operate a branch office within six months after the commissioner approves the application therefor shall automatically terminate the right of safe deposit company to open the branch office, and it shall make no further application to establish a branch office at the location, or in the area which would be served by a safe deposit company doing business at the location, until after the expiration of one year from the date of such approval; except that, for good cause shown, the commissioner may, in his discretion, on application of the safe deposit company made before the expiration of the six months period, extend for additional periods, not in excess of six months each, the time within which the branch office may be opened.
##### **§ 17:14A-32** Branch offices; discontinuance {#sec-17-14a-32 omnilex-key=us-nj-statutes--title-17--17:14A-32}
By resolution of its board of directors, a safe deposit company may discontinue a branch office. Upon adoption of the resolution, the safe deposit company shall file a certificate in the department specifying the location of the branch office to be discontinued, and the date upon which the discontinuance shall be effective.
##### **§ 17:14A-33** Change of principal or branch office; application {#sec-17-14a-33 omnilex-key=us-nj-statutes--title-17--17:14A-33}
A safe deposit company may change the location of its principal office or of a branch office to a location by filing an application in the department.
##### **§ 17:14A-34** Change of principal or branch office; approval {#sec-17-14a-34 omnilex-key=us-nj-statutes--title-17--17:14A-34}
The commissioner shall approve the application for a change of location of the principal office of a safe deposit company or a branch office if it shall appear from the application or from any investigation he may make that the area to be served by the office after its change in location would not be substantially different from the area previously served by the office.
##### **§ 17:14A-35** Merger {#sec-17-14a-35 omnilex-key=us-nj-statutes--title-17--17:14A-35}
Any safe deposit company may, with the approval of the commissioner, merge with any other safe deposit company, bank, savings bank or savings and loan association subject to any applicable law relating to the merger of banks, savings banks or savings and loan associations as hereinafter provided. In a merger with a bank, savings bank or savings and loan association, the surviving company shall be a bank, savings bank or savings and loan association.
##### **§ 17:14A-36** Merger agreement; authorization {#sec-17-14a-36 omnilex-key=us-nj-statutes--title-17--17:14A-36}
The boards of directors of each company proposing to merge shall authorize the execution of a merger agreement which shall contain:
a. The names of the safe deposit companies proposing to merge and the location of the principal office and branch offices of the merging company;
b. The name of the company into which they propose to merge, which is hereinafter designated as the surviving company;
c. The location of the principal office of the surviving company;
d. The names of the persons who will be the directors of the surviving company;
e. The names of the persons who will be the officers of the surviving company;
f. The locations then occupied by the principal offices, branch offices of the merging companies and the surviving company which will be continued as branch offices of the surviving company;
g. The effective date of the merger;
h. The amount of capital stock, the number of shares into which it will be divided, the par value of each share, which the surviving company will have after the merger is affected;
i. The manner and basis of converting the shares of each merging company into shares, other securities, or obligations of the surviving company, or into cash or other consideration which may include shares or other securities or obligations of a corporation not a party to the merger, or into any combinations thereof;
j. A statement of any amendments in the certificate of incorporation of the surviving company to be effected by the merger; and
k. Any other provisions, not inconsistent with this chapter, which may be necessary or appropriate to effect the merger.
##### **§ 17:14A-37** Consolidation {#sec-17-14a-37 omnilex-key=us-nj-statutes--title-17--17:14A-37}
Any two or more safe deposit companies may, with the approval of the commissioner, consolidate into a new company as hereinafter provided.
##### **§ 17:14A-38** Consolidation plan; authorization {#sec-17-14a-38 omnilex-key=us-nj-statutes--title-17--17:14A-38}
The boards of directors of each safe deposit company proposing to consolidate into a new company shall authorize the execution of a plan of consolidation which shall contain:
a. The names of the safe deposit companies proposing to consolidate;
b. The name of the new company into which the safe deposit companies propose to consolidate, which is hereinafter designated as the new company;
c. The location of the principal office of the new company;
d. The names of the persons who will be directors of the new company;
e. The names of the persons who will be officers of the new company;
f. The effective date of the consolidation;
g. The amount of capital stock, the number of shares into which it will be divided, the par value of each share, which the new company will have after the consolidation is effective;
h. The manner and basis of converting the shares of each company into shares, other securities or obligations of the new company, or into cash or other consideration which may include shares or other securities or obligations of a corporation not a party to the consolidation, or any combination thereof;
i. With respect to the new corporation, all of the statements required to be set forth in the certificate of incorporation for companies organized under this chapter, except it will not be necessary to set forth the names and addresses of each incorporator; and
j. Any other provisions, not inconsistent with this chapter, which may be necessary or appropriate to effect the consolidation.
##### **§ 17:14A-39** Approval or disapproval of merger agreement or consolidation plan by commissioner {#sec-17-14a-39 omnilex-key=us-nj-statutes--title-17--17:14A-39}
The merger agreement or consolidation plan, executed by all the parties thereto, shall be submitted to the commissioner who shall, within 60 days from the date of submission, endorse thereon his approval or disapproval. If the commissioner shall disapprove the agreement or plan, he shall forthwith file a memorandum in the department stating the reasons for his disapproval, and shall mail a copy of the memorandum to each of the companies which is a party to the merger agreement or consolidation plan. The commissioner shall not withhold his approval unless he shall find that the merger agreement or consolidation plan contains provisions which do not conform to this chapter, or that the merger or consolidation will not be in the public interest.
##### **§ 17:14A-40** Review of commissioner's disapproval of merger agreement or consolidation plan {#sec-17-14a-40 omnilex-key=us-nj-statutes--title-17--17:14A-40}
The commissioner's disapproval of a merger agreement or consolidation plan, as provided in R.S. 17:14A-39, shall be subject to review by appeal to the Appellate Division of the Superior Court.
##### **§ 17:14A-41** Submission of merger agreement or consolidation plan to stockholders {#sec-17-14a-41 omnilex-key=us-nj-statutes--title-17--17:14A-41}
If the commissioner approves the merger agreement or consolidation plan, or if the merger agreement or consolidation plan is approved after review as provided in R.S. 17:14A-40, it shall, within 180 days after the date of approval, be submitted to the stockholders of each of the companies which are parties to the agreement or plan, at separate meetings called for that purpose upon at least 20 days' notice prior to the meeting, by mail, postage prepaid, addressed to each stockholder at his address as it appears on the books of the company. The notice shall specify the place, day and the hour of the meeting and the nature of the business to be transacted. A copy of the merger agreement or consolidation plan shall be mailed to each stockholder of each company, together with the notice of the meeting.
##### **§ 17:14A-42** Approval by stockholders; filing agreement or plan {#sec-17-14a-42 omnilex-key=us-nj-statutes--title-17--17:14A-42}
If the merger agreement or consolidation plan is approved by the affirmative vote of 2/3 of the stockholders of each company, that fact shall be certified as to each company by its president or a vice president and the certifications shall be attached to the merger agreement or consolidation plan and filed in the department at which time it shall become effective.
##### **§ 17:14A-43** Merger agreement or consolidation plan as evidence {#sec-17-14a-43 omnilex-key=us-nj-statutes--title-17--17:14A-43}
A copy of the merger agreement or consolidation plan, certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:14A-44** Recording copy of merger agreement or consolidation plan with county recording officer {#sec-17-14a-44 omnilex-key=us-nj-statutes--title-17--17:14A-44}
A copy of the merger agreement or consolidation plan, certified by the commissioner, may be recorded in the office of the county recording officer charged with the duty of recording instruments affecting title to real property in the county, and the record shall have the same effect as if duly executed and acknowledged deeds to real property and assignments of mortgages affecting real or personal property owned by the merging or consolidating companies had been made and delivered by the merging companies to the surviving company and the consolidating companies to the new company, and had been duly recorded.
##### **§ 17:14A-45** Effect of merger or consolidation {#sec-17-14a-45 omnilex-key=us-nj-statutes--title-17--17:14A-45}
Upon the merger or consolidation of two or more safe deposit companies:
a. The parties to the merger agreement or plan of consolidation shall be a single company, which, in the case of a merger, shall be the corporation designated in the merger agreement as the surviving company, and in the case of a consolidation, shall be the new company provided for in the consolidation plan;
b. The separate existence of all parties to the merger agreement or consolidation plan, except the surviving company or new company, shall cease;
c. The surviving or new company shall, to the extent consistent with its certificate of incorporation as amended or established by the merger or consolidation, possess all the rights, privileges, powers, immunities, purposes and franchises, both public and private, of each of the merging or consolidating companies;
d. All real property and personal property, tangible and intangible, of every kind and description, belonging to each of the companies so merged or consolidated shall be vested in the surviving or new company without further act or deed, and the title to any real estate, or any interest therein, vested in any of the companies shall not revert or be in any way impaired by reason of the merger or consolidation;
e. The surviving or new company shall be liable for all the obligations and liabilities of each of the companies so merged or consolidated, and any claim existing or action or proceeding pending by or against any of the companies may be enforced as if the merger or consolidation had not taken place and neither the rights of creditors nor any liens upon, or security interests in, the property of any of the companies shall be impaired by the merger or consolidation;
f. In the case of a merger, the certificate of incorporation of the surviving company shall, without further act or deed, be amended to the extent, if any, stated in the plan of merger, and, in the case of a consolidation, the statements set forth in the certificate of consolidation and which are required or permitted to be set forth in the certificate of incorporation of companies organized under this chapter shall be the certificate of incorporation of the new company; and
g. The directors named in the merger agreement or consolidation plan shall be the directors of the surviving company or new company and shall serve until the time new directors are elected at the annual meeting of stockholders following the effective date of the merger or consolidation.
##### **§ 17:14A-46** Merger or consolidation; issuance of new stock certificates {#sec-17-14a-46 omnilex-key=us-nj-statutes--title-17--17:14A-46}
A surviving company or the new company resulting from a merger or consolidation shall require each stockholder of a company participating in a merger or consolidation to surrender his certificates of capital stock of each participating company, and shall upon the surrender thereof, issue or deliver in lieu thereof, certificates for the number of its own shares of capital stock, or other securities or obligations of the surviving company or new company, or cash or other consideration including shares or other securities or obligations of a corporation not a party to the merger or consolidation, as the stockholder is entitled to receive pursuant to the terms of the merger agreement or consolidation plan.
##### **§ 17:14A-47** Liability of stockholders {#sec-17-14a-47 omnilex-key=us-nj-statutes--title-17--17:14A-47}
The holders of shares of capital stock of a safe deposit company shall not be liable, by reason of their owning the stock, for any debts, contracts or obligations of the safe deposit company.
##### **§ 17:14A-48** Language in rental agreement {#sec-17-14a-48 omnilex-key=us-nj-statutes--title-17--17:14A-48}
An agreement for the rental of vaults, safe deposit boxes, and other receptacles for the storage and safekeeping of personal property shall be written in simple, clear, understandable and easily readable language as provided in P.L.1980, c. 125 (C. 56:12-1 et seq.).
##### **§ 17:14A-49** Notice to lessee as to insurance and contents of vaults, etc. {#sec-17-14a-49 omnilex-key=us-nj-statutes--title-17--17:14A-49}
An agreement for the rental vaults, safe deposit boxes or other receptacles for the storage and safekeeping of personal property shall contain language in bold face type substantially as follows:
Important Notice
The contents of your vault, safe deposit box or storage receptacle are not protected against loss by the lessor unless specifically indicated in this notice, and for your protection you may wish to secure your own insurance for protection against loss with an insurance company of your own choice.
You should keep a complete list and description of all your property stored in your vault, safe deposit box or storage receptacle and any available proof of ownership.
A copy of the notice shall be posted in the principal office of the company and in each branch office and shall be given to each lessee before the lessee enters into an agreement for the rental of a vault, safe deposit box or other receptacle for the storage and safekeeping of personal property.
##### **§ 17:14A-50** Books and records {#sec-17-14a-50 omnilex-key=us-nj-statutes--title-17--17:14A-50}
A safe deposit company shall keep and maintain all books and records required by law and in addition thereto shall keep and maintain all books and records as may be required under rules and regulations promulgated by the commissioner pursuant to P.L.1958, c. 66 (C. 17:1-8.1 et seq.), and a list setting forth the names and addresses of all lessees, together with the numbers of their respective safe deposit boxes.
##### **§ 17:14A-51** Proceedings for unpaid rental {#sec-17-14a-51 omnilex-key=us-nj-statutes--title-17--17:14A-51}
If the amount due for the rental of any vault, safe deposit box or receptacle for the storage and safekeeping of personal property of any safe deposit company or bank, savings bank, or savings and loan association authorized to conduct a safe deposit business under the laws of this State has not been paid for one year, the safe deposit company, bank, savings bank, savings and loan association may at any time after the expiration of the year send a written notice by registered mail addressed to the lessee or lessees in whose name the vault, safe deposit or receptacle stands on its records, directed to the address on its records, that if the rental for the vault, safe deposit box or receptacle is not paid within 30 days after the date of the mailing of the notice, it will have the vault, safe deposit box or receptacle opened in the presence of one of its officers and of a notary public not in its employ, and the contents thereof, if any, placed in a sealed package by the notary public, marked by him with the name of the lessee or lessees in whose name the vault, safe deposit box or receptacle stands and the estimated value thereof, and the package so sealed and marked will be placed in one of the general vaults, safes or boxes of the safe deposit company, bank, savings bank or savings and loan association. The notary's proceedings shall be set forth in a certificate under his official seal, and the certificate shall be delivered to the savings and loan association, bank, savings bank or safe deposit company. The safe deposit company, bank, savings bank or savings and loan association shall have a lien on the contents of the vault, safe deposit box or receptacle so removed for the amount due to it for the rental of the vault, safe deposit box or receptacle up to the time of the removal of the contents, and for the costs and expenses, if any incurred in its opening, repairing and restoration for use. If the lien is not paid and discharged within one year from the opening of the vault, safe deposit box or receptacle and the removal of its contents, the safe deposit company, bank, savings bank or savings and loan association may sell the contents at public auction, or so much thereof as is required, to pay and discharge the lien and expenses of sale. A notice of the date, time and place of the sale shall be advertised in a newspaper having a general circulation in the county within which the principal office of the safe deposit company, bank, savings bank or savings and loan association is located, at least once a week for two successive weeks prior to the sale. The safe deposit company, bank, savings bank or savings and loan association may retain from the proceeds of sale the amount due to it for its lien and the expenses of sale. The balance of the proceeds of the sale and the unsold contents, if any, shall be held to be paid and delivered to the lessee or owner of the contents of the vault, safe deposit box or receptacle so sold.
If the balance of the proceeds of sale and the unsold contents, if any, remain unclaimed by the owner for the time prescribed in the "Uniform Unclaimed Property Act (1981)," R.S.46:30B-1 et seq., it shall be presumed to be abandoned and disposed of as therein provided.
##### **§ 17:14A-52** Accessibility to vault, safe deposit box or receptacle {#sec-17-14a-52 omnilex-key=us-nj-statutes--title-17--17:14A-52}
The right of access to a vault, safe deposit box or receptacle rented to a lessee by a safe deposit company shall be governed by the rental agreement, the provisions of P.L.1955, c. 151 (C. 46:39-1 et seq.), R.S. 54:35-19 and R.S. 54:35-20.
##### **§ 17:14A-53** Control of safe deposit company {#sec-17-14a-53 omnilex-key=us-nj-statutes--title-17--17:14A-53}
It shall be unlawful for any person or company, except with the approval of the commissioner, to acquire control of a safe deposit company incorporated under this chapter.
##### **§ 17:14A-54** Control of safe deposit company; "control" defined {#sec-17-14a-54 omnilex-key=us-nj-statutes--title-17--17:14A-54}
As used in R.S. 17:14A-53, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a safe deposit company, whether by means of the ownership of the stock or equity interests of the safe deposit company by means of a contractual arrangement, or otherwise. Control shall be presumed to exist if any person or company, directly or indirectly, owns, controls or holds with power to vote 10% or more of the stock of the safe deposit company or of any company which owns, controls or holds with power to vote 10% or more of the stock of the safe deposit company, but a person shall not be deemed to control a safe deposit company solely by reason of his being an officer or director of the safe deposit company.
##### **§ 17:14A-55** Control of safe deposit company; "company" defined {#sec-17-14a-55 omnilex-key=us-nj-statutes--title-17--17:14A-55}
As used in R.S. 17:14A-53, "company" means a corporation, joint stock company, business trust, investment trust, general or limited partnership, voting trust, association, and any similar organized group of persons, whether incorporated or not, and whether or not organized or incorporated under the laws of this State or any other state or any territory or possession of the United States or under the laws of a foreign country, territory, colony or possession thereof.
##### **§ 17:14A-56** Control of safe deposit company; application to commissioner {#sec-17-14a-56 omnilex-key=us-nj-statutes--title-17--17:14A-56}
A person or company seeking to acquire control of a safe deposit company shall file a written application therefor with the commissioner which shall be in such form and contain such information as the commissioner may require.
##### **§ 17:14A-57** Control of safe deposit company; investigation by commissioner {#sec-17-14a-57 omnilex-key=us-nj-statutes--title-17--17:14A-57}
After the filing of the application as provided in R.S. 17:14A-56, the commissioner shall conduct an investigation to determine whether:
a. The acquisition of control of the safe deposit company is not contrary to law;
b. The acquisition of control of the safe deposit company is in the best interest of the public;
c. The character, responsibility and general fitness of the person or company seeking to acquire control of the safe deposit company are such as to command confidence and warrant belief that the business of the safe deposit company will be honestly and efficiently conducted in a manner consistent with the public interest, the interests of lessees and creditors of the safe deposit company; and
d. The exercise of control of the safe deposit company may impair the safe and sound conduct of the business of the safe deposit company, the conservation of its assets or public confidence in its business.
##### **§ 17:14A-58** Control of safe deposit company; approval or disapproval of application {#sec-17-14a-58 omnilex-key=us-nj-statutes--title-17--17:14A-58}
The commissioner shall notify the applicant in writing of his approval or disapproval of the application to acquire control within 90 days after its filing unless he shall advise the applicant in writing before the expiration of the 90-day period of his determination to extend the period for an additional 90 days. If the commissioner shall disapprove the application, he shall set forth his reasons therefor in the notification to the application.
##### **§ 17:14A-59** Control of safe deposit company; review of commissioner's disapproval {#sec-17-14a-59 omnilex-key=us-nj-statutes--title-17--17:14A-59}
The commissioner's disapproval of an application to acquire control of a safe deposit company shall be subject to review by appeal in the Appellate Division of the Superior Court.
##### **§ 17:14A-60** Communications received from the commissioner {#sec-17-14a-60 omnilex-key=us-nj-statutes--title-17--17:14A-60}
Every official communication directed to and received by a safe deposit company or any of its officers or directors shall be submitted to the board of directors at the board's next meeting following receipt and noted in the minutes of the meeting.
##### **§ 17:14A-61** Examination of safe deposit company affairs; by whom made {#sec-17-14a-61 omnilex-key=us-nj-statutes--title-17--17:14A-61}
The board of directors of a safe deposit company shall have an examination of the company's affairs made, from time to time, by or under the supervision of a person who is a certified public accountant, a public accountant or a person whose qualifications for making the examination have been approved by the commissioner. A person who is an officer, director or employee of the company or who was an officer, director or employee of the company within a period of 13 months preceding the commencement of the examination shall not participate in any examination required by this section.
##### **§ 17:14A-62** Examination of safe deposit company affairs; scope {#sec-17-14a-62 omnilex-key=us-nj-statutes--title-17--17:14A-62}
The scope of examinations made as required by R.S. 17:14A-61 shall be as determined by regulations of the commissioner or, in the absence of regulations, by the board of directors of the company.
##### **§ 17:14A-63** Examination of safe deposit company affairs; when made {#sec-17-14a-63 omnilex-key=us-nj-statutes--title-17--17:14A-63}
An examination pursuant to R.S. 17:14A-61 shall be made at least once in each calendar year and shall be commenced not less than six months and not more than 15 months following the commencement of the preceding examination made pursuant to R.S. 17:14A-61, but an examination shall not be commenced when an examination is being made pursuant to R.S. 17:14A-70. The board of directors may, whenever it deems it advisable, have examinations made of the company's affairs other than as required by this section.
##### **§ 17:14A-64** Examination of safe deposit company affairs; report; statement by directors; filing {#sec-17-14a-64 omnilex-key=us-nj-statutes--title-17--17:14A-64}
Within 60 days after completion of an examination made pursuant to R.S. 17:14A-61, a report thereof, in a form prescribed by the commissioner, certified by the person by whom and under whose supervision the examination was made, shall be presented to the directors at a meeting of the board. The board of directors shall have a statement prepared setting forth in detail the assets and their values, liabilities and net worth of the company. Within the time specified in this section, the directors shall file a copy of the statement and a certified copy of the report with the commissioner.
##### **§ 17:14A-65** Examination of safe deposit company affairs; curtailment or extension of time by commissioner {#sec-17-14a-65 omnilex-key=us-nj-statutes--title-17--17:14A-65}
The commissioner shall have power, for good cause shown, to curtail the six-month period, and to extend the 15-month period specified in R.S. 17:14A-63 for a period not exceeding one month in either case, and to extend the 60-day period specified in R.S. 17:14A-64 for a period not exceeding 30 days. An extension or curtailment shall not be allowed by the commissioner which will result in the lapse of a calendar year without the commencement of an examination pursuant to R.S. 17:14A-63.
##### **§ 17:14A-66** Reports to commissioner as to assets and liabilities {#sec-17-14a-66 omnilex-key=us-nj-statutes--title-17--17:14A-66}
A safe deposit company shall make and file with the commissioner, in the form prescribed by the commissioner, periodic reports as the commissioner may from time to time request setting forth in detail and under appropriate heads the assets and liabilities of the company at the close of business on any day specified by the commissioner. The report shall be filed by the company within 10 days after receipt of the request. The report shall be attested by at least three directors who are not officers of the company, and shall be verified by the oaths of at least two officers of the company. The commissioner may extend the time within which the report shall be filed for not more than 10 days.
##### **§ 17:14A-67** Special reports as to condition of company {#sec-17-14a-67 omnilex-key=us-nj-statutes--title-17--17:14A-67}
The commissioner shall have the power to call for special reports from a safe deposit company when, in his judgment, a special report is necessary to obtain a full and complete knowledge as to the company's condition. The special report shall be filed with the commissioner within 10 days after receipt of the request.
##### **§ 17:14A-68** Penalty for failure to make and file report {#sec-17-14a-68 omnilex-key=us-nj-statutes--title-17--17:14A-68}
A safe deposit company which fails to make and file a report as required pursuant to R.S. 17:14A-66 and R.S. 17:14A-67 shall be subject to a penalty of $100.00 for each day during which the failure continues, to be recovered by the State in a civil action prosecuted by the Attorney General.
##### **§ 17:14A-69** Publication of report {#sec-17-14a-69 omnilex-key=us-nj-statutes--title-17--17:14A-69}
A summary of each report filed pursuant to R.S. 17:14A-66, in a form prescribed by the commissioner, shall be published by the safe deposit company once in a newspaper having a general circulation in the county in which the company's principal office is located within two weeks after the report is filed. The cost of publication shall be paid by the company and a proof of publication filed with the commissioner. A copy of the report shall be made available to any person requesting it.
##### **§ 17:14A-70** Examination of safe deposit companies by commissioner {#sec-17-14a-70 omnilex-key=us-nj-statutes--title-17--17:14A-70}
The commissioner shall, whenever and as often as he shall deem it advisable, cause the affairs of every safe deposit company to be examined to determine whether the company is conducting its business in conformity with the laws of this State and its certificate of incorporation, and with safety to its lessees, creditors and the public.
The officers and employees of every safe deposit company, being examined shall exhibit to the examiners all its securities, books, records and accounts and shall otherwise facilitate the examination so far as it may be in their power.
##### **§ 17:14A-71** Examination of safe deposit companies by commissioner; examination of witnesses {#sec-17-14a-71 omnilex-key=us-nj-statutes--title-17--17:14A-71}
The commissioner, a deputy commissioner, and every examiner assigned by the commissioner or by a deputy commissioner to examine the affairs of a company may administer an oath to any person whose testimony is required for the purposes of the examination. The commissioner or deputy commissioner may compel the appearance of any person for the purposes of examination, by subpena ad testificandum and the production of books, papers, documents or records by subpena duces tecum.
##### **§ 17:14A-71.1** Examinations confidential {#sec-17-14a-71.1 omnilex-key=us-nj-statutes--title-17--17:14A-71.1}
Every report and copy of a report of examination of a safe deposit company made by or under the supervision of the commissioner shall be confidential and shall not be made public by any officer, director or employee of a safe deposit company.
##### **§ 17:14A-71.2** Examinations confidential; evidence; subpenas {#sec-17-14a-71.2 omnilex-key=us-nj-statutes--title-17--17:14A-71.2}
Every report and copy of a report of examination of a safe deposit company made by or under the supervision of the commissioner shall not be subject to subpena or to admission into evidence in any court, except pursuant to an order of the court made upon notice of the commissioner affording the commissioner an opportunity to advise the court of reasons for excluding the report or any portion thereof from evidence. The court shall order the issuance of a subpena for the production of or the admission into evidence of a report or portion thereof only after it is satisfied that it is material and relevant to the issues in the proceedings, and the ends of justice and the public interest will be served thereby. This section shall not apply to any action or proceeding instituted by the commissioner or the Attorney General pursuant to any law of this State.
##### **§ 17:14A-72** Commissioner's powers on ultra vires, unlawful and unsafe practices {#sec-17-14a-72 omnilex-key=us-nj-statutes--title-17--17:14A-72}
If the commissioner finds that a safe deposit company is violating the provisions of its certificate of incorporation, or is conducting its business in violation of any law of this State, or in an unsafe manner, he shall order the safe deposit company to cease its ultra vires, unlawful or unsafe practices, as the case may be.
##### **§ 17:14A-73** Review of commissioner's order to cease ultra vires, unlawful or unsafe practices {#sec-17-14a-73 omnilex-key=us-nj-statutes--title-17--17:14A-73}
An order of the commissioner made pursuant to R.S. 17:14A-72 shall be subject to review by appeal to the Appellate Division of the Superior Court. The institution of proceedings for review shall suspend the accrual of the penalties provided for by R.S. 17:14A-74 until the final determination of the proceedings.
##### **§ 17:14A-74** Penalty for failure to comply with commissioner's order as to ultra vires, unlawful and unsafe practices {#sec-17-14a-74 omnilex-key=us-nj-statutes--title-17--17:14A-74}
A safe deposit company which continues to violate the provisions of its certificate of incorporation or which continues to conduct its business in violation of any law of this State, or in an unsafe manner, after having been ordered by the commissioner to cease those practices, shall be liable to a penalty of $1,000.00 to be recovered with costs by the State in a court of competent jurisdiction in a civil action prosecuted by the Attorney-General, and it shall be liable to a like penalty for each day's additional default from and after the time specified in the order. The penalty provided by this section shall be in addition to and not in lieu of any other provision of law applicable upon a safe deposit company's failure to comply with an order of the commissioner.
##### **§ 17:14A-75** Removal of director or officer {#sec-17-14a-75 omnilex-key=us-nj-statutes--title-17--17:14A-75}
Whenever, in the opinion of the commissioner, any director or officer of a safe deposit company has and continues to violate any law relating to a safe deposit company or has or continues unsafe or unsound practices in conducting the business of the safe deposit company after having been directed by the commissioner to discontinue the violation of law or the unsafe or unsound practices, the commissioner may cause notice to be served upon the director or officer to appear and show cause before him why he should not be removed from office. A copy of a notice so served shall be sent to each of the other directors of the safe deposit company by registered mail. If, after granting the director or officer a reasonable opportunity to be heard, the commissioner finds that he has and continues to violate any law relating to the safe deposit company, or has and continues unsafe or unsound practices in conducting the business of the safe deposit company, after having been directed by the commissioner to discontinue the violation of law or the unsafe or unsound practices, the commissioner may make an order removing the director or officer from office. A copy of the order shall be served upon the director or officer and upon the safe deposit company of which he is a director or officer. After the service of the copies of the order, the director or officer shall cease to be a director or officer of the safe deposit company.
##### **§ 17:14A-76** Participation in management of company after removal from office {#sec-17-14a-76 omnilex-key=us-nj-statutes--title-17--17:14A-76}
Any director or officer who, after service upon him of a copy of the order removing him from office, participates in any manner in the management of the safe deposit company is guilty of a disorderly persons offense.
##### **§ 17:14A-77** Record of proceedings to remove director or officer not to be made public; exception {#sec-17-14a-77 omnilex-key=us-nj-statutes--title-17--17:14A-77}
No part of the record of any proceedings under R.S. 17:14A-75 shall be made public or disclosed to anyone except the director or officer involved and the other directors of the safe deposit company involved, except in connection with proceedings brought pursuant to R.S. 17:14A-76.
##### **§ 17:14A-77.1** Review of commissioner's order to remove director or officer {#sec-17-14a-77.1 omnilex-key=us-nj-statutes--title-17--17:14A-77.1}
An order by the commissioner made pursuant to R.S. 17:14A-75 shall be subject to review by appeal to the Appellate Division of the Superior Court.
##### **§ 17:14A-78** Costs of examination of safe deposit company {#sec-17-14a-78 omnilex-key=us-nj-statutes--title-17--17:14A-78}
Every safe deposit company shall pay to the commissioner for the use of the State the reasonable costs of each examination of its affairs made pursuant to this chapter. The Attorney General may prosecute an action in the name of and for the benefit of the State, in a court of competent jurisdiction, against any safe deposit company which fails to pay the costs of examination.
##### **§ 17:14A-79** Filing documents and reports {#sec-17-14a-79 omnilex-key=us-nj-statutes--title-17--17:14A-79}
All documents and reports which are required to be filed by a corporation pursuant to the provisions of Title 14A, Corporations, General, of the New Jersey Statutes and which apply to a safe deposit company shall be filed in the department.
##### **§ 17:14A-80** Custodial possession by commissioner; causes {#sec-17-14a-80 omnilex-key=us-nj-statutes--title-17--17:14A-80}
The commissioner shall have the authority to institute an action in the Superior Court to take custodial possession of the property of any safe deposit company:
a. Which has filed for bankruptcy or has been adjudicated a bankrupt;
b. Which is insolvent or has been placed in receivership;
c. Against which any proceedings have been instituted for bankruptcy, insolvency, receivership, agreement of composition or assignment for the benefit of creditors;
d. Against which a summary dispossess action has been instituted;
e. Against which has been issued a judgment, writ of execution, levy or sale;
f. Which has violated the provisions of its certificate of incorporation or any law of this State;
g. Which has refused to submit its books, papers, records, documents, and things to the inspection of the commissioner or any examiner appointed by him;
h. Whose officer or director has refused to be examined upon oath concerning the affairs of the safe deposit company or has refused to answer questions under oath or to produce any books, papers, records, or documents of the safe deposit company in his possession, custody or control;
i. Which has suspended its business for want of funds to carry on its business;
j. Which is, in the opinion of the commissioner, in an unsafe or unsound condition to transact business.
##### **§ 17:14A-81** Custodial possession by commissioner; purpose {#sec-17-14a-81 omnilex-key=us-nj-statutes--title-17--17:14A-81}
Possession by the commissioner shall be for the sole purpose of serving as a custodian of the safe deposit company until the lessees of the vaults, safe deposit boxes and other receptacles have removed their personal property therefrom after notice from the commissioner or upon removal by the commissioner to a place of safe storage.
##### **§ 17:14A-82** Custodial possession by commissioner; return of property to management of safe deposit company {#sec-17-14a-82 omnilex-key=us-nj-statutes--title-17--17:14A-82}
If and when the commissioner determines that the cause or causes for his taking custodial possession of a safe deposit company have been removed or remedied, he may return the property of the safe deposit company to the control and management of its officers and directors.
##### **§ 17:14A-83** Custodial possession by commissioner; corporate title and existence {#sec-17-14a-83 omnilex-key=us-nj-statutes--title-17--17:14A-83}
Notwithstanding the taking of custodial possession of the property of a safe deposit company by the commissioner:
a. Title to all the property of the safe deposit company, including property held in fiduciary capacities, shall remain in the safe deposit company;
b. The corporate existence of the safe deposit company shall continue unless terminated as provided in R.S. 17:14A-80; and
c. The stockholders and directors of the safe deposit company shall be entitled to meet and the stockholders, directors and officers of the safe deposit company shall be entitled to act upon any matter which does not infringe upon the powers granted to the commissioner by R.S. 17:14A-80.
##### **§ 17:14A-84** Custodial possession by commissioner; notice to commissioner {#sec-17-14a-84 omnilex-key=us-nj-statutes--title-17--17:14A-84}
A safe deposit company shall immediately notify the commissioner in writing of any of the actions or proceedings set forth in subsections a. through e. of R.S. 17:14A-80 instituted by or against the safe deposit company.
##### **§ 17:14A-85** Custodial possession by commissioner; surety bond {#sec-17-14a-85 omnilex-key=us-nj-statutes--title-17--17:14A-85}
A safe deposit company shall file and keep on file with the commissioner a surety bond obtained from a surety company authorized to transact business in this State in an amount of not less than $25,000.00 and in form prescribed by regulation of the commissioner. The bond shall be conditioned for payment to the State for the benefit of the Department of Banking of the costs and expenses incurred by the commissioner in taking custodial possession of the property of a safe deposit company pursuant to R.S. 17:14A-80 in the event the safe deposit company is unable to reimburse the department for those costs and expenses.
##### **§ 17:14A-86** Standards for vaults {#sec-17-14a-86 omnilex-key=us-nj-statutes--title-17--17:14A-86}
Vaults shall have walls, floors and ceiling of reinforced concrete at least 12 inches in thickness constructed as follows:
a. Two grids of #5 ( 5/8 " diameter) deformed steel bars located in horizontal and vertical rows in each direction to form grids not more than four inches on center; or
b. Two grids of expanded steel bank vault mesh placed parallel to the face of the walls, weighing at least six pounds per square foot to each grid, having a diamond pattern not more than 3 " x 8 " ; or
c. Two grids of any other fabricated steel placed parallel to the face of the walls, weighing at least six pounds per square foot to each grid and having an open area not exceeding four inches on the center;
d. Grids are to be located not less than six inches apart and stagger in each direction;
e. The concrete shall develop an ultimate compression strength of at least 3,000 pounds per square inch;
f. Electric conduits into the vault shall not exceed 1 1/2 inches in diameter and shall be offset within the walls, floor or ceiling so as not to form a direct path of entry; and
g. A vault ventilator, if provided, shall be designed with consideration of safety to life without significant reduction of the strength of the vault wall to burglary attack.
##### **§ 17:14A-87** Standards for vault doors {#sec-17-14a-87 omnilex-key=us-nj-statutes--title-17--17:14A-87}
Vault doors shall be made of steel at least 3 1/2 inches in thickness, or other drill and torch resistant material, and be equipped with a dial combination lock, a time lock, and a substantial lockable day-gate gate.
##### **§ 17:14A-88** Standards for safes {#sec-17-14a-88 omnilex-key=us-nj-statutes--title-17--17:14A-88}
A safe shall weigh at least 750 pounds empty, or be securely anchored to the premises where located. The body shall consist of steel, at least one inch in thickness, either cast or fabricated, with an ultimate tensile strength of at least 50,000 pounds per square inch and be fastened in a manner equal to a continuous 1/4 inch penetration weld having an ultimate tensile strength of at least 50,000 pounds per square inch. The door shall be made of steel that is at least 1 1/2 inch in thickness and at least equivalent in strength to that specified for the body, and the door shall be equipped with a combination lock, or time lock, and with a relocking device that will effectively lock the door if the combination lock or time lock is punched. One hole not exceeding 1/2 inch diameter may be provided in the body to permit insertion of electrical conductors, but shall be located so as not to permit a direct view of the door or locking mechanism.
##### **§ 17:14A-89** Safe deposit box standards {#sec-17-14a-89 omnilex-key=us-nj-statutes--title-17--17:14A-89}
A safe deposit box used to store and safeguard a lessee's personal property shall be enclosed in a vault or safe meeting the minimum standards set forth in R.S. 17:14A-86 and R.S. 17:14A-87 or R.S. 17:14A-88.
##### **§ 17:14A-90** Surveillance systems {#sec-17-14a-90 omnilex-key=us-nj-statutes--title-17--17:14A-90}
A surveillance system shall be provided for each office of a safe deposit company which shall:
a. Be equipped with one or more photographic, recording, monitoring, or like devices capable of reproducing images of persons in the safe deposit company office with sufficient clarity to facilitate (through photographs capable of being enlarged to produce a one-inch vertical head-size of persons whose images have been reproduced) the identification and apprehension of robbers or other suspicious persons.
Any camera used in the system shall be capable of taking at least one picture every two seconds and, if it uses film, should contain enough unexposed film at all times to be capable of operating for not less than three minutes, and the film shall be at least 16mm, and
(1) Located so as to reproduce identifiable images of persons either leaving the safe deposit company office or in a position to transact business at the office; and
(2) Capable of actuation by initiating devices located throughout the office;
b. Be reasonably silent in operation; and
c. Be so designed and constructed that necessary services, repairs or inspections can readily be made.
##### **§ 17:14A-91** Robbery alarm systems {#sec-17-14a-91 omnilex-key=us-nj-statutes--title-17--17:14A-91}
A robbery alarm system shall be provided for each office of a safe deposit company at which the police ordinarily can arrive within five minutes after an alarm is actuated. Robbery alarm systems shall be:
a. Designed to transmit to the police, either directly or through an intermediary, a signal (not detectable by unauthorized persons) indicating that a crime against the office has occurred or is in progress;
b. Capable of actuation by initiating devices located throughout the office;
c. Safeguarded against accidental transmission of an alarm;
d. Equipped with a visual and audible signal capable of indicating improper functioning of or tampering with the system; and
e. Equipped with an independent source of power (such as a battery) sufficient to assure continuously reliable operation of the system for at least 24 hours in the event of failure of the usual source of power.
##### **§ 17:14A-92** Burglary alarm systems {#sec-17-14a-92 omnilex-key=us-nj-statutes--title-17--17:14A-92}
A burglary alarm system shall be provided for each office of a safe deposit company. Burglary alarm systems shall be:
a. Capable of detecting promptly an attack on the outer door, walls, floor, or ceiling of each vault, and each safe not stored in a vault, in which personal property of lessees are stored when the office is closed, and any attempt to move a safe;
b. Designed to transmit to the police, either directly or through an intermediary, a signal indicating that an attempt is in progress; and for offices at which the police ordinarily cannot arrive within five minutes after an alarm is actuated, designed to actuate a loud sounding bell or other device that is audible inside the office and for a distance of approximately 500 feet outside the office;
c. Safeguarded against accidental transmission of an alarm;
d. Equipped with a visual and audible signal capable of indicating improper functioning of or tampering with the system; and
e. Equipped with an independent source of power (such as a battery) sufficient to assure continuously reliable operation of the system for at least 80 hours in the event of failure of the usual source of power.
##### **§ 17:14A-93** Notice of crime {#sec-17-14a-93 omnilex-key=us-nj-statutes--title-17--17:14A-93}
The board of directors of a safe deposit company shall promptly notify the commissioner of any crime committed or attempted to be committed against the safe deposit company by any person even though the crime or attempted crime has not resulted in a loss.
##### **§ 17:14A-94** Rules and regulations {#sec-17-14a-94 omnilex-key=us-nj-statutes--title-17--17:14A-94}
In addition to other powers and duties vested in him by this chapter or by any other law, the commissioner is authorized and empowered to make reasonable rules and regulations not inconsistent with the provisions of this chapter, and specific rulings, demands and findings as he may deem necessary for the proper operation and enforcement of this chapter.
The commissioner's authority to make rules and regulations may include higher or equivalent modifications in the standards for the construction of vaults, vault doors, safes, safe deposit box standards, surveillance, robbery and burglary alarm systems when the commissioner deems those modifications are warranted and continue to maintain protection of the safe deposit company.
##### **§ 17:14A-95** Dissolution {#sec-17-14a-95 omnilex-key=us-nj-statutes--title-17--17:14A-95}
A safe deposit company may be dissolved in the manner provided by chapter 12 of Title 14A, Corporations, General of the New Jersey Statutes, except that filings thereunder shall be made in the department.
##### **§ 17:14A-96** Filing fees {#sec-17-14a-96 omnilex-key=us-nj-statutes--title-17--17:14A-96}
A safe deposit company shall pay to the commissioner for the use of the State:
a. For filing an application for charter ...... $2,500.00
b. For the issuance by the commissioner for
a certificate of authority .......... 100.00
c. For filing the original certificate of
incorporation .......... 50.00
d. For filing a certificate of amendment of
a certificate of incorporation or an amended
certificate of amendment .......... 50.00
e. For filing any other certificate .......... 10.00
f. For filing an application of the establishment
of a branch office .......... 500.00
g. For filing an agreement of merger per
company .......... $1,500.00
h. For filing a plan for consolidation per
company ....... 1,500.00
i. For filing a report required by this
chapter or any other law .......... 25.00
j. For filing an affidavit .......... 10.00
k. For filing proof of publication and mailing
or other proof required by this chapter or any
other law .......... 10.00
l. For filing application for approval of a change
of principal office or branch office ........ 250.00
m. For the issuance of a certified copy of any
certificate of incorporation or agreement of
merger or plan for consolidation or any other
certificate or affidavit ......... 10.00
plus $1.00 per page
n. For application for control of safe
deposit company ....... 1,000.00
o. For filing certificate of dissolution ...... 35.00
##### **§ 17:14A-97** Statutes repealed {#sec-17-14a-97 omnilex-key=us-nj-statutes--title-17--17:14A-97}
The following are repealed:
R.S. 17:14-1 to R.S. 17:14-8 inclusive.
## **Chapter 15A** {#struct-chapter-15a}
##### **§ 17:15A-30** Short title {#sec-17-15a-30 omnilex-key=us-nj-statutes--title-17--17:15A-30}
1. This act shall be known and may be cited as "The Check Cashers Regulatory Act of 1993."
##### **§ 17:15A-31** Definitions. {#sec-17-15a-31 omnilex-key=us-nj-statutes--title-17--17:15A-31}
2. As used in this act:
"Applicant" means a person who has applied or is in the process of applying for a license pursuant to this act.
"Automated cash machine" means an unmanned communications terminal which dispenses cash, traveler's checks or both; does not accept deposits; and through which transactions with banking institutions are consummated.
"Automated check cashing machine" means an unmanned communications terminal which only cashes checks for a fee.
"Check" includes a check, draft, money order, negotiable order of withdrawal and similar types of negotiable instruments.
"Commissioner" means the Commissioner of Banking and Insurance.
"Controlling interest" means ownership, control or interest in 25% or more of the outstanding and issued voting stock of the check cashing business.
"Customer" means any person who seeks to have a check cashed by a licensee but does not include the maker of a check payable to another person.
"Department" means the Department of Banking and Insurance.
"Fee" includes any fee, charge, cost, expense, or other consideration.
"License" means a license issued pursuant to this act and held by a licensee, which license authorizes the licensee to cash checks for a fee as provided pursuant to this act.
"Licensee" means a person who holds, or who should hold, a license pursuant to this act.
"Limited branch office" means a private premises where a licensee maintains and makes available to the particular group specified in the authorization, and to that group only, the facilities for cashing checks, drafts, or money orders on the designated premises for no more than two days of each week as designated in the authorization pursuant to subsection c. of section 12 of this act and also includes the premises where payroll services are provided.
"Mobile office" means any vehicle or other moveable means from which the business of cashing checks is conducted.
"Natural person" does not include a payee identified on the payee line of a check as a partnership, professional association, company, corporation, or other business entity.
"Office" includes a principal office and a full branch office.
"Payroll check" means a check issued by an employer to its employee in payment of salary or wages for services rendered by the employee.
"Payroll service" means a service provided, pursuant to a written agreement, by a licensed check casher to an employer in which the employer pays a fixed fee or rate for the on-site delivery of payroll or cashing of payroll checks issued to its employees, at no cost to the employees.
"Person" has the meaning given that word in R.S.1:1-2.
"Substantial stockholder" means any person who beneficially owns or controls more than 10% of the outstanding voting shares of an applicant or a licensee.
##### **§ 17:15A-32** License required {#sec-17-15a-32 omnilex-key=us-nj-statutes--title-17--17:15A-32}
3. No person shall cash a check for a fee unless that person has a license. The license shall not be transferable or assignable.
##### **§ 17:15A-32.1** Sale of check cashing business. {#sec-17-15a-32.1 omnilex-key=us-nj-statutes--title-17--17:15A-32.1}
1. a. A person who is conducting business as a check casher pursuant to P.L.1993, c.383 (C.17:15A-30 et seq.), whose license was continued pursuant to section 21 of P.L.1993, c.383 (C.17:15A-50), and who is not the subject of any action by the commissioner pursuant to section 19 or 20 of P.L.1993, c.383 (C.17:15A-48 or 17:15A-49), shall be permitted to sell the assets of the business of cashing checks.
b. A person purchasing the assets of the business of cashing checks from a person permitted to sell those assets pursuant to subsection a. of this section shall be required to:
(1) qualify for a license pursuant to the provisions of P.L.1993, c.383 (C.17:15A-30 et seq.), except that the person shall not be required to comply with the provisions of subsection e. of section 12 and subsection f. of section 18 of P.L.1993, c.383 (C.17:15A-41 and 17:15A-47) ; and
(2) conduct the business of cashing checks from the location the address of which is listed on the license of the person from whom the assets of the business of cashing checks are being purchased.
c. A business of cashing checks which is sold and purchased pursuant to subsections a. and b. of this section may be sold and purchased subsequently as long as each time the business is sold the seller is not the subject of any action by the commissioner pursuant to section 19 or 20 of P.L.1993, c.383 (C.17:15A-48 or 17:15A-49) and the person purchasing the business of check cashing :
(1) qualifies for a license pursuant to the provisions of P.L.1993, c. 383 (C.17:15A-30 et seq.), except that the purchaser shall not be required to comply with the provisions of subsection e. of section 12 and subsection f. of section 18 of P.L.1993, c.383 (C.17:15A-41 and 17:15A-42); and
(2) conducts the business of cashing checks from the location the address of which is listed on the license of the person from whom the business of cashing checks is purchased.
##### **§ 17:15A-33** Application for licensure; requirements {#sec-17-15a-33 omnilex-key=us-nj-statutes--title-17--17:15A-33}
4. Any person wishing to be licensed to cash checks for a fee shall:
a. Submit to the commissioner a completed written application on forms prescribed by the commissioner which shall contain notice that false statements made therein are punishable and supported by evidence as required by the commissioner;
b. Submit an application fee as prescribed by the commissioner by regulation in an amount not to exceed $2,000;
c. Submit proof of net worth and liquid assets as required pursuant to section 8 of this act; and
d. Execute a statement on the application in which the applicant consents to allow the department to examine the records of the bank account or accounts used for its check cashing business.
##### **§ 17:15A-34** Approval of application {#sec-17-15a-34 omnilex-key=us-nj-statutes--title-17--17:15A-34}
5. The commissioner shall approve an application for a license if:
a. The applicant has complied with the requirements of section 4 of this act;
b. The commissioner finds that the financial responsibility, experience, character, and general fitness of the applicant support the belief that the business will be operated honestly and fairly; and
c. The commissioner finds that none of the grounds for revoking or suspending a license set forth in section 19 of this act exist.
##### **§ 17:15A-35** Contents of application. {#sec-17-15a-35 omnilex-key=us-nj-statutes--title-17--17:15A-35}
6. The application for a license shall include, but not be limited to, the following:
a. The name, age, business address, residence and present and previous occupations of each applicant or licensee and of each officer, owner, director, partner, and substantial stockholder of the check cashing business to be licensed;
b. The name and business address of each manager of each office, mobile office or limited branch office that the applicant proposes to operate;
c. The address of each stationary site, if the check cashing business, or any portion thereof, is to be conducted from a stationary site or sites;
d. The New Jersey motor vehicle registration number or other identification of the mobile office and the exact location or locations, if more than one, at which the applicant proposes to operate the mobile office, if the check cashing business, or any portion thereof, is to be conducted from a mobile office;
e. Any other information that the commissioner may reasonably require;
f. All licensees shall have an affirmative obligation to advise the commissioner in writing within five days of any change in the information required under subsections a., c. and d. of this section; and
g. An applicant's customer information, customer lists, authorizations and customer contracts submitted to or obtained by the department in connection with an application for licensure for a limited branch office shall be confidential and not public records subject to public access, inspection or copying under P.L.1963, c.73 (C.47:1A-1 et seq.) or the common law concerning access to public records. The applicant's name and address and an application for licensure for a limited branch office shall be public records. Nothing contained in this subsection shall restrict the authority of the department or any other governmental entity to access documents, whether or not deemed public records, submitted in connection with an application for a limited branch office license.
##### **§ 17:15A-36** Fingerprinting, background checks for licensees {#sec-17-15a-36 omnilex-key=us-nj-statutes--title-17--17:15A-36}
7. Each director, substantial stockholder, officer, owner, partner, manager, and employee in the check cashing business of a licensee shall submit to being fingerprinted on forms supplied by the commissioner and shall provide written consent to the performance of background checks. The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the Federal Bureau of Investigation and the Division of State Police for use in performing background checks. The commissioner is authorized to conduct such additional background checks as he deems appropriate. The department is authorized to collect from the applicant or licensee any costs connected with these background investigations.
##### **§ 17:15A-37** Required capital, net worth, liquid assets. {#sec-17-15a-37 omnilex-key=us-nj-statutes--title-17--17:15A-37}
8. An applicant shall prove, in a manner and form satisfactory to the commissioner, that the applicant has available for the operation of its check cashing business at each office, mobile office or automated check cashing machine location, capital or net worth of at least $50,000, and has available for the operation of its check cashing business at each office , mobile office or location, liquid assets of at least $50,000.
##### **§ 17:15A-38** Licensee to engage services of public accountant {#sec-17-15a-38 omnilex-key=us-nj-statutes--title-17--17:15A-38}
9. a. Each applicant shall engage and each licensee shall maintain the services of a public accountant, which accountant shall assist the licensee to maintain the records of the check cashing business in an orderly and accurate manner.
b. The contract between the licensee and the public accountant shall include a statement by the accountant consenting to allow the department to examine all records of the licensee at the accountant's place of business during normal business hours.
c. If a licensee changes the public accountant used to assist in the maintenance of the licensee's records of the check cashing business, the licensee shall notify the department within 15 days of the date a change is made and provide the department with the information required pursuant to subsection d. of section 10 of this act.
##### **§ 17:15A-39** License required for operation, conditions {#sec-17-15a-39 omnilex-key=us-nj-statutes--title-17--17:15A-39}
10. No applicant for a license shall commence operations until a license has been issued. The commissioner shall not issue a license unless the following conditions have been met:
a. The application for the license has been approved pursuant to section 5 of this act;
b. The applicant's place or places of business have been approved by the department and the department has determined that the applicant has the necessary equipment to record transactions and maintain other records as required by this act;
c. The applicant has submitted to the department a statement that the applicant has a bank account or accounts which will be used solely for the check cashing business, together with the number or numbers of those accounts and the name of the institution in which each account is held; and
d. The applicant has submitted to the department the name and business address of the applicant's public accountant and evidence acceptable to the commissioner demonstrating compliance with subsections a. and b. of section 9 of this act.
##### **§ 17:15A-40** Valid license, civil actions. {#sec-17-15a-40 omnilex-key=us-nj-statutes--title-17--17:15A-40}
11. a. A license shall be valid until surrendered by the licensee, or unless revoked or suspended pursuant to this act.
b. The license shall be for a term of not less than two years as set by the commissioner by regulation.
c. A licensee may bring a civil action in Superior Court against another licensee, or against a depository institution subject to subsection b. of section 21 of P.L.1993, c.383 (C.17:15A-50), as amended, or subsection c. of section 21 of P.L.1993, c.383 (C.17:15A-50), as amended, for violating any of the following provisions, if that violation has an impact on the check cashing business of the licensee bringing the action: (1) section 3 of P.L.1993, c.383 (C.17:15A-32); (2) the requirements set forth in paragraph (6) of subsection d. of section 12 of P.L.1993, c. 383 (C.17:15A-41); (3) subsection e. of section 12 of P.L.1993, c. 383 (C.17:15A-41); (4) subsection f. of section 18 of P.L.1993, c.383 (C.17:15A-47); (5) subsection b. of section 21 of P.L.1993, c.383 (C.17:15A-50); or (6) subsection c. of section 21 of P.L.1993, c.383 (C.17:15A-50). Nothing contained in this subsection shall be construed to restrict, limit or alter in any way the commissioner's authority to enforce the provisions of "The Check Cashers Regulatory Act of 1993," P.L.1993, c.383 (C.17:15A-30 et seq.) or any other law.
d. If a licensee has not provided check cashing services during normal business hours at the location specified in the license for a period of 180 consecutive days or more, and if no application for renewal of the license or relocation of the licensed check casher is or shall have been filed prior to expiration of that 180-day period, the department may, after notice to the licensee and opportunity to be heard, revoke the license or for good cause shown, the department may extend the 180-day period.
##### **§ 17:15A-41** Maintenance of offices by licensee; requirements {#sec-17-15a-41 omnilex-key=us-nj-statutes--title-17--17:15A-41}
12. a. Except as provided in subsections b., c. and d. of this section, a licensee shall have and maintain a single office at one address in the State for the transaction of business. No licensee shall change the address of an existing office without prior written approval from the commissioner.
b. The commissioner shall authorize a licensee, pursuant to an application approved by the commissioner, to establish and operate a full branch office or offices at which may be conducted all of the business which may be conducted at the principal office if:
(1) the licensee provides the name of the person who will manage the full branch office;
(2) the licensee has paid a full branch application fee, as specified by regulation;
(3) the licensee has submitted proof, as required pursuant to section 8 of this act, that there is sufficient net worth and liquid assets for the operation of a full branch office;
(4) the site of the full branch office has been approved by the commissioner and the commissioner has determined that the applicant or licensee has the necessary equipment to record transactions and maintain other records as required by this act; and
(5) the licensee or applicant has met any additional conditions which the commissioner may require in the public interest.
c. The commissioner shall authorize a licensee, pursuant to an application approved by the commissioner, to operate a limited branch office or offices, the business of which shall be limited to cashing checks for a particular group or groups at one or more private premises, provided that the holder of a limited branch authorization observes all of the rules and regulations issued by the commissioner applicable to all licensees except that:
(1) the books and records required to be kept may be kept at the principal office of the licensee; and
(2) the requirements of section 8 of this act concerning capital and net worth shall not apply with respect to a limited branch office if the licensee is in compliance with section 8 of this act with respect to its principal office.
d. The commissioner shall authorize a licensee, pursuant to an application approved by the commissioner, to operate a mobile office, the business of which shall be conducted from a suitable motor vehicle or similar mobile device, at a designated geographic location or locations specified to the commissioner in its application and for the purpose of serving the public in that specific location or locations if the commissioner finds that:
(1) an applicant for a mobile office has met the requirements of paragraphs (1) through (3) and (5) of subsection b. of this section;
(2) the mobile office facility has been approved by the commissioner and the commissioner has determined that the applicant has the necessary equipment to record transactions and maintain other records as required by this act;
(3) the commissioner has approved the one or more geographic locations and the days and hours of operation at each geographic location at which the check cashing services of the mobile unit are to be made available to the public for the cashing of checks, drafts or money orders;
(4) the place where the books, records, and all information pertaining to its business are to be kept and made available to representatives of the department has been specified, which location shall not be changed without first advising the department in writing of the new location where those books, records and information shall be kept;
(5) a licensee's application for multiple geographic locations for operating a mobile unit is in the public interest; and
(6) the holder of a license to operate a mobile unit is in compliance with the provisions of Title 39 of the Revised Statutes and the ordinances and traffic regulations issued by municipal and other authorities. If a municipality requires a special permit or license fee for the purpose of operating a mobile unit, the applicant or licensee shall obtain that permit or license as a condition for the issuance of the authority to operate a mobile unit pursuant to this section.
e. No office or mobile office shall be located within 2,500 feet of an existing office or mobile office, that distance being measured as the radius of a circle with the entrance to the existing office or mobile office considered the center point from which the radius is measured.
##### **§ 17:15A-42** Approval required for sale, transfer of business {#sec-17-15a-42 omnilex-key=us-nj-statutes--title-17--17:15A-42}
13. Any sale or transfer of a controlling interest in a licensee's or applicant's check cashing business shall be approved by the commissioner prior to the transfer or sale, after the licensee or applicant has provided written notice of the proposed sale or transfer to the commissioner. The commissioner shall approve the transfer or sale unless he determines, following an opportunity for a hearing, that sufficient grounds exist to deny, revoke, or suspend the license.
##### **§ 17:15A-43** Fees permitted. {#sec-17-15a-43 omnilex-key=us-nj-statutes--title-17--17:15A-43}
14. No licensee shall charge a fee or receive any other consideration, directly or indirectly, which is greater than the amount permitted pursuant to this section, as follows:
a. For cashing a check drawn on a depository institution or other financial entity located in this or any other State, two percent of the face amount of the check, or $.90, whichever is greater;
b. For cashing a check payable to a recipient of Temporary Assistance for Needy Families (TANF), one percent of the face amount of the check, or $.90, whichever is greater;
c. For cashing a check payable to a recipient of supplemental security income pursuant to Subchapter XVI of the Social Security Act, 42 U.S.C. s.1381 et seq., one and one half percent of the face amount of the check, or $.90, whichever is greater;
d. For cashing a check payable to a recipient of old-age and survivors benefit payments pursuant to Subchapter II of the Social Security Act, 42 U.S.C. s.401 et seq., one and one half percent of the face amount of the check, or $.90, whichever is greater;
e. On or after the 365th day from the effective date of this act, subsequent increases to the fees which may be charged pursuant to subsection a. of this section by a licensee for cashing a check, draft or money order shall be set by the commissioner by regulation;
f. In setting the fees pursuant to subsection e. of this section, the commissioner shall consider, but not be limited to, the following:
(1) rates charged in the past;
(2) the income, cost and expense of the operation of licensees;
(3) rates charged by licensed check cashers or other similar entities located in other states for the same or similar services and the factors upon which those rates are based;
(4) changes in the population served; and
(5) a reasonable profit for check cashers; and
g. For cashing a check in excess of $2,500, a licensee may charge up to three percent of the face amount of the check, except, in the case of a check subject to subsection b., c., or d. of this section, the licensee shall charge no greater amount than the amount specified in the applicable subsection.
##### **§ 17:15A-44** Responsibilities of licensee. {#sec-17-15a-44 omnilex-key=us-nj-statutes--title-17--17:15A-44}
15. A licensee shall:
a. Conspicuously display at each office, limited branch office or mobile office it operates the original license, certificate or branch authorization, as appropriate, issued by the commissioner.
b. Conspicuously display all signs and notifications which the commissioner may require.
c. Provide each customer, at the time of a transaction, with a record of each transaction as specified by regulation.
d. Produce a photographic record, on such equipment as the commissioner may prescribe, of all of the checks cashed at the place of business and maintain a true copy of each such record.
e. Endorse each check cashed with the actual name under which the licensee is doing business and legibly write or stamp the words "Licensed Casher of Checks" immediately after or below the licensee's name.
f. Conduct all check cashing business through a bank account or accounts which are used solely for that purpose, and which have been identified as such to the department.
g. Inform the department if any bank account number changes or if any bank account is closed.
h. Maintain adequate records of its check cashing business as prescribed by the commissioner by regulation.
i. Retain for five years essential records, and retain all other records for a shorter period as prescribed by the commissioner by regulation. Such records shall be separate from the records of other businesses in which the licensee may be engaged. Although separate records are required, it is not required that the licensee's check cashing business have a different legal identity from other businesses in which the licensee is engaged.
j. Suspend for at least six months the check cashing privileges of any customer who cashes, in any one calendar year, more than three checks which are returned by the payor bank because of insufficient funds, and notify the department in writing of the name of such customer and the action taken, except that for purposes of this subsection two or more checks of a single maker which are returned because of insufficient funds shall be counted as one check provided they were cashed the same day and deposited in the licensee's bank account on the same banking day.
k. Maintain at all times a capital or net worth of at least $50,000 for the operation of the licensee's check cashing business at each office, mobile office and automated check cashing machine location, and maintain at all times liquid assets of at least $50,000 for the operation of the licensee's check cashing business at each office, mobile office and automated check cashing machine location.
l. (1) Maintain on its premises, a record keeping system by which a licensee may track, and provide for inspection at the request of the commissioner, checks which the licensee cashed and which were made payable to a payee other than a natural person and checks which the licensee cashed in the amount of $2,500.00 or more.
(2) The record keeping system required pursuant to paragraph (1) of this subsection l. shall include, but not be limited to, the following information:
(a) the date of the transaction;
(b) the name of the payee;
(c) the federal tax payer identification number of the payee;
(d) the face amount of the check;
(e) the date of the check;
(f) the name or names of those presenting the check for payment;
(g) the name of the financial institution on which the check is drawn and the financial institution's transit routing number;
(h) the amount of the fee charged; and
(i) a photograph, photostat, duplicate, microfilm, microfiche or any other reproduction of the front and back of the fully endorsed check.
(3) The record keeping system shall be made available to any State or federal law enforcement agency upon written request and without necessity of subpoena.
m. Retain for five years a complete copy of any report, including all such reports filed electronically, regarding business conducted in this State pursuant to 31 U.S.C.s.5311 et seq. and 31 C.F.R. Chapter X.
n. Supervise employees engaged in the operation of the check cashing business to ensure the business is conducted lawfully and pursuant to the provisions of this act and any order, rule or regulation made or issued pursuant to this act.
##### **§ 17:15A-45** Annual report by check cashing business; violations, penalties. {#sec-17-15a-45 omnilex-key=us-nj-statutes--title-17--17:15A-45}
16. Each licensee shall annually file a report with the commissioner giving the information the commissioner may require concerning its check cashing business and operations during the preceding calendar year. In addition to the annual report the commissioner may require additional regular or special reports as the commissioner deems necessary to effectuate the purposes of this act. These reports shall be made under oath or affirmation and shall be in the form and within the time prescribed by the commissioner by regulation.
A licensee that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:15A-46** Right to examine books, records {#sec-17-15a-46 omnilex-key=us-nj-statutes--title-17--17:15A-46}
17. The department shall have the right to examine the books and records, and the place or places of business of any licensee. The reasonable cost of the examination shall be borne by the licensee. The department may order that the books and records be made available, and that the examination take place, at the office of the licensee's public accountant.
##### **§ 17:15A-47** Prohibitions for licensees. {#sec-17-15a-47 omnilex-key=us-nj-statutes--title-17--17:15A-47}
18. No licensee, or any person acting on behalf of a licensee, shall:
a. Cash a check which is made payable to a payee which is other than a natural person unless the licensee has on file a corporate resolution or other appropriate documentation indicating that the corporation, partnership or other entity has authorized the presentment of a check on its behalf and the federal taxpayer identification number of the corporation, partnership or other entity;
b. Cash a check for anyone other than the payee named on the face of the check, except that the commissioner may, by regulation, establish exceptions to this prohibition;
c. Cash or advance any money on a postdated check; except that a licensee may cash a check payable on the first banking business day following the date of cashing, if the check is:
(1) drawn by the United States, the State of New Jersey, or any department, bureau, agency or authority of the United States or the State of New Jersey, or
(2) a payroll check drawn by any employer to the order of its employee in payment for services performed by that employee;
d. Fail to give each customer at the end of each transaction a receipt showing the amount of the check which was cashed, the amount which was charged for cashing the check, and the amount of cash which the customer was given;
e. Engage in the business of making loans of money, credit, goods or things or discounting or buying of notes, bills of exchange, checks or other evidences of debt, or conduct, or allow to be conducted, a loan business or the negotiation of loans or the discounting or buying of notes, bills of exchange, checks or other evidences of debt in the same premises where the licensee is cashing checks. For purposes of this subsection, a licensee shall be deemed to have made a loan if the licensee cashes a check deposited by a customer whose check cashing privileges were required to be suspended under subsection j. of section 15 of this act. Notwithstanding the provisions of this subsection, any person licensed as a pawnbroker in this State shall be eligible to qualify as a licensee under this act, and upon being so licensed, may conduct business as a check casher in the same premises in which that person conducts business as a pawnbroker;
f. Engage in business at an office or mobile office other than a business which primarily provides financial services, except as otherwise provided pursuant to subsection e. of this section;
g. Violate any provision of this act or regulations promulgated pursuant to this act; or
h. Fail to comply with any order of the commissioner.
##### **§ 17:15A-48** Revocation, suspension of license. {#sec-17-15a-48 omnilex-key=us-nj-statutes--title-17--17:15A-48}
19. a. Except as provided in subsection c. of this section, the commissioner may revoke or suspend a license if, after notice and hearing, the commissioner determines that the licensee:
(1) Has violated any provision of this act or any order, rule, or regulation made or issued pursuant to this act or has violated any other law in connection with the operation of the check cashing business;
(2) Has failed to pay any fee, penalty, or other lawful levy imposed by the commissioner;
(3) Has withheld information or made a material misstatement in the application for the license, or in any branch application or in any other submission to the department;
(4) Has been convicted of an offense involving breach of trust, moral turpitude or fraudulent or dishonest dealing, or has had a final judgment entered against him in a civil action upon grounds of fraud, misrepresentation or deceit;
(5) Is associating with, or has associated with, any person who has been convicted of an offense involving breach of trust, moral turpitude or fraudulent or dishonest dealing, or who has had a final judgment entered against him in a civil action upon grounds of fraud, misrepresentation or deceit;
(6) Has become insolvent or has acted in a way that indicates the licensee's check cashing business would not be operated in a financially responsible manner;
(7) Has demonstrated unworthiness, incompetence, bad faith or dishonesty in transacting business or otherwise; or
(8) Has engaged in any other conduct which would be deemed by the commissioner to be grounds to deny, revoke or suspend a license.
b. Pending an investigation or a hearing for the suspension or revocation of any license issued pursuant to this act, the commissioner may temporarily suspend such license for a period not to exceed 90 days, if the commissioner finds that such suspension is in the public interest.
c. The commissioner shall revoke a license if, after notice and a hearing, the commissioner determines that the licensee was convicted of a crime pursuant to the provisions of P.L.1994, c.121 (C.2C:21-23 et seq.) or any other crime defined in chapter 20 or chapter 21 of Title 2C of the New Jersey Statutes.
d. A licensee and the probation department shall, not later than 10 days after the entry of a judgment of conviction or the imposition of sentence, whichever first occurs, notify the commissioner of a licensee's conviction of any criminal offense.
e. For the purposes of this section, a conviction exists if the person has been convicted under the laws of this State, the United States or another state for an offense that is substantially similar to the offenses enumerated in this section.
##### **§ 17:15A-49** Violations, penalties. {#sec-17-15a-49 omnilex-key=us-nj-statutes--title-17--17:15A-49}
20. a. Any person who knowingly cashes a check for consideration without having first obtained a license as required by section 3 of P.L.1993, c.383 (C.17:15A-32) shall be guilty of an offense. If the face value of the check is in an amount less than $1,000.00 and the actor previously has not been convicted of an offense under this section, the actor shall be guilty of a disorderly persons offense. If the face value of the check is at least $1,000.00 but less than $10,000.00 and the actor previously has not been convicted of an offense under this section, the offense is a crime of the fourth degree. If the actor previously has been convicted of an offense under this section, the actor shall be guilty of a crime of the third degree. If the person conducts a transaction that would be required to be reported pursuant to the laws or regulations of this State had the actor obtained the license required by section 3 of P.L.1993, c.383 (C.17:15A-32), the actor shall be guilty of a crime of the third degree. Notwithstanding the provisions of N.J.S.2C:43-3 and in addition to any other disposition made pursuant to Title 2C of the New Jersey Statutes or any statute imposing sentences for crimes, any person convicted of any offense defined in this section may be sentenced to pay a fine not to exceed $30,000.00. For the purposes of this section, each check cashed for consideration without a license shall constitute a separate violation.
b. (1) In addition to any civil or criminal penalties that may be imposed, any person who cashes a check for consideration without having first obtained a license as required by section 3 of P.L.1993, c.383 (C.17:15A-32) shall be liable for a penalty of not more than $1,000.00 for each violation. For the purposes of this paragraph, each check cashed for consideration without a license shall constitute a separate violation.
(2) Any person who violates or causes to be violated any provision of this act or any order, rule or regulation made or issued pursuant to this act shall be liable for a penalty, in addition to all other penalties or forfeitures imposed by this or any other law, of not more than $5,000 for each violation. Any person who shall aid or abet a violation shall be equally liable for such a penalty as may be imposed upon a principal violator. For the purpose of this paragraph, a violation of any provision of this act or any order of the commissioner or rule or regulation promulgated by the commissioner pursuant thereto shall constitute a separate violation.
c. The commissioner may issue an order to any licensee who violates any provision of this act or regulation promulgated thereunder, ordering payment of the penalties provided in this act and corrective action concerning the violation. Any person aggrieved by any ruling, action, order, or notice of the commissioner shall be entitled to a hearing. The application for such a hearing shall be filed in writing with the commissioner within 15 days of receipt thereof.
d. Where any violation of any provision of this act is of a continuing nature, each day during which the violation remains uncorrected after the date fixed by the commissioner in any order or notice for the correction or termination of such continuing violation shall constitute a separate and distinct violation, except during the time when an appeal from such an order is being taken.
e. The commissioner is hereby authorized and empowered to compromise and settle any claim for a penalty under this section for an amount that appears appropriate and equitable under the circumstances.
f. The civil penalties provided for in this section, if not paid to the commissioner within 30 days of their issuance, shall be collected in a civil action brought in the name of the commissioner pursuant to the provisions of "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
g. Penalties imposed pursuant to this act shall not diminish the remedies which may be available to complainants through private actions.
##### **§ 17:15A-50** Compliance of existing licensees; nonapplicability of act. {#sec-17-15a-50 omnilex-key=us-nj-statutes--title-17--17:15A-50}
21. a. Any person holding a license in good standing issued pursuant to "The Check Cashing Law," P.L.1951, c.187 (C.17:15A-1 et seq.), and who wishes to continue to engage in the business of cashing checks, shall, within 90 days of the effective date of this act, submit to the commissioner a written statement certified to be true under penalty of law that the licensee complies with the provisions of this act; this statement shall include the information required by section 6 and section 10 of this act. Upon submission of the aforementioned statement under oath, a licensee's current license shall continue in accordance with the provisions of subsection a. of section 11 of this act. The licensee shall not be required to comply with subsection e. of section 12 or subsection f. of section 18 of this act.
b. This act shall not apply to any federal or State chartered bank, savings bank, savings and loan association, credit union or to any automated cash machine, including an automated cash machine that cashes checks for a fee, or to any automated check cashing machine operated at a principal office or branch location, except that no such entity shall conduct the business of cashing checks for a fee at a separate location, including by means of an automated check cashing machine or operating subsidiary, if that separate location is used primarily by any such entity for the purpose of cashing checks for a fee and is closer than 2,500 feet to an existing licensee. For purposes of this subsection, a separate location used primarily for the purpose of cashing checks for a fee as referred to in the preceding sentence shall not include any location that offers services equivalent to or greater than those provided by automated cash machines.
c. Notwithstanding subsection b. of this section, the provisions of P.L.1993, c.383 (C.17:15A-30 et seq.), including the distance restrictions set forth at subsection e. of section 12 of P.L.1993, c.383 (C.17:15A-41), shall apply to the operation of automated check cashing machines, except that automated check cashing machines shall not be subject to subsection f. of section 18 of P.L.1993, c.383 (C.17:15A-47). No person, partnership, association, corporation or other organization, other than a depository institution as defined in section 2 of P.L.1996, c.157 (C.17:11C-2), shall operate an automated check cashing machine without being duly licensed by the commissioner to engage in that business pursuant to P.L.1993, c.383 (C.17:15A-30 et seq.).
d. Payroll service providers are not subject to the fee limitations provided in section 14 of P.L.1993, c.383 (C.17:15A-43) when providing those services.
e. If any of the provisions of subsection b. or c. of this section are judicially determined to be unenforceable, preempted or inapplicable as applied to non-New Jersey chartered depositories, these restrictions shall be void and shall not be applicable to any depository institution.
##### **§ 17:15A-51** Waivers unenforceable, void {#sec-17-15a-51 omnilex-key=us-nj-statutes--title-17--17:15A-51}
22. Any agreement to waive any requirement contained in this act shall be unenforceable and void.
##### **§ 17:15A-52** Rules, regulations. {#sec-17-15a-52 omnilex-key=us-nj-statutes--title-17--17:15A-52}
23. a. The commissioner shall promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the purposes of this act.
b. If the commissioner finds that reasonable grounds exist for requiring additional record keeping and reporting in order to carry out the purposes of this act, the commissioner may:
(1) issue an order requiring any group of licensees in a geographic area to provide information regarding transactions that involve a total dollar amount or denomination of $2,500 or more, including the names of the persons participating in those transactions; and
(2) establish by regulation a reasonable fee for filing any report required by this subsection.
## **Chapter 15C** {#struct-chapter-15c}
##### **§ 17:15C-1** Short title. {#sec-17-15c-1 omnilex-key=us-nj-statutes--title-17--17:15C-1}
1. This act shall be known and may be cited as the "New Jersey Money Transmitters Act."
##### **§ 17:15C-2** Definitions relative to money transmitters. {#sec-17-15c-2 omnilex-key=us-nj-statutes--title-17--17:15C-2}
2. As used in this act:
"Applicant" means a person filing an application for a license under this act.
"Authorized delegate" means an entity authorized by the licensee pursuant to the provisions of section 17 of this act to sell or issue payment instruments or engage in the business of transmitting money on behalf of a licensee.
"Commissioner" means the Commissioner of Banking and Insurance.
"Control" means ownership of, or the power to vote, 25 percent or more of the outstanding voting securities of a licensee or controlling person. For purposes of determining the percentage of a licensee controlled by any person, there shall be aggregated with the person's interest the interest of any other person controlled by that person or by any spouse, parent, or child of that person.
"Controlling person" means any person in control of a licensee.
"Department" means the Department of Banking and Insurance.
"Executive officer" means the licensee's president, chairman of the executive committee, senior officer responsible for the licensee's business in this State, chief financial officer and any other person who performs similar functions.
"Foreign money transmitter" means a person who engages, in this State, only in the business of the receipt of money for transmission or transmitting money to locations outside of the United States by any and all means, including but not limited to payment instrument, wire, facsimile, electronic transfer, or otherwise for a fee, commission or other benefit.
"Key shareholder" means any person, or group of persons acting in concert, who is the owner of 25 percent or more of any voting class of an applicant's stock.
"Licensee" means a person licensed under this act.
"Location" means a place of business at which activities regulated by this act occur.
"Material litigation" means any litigation that, according to generally accepted accounting principles, is deemed significant to any applicant's or licensee's financial health and would be required to be referenced in that entity's annual audited financial statements, report to shareholders or similar documents.
"Money" means a medium of exchange authorized or adopted by the United States or a foreign government as a part of its currency and that is customarily used and accepted as a medium of exchange in the country of issuance.
"Money transmitter" means a person who engages in this State in the business of:
(1) the sale or issuance of payment instruments for a fee, commission or other benefit;
(2) the receipt of money for transmission or transmitting money within the United States or to locations abroad by any and all means, including but not limited to payment instrument, wire, facsimile, electronic transfer, or otherwise for a fee, commission or other benefit; or
(3) the receipt of money for obligors for the purpose of paying obligors' bills, invoices or accounts for a fee, commission or other benefit paid by the obligor.
"Outstanding payment instrument" means any payment instrument issued by the licensee which has been sold in the United States directly by the licensee or any payment instrument issued by the licensee which has been sold by an authorized delegate of the licensee in the United States, which has been reported to the licensee as having been sold, and which has not yet been paid by or for the licensee.
"Payment instrument" means any check, draft, money order, travelers check or other instrument or written order for the transmission or payment of money, sold or issued to one or more persons, whether or not the instrument is negotiable. The term "payment instrument" does not include any credit card voucher, any letter of credit or any instrument which is redeemable by the issuer in goods or services.
"Permissible investments" means:
(1) cash;
(2) certificates of deposit or other debt obligations of a bank, savings bank, savings and loan association, or credit union, either domestic or foreign;
(3) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers' acceptances, which are eligible for purchase by member banks of the Federal Reserve System;
(4) any investment which is rated in one of the three highest rating categories by a nationally recognized statistical rating organization;
(5) investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest by the United States, or any obligations of any state, municipality or any political subdivision thereof which is rated in one of the three highest rating categories by a nationally recognized statistical rating organization;
(6) shares in a money market mutual fund, interest-bearing bills, notes or bonds, debentures or stock traded on any national securities exchange or on a national over-the-counter market, or mutual funds primarily composed of those securities or a fund composed of one or more permissible investments as set forth in this section;
(7) demand borrowing agreements made to a corporation or a subsidiary of a corporation whose capital stock is listed on a national exchange;
(8) receivables which are due to a licensee from its authorized delegates pursuant to a contract described in section 17 of this act, which are not past due or doubtful of collection; or
(9) any other investments or security device which the commissioner may authorize by rule.
##### **§ 17:15C-3** Inapplicability of act; exemptions. {#sec-17-15c-3 omnilex-key=us-nj-statutes--title-17--17:15C-3}
3. a. This act shall not apply to:
(1) The United States or any department, agency, or instrumentality thereof;
(2) The United States Postal Service;
(3) The State or any political subdivision thereof;
(4) Banks, bank holding companies, credit unions, building and loan associations, savings and loan associations, savings banks or mutual banks organized under the laws of any state or the United States, provided that they do not issue or sell payment instruments through authorized delegates who are not banks, bank holding companies, credit unions, building and loan associations, savings and loan associations, savings banks or mutual banks;
(5) The provision of electronic transfer of government benefits for any federal, state or county agency as defined in Regulation E, 12 C.F.R. s.205.1 et seq., by a contractor for and on behalf of the United States or any department, agency or instrumentality thereof, or any state or political subdivision thereof; and
(6) A person licensed to conduct business as a debt adjuster pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.), when acting within the scope of activities regulated by that license.
b. Authorized delegates of a licensee, acting within the scope of authority conferred by a written contract as described in section 17 of this act shall not be required to obtain a license pursuant to this act.
##### **§ 17:15C-4** License required. {#sec-17-15c-4 omnilex-key=us-nj-statutes--title-17--17:15C-4}
4. a. No person, other than a person exempt from the provisions of this act pursuant to section 3, shall engage in the business of money transmission without a license as provided in this act.
b. A licensee may conduct its business in this State at one or more locations, directly or indirectly owned, or through one or more authorized delegates, or both, pursuant to the single license granted to the licensee under this act.
##### **§ 17:15C-5** Net worth requirements for licensees. {#sec-17-15c-5 omnilex-key=us-nj-statutes--title-17--17:15C-5}
5. a. (1) Except as provided pursuant to paragraph (2) of this subsection a., for a person licensed to engage in business in this State only as a foreign money transmitter, each licensee shall at all times have a net worth of not less than $100,000, calculated in accordance with generally accepted accounting principles. Licensees engaging in money transmission at more than one location or through authorized delegates shall have an additional net worth of $25,000 per location or agent located in this State, as applicable, up to a maximum net worth amount of $1,000,000.
(2) Each person licensed to engage in business in this State only as a foreign money transmitter shall at all times have a net worth of not less than $50,000, calculated in accordance with generally accepted accounting principles. Licensees engaging in foreign money transmission at more than one location or through authorized delegates shall have an additional net worth of $10,000 per location or agent located in this State, as applicable, up to a maximum net worth amount of $400,000.
(3) A person licensed to engage in the business of a foreign money transmitter pursuant to R.S.17:15-1 et seq. on the day prior to the effective date of this act, whose license is continued pursuant to subsection b. of section 27 of this act, shall fully comply with the net worth requirements of paragraph (2) of this subsection a. as follows:
(a) by the first business day following 90 days after the effective date of this act, have a net worth of $5,000;
(b) by July 1, 1999, have a net worth of $5,000 plus 25% of the additional net worth amount required pursuant to paragraph (2) of this subsection a.;
(c) by July 1, 2000, have a net worth of $5,000 plus 50% of the additional net worth amount required pursuant to paragraph (2) of this subsection a.; and
(d) by July 1, 2001, have a net worth in full compliance with the amount required pursuant to paragraph (2) of this subsection a.
b. Every corporate applicant, at the time of filing an application and at all times after a license is issued, shall be in good standing in the state of its incorporation. All non-corporate applicants shall, at the time of the filing of an application and at all times after a license is issued, be registered or qualified to do business in this State.
##### **§ 17:15C-6** Possession of security device, permissible investments. {#sec-17-15c-6 omnilex-key=us-nj-statutes--title-17--17:15C-6}
6. a. Each licensee shall at all times possess a surety bond, irrevocable letter of credit or such other similar security device acceptable to the commissioner in the amount required pursuant to section 8 of this act.
b. Each licensee shall at all times possess permissible investments having an aggregate market value, calculated in accordance with generally accepted accounting principles, of not less than the aggregate face amount of all outstanding payment instruments issued or sold by the licensee in the United States. This requirement may be waived by the commissioner if the dollar volume of a licensee's outstanding payment instruments does not exceed the bond or other security devices posted by the licensee pursuant to section 8 of this act.
c. In the event of bankruptcy of the licensee, permissible investments, even if commingled with other assets of the licensee, shall be deemed to be held in trust for the benefit of the purchasers and holders of the licensee's outstanding payment instruments by operation of law.
##### **§ 17:15C-7** Application for license; requirements. {#sec-17-15c-7 omnilex-key=us-nj-statutes--title-17--17:15C-7}
7. Each application for a license shall be made in writing, under oath, and in a form prescribed by the commissioner. Each application shall contain:
a. For all applicants:
(1) The exact name of the applicant, the applicant's principal address, any fictitious or trade name used by the applicant in the conduct of its business and the location of the applicant's business records;
(2) The history, if any, of the applicant's material litigation and criminal convictions for the five-year period prior to the date of the application;
(3) A description of the activities conducted by the applicant and a history of operations;
(4) A description of the business activities in which the applicant seeks to be engaged in the State;
(5) A list identifying the applicant's proposed authorized delegates in the State, if any, at the time of the filing of the license application;
(6) A sample authorized delegate contract, if applicable;
(7) A sample form of payment instrument, if applicable;
(8) Each location at which the applicant and its authorized delegates, if any, propose to conduct the licensed activities in the State;
(9) The name and address of each clearing bank on which the applicant's payment instruments will be drawn or through which those payment instruments will be payable;
(10) A list identifying each country to which an applicant proposes to transmit money or from which an applicant proposes to receive money transmissions;
(11) Federal tax identification number; and
(12) Non-refundable application fee as prescribed by regulation by the commissioner in an amount not to exceed $1,000.
b. If the applicant is a corporation, the applicant shall also provide:
(1) The date of the applicant's incorporation and state of incorporation;
(2) A certificate of good standing from the state in which the applicant was incorporated;
(3) A description of the corporate structure of the applicant, including the identity of any parent or subsidiary of the applicant, and the disclosure of whether any parent or subsidiary is publicly traded on any stock exchange;
(4) The name, business and residence address, social security number, date of birth and employment history for the past five years of each of the applicant's executive officers and of each officer or manager who will be in charge of the applicant's activities to be licensed under this act;
(5) The name, business and residence address, social security number, date of birth and employment history for the period five years prior to the date of the application of each key shareholder of the applicant;
(6) The history, if any, of material litigation and criminal convictions for the five-year period prior to the date of the application of every executive officer or key shareholder of the applicant;
(7) A copy of the applicant's most recent audited financial statements (including balance sheet, statement of income or loss, statement of changes in shareholder equity and statement of changes in financial position) prepared by a certified public accountant or public accountant in good standing and, if available, the applicant's audited financial statements for the immediately preceding three-year period. However, if the applicant is a wholly owned subsidiary of another corporation, the applicant may submit either the parent corporation's consolidated audited financial statements for the current year and for the immediately preceding three-year period or the parent corporation's Form 10-K reports filed with the Securities and Exchange Commission for the prior three years in lieu of the applicant's financial statements. If the applicant is a wholly owned subsidiary of a corporation having its principal place of business outside the United States, similar documentation filed with the parent corporation's non-United States regulator may be submitted to satisfy this provision;
(8) Copies of all filings, if any, made by the applicant with the Securities and Exchange Commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application; and
(9) Except in the case of a publicly traded corporation, its subsidiaries and affiliates, or a bank, bank holding company, subsidiaries and affiliates thereof, fingerprints of each of the applicant's executive officers and of each officer or manager who will be in charge of the applicant's activities to be licensed hereunder.
c. If the applicant is not a corporation, the applicant shall also provide:
(1) The name, business and residence address, personal financial statement and employment history for the past five years, social security number, date of birth, and fingerprints of each principal of the applicant and the name, business and residence address, employment history for the past five years, social security number, date of birth, and fingerprints of any other persons who will be in charge of the applicant's activities to be licensed under this act;
(2) The place and date of the applicant's registration or qualification to do business in this State;
(3) The history, if any, of material litigation and criminal convictions for the five-year period prior to the date of the application for each individual having any ownership interest in the applicant and each individual who exercises supervisory responsibility with respect to the applicant's activities;
(4) Copies of the applicant's audited financial statements (including balance sheet, statement of income or loss, and statement of changes in financial position) prepared by a certified public accountant or public accountant in good standing for the current year and, if available, for the immediately preceding two-year period; and
(5) Alien registration information, if applicable.
d. Such other information as the commissioner may require by regulation.
##### **§ 17:15C-8** Accompaniment of application with security device; amounts required; conditions. {#sec-17-15c-8 omnilex-key=us-nj-statutes--title-17--17:15C-8}
8. a. (1) Except as provided pursuant to paragraph (2) of this subsection a., each application shall be accompanied by a surety bond, irrevocable letter of credit or such other similar security device (hereinafter "security device") acceptable to the commissioner in an amount prescribed by the commissioner by regulation of not less than $100,000 and not more than $1,000,000. The security device shall be in a form satisfactory to the commissioner and shall run to the State for the benefit of any person injured by a wrongful act, default, fraud or misrepresentation of the licensee, including its directors, officers, authorized delegates and employees, to secure the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission, and payment of money in connection with the sale and issuance of payment instruments, transmission of money, or both. In the case of a bond, the bond shall be obtained from a surety company authorized to do business in this State and the aggregate liability of the surety in no event shall exceed the principal sum of the bond.
(2) Each application to engage only in the business of a foreign money transmitter shall be accompanied by a surety bond, irrevocable letter of credit or such other similar security device (hereinafter "security device") acceptable to the commissioner in an amount which is based on the annual volume of business in this State as reported in the most recent annual report filed pursuant to section 12 of this act as set forth in the following schedule:
Security
Annual Volume of Business Device
Amount
Up to and including $500,000 $25,000.
Over $500,000 and up to and including $1,000,000 $30,000.
Over $1,000,000 and up to and including $2,000,000 $35,000.
Over $2,000,000 and up to and including $3,000,000 $40,000.
Over $3,000,000 and up to and including $4,000,000 $45,000.
Over $4,000,000 and up to and including $5,000,000 $50,000.
Over $5,000,000 and up to and including $6,000,000 $55,000.
Over $6,000,000 and up to and including $7,000,000 $60,000.
Over $7,000,000 and up to and including $8,000,000 $65,000.
Over $8,000,000 and up to and including $9,000,000 $70,000.
Over $9,000,000 and up to and including $10,000,000 $75,000.
Over $10,000,000 and up to and including $11,000,000 $80,000.
Over $11,000,000 and up to and including $12,000,000 $80,000.
Over $12,000,000 and up to and including $13,000,000 $90,000.
Over $13,000,000 and up to and including $14,000,000 $95,000.
Over $14,000,000 and up to and including $15,000,000 $100,000.
The security device amount required on an annual volume of business in excess of $15 million shall be $100,000 plus an additional amount set by the commissioner by regulation not to exceed $900,000. The security device shall be in a form satisfactory to the commissioner and shall run to the State for the benefit of any person injured by a wrongful act, default, fraud or misrepresentation of the licensee, including its directors, officers, authorized delegates and employees, to secure the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission, and payment of money in connection with the sale and issuance of payment instruments, transmission of money, or both. In the case of a bond, the bond shall be obtained from a surety company authorized to do business in this State and the aggregate liability of the surety in no event shall exceed the principal sum of the bond.
(3) Persons licensed pursuant to R.S.17:15-1 et seq. on the day prior to the effective date of this act whose license is continued pursuant to subsection b. of section 27 of this act shall fully comply with the requirements of paragraph (2) of this subsection a. as follows:
(a) by the first business day following 90 days after the effective date of this act, have a security device acceptable to the commissioner of $25,000;
(b) by July 1, 1999, have a security device acceptable to the commissioner in the amount that is required pursuant to subparagraph (a) of this paragraph (3), plus 25% of the additional amount required pursuant to paragraph (2) of this subsection a., if any;
(c) by July 1, 2000, have a security device acceptable to the commissioner in the amount that is required pursuant to subparagraph (a) of this paragraph (3), plus 50% of the additional amount required pursuant to paragraph (2) of this subsection a., if any; and
(d) by July 1, 2001, have a security device acceptable to the commissioner that is in full compliance with the amount required under this act.
b. In lieu of the security device or of any portion of the principal thereof, as required by this section, the licensee may deposit with the commissioner, or with banks in this State that the licensee designates and the commissioner approves, cash, interest-bearing stocks and bonds, notes, debentures or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of this State, or of a political subdivision or instrumentality of this State, or guaranteed by this State which is rated in one of the three highest categories by a nationally recognized statistical rating organization, to an aggregate amount, based upon principal amount or market value, whichever is lower, of not less than the amount of the security device or portion thereof. The securities, cash, or both, shall be deposited as aforesaid and held to secure the same obligations as the security device, but the depositor shall be entitled to receive all interest and dividends thereon, shall have the right, with the approval of the commissioner, to substitute other securities for those deposited, and shall be required to do so on written order of the commissioner for good cause shown.
c. The security device shall remain in effect until cancellation, which may occur only after thirty days' written notice to the commissioner. Cancellation shall not affect any liability incurred or accrued during that period.
d. The security device shall remain in place for no longer than five years after the licensee ceases money transmission operations in the State. However, notwithstanding this provision, the commissioner may permit the security device to be reduced or eliminated prior to that time to the extent that the amount of the licensee's payment instruments outstanding in this State are reduced. The commissioner may also permit a licensee to substitute a letter of credit or other form of security device acceptable to the commissioner for the security device in place at the time the licensee ceases money transmission operations in the State by surrender, revocation or expiration of its license.
##### **§ 17:15C-9** Investigation of applicants for licensing, renewal; licensing period. {#sec-17-15c-9 omnilex-key=us-nj-statutes--title-17--17:15C-9}
9. a. Upon the filing of a complete application, in the case of an initial application, or the filing of a complete renewal application, the commissioner shall investigate the financial condition and responsibility, financial and business experience, character and general fitness of the applicant for an initial license or a renewal license. The commissioner may conduct an on-site investigation of the applicant for an initial license, the reasonable cost of which shall be borne by the applicant. If the commissioner finds that the applicant's business will be conducted honestly, fairly and in a manner commanding the confidence and trust of the community and that the applicant has fulfilled the requirements imposed by this act and has paid the required license fee, the commissioner shall issue a license to the applicant authorizing the applicant to engage in the licensed activities in this State. If these requirements have not been met, the commissioner shall deny the application in writing, setting forth the reasons for the denial.
b. The commissioner shall approve or deny every application for an initial license within 120 days from the date that the applicant has satisfied all requirements for licensure.
c. The license period of not less than two years shall be set by the commissioner by rule or regulation. A license shall run from the date of issuance to the end of the licensing period.
d. Licenses shall not be transferable or assignable.
e. The licensee shall register locations in the State.
f. Within 45 days after the end of each calendar quarter, each licensee shall file with the commissioner in writing a list of all locations within the State that have been added or terminated by the licensee, if any. The list shall include the name and business address of each location.
g. If the licensed name or licensed business address is changed, the licensee shall notify the commissioner in writing of the change within 10 days.
##### **§ 17:15C-10** Keeping of records required. {#sec-17-15c-10 omnilex-key=us-nj-statutes--title-17--17:15C-10}
10. a. Each licensee, shall make, keep and preserve the following books, accounts and other records for a period of three years:
(1) a record of each payment instrument sold;
(2) a general ledger containing all assets, liabilities, capital, income and expense accounts (which general ledger shall be posted at least monthly);
(3) settlement sheets received from authorized delegates;
(4) bank statements and bank reconciliation records;
(5) records of outstanding payment instruments;
(6) records of each payment instrument paid within the three-year period;
(7) a list of names and addresses of all of the licensee's authorized delegates;
(8) a list of all countries to which money is transmitted or from which money is received for transmission;
(9) a list of the names and addresses of all clearing banks through which the licensee's money transmission business is conducted; and
(10) such other books and records as the commissioner may require by regulation.
b. Maintenance of the documents required by this section in a photographic, electronic or other similar form shall constitute compliance with this section.
c. Each licensee shall maintain the records it is required to maintain pursuant to 31 C.F.R. s.103.11 et seq.
d. The records of the licensee regarding business regulated under this act shall be maintained at its principal place of business or, with notice to the commissioner, at another location designated by the licensee. If the records are maintained outside this State, the commissioner may require that the licensee reimburse the department for the travel costs incurred in the examination or investigation of those records or may require that the licensee make those records available to the commissioner at the commissioner's office not more than seven business days after demand. The commissioner may further require that those records be accompanied by an individual who will be available to answer questions regarding those records and the business regulated under this act. The commissioner may require the appearance of a specific individual, or request that the licensee designate an individual with knowledge of the records and the business.
##### **§ 17:15C-11** Investigation, examination of license. {#sec-17-15c-11 omnilex-key=us-nj-statutes--title-17--17:15C-11}
11. a. The commissioner may investigate and examine any licensee or other person the commissioner deems necessary to determine compliance with this act and the orders, rules and regulations issued hereunder. For these purposes, the commissioner may examine the books, accounts, records, and other documents or matters of any licensee or other person. The commissioner shall have the power to compel by subpoena the production of all relevant books, records and other documents and materials relative to an examination or investigation. The cost of the investigations and examinations shall be borne by the licensee.
b. Examinations and investigations conducted under the provisions of this section shall be confidential except as required in the administration, enforcement and prosecution of violations under this act, or pursuant to a court order made upon notice to the commissioner and after affording the commissioner an opportunity to advise the court of reasons for excluding that evidence. The court shall order the issuance of a subpoena for the production or admission into evidence of any report or portion thereof, only if it is satisfied that: (1) it is material and relevant to the issues in the proceedings; and (2) the ends of justice and public advantage will be served thereby. If any person refuses to obey a subpoena, or to give testimony or produce evidence as required thereby, the commissioner may apply ex parte to any court having jurisdiction over that person for an order compelling the appearance of the witness before the commissioner to give testimony or to produce evidence as required thereby, or both. The commissioner, in lieu of an on-site examination, may establish by regulation other reports which will be deemed acceptable and which will be considered for all purposes an official report of the commissioner.
c. The commissioner may request additional financial data from a licensee or conduct an on-site examination or investigation of any authorized delegate or location of a licensee within this State without prior notice to the authorized delegate or licensee if the commissioner has a reasonable basis to believe that the licensee or authorized delegate is not in compliance with this act. Whenever the commissioner examines or investigates an authorized delegate's operations, the authorized delegate shall pay the costs of that examination or investigation, but the licensee shall remain liable for ensuring that the payment is made. Whenever the commissioner examines or investigates a licensee's location within the State, the licensee shall pay all reasonably incurred costs of that examination.
##### **§ 17:15C-12** Annual reports; violations, penalties. {#sec-17-15c-12 omnilex-key=us-nj-statutes--title-17--17:15C-12}
12. a. Each licensee shall file with the commissioner an annual report containing the information required by the commissioner by regulation.
b. The commissioner may require reports of any licensee or authorized delegate, under penalty of perjury or otherwise, concerning the licensee's or authorized delegate's business conducted pursuant to the license issued under this act, as the commissioner requires for the enforcement of this act.
c. A licensee who fails to file any report required by this section on or before the day designated for making the report, or fails to include any prescribed matter in the report, shall pay a penalty of not more than $100 for each day that the report is delayed or incomplete, unless the commissioner, for good cause shown, reduces the amount to be paid, or unless the time to file the report is extended in writing by the commissioner. In addition, the commissioner may revoke or suspend the authority of a licensee to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
d. The licensee shall include in its annual report:
(1) (a) except as provided pursuant to subparagraph (b) of this paragraph (1), for a person licensed to engage only in the business of a foreign money transmitter, a copy of its most recent audited consolidated annual financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position, or, in the case of a licensee that is a wholly owned subsidiary of another corporation, the consolidated audited annual financial statement of the parent corporation may be filed in lieu of the licensee's audited annual financial statement;
(b) for a person licensed to engage only in the business of a foreign money transmitter, a copy of its most recent compiled annual financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position, except that the commissioner may, for good cause, request a foreign money transmitter to submit an audited financial statement;
(2) for the most recent quarter for which data is available prior to the date of the filing of the annual report, but in no event more than 120 days prior to the annual report filing date, the licensee shall provide the number of payment instruments sold by the licensee in the State, the dollar amount of those instruments and the dollar amount of those instruments currently outstanding;
(3) any material changes to any of the information submitted by the licensee on its original application which have not previously been reported to the commissioner on any other report required to be filed under this act;
(4) a list of the licensee's permissible investments;
(5) a list of the locations within this State at which business regulated by this act is being conducted by either the licensee or its authorized delegate; and
(6) such other information as the commissioner may require by regulation.
##### **§ 17:15C-13** Written report required upon occurrence of certain events. {#sec-17-15c-13 omnilex-key=us-nj-statutes--title-17--17:15C-13}
13. Within 15 days of the occurrence of any one of the events listed below, a licensee shall file a written report with the commissioner describing the event and its expected impact on the licensee's activities in the State:
a. The filing for bankruptcy or reorganization by the licensee;
b. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority with regard to the licensees' money transmission activities;
c. Any indictment of the licensee or any of its key officers or directors related to money transmission activities and specified as a crime by P.L.1994, c.121 (C.2C:21-23 et seq.);
d. Any conviction of the licensee or any of its key officers or directors related to money transmission activities and specified as a crime by P.L.1994, c.121 (C.2C:21-23 et seq.).
##### **§ 17:15C-14** Approval for acquisition of control of licensee; application, fee. {#sec-17-15c-14 omnilex-key=us-nj-statutes--title-17--17:15C-14}
14. a. A person shall not directly or indirectly acquire control of a licensee without the prior written approval of the commissioner. The application for change of control shall be in writing in a form prescribed by the commissioner and shall be accompanied by the information, data and records the commissioner requires by regulation. The application shall be accompanied by a fee in an amount not to exceed $500 set by the commissioner by regulation.
b. The commissioner shall deny the application to acquire control of a licensee if the commissioner finds that the acquisition of control is contrary to law or that disapproval is reasonably necessary to protect the interest of the public. In making that determination, the commissioner shall consider the following:
(1) Whether the financial condition of the person that seeks to control the licensee might jeopardize the financial condition of the licensee or the interests of the public in the conduct of the business regulated under this act; and
(2) Whether the competence, experience, and integrity of the person who seeks to control the licensee, or the officers, directors and controlling persons of the person who seeks to control the licensee, indicate that it would not be in the interests of the public to permit that person to control the licensee.
c. Nothing in this section shall prohibit a person from negotiating or entering into agreements subject to the condition that the acquisition of control will not be effective until approved by the commissioner.
d. This section shall not apply to any of the following persons or transactions:
(1) A registered dealer who acts as an underwriter or member of a selling group in a public offering of the voting securities of a licensee or controlling person of a licensee;
(2) A person who acts as proxy for the sole purpose of voting at a designated meeting of the security holders of a licensee or controlling person of a licensee;
(3) A person who acquires control of a licensee or controlling person as a personal representative, custodian, guardian, conservator, trustee or other officer appointed by a court of competent jurisdiction or by operation of law;
(4) Purchases of a controlling amount of shares on a national stock exchange of a publicly held licensee, until the licensee has actual notice of that purchase and, within five days, notifies the commissioner; and
(5) Any other person or transaction that the commissioner by rule or order exempts in the public interest.
e. Before filing an application for approval to acquire control, a person may request in writing a determination from the commissioner as to whether that person will be deemed in control, upon consummation of a proposed transaction. If the commissioner determines in response to that request that the person will not be in control within the meaning of this act, the commissioner shall notify the person that the proposed transaction is not subject to the requirements of this section.
##### **§ 17:15C-15** Confidentiality of information, reports. {#sec-17-15c-15 omnilex-key=us-nj-statutes--title-17--17:15C-15}
15. a. Notwithstanding any other provision of law, all information or reports obtained by the department from an applicant, licensee or authorized delegate, whether obtained through reports, applications, examinations, audits, investigations, or otherwise, including, but not limited to: (1) all information contained in or related to examination, investigation, operating, or condition reports prepared by, on behalf of, or for the use of the department; or (2) financial statements, balance sheets, or authorized delegate information, are confidential and may not be disclosed or distributed outside the department by the commissioner or any officer or employee of the department. The commissioner, however, may provide for the release of information to representatives of state or federal agencies and foreign countries having regulatory or supervisory authority over the activities of the licensee or similar licensees if those representatives, upon request of the commissioner, disclose similar information respecting those licensees under their regulation or supervision, or to those representatives who state in writing under oath that they shall maintain the confidentiality of that information.
b. The commissioner may:
(1) Disclose the fact of filing of applications with the department pursuant to this act, give notice of a hearing, if any, regarding those applications, and announce his action thereon;
(2) Disclose final decisions in connection with proceedings for the suspension or revocation of licenses issued pursuant to this act;
(3) Prepare and circulate reports reflecting the assets and liabilities of money transmitters in general, including other information considered pertinent to the purpose of each report for general statistical information; and
(4) Prepare and circulate reports as provided by law.
c. Every official report of the department is prima facie evidence of the facts therein stated in any action or proceeding wherein the commissioner is a party.
d. Nothing in this section shall be construed to prevent the disclosure of information that is admissible in evidence in any civil or criminal proceeding brought by or at the request of the commissioner or this State to enforce or prosecute violations of this act or the rules, regulations or orders issued or promulgated pursuant to this act.
##### **§ 17:15C-16** Suspension, revocation of license. {#sec-17-15c-16 omnilex-key=us-nj-statutes--title-17--17:15C-16}
16. After notice and hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), the commissioner may suspend or revoke a licensee's license if the commissioner finds that:
a. The licensee has made a material misstatement or suppressed or withheld information on the application for a license or any document required to be filed with the commissioner;
b. Any fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying the application;
c. The licensee's net worth has become inadequate and the licensee, after 10 days' written notice from the commissioner, fails to take the steps the commissioner deems necessary to remedy the deficiency;
d. The licensee knowingly violates any material provision of this act or any rule or order validly promulgated by the commissioner under authority of this act;
e. The licensee is conducting its business in an unsafe or unsound manner;
f. The licensee is insolvent; for the purposes of this section, a licensee shall be insolvent if: (1) the aggregate of its property at a fair valuation, exclusive of any property which it may have conveyed, transferred, concealed, removed or permitted to be concealed or removed, with intent to defraud, hinder or delay its creditors, is not sufficient in amount to pay its debts; or (2) the licensee is unable, by its available assets or the honest use of credit, to pay its debts as they become due;
g. The licensee has suspended payment of its obligations, has made an assignment for the benefit of its creditors, or has admitted in writing its inability to pay its debts as they become due;
h. The licensee has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under any bankruptcy;
i. The licensee refuses to permit the commissioner to make any examination or investigation authorized by this act;
j. The licensee willfully fails to make any report required by this act;
k. The licensee has willfully violated any provision of 31 C.F.R. s.103.11 et seq.; or
l. The licensee has willfully violated any provision of P.L.1994, c.121 (C.2C:21-23 et seq.).
##### **§ 17:15C-17** Authorization of delegates. {#sec-17-15c-17 omnilex-key=us-nj-statutes--title-17--17:15C-17}
17. Licensees desiring to conduct licensed activities through authorized delegates shall authorize each delegate to operate pursuant to an express written contract, which shall provide that the licensee appoints the person as its delegate with authority to engage in the activities of a money transmitter on behalf of the licensee.
##### **§ 17:15C-18** Regulations pertinent to delegates. {#sec-17-15c-18 omnilex-key=us-nj-statutes--title-17--17:15C-18}
18. a. An authorized delegate shall not make any fraudulent or false statement or misrepresentation to a licensee or to the commissioner.
b. All money transmission or sale or issuance of payment instrument activities conducted by authorized delegates shall be strictly in accordance with the licensee's written procedures to the authorized delegate.
c. An authorized delegate shall remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized delegate. The failure of an authorized delegate to remit all money owing to a licensee within the time presented shall result in liability of the authorized delegate to the licensee for three times the licensee's actual damages. The commissioner shall have the discretion to set, by regulation, the maximum remittance time.
d. An authorized delegate is deemed to consent to the commissioner's inspection, with or without prior notice to the licensee or authorized delegate, of the books and records of the authorized delegate of the licensee whenever the commissioner has a reasonable basis to believe that the licensee or authorized delegate is not in compliance with this act.
e. An authorized delegate is under a duty to act only as authorized under the contract with the licensee and an authorized delegate who exceeds its authority is subject to cancellation of its contract and further disciplinary action by the commissioner.
f. All funds (less fees) received by an authorized delegate of a licensee from the sale or delivery of a payment instrument issued by a licensee or received by an authorized delegate for transmission shall, from the time the funds are received by an authorized delegate until that time when the funds or an equivalent amount are remitted by the authorized delegate to the licensee, constitute trust funds owned by and belonging to the licensee. If an authorized delegate commingles any trust funds with any other funds or property owned or controlled by the authorized delegate, all commingled proceeds and other property shall be impressed with a trust in favor of the licensee in the amount equal to the amount of the proceeds due the licensee.
g. An authorized delegate shall report to the licensee the theft or loss of payment instruments within 24 hours from the time it knew or should have known of that theft or loss.
h. Authorized delegates shall comply with the provisions of 31 C.F.R. s.103.11 et seq. and P.L.1994, c.121 (C.2C:21-23 et seq.).
i. Authorized delegates shall conduct all business governed by this act in the name of the licensee.
##### **§ 17:15C-19** Violations by delegates; issuance of order suspending, barring; application for modification, rescission. {#sec-17-15c-19 omnilex-key=us-nj-statutes--title-17--17:15C-19}
19. a. If, after notice and a hearing, the commissioner finds that any authorized delegate of a licensee or any director, officer, employee, or controlling person of that authorized delegate:
(1) has violated any provision of this act or of any rule or regulation or order issued under this act;
(2) has engaged or participated in any unsafe or unsound act with respect to the business of selling or issuing payment instruments of the licensee or the business of money transmission; or
(3) has made or caused to be made in any application or report filed with the commissioner or in any proceeding before the commissioner, any statement which was at the time and in the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such application or report any material fact which is required to be stated therein, the commissioner may issue an order, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) suspending or barring the authorized delegate from continuing to be or becoming an authorized delegate of any licensee during the period for which the order is in effect. Upon issuance of an order, the licensee shall terminate its relationship with the authorized delegate according to the terms of the order.
b. (1) Any authorized delegate to whom an order is issued under this section may apply to the commissioner to modify or rescind the order. The commissioner shall not grant the application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when the person is permitted to resume being an authorized delegate of a licensee, comply with all applicable provisions of this act and of any regulation and order issued under this act.
(2) The right of any authorized delegate to whom an order is issued under this section to petition for judicial review of that order shall not be affected by the failure of that person to apply to the commissioner to modify or rescind the order.
##### **§ 17:15C-20** Limitation of licensee's responsibility. {#sec-17-15c-20 omnilex-key=us-nj-statutes--title-17--17:15C-20}
20. A licensee's responsibility to any person for a money transmission conducted on that person's behalf by the licensee or the licensee's authorized delegate shall be limited to the amount of money transmitted or the face amount of the payment instrument purchased and any fee, commission or other benefit paid to the licensee or the licensee's authorized delegate for that service.
##### **§ 17:15C-21** Applicability of APA. {#sec-17-15c-21 omnilex-key=us-nj-statutes--title-17--17:15C-21}
21. The provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) shall apply to any hearing afforded pursuant to this act.
##### **§ 17:15C-22** Violations, penalties. {#sec-17-15c-22 omnilex-key=us-nj-statutes--title-17--17:15C-22}
22. a. If, after notice and hearing, the commissioner finds that a person has violated any provision of this act or a rule adopted under this act, the commissioner may order the person to pay the commissioner a civil penalty in an amount specified by the commissioner, not to exceed $5,000 for each violation. Each violation shall constitute a separate offense and the penalty under this section shall be in addition to a suspension or revocation of a license. No such proceeding shall be initiated and no penalty shall be assessed pursuant to this section until after that person has been notified in writing of the nature of the violation and has been afforded a reasonable period of time, as set forth in the notice, to correct the violation and has failed to do so. The provisions of "the penalty enforcement law," N.J.S.2A:58-1 et seq., shall apply.
b. The commissioner, in the exercise of the commissioner's reasonable judgment, is authorized to compromise, settle, and collect civil penalties with any person for violations of any provision of this act, or of any rule, regulation or order issued or promulgated pursuant to this act.
##### **§ 17:15C-23** Powers of commissioner. {#sec-17-15c-23 omnilex-key=us-nj-statutes--title-17--17:15C-23}
23. a. If it appears to the commissioner that any person has committed or is about to commit a violation of any provision of this act or of any rule or order of the commissioner, the commissioner may apply to the Superior Court for an order enjoining that person from violating or continuing to violate this act or any rule, regulation or order of the commissioner and for injunctive or other relief as the nature of the case may require.
b. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this act. A consent order shall be signed by the person to whom it is issued or a duly authorized representative, and shall indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this act, or any rule, regulation or order promulgated or issued thereunder has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this act or any rule, regulation or order promulgated or issued thereunder.
c. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order, unless the consent order by its terms expressly precludes the commissioner from so doing.
d. The commissioner is authorized to exchange fingerprint data with and receive criminal history information from the Federal Bureau of Investigation and the New Jersey Division of State Police or any other appropriate agency for use in performing background checks. The commissioner is authorized to conduct additional background checks the commissioner deems appropriate.
##### **§ 17:15C-24** Violations designated fourth, third degree crimes. {#sec-17-15c-24 omnilex-key=us-nj-statutes--title-17--17:15C-24}
24. a. Any person who knowingly and willfully violates any provision of this act for which a penalty is not specifically provided is guilty of a crime of the fourth degree.
b. Any person who knowingly and willfully makes a material, false statement in any document filed or required to be filed under this act with the intent to deceive the recipient of the document is guilty of a crime of the third degree.
c. Any person who knowingly and willfully engages in the business of money transmission without a license as provided herein shall be guilty of a crime of the third degree.
d. Any person who purposely or knowingly refuses to permit any lawful investigation by the commissioner or the Attorney General shall be guilty of a crime of the third degree.
##### **§ 17:15C-25** Regulations. {#sec-17-15c-25 omnilex-key=us-nj-statutes--title-17--17:15C-25}
25. The commissioner shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
##### **§ 17:15C-26** Presumptions regarding licensees, delegates; service of process. {#sec-17-15c-26 omnilex-key=us-nj-statutes--title-17--17:15C-26}
26. a. Any licensee, authorized delegate or other person who engages in business activities that are regulated under this act, with or without filing an application, is deemed to have done both of the following:
(1) Consented to the jurisdiction of the courts of this State for all actions arising under this act; and
(2) Appointed the commissioner as his lawful agent for the purpose of accepting service of process in any action, suit or proceeding that may arise under this act.
b. Within three business days after service of process upon the commissioner, the commissioner shall transmit by certified mail copies of all lawful process accepted by the commissioner as an agent to that person at its last known address. Service of process shall be considered complete three business days after the commissioner deposits copies of the documents in the United States mail.
##### **§ 17:15C-27** Application required for those currently doing business; status of current licensees. {#sec-17-15c-27 omnilex-key=us-nj-statutes--title-17--17:15C-27}
27. a. Every person engaged in activities within this State encompassed by this act on the effective date of this act, except those persons already licensed under chapter 15 of Title 17 of the Revised Statutes or P.L.1964, c.273 (C.17:15B-1 et seq.), shall file an application in accordance with the provisions of this act by the first business day following 90 days after the effective date of this act.
b. A person holding a license in good standing under chapter 15 of Title 17 of the Revised Statutes shall continue as a licensee under this act until the first business day following 90 days after the effective date of this act. If the licensee intends to continue to engage only in the business of a foreign money transmitter regulated by this act, the licensee shall, by the first business day following 90 days after the effective date of this act, submit to the commissioner a written statement certified to be true under penalty of law that the licensee is in full compliance with the provisions of this act; this statement shall include the information required by sections 5, 6 and 8 of this act. Upon submission of the aforementioned statement under oath, a licensee's current license shall continue in accordance with the provisions of this act.
c. A person holding a license in good standing under chapter 15 of Title 17 of the Revised Statutes or P.L.1964, c.273 (C.17:15B-1 et seq.), or both, who wishes to continue as a licensee under this act, shall, by the first business day following 90 days after the effective date of this act, submit to the commissioner a written statement certified to be true under penalty of law that the licensee is in full compliance with the provisions of this act; this statement shall include the information required by sections 5, 6 and 8 of this act. Upon submission of the aforementioned statement under oath, a licensee's current license shall continue in accordance with the provisions of this act.
## **Chapter 16A** {#struct-chapter-16a}
##### **§ 17:16A-1** Definitions {#sec-17-16a-1 omnilex-key=us-nj-statutes--title-17--17:16A-1}
As used in this chapter
a. "Investment company" means any corporation, foreign or domestic, any partnership or any individual which engages principally in an investment business as defined in this section, but this chapter shall not be construed to affect any corporation, partnership or individual, other than an investment company, to which a certificate of authority to do business has been issued in accordance with, may be issued on compliance with, or the issue of which is prohibited by the provisions of any other chapter of this Title;
b. "Investment contract" means any agreement, certificate, instrument or other writing containing an undertaking by the company making, issuing or guaranteeing the same to pay the holder thereof, or his assignee, or his personal representative, a stated or determinable maturity value in cash or its equivalent on a fixed or determinable date, the consideration for which consists of the payment to the company of payments, deposits, dues, installments or a single sum, according to a plan fixed by the contract, regardless of whether the holder is entitled to share in the profits or earnings of the issuer;
c. "Investment business" means the business of making, issuing, or guaranteeing investment contracts, but does not include the business of any mortgage guaranty corporation, bank, trust company or other corporation of this State incorporated under any general or special law which makes insurance against, or guarantees against, loss by reason of nonpayment of principal or interest on bonds and mortgages, or any corporation authorized to do a life insurance business in this State.
##### **§ 17:16A-2** Compliance with law before doing business; liability of directors and corporators for transacting business without certificate of authority {#sec-17-16a-2 omnilex-key=us-nj-statutes--title-17--17:16A-2}
Prohibition to do business. No investment company as defined in this chapter shall undertake the transaction of an investment business in this State until it shall have complied with the applicable requirements of this chapter and shall have received a certificate of authority from the Commissioner of Insurance setting forth that it has complied with the provisions of this chapter and specifying the kind of business to be transacted by it. The directors and corporators of any investment company incorporated under the laws of this State shall be jointly and severally liable for all obligations incurred by the company after the effective date of this chapter by reason of its having transacted such business in this State before it has received a certificate of authority from the commissioner pursuant to the provisions of this chapter.
##### **§ 17:16A-3** Authorization of domestic companies, individuals and partnerships {#sec-17-16a-3 omnilex-key=us-nj-statutes--title-17--17:16A-3}
Authorization of domestic companies, individuals and partnerships. An investment company, other than a foreign corporation, desiring to secure a certificate of authority shall make application to the commissioner who may issue such certificate of authority to transact business to any such company when:
a. The investment company, if a corporation of this State, has filed in the department a certified copy of its charter or certificate of incorporation and a statement, in such form as the commissioner shall prescribe, attested by its president or vice-president and secretary or treasurer under its corporate seal, showing the financial condition of the corporation; or if an individual or partnership, has filed in the department such evidence as may be satisfactory to the commissioner that the individual or members of the partnership are citizens of the United States and residents of this State and a statement, in such form as the commissioner shall prescribe, attested by the individual or by the members of the partnership, showing the financial condition of the individual or partnership.
b. The commissioner shall be satisfied, by such examination and evidence as he sees fit to make and require; if a corporation, that the whole amount of the capital set forth in the certificate of incorporation and the required minimum surplus of the company has been actually paid in cash and is possessed by the company in money or in such stocks, bonds, bonds and mortgages, or other securities as are authorized for investment by this chapter, or, if an individual or partnership, that the minimum amount of unencumbered assets over its liabilities required by this chapter are held in such stocks, bonds, bonds and mortgages, or other securities authorized by this chapter for the investment of the funds of investment companies incorporated under the laws of this State. No investment company hereafter incorporated under the laws of this State shall be entitled to commence business unless it has a capital stock of at least one hundred thousand dollars ($100,000.00) and in addition thereto a surplus actually paid in cash equal to one-half the minimum capital stock required by this chapter. Any company heretofore incorporated under the laws of this State and engaged in the investment business as defined in this act, within this State, shall be entitled to make application to the commissioner for a certificate of authority, authorized by this act; provided, such company shall at all times have capital stock and surplus actually paid in cash amounting to twenty per centum (20%) of its liabilities, such liabilities to be determined by the Commissioner of Insurance of this State; and provided, further, that the said capital and surplus shall be at a minimum amount of at least thirty thousand dollars ($30,000.00). No individual or partnership shall be entitled to commence business unless the amount of its unencumbered assets, invested as herein provided, over its liabilities shall not be less than one hundred fifty thousand dollars ($150,000.00).
c. The company shall have deposited with the custodian on behalf of the commissioner, securities with a market value of at least $100,000.00 to be held in physical form or purchased for its account in the Federal Reserve book-entry system. The deposits shall be held for the benefit and security of all policyholders of the company depositing them. The records of the custodian, through which an insurance company holds securities in the Federal Reserve book-entry system or in physical form, shall at all times show that these securities are held for an insurance company and for which accounts thereof.
Every individual or partnership authorized to transact business pursuant to this chapter shall conform to all requirements of this chapter applicable to corporations of this State and which by their nature are applicable to individuals or partnerships. When in this chapter reference is made to officers of an investment company, such reference shall be deemed to be reference to the individual or to the members of a partnership. The commissioner may refuse to issue a certificate of authority to any individual or partnership and may cancel any outstanding certificate of authority of any individual or partnership, if in his judgment, the interests of the public would be best served by such refusal or cancellation.
##### **§ 17:16A-4** Foreign investment companies; requirements for admission {#sec-17-16a-4 omnilex-key=us-nj-statutes--title-17--17:16A-4}
Any investment company incorporated by authority of another State or Foreign Government, upon complying with the conditions hereinafter specified, may be admitted to transact in this State any business authorized by this chapter to be transacted by an investment company of this State. No such company shall be admitted until:
a. It shall file in the department a certified copy of its charter, or deed of settlement or certificate of organization, and a statement of its financial condition and business, in such form and detail as the commissioner may require, signed and sworn to by its president and secretary or other proper officer;
b. It shall satisfy the commissioner that it is fully and legally organized under the laws of its State to do the business it proposes to transact; that its condition or methods of operation are not such as would render its operation hazardous to the public or to its creditors in this State; that it has a fully paid-up, well invested and minimum unimpaired capital and surplus of not less than the amount required by section three of this chapter to be possessed by an investment company of this State;
c. It shall, by an instrument filed in the department, constitute the commissioner and his successor in office its true and lawful attorney, upon whom all original process in any action or legal proceeding against it may be served, and therein shall agree that any original process against it which may be served upon said commissioner shall be of the same force and validity as if served on the company, and that the authority thereof shall continue in force irrevocable so long as any liability of the company remains outstanding in this State;
d. It shall deposit with the commissioner securities amounting to at least thirty thousand dollars ($30,000.00) which securities shall be of such kinds and value as are prescribed for deposit by domestic companies by the provisions of section three of this chapter. The securities shall be held in trust for the benefit of the creditors of the company in this State. If any such company shall have and keep a deposit of at least one hundred thousand dollars ($100,000.00) in cash or such securities with any department or office of the State where the company is organized and the cash or securities so deposited are held in trust for all the creditors of the company, the commissioner shall not require the deposit of securities as herein provided;
e. It shall obtain from the commissioner a certificate that it has complied with all the requirements of this chapter applicable to it, and is authorized to transact business in this State. The certificates shall expire on May first next after their issue, and shall be renewed each year before May first. All certificates issued to investment companies by the commissioner under any other law and outstanding and in force at the effective date of this chapter shall continue in full force and effect until May first, one thousand nine hundred and thirty-nine unless sooner revoked in the manner in this chapter provided.
##### **§ 17:16A-5** Officers or agents of foreign investment companies; certificate of authority {#sec-17-16a-5 omnilex-key=us-nj-statutes--title-17--17:16A-5}
No officer or agent of any foreign investment corporation shall make, issue, sell, offer for sale, negotiate or guarantee any investment contract or transact any business or act, or aid in any way, in the transaction of any business authorized by a certificate of authority issued to such foreign corporation until he shall have procured from the commissioner a certificate of authority to do so. The certificate shall state in substance that the corporation is authorized to transact business in this State and that the person named therein is an agent of the company for the transaction of such business. Upon receipt of a certificate from such corporation of its appointment of a suitable person to act as its agent in this State, the commissioner shall, if the facts warrant it, grant such certificate which shall continue in force until May 1 after its issue, and by renewal thereof before May 1 of each year until revoked by the commissioner for noncompliance with the laws, or until the appointment of such agent is revoked by written notice from the corporation to that effect. A certificate may be issued by the commissioner to and in the name of any copartnership or corporation as agent for an investment company upon written request and payment of the $10.00 fee prescribed in section 15 of this chapter; provided, all members of the copartnership or all of the officers of the corporation, as the case may be, actively engaged in the investment company business of the copartnership or corporation in this State hold an unexpired certificate issued in accordance with the provisions of this act. All certificates outstanding and in force on the effective date of this chapter shall continue in full force and effect until May 1, 1939, unless sooner revoked in the manner above provided.
##### **§ 17:16A-6** Service of process on Commissioner as attorney for foreign investment company {#sec-17-16a-6 omnilex-key=us-nj-statutes--title-17--17:16A-6}
When any original process is served upon the commissioner as attorney for an investment company of another State, and a service fee of $10.00 paid to him, he shall forthwith notify the company of such service by letter directed to its secretary, or resident manager in the case of a company of a foreign country; and shall within 2 days after such service forward by letter a copy of the process served on him to such secretary or manager, or to such other person as may have been previously designated by the company by written notice filed in the department. The commissioner shall keep a record of all such process, which shall show the day and hour of service. The serving of such process shall be made by leaving a copy of the same in the office of the commissioner with a service fee of $2.00. Service upon the commissioner as herein provided shall be deemed sufficient service upon the company. The plaintiff in the action shall be entitled to recover the amount of the service fee so paid as part of the taxable costs if he prevails in the action.
##### **§ 17:16A-7** Certificate of authority as prima facie evidence of incorporation of foreign company {#sec-17-16a-7 omnilex-key=us-nj-statutes--title-17--17:16A-7}
When an investment company of another State shall hold the certificate of the commissioner authorizing it to transact business in this State, in any civil action in which such company is plaintiff or defendant, or in any criminal proceeding in this State, a copy of such certificate of authority, certified under the hand and official seal of the commissioner, shall be prima facie evidence of the incorporation of such company.
##### **§ 17:16A-8** Securities deposited with Commissioner {#sec-17-16a-8 omnilex-key=us-nj-statutes--title-17--17:16A-8}
a. The commissioner may order a change of any of the securities deposited by any investment company incorporated under the laws of any other State or country as hereinabove provided, or any part of them, at any time during the continuance of the certificate of authority issued to the company, and during the same period the company may change the securities or any part thereof with the consent of the commissioner. The company so depositing securities shall be entitled to receive the dividends or interest thereon, and upon the termination of its authority to transact business in this State it shall be entitled to withdraw any part of or all of the securities. The amount of such deposit shall not be reduced by any withdrawal to less than the total outstanding liability of the company to its creditors in this State.
b. As to investment companies other than those affected by paragraph (a) of this section, the commissioner shall hold the securities deposited for the benefit and security of all the creditors of the company depositing them, but shall, so long as the company shall continue solvent and comply with all the requisites of the laws of this State applicable to it, permit the company to collect the interest or dividends on the securities so deposited, and, from time to time, with his assent, to withdraw any of such securities, on depositing with him other like securities, the par value of which shall be equal to the par value of such as may be withdrawn.
c. Whenever any investment company incorporated under the laws of this State shall voluntarily dissolve or a receiver thereof shall be appointed by the Superior Court, or shall have heretofore or hereafter become legally merged into another corporation, the commissioner shall thereupon deliver to such receiver or to the directors or trustees on dissolution, or to the corporation into which merged, the securities deposited as aforesaid, and upon such delivery the commissioner shall be relieved of all further responsibility or obligation in regard to the securities so deposited; provided, that said deposited securities shall not be delivered to the directors or trustees on dissolution until all proceedings in such voluntary dissolution shall have been first approved by the commissioner.
d. The securities deposited by any individual or partnership shall not be returned to such individual or partnership until after cancellation of his or its outstanding certificate of authority and the commissioner is satisfied, on the basis of such reasonable evidence and security as he may require, that all liabilities under his or its investment contracts have been fully discharged. In the event of death or insolvency of the individual or insolvency of the partnership, the commissioner may deliver such securities to the executor, administrator, receiver, trustee in bankruptcy or such other legal representative as may be authorized by a court of competent jurisdiction to administer the estate of the deceased person or insolvent debtor. The commissioner shall not be liable for the surrender of securities pursuant to this subdivision.
##### **§ 17:16A-9** Investment of capital, surplus or other funds {#sec-17-16a-9 omnilex-key=us-nj-statutes--title-17--17:16A-9}
An investment company incorporated under the laws of this State, for the purpose of investing its capital, surplus or other funds, or any part thereof, may purchase or hold as collateral security or invest in any and all the kinds of property and securities, to the same extent and subject to the same limitations, which are legally permitted to be acquired by life insurance companies for the purpose of investing their funds. An investment company may lend to the holder of any investment contract, at an interest rate not exceeding six per centum (6%) annually, any sum or sums which shall not exceed the company's liability thereon at the time the loan is made, and which shall be a lien upon such contract and all additions or credits thereon.
##### **§ 17:16A-10** Investment contracts; form; approval by Commissioner; review {#sec-17-16a-10 omnilex-key=us-nj-statutes--title-17--17:16A-10}
Except as herein otherwise provided, no investment contract shall be issued by any investment company of this State or be made, issued, solicited, sold or delivered in this State by any investment company of another State or country until the expiration of at least thirty days after the form thereof shall have been filed with the commissioner. After the expiration of such period, or if prior to the expiration of such period the commissioner shall acknowledge such filing, investment contracts in the form so filed, or so filed and acknowledged, as the case may be, may thereafter be made, issued, solicited, sold and delivered in this State by the company filing the same while the company is authorized to transact an investment business in this State. If the commissioner shall at any time notify the company filing such form of his disapproval thereof, as containing provisions which are unfair, unjust, inequitable, contrary to law or to the public policy of this State, the company shall not thereafter make, issue, solicit, sell or deliver in this State any investment contract in the form so disapproved unless and until such disapproval is canceled or withdrawn by him. The disapproval of the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:16A-11** Reserves on investment contracts {#sec-17-16a-11 omnilex-key=us-nj-statutes--title-17--17:16A-11}
Every investment company authorized to transact business in this State shall maintain on all its outstanding investment contracts the reserves specified in this section. The reserve on any investment contract at any time shall not be less than the amount which the issuer, under the terms of such contract, is liable as of such time to pay in cash or its equivalent as a surrender value or otherwise to the holder of such contract. If the commissioner shall not be satisfied of the sufficiency of such minimum reserves as affording reasonable assurance of the company's ability to meet all such liabilities, including all deferred maturities under its outstanding investment contracts as they fall due, he may require the company to increase such reserves to such amount as shall be deemed by him sufficient for such purposes. The reserve on any investment contract shall not be required to be increased to an amount exceeding the net value of such investment contract as determined by the commissioner. The net value of an investment contract shall be based upon such assumed annual net payments as may bear reasonable relationship to the incidence of reasonable expenses of procurement, issue and maintenance of such contract, the net payments to be exactly sufficient to provide for the maturity payments provided for in such contract when due, at such rate of interest as may be determined by the commissioner in the exercise of reasonable discretion and based on the company's experience and on the rate of interest earned or earnable by the company on its investments.
##### **§ 17:16A-12** Surrender values under investment contracts {#sec-17-16a-12 omnilex-key=us-nj-statutes--title-17--17:16A-12}
Every investment contract issued or delivered in this State to any resident of this State by any investment company, providing for payments, dues or deposits by the holder to the company on an installment plan over a period of years, shall contain a provision that after the payment by the holder of the contract of all deposits, payments, dues or assessments due thereon for at least one year, and after such contract shall have been maintained in force by such payments for the period for which the same have been made, the holder thereof shall be entitled to a surrender value payable in cash or its equivalent. The surrender value shall, if so required by the commissioner, be equal to the amount of the net value of the contract, as defined in section eleven of this chapter, less such reasonable surrender charge or charges as may be imposed thereon by the company subject to the right of the commissioner to approve or disapprove the same. If an investment contract filed pursuant to the provisions of this chapter shall contain a provision which stipulates the amounts of the surrender values available to the holder, at intervals not greater than the period covered by one year's payment or payments by the holder under the terms of the contract, during its entire duration prior to maturity, the surrender charge as determined thereby shall be deemed to have been imposed with the consent of the commissioner, and such surrender values are hereby authorized with respect to all such investment contracts legally issued prior to any disapproval of the form of such contract by the commissioner pursuant to this chapter.
##### **§ 17:16A-13** Annual reports of financial condition {#sec-17-16a-13 omnilex-key=us-nj-statutes--title-17--17:16A-13}
Every investment company transacting business in this State shall annually on or before March first file in the department a statement, subscribed and sworn to by its president and secretary, or, in their absence, by two of its principal officers, showing its financial condition at the close of business on December thirty-first of the year last preceding, and its business for that year. The statement shall be in the form and contain the matters the commissioner prescribes. The commissioner may also address inquiries to the company or its officers in relation to its condition or affairs, or any matter connected with its transactions and the officers of the company shall promptly reply in writing to all such inquiries. For good cause shown the commissioner may extend the time within which any such statement may be filed. Any such company neglecting to make and file its annual statement in the form and within the time provided by this section shall forfeit one hundred dollars ($100.00) for each day's neglect, to be recovered in a civil action; and upon notice by the commissioner to that effect, its authority to do new business in this State shall cease while such default continues.
##### **§ 17:16A-14** Examination of affairs; expenses; duty to exhibit books, records and accounts {#sec-17-16a-14 omnilex-key=us-nj-statutes--title-17--17:16A-14}
The commissioner may, whenever he deems the same expedient, make or cause to be made, an examination of the assets and liabilities, method of conducting business and all other affairs of every investment company authorized to transact business in this State. For the purpose of the examination the commissioner may authorize and employ such persons to conduct the same or to assist therein as he may deem advisable. The examination may be conducted in any State or country in which the company examined is incorporated or has an office, agent or place of business. The reasonable expenses of such examination shall be fixed and determined by the commissioner, and he shall collect them from the company examined, which shall pay them on presentation of a detailed account of the expenses. If any company, after the examination, shall be adjudged by the Superior Court to be insolvent, the expense of the examination, if unpaid, shall be ordered paid out of the assets of the company. No company shall, either directly or indirectly, pay, by way of gift, credit or otherwise, any other or further sum to the commissioner or to any person in the employ of the department for extra service or for purposes of legislation, or for any other purpose. It shall be the duty of the officers, agents and employees of any such company to exhibit all its books, records and accounts for the purpose of the examination, and otherwise to facilitate it so far as it may be in their power to do, and for that purpose the commissioner, his deputy, assistants and employees may examine, under oath, the officers, agents and employees of any such company relative to its business and affairs.
##### **§ 17:16A-15** Fees {#sec-17-16a-15 omnilex-key=us-nj-statutes--title-17--17:16A-15}
The commissioner shall charge and collect for his services under the provisions of this chapter and pay into the State Treasury the following fees: for issue of certificate of authority annually, $250.00; for filing the certified copy of the charter, deed of settlement or certificate of organization of an investment company, $20.00; for filing each annual statement of each investment company, $20.00; for each certificate of authority to an agent of an investment company of another State, $50.00; for each certificate of the condition or qualification of an investment company, $1.00; for each copy of any paper filed in the department, $0.20 a sheet or folio of 100 words and $1.00 for certification; for services in connection with deposits of securities by investment companies, the depositing company shall pay to the commissioner an annual fee of $15.00 on January 1 of each year, and on each substitution of securities and clipping and forwarding of interest coupons an additional fee of $25.00; and all other fees and charges due and payable into the State Treasury for any official or service of the commissioner.
##### **§ 17:16A-16** Revocation of certificate of authority of foreign investment company {#sec-17-16a-16 omnilex-key=us-nj-statutes--title-17--17:16A-16}
When the commissioner shall find that the affairs of any investment company incorporated under the laws of another State or country are in an unsound condition because of illegal or unsafe investments, or that its assets do not exceed its liabilities including reserves and exclusive of capital stock, by at least one hundred thousand dollars ($100,000.00), or that the transaction of business in this State by the company has resulted in the establishing of a contract or contracts between the purchaser or purchasers and the company which are unlawful, unfair, unjust, oppressive, inequitable, or against the public policy of this State, or if the commissioner finds that the solicitation or selling plan, soliciting or selling representations, or methods of solicitation or selling used by the company or by its agents, in conducting solicitation or sales of investment contracts or securities within this State are unfair, unjust, oppressive, inequitable, or against the public policy of this State, or are calculated to mislead the purchaser thereof, the commissioner may cancel and revoke the certificate of authority issued to the company pursuant to the provisions of this chapter.
##### **§ 17:16A-17** Procedure for revocation of certificate of authority of foreign company {#sec-17-16a-17 omnilex-key=us-nj-statutes--title-17--17:16A-17}
Before any such certificate of authority shall be cancelled or revoked as provided in section sixteen of this chapter, the commissioner shall give at least twenty days' notice by mail to the company whose certificate of authority is sought to be cancelled or revoked. The notice shall be directed to the address of the said company as shown on the records of the department, shall notify the company of the time and place of a hearing before the commissioner at which it will be required to show cause why its certificate of authority should not be cancelled or revoked, and shall contain a statement of the acts or conditions upon which the proceedings for revocation are based.
##### **§ 17:16A-18** Revocation, cancellation or refusal to issue certificate of authority; review {#sec-17-16a-18 omnilex-key=us-nj-statutes--title-17--17:16A-18}
The revocation or cancellation by the commissioner of a certificate of authority or the refusal or failure by the commissioner to issue or renew a certificate of authority within a reasonable time shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:16A-19** Domestic investment companies; insolvency; suspension of business and other acts; receiver; injunction {#sec-17-16a-19 omnilex-key=us-nj-statutes--title-17--17:16A-19}
When any investment company of this State shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, or when the commissioner shall ascertain, as a result of examination as authorized by this chapter, or in any other manner, that any company is exceeding its powers, or violating the law, or that its condition or methods of business are such as to render the continuance of its operations hazardous to the public or its creditors, or that the assets of the company are less than its liabilities including capital and all reserve funds required by the provisions of this chapter, the commissioner may institute an action in the Superior Court to enjoin the company from the transaction of any further business, or the transfer or disposal of its property in any manner whatsoever, and the court may appoint a receiver, with power to sue for, collect, receive and take into his possession all the goods and chattels, rights, and credits, moneys and effects, lands and tenement, books, papers, choses in action, bills, notes and property of every description belonging to such company, and sell and convey and assign the same, and hold and dispose of the proceeds thereof under the directions of the court. The court may proceed in the action in a summary manner or otherwise.
##### **§ 17:16A-20** Offenses and penalties {#sec-17-16a-20 omnilex-key=us-nj-statutes--title-17--17:16A-20}
If any investment company itself or by its agents, attorneys, solicitors, surveyors, canvassers, collectors or other representatives of whatsoever designation shall solicit, negotiate, or in anywise transact any business in this State except in the enforcement of contracts by legal process, without having complied with the requirements of this chapter, the investment company so offending shall be liable to a penalty of one thousand dollars ($1,000.00) and costs of suit, to be sued for and collected in a civil action by the commissioner in the name and for the benefit of the State.
Any officer, agent, employee or other representative of any investment company doing business in this State who shall have failed or neglected to procure a certificate of authority as agent for such company as required by this act; or who shall issue, circulate or cause or permit to be circulated any estimate, illustration or circular misrepresenting the terms of any investment contract or security issued by such company; and any such representative of any company who shall solicit, negotiate or effect the sale of any investment contract or otherwise transact business on behalf of any company which shall have neglected, failed or refused to procure a certificate of authority as provided for by the provisions of this chapter; or who shall accept any deposit, dues, premiums or other contributions or things of value on behalf of such unauthorized company shall be guilty of a misdemeanor. L.1938, c. 322, p. 832, s. 20. Amended by L.1953, c. 17, p. 233, s. 103.
## **Chapter 16BB** {#struct-chapter-16bb}
##### **§ 17:16BB-1** Purpose of act. {#sec-17-16bb-1 omnilex-key=us-nj-statutes--title-17--17:16BB-1}
1. a. The purpose of this act is to provide a framework within which guaranteed asset protection waivers are defined and may be offered within this State.
b. This act shall not apply to:
(1) An insurance policy offered by an insurer under the insurance laws of this State; or
(2) A debt cancellation or debt suspension contract being offered in compliance with 12 C.F.R. Part 37 or 12 C.F.R. Part 721 or other federal law.
c. Guaranteed asset protection waivers governed under this act are not insurance and are exempt from the insurance laws of this State. Persons marketing, selling or offering to sell guaranteed asset protection waivers to borrowers that comply with this act shall be exempt from this State's licensing requirements provided in the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.).
##### **§ 17:16BB-2** Definitions relative to guaranteed asset protection waivers. {#sec-17-16bb-2 omnilex-key=us-nj-statutes--title-17--17:16BB-2}
2. As used in this act:
"Administrator" means a person, other than an insurer or creditor, that performs administrative or operational functions pursuant to a guaranteed asset protection waiver program.
"Borrower" means a debtor, retail buyer or lessee, under a finance agreement.
"Commissioner" means the Commissioner of Banking and Insurance.
"Creditor" means:
(1) the lender in a loan or credit transaction;
(2) the lessor in a lease transaction;
(3) a dealer of motor vehicles that provides credit to retail buyers of motor vehicles, provided that the dealer complies with the provisions of this act;
(4) the seller in commercial retail installment sales transactions; or
(5) the assignees of any of the foregoing to whom the credit obligation is payable.
"Department" means the Department of Banking and Insurance.
"Finance agreement" means a loan, lease or retail installment sales contract for the purchase or lease of a motor vehicle.
"Free look period" means the period of time from the effective date of the GAP waiver until the date the borrower may cancel the contract without penalty, fees or costs to the borrower, which period shall not be less than 30 days.
"Guaranteed asset protection waiver" or "GAP waiver" means a contractual agreement wherein a creditor agrees for a separate charge to cancel or waive all or part of the amount due on a borrower's finance agreement in the event of a total physical damage loss or unrecovered theft of the motor vehicle, which agreement shall be part of, or a separate addendum to, the finance agreement.
"Insurer" means an insurance company licensed, registered, or otherwise authorized to do business under the laws of this State.
"Motor vehicle" means self-propelled or towed vehicles designed for personal or commercial use, including but not limited to automobiles, trucks, motorcycles, recreational vehicles, all-terrain vehicles, snowmobiles, campers, boats, personal watercraft, and motorcycle, boat, camper and personal watercraft trailers.
"Person" includes an individual, company, association, organization, partnership, business trust, corporation, and every form of legal entity.
The terms defined in this section are defined for purposes of this act and are not intended to provide actual terms required in guaranteed asset protection waivers.
##### **§ 17:16BB-3** Conditions for offer of GAP waiver. {#sec-17-16bb-3 omnilex-key=us-nj-statutes--title-17--17:16BB-3}
3. a. A GAP waiver may be offered, sold or provided to borrowers in this State in compliance with the provisions of this act.
b. A GAP waiver may, at the option of the creditor, be sold for a single payment or may be offered with a monthly or periodic payment option.
c. Notwithstanding any other provision of law, any cost to the borrower for a GAP waiver entered into in compliance with the Truth in Lending Act (15 U.S.C. s.1601 et seq.) and its implementing regulations, as they may be amended from time to time, shall be separately stated and shall not be considered a finance charge or interest.
d. A dealer of motor vehicles shall insure its GAP waiver obligations under a contractual liability or other insurance policy issued by an insurer. A creditor, other than a dealer, may insure its GAP waiver obligations under a contractual liability policy or other policy issued by an insurer. Any insurance policy may be directly obtained by a creditor, dealer, or may be procured by an administrator to cover a creditor's or dealer's obligations. However, dealers that are lessors of motor vehicles are not required to insure obligations related to GAP waivers on those leased vehicles.
e. The GAP waiver shall remain a part of the finance agreement upon the assignment, sale or transfer of that finance agreement by the creditor.
f. Neither the extension of credit, the terms of the credit, nor the terms of the related motor vehicle sale or lease may be conditioned upon the purchase of a GAP waiver.
g. Any creditor that offers a GAP waiver shall report the sale of, and forward funds received on, all waivers to the designated party, if any, as prescribed in any applicable administrative services agreement, contractual liability policy, other insurance policy or other specified program documents.
h. Funds received or held by a creditor or administrator and belonging to an insurer, creditor or administrator, pursuant to the terms of a written agreement shall be held by that creditor or administrator in a fiduciary capacity.
i. The total physical damage loss of a borrower's motor vehicle shall be determined in accordance with the terms of the borrower's primary motor vehicle insurance policy. In instances in which the borrower has no primary motor vehicle insurance or in which the primary motor vehicle insurer is insolvent at the time of loss, then a total loss shall be determined in accordance with the terms of the GAP waiver.
##### **§ 17:16BB-4** Obligations of insurer. {#sec-17-16bb-4 omnilex-key=us-nj-statutes--title-17--17:16BB-4}
4. a. Contractual liability or other insurance policies insuring GAP waivers shall state the obligation of the insurer to reimburse or pay to the creditor any sums the creditor is legally obligated to waive under the GAP waivers issued by the creditor and purchased or held by the borrower.
b. Coverage under a contractual liability or other insurance policy insuring a GAP waiver shall also cover any subsequent assignee upon the assignment, sale or transfer of the finance agreement.
c. Coverage under a contractual liability or other insurance policy insuring a GAP waiver shall remain in effect unless cancelled or terminated in compliance with applicable insurance laws of this State.
d. The cancellation or termination of a contractual liability or other insurance policy shall not reduce the insurer's responsibility for GAP waivers issued by the creditor prior to the date of cancellation or termination and for which premium has been received by the insurer.
##### **§ 17:16BB-5** Contents of GAP waiver agreement. {#sec-17-16bb-5 omnilex-key=us-nj-statutes--title-17--17:16BB-5}
5. A GAP waiver agreement shall disclose, as applicable, in writing and in clear, understandable language that is easy to read, the following:
a. The name and address of the initial creditor and the borrower at the time of sale, and the identity of any administrator if different from the creditor.
b. The purchase price and the terms of the GAP waiver, including without limitation, the requirements for protection, conditions, or exclusions associated with the GAP waiver.
c. That the borrower may cancel the GAP waiver at any time. If cancelled within the free look period as specified in the waiver, the borrower shall be entitled to a full refund of the purchase price, so long as no benefits have been provided; or if benefits have been provided, the borrower may receive a full or partial refund pursuant to the terms of the waiver. If cancelled after the free look period and no benefits have been provided, the borrower shall receive a pro rata refund less a cancellation fee no greater than $50, in accordance with the terms of the waiver.
d. The procedure the borrower shall follow, if any, to obtain GAP waiver benefits under the terms and conditions of the waiver, including a telephone number and address where the borrower may apply for waiver benefits.
e. (Deleted by amendment, P.L.2019, c.181)
f. The procedures for cancelling the GAP waiver agreement and receiving any refund due pursuant to section 6 of P.L.2017, c.82 (C.17:16BB-6).
g. The methodology for calculating any refund of the unearned purchase price of the GAP waiver due in the event of cancellation of the GAP waiver or early termination of the finance agreement.
h. That neither the extension of credit, the terms of the credit, nor the terms of the related motor vehicle sale or lease, may be conditioned upon the purchase of the GAP waiver.
##### **§ 17:16BB-6** Cancellation of GAP waiver agreements, free look period. {#sec-17-16bb-6 omnilex-key=us-nj-statutes--title-17--17:16BB-6}
6. a. GAP waiver agreements shall be cancellable. A GAP waiver shall provide that if a borrower cancels a waiver within the free look period, the borrower will be entitled to a full refund of the purchase price, so long as no benefits have been provided; or if benefits have been provided, the borrower may receive a full or partial refund pursuant to the terms of the waiver. In the event a borrower cancels the waiver after the free look period and no benefits have been provided, the borrower will be entitled to a pro rata refund of the purchase price, less any cancellation fee no greater than $50 in accordance with the terms of the waiver.
b. In the event of a borrower's cancellation of the GAP waiver or early termination of the finance agreement after the agreement has been in effect beyond the free look period, the borrower shall be entitled to receive a pro rata refund of any unearned portion of the purchase price of the waiver. The creditor shall provide, or cause the administrator or retail seller to provide, the borrower any refund due pursuant to this section within 60 days of the event terminating the finance agreement, without requiring the borrower to request the refund, or within 60 days of the receipt of a borrower's cancellation of the GAP waiver.
c. If the cancellation of a GAP waiver occurs as a result of a default under the finance agreement or the repossession of the motor vehicle associated with the finance agreement, or any other termination of the finance agreement, any refund due may be paid directly to the creditor or administrator and applied as set forth in subsection d. of this section.
d. Any cancellation refund under subsection a., b. or c. of this section may be applied by the creditor as a reduction of the amount owed under the finance agreement, unless the borrower can show that the finance agreement has been paid in full.
##### **§ 17:16BB-7** Certain exceptions. {#sec-17-16bb-7 omnilex-key=us-nj-statutes--title-17--17:16BB-7}
7. A GAP waiver offered in connection with a lease or retail installment sale associated with a commercial transaction shall not be subject to: subsection c. of section 3; section 5; or section 8 of this act.
##### **§ 17:16BB-8** Actions by commissioner. {#sec-17-16bb-8 omnilex-key=us-nj-statutes--title-17--17:16BB-8}
8. The commissioner may take any action which is necessary or appropriate to enforce the provisions of this act and to protect guaranteed asset protection waiver holders in this State. After proper notice and opportunity for hearing, the commissioner may:
a. Order the creditor, administrator or any other person not in compliance with this act to cease and desist from further guaranteed asset protection waiver-related operations which are in violation of this act.
b. Impose a penalty of not more than $500 per violation and no more than $10,000 in the aggregate for all violations of a similar nature. For purposes of this act, violations are of a similar nature if the violation consists of the same or similar course of conduct, action or practice, irrespective of the number of times the act, conduct or practice which is determined to be a violation of the act occurred.
##### **§ 17:16BB-9** GAP not construed as insurance. {#sec-17-16bb-9 omnilex-key=us-nj-statutes--title-17--17:16BB-9}
9. GAP waivers issued in this State prior to and after the effective date of this act shall not be construed as insurance.
## **Chapter 16C** {#struct-chapter-16c}
##### **§ 17:16C-1** Definitions {#sec-17-16c-1 omnilex-key=us-nj-statutes--title-17--17:16C-1}
In this act, unless the context otherwise requires, the following words and terms shall have the following meanings:
(a) "Goods" means all chattels personal which are primarily for personal, family or household purposes, including merchandise certificates and coupons to be exchanged for goods or services, having a cash price of $10,000.00 or less, but not including money or other choses in action. Goods shall not include chattels personal sold for commercial or business use.
(b) "Retail installment contract" means any contract, other than a retail charge account or an instrument reflecting a sale pursuant thereto, entered into in this State between a retail seller and a retail buyer evidencing an agreement to pay the retail purchase price of goods or services, which are primarily for personal, family or household purposes, or any part thereof, in two or more installments over a period of time. This term includes a security agreement, chattel mortgage, conditional sales contract, or other similar instrument and any contract for the bailment or leasing of goods by which the bailee or lessee agrees to pay as compensation a sum substantially equivalent to or in excess of the value of the goods, and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming, the owner of such goods upon full compliance with the terms of such retail installment contract.
(c) "Retail seller" means a person who sells or agrees to sell goods or services under a retail installment contract or a retail charge account to a retail buyer, and shall include a motor vehicle installment seller.
(d) "Retail buyer" means a person who buys or agrees to buy goods or services from a retail seller, not for the purpose of resale, pursuant to a retail installment contract or a retail charge account.
(e) "Person" means an individual, partnership, firm, corporation, banking institution, association or any other group of individuals however organized.
(f) "Sales finance company" means and includes any person engaging in this State in the business of acquiring or arranging for the acquisition of retail installment contracts or obligations incurred pursuant to retail charge accounts by purchase, discount, pledge or otherwise from a retail seller which is not wholly owned by or does not wholly own such person, and any person engaging, directly or indirectly, in the business of soliciting the purchase of retail installment contracts or obligations incurred pursuant to retail charge accounts from a retail seller which is not wholly owned by or does not wholly own such person, or in the business of aiding the retail seller in selling, assigning or arranging for the sale or assignment of retail installment contracts or obligations incurred pursuant to retail charge accounts, and any person other than a retail seller who enters into a retail charge account with a retail buyer.
(g) "Motor vehicle" includes all vehicles used for transportation upon a highway propelled otherwise than by muscular power, excepting such vehicles as run only upon rails or tracks.
(h) "Motor vehicle installment seller" means a dealer in motor vehicles, who is required to be licensed under chapter 10 of Title 39 of the Revised Statutes and who sells or offers to sell a motor vehicle to a retail buyer under a retail installment contract.
(i) "Cash price" means the minimum price for which the goods or services subject to a retail installment contract or a retail charge account or other goods or services of like kind and quality may be purchased for cash from the seller by the buyer, as stated in the retail installment contract, the retail charge account or an instrument reflecting a sale pursuant thereto.
(j) "Down payment" means all payments made in cash or in goods or partly in cash and partly in goods, received by the retail seller prior to or substantially contemporaneous with either the execution of the retail installment contract or the delivery of the goods, whichever occurs later.
(k) "Official fees" means the filing or other fees required by law to be paid to a public officer to perfect an interest or lien, on the goods, retained or taken by a retail seller under a retail installment contract and motor vehicle license and transfer fees paid to the State.
( l ) "Time price differential" means the amount or amounts, however denominated or computed, in addition to the cash price or prices, to be paid by the retail buyer for the privilege of purchasing goods or services pursuant to a retail installment contract or a retail charge account. The term does not include the amount, if a separate charge is made therefor, for insurance and official fees.
(m) "Holder" means any person, including a retail seller, who is entitled to the rights of a retail seller under a retail installment contract or retail charge account.
(n) "Banking institution" means any bank, national banking association, savings bank, or Federally chartered savings bank authorized to do business in this State, and for the purposes of this act only, an association as defined in section 5 of the "Savings and Loan Act (1963)," P.L.1963, c. 144 (C. 17:12B-5).
( o ) "Commissioner" means the Commissioner of Banking of New Jersey and includes his deputies or any salaried employee of the Department of Banking named or appointed by the said commissioner to perform any function in the administration or enforcement of this act.
(p) "Payment-period" means the period of time scheduled by a retail installment contract to elapse between the days upon which installment payments are scheduled to be made on such contract; except that, when installment payments are scheduled to be omitted, pursuant to section 26, "payment-period" means the period of time scheduled by the contract to elapse between the days upon which installment payments are scheduled to be made during that portion of the contract period in which no installment payment is scheduled to be omitted.
(q) "Contract period" means the period beginning on the date of a retail installment contract and ending on the date scheduled by the contract for the payment of the final installment.
(r) "Retail charge account" means any account, other than a retail installment contract or a home repair contract which is subject to the "Home Repair Financing Act" (P.L.1960, c. 41; C. 17:16C-62 et seq.), established by an agreement which prescribes the terms under which a retail buyer may from time to time purchase or lease goods or services which are primarily for personal, family or household purposes, and under which the unpaid balance thereunder, whenever incurred, is payable in one or more installments and under which a time price differential may be added in each billing period as provided herein. Retail charge account also includes all accounts arising out of the utilization by the holder of a credit card, letter of credit or other credit identification issued by a sales finance company, giving the holder the privilege of using the credit card, letter of credit or other credit identification to become a retail buyer in transactions out of which debt arises: (1) by the sales finance company's payment or agreement to pay the retail buyer's obligations; or (2) by the sales finance company's purchase from the retail seller of the obligations of the user of the credit card, letter of credit or other credit identification as a retail buyer.
(s) "Services" means and includes work, labor and services, professional and otherwise which are primarily for personal, family or household purposes but does not include services which are subject to the "Home Repair Financing Act," and insurance premiums financing which is subject to the "Insurance Premium Finance Company Act" (P.L.1968, c. 221; C. 17:16D-1 et seq.).
(t) "Billing period" means the time interval between regular periodic billing statement dates. In the case of monthly billing periods, such intervals shall be considered equal intervals of time if the billing date of a billing period does not vary more than 4 days from the billing date of the immediately preceding billing period. In the case of billing periods which are not monthly, the permissible variation in billing dates shall be that proportion of 4 days (adjusted to the nearest whole number) which the number of days in the billing period bears to 30.
(u) "Professional services" means services rendered or performed by a person authorized by law to practice a recognized profession whose practice is regulated by law and the performance of which services requires knowledge of an advanced type in a field of learning acquired by a prolonged formal course of specialized instruction and study as distinguished from general academic instruction or apprenticeship and training.
##### **§ 17:16C-2** Necessity of license {#sec-17-16c-2 omnilex-key=us-nj-statutes--title-17--17:16C-2}
No person shall hereafter engage in or continue to engage in the business of a sales finance company or in the business of a motor vehicle installment seller in this State without first obtaining a license from the commissioner as provided for in this act; provided, however, that no sales finance company shall be required to obtain a license to engage in the business of a motor vehicle installment seller for the purpose of disposing of any goods to which it has obtained title as a result of legal or contract right under any retail installment contract; and provided, further, that any banking institution authorized to do business in this State shall be authorized to transact business as a sales finance company, subject to all of the provisions of this act, except that it shall not be required to obtain a license or pay a license fee hereunder.
##### **§ 17:16C-3** License application {#sec-17-16c-3 omnilex-key=us-nj-statutes--title-17--17:16C-3}
3. An application for a new license or for a renewal thereof shall be accompanied by the required application and license fees, as appropriate, and shall be made on the forms and in the manner and accompanied by such evidence in support of the application as may be prescribed by the commissioner.
##### **§ 17:16C-4** Issuance or refusal of license {#sec-17-16c-4 omnilex-key=us-nj-statutes--title-17--17:16C-4}
Within 60 days after the filing of the application and the payment of the fees hereinafter set forth the commissioner shall either:
(a) Issue and deliver to the applicant a license to engage in the business of a sales finance company or a motor vehicle installment seller in accordance with the provisions of this act at the location specified in the said application; or
(b) Refuse to issue the license for any reason for which he may suspend, revoke or refuse to renew any license under section 10 of this act.
##### **§ 17:16C-5** Notice and hearing on refusal of license {#sec-17-16c-5 omnilex-key=us-nj-statutes--title-17--17:16C-5}
If the commissioner refuses to issue a license he shall:
(a) Notify the applicant of the denial and of his right to request a hearing within 10 days.
(b) If the applicant does not request a hearing, return the sum paid as a license fee.
(c) If the applicant requests such a hearing, give notice of the grounds for refusal and hold a hearing thereon. Within 30 days thereafter the commissioner shall file a written decision containing his findings and conclusions and serve a copy thereof upon the applicant.
##### **§ 17:16C-6** License; specification of office or branch; transferability; transaction of business under other names or at other locations {#sec-17-16c-6 omnilex-key=us-nj-statutes--title-17--17:16C-6}
(a) Each license shall specify the location of the office or branch and must be conspicuously displayed therein. In case such location be changed, the commissioner shall endorse the change of location on the license without charge.
(b) Such license shall not be transferable or assignable.
(c) No licensee shall transact the business provided for by this act under any other name or maintain an office at any other location than that designated in the license.
##### **§ 17:16C-7** Application fee for sales finance companies, license period. {#sec-17-16c-7 omnilex-key=us-nj-statutes--title-17--17:16C-7}
7. Every application for a new license shall be accompanied by a nonrefundable application fee as provided in subsection d. of section 8 of P.L.1996, c.157 (C.17:11C-8).
The license shall run from the date of issuance to the end of a term of not less than two years as set by the commissioner by regulation.
##### **§ 17:16C-8** Motor vehicle installment seller; license, application fee. {#sec-17-16c-8 omnilex-key=us-nj-statutes--title-17--17:16C-8}
8. With respect to a license fee imposed prior to the implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), every motor vehicle installment seller shall pay to the commissioner at the time of making the application and biennially thereafter upon renewal a license fee for its principal office and for each additional place of business conducted in this State. The commissioner shall charge for a license such fee as he shall prescribe by rule or regulation. Each fee shall not exceed $300. The license shall run from the date of issuance to the end of the licensing period of not less than two years as set by the commissioner by regulation. Upon implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), a license fee shall no longer be imposed or collected by the commissioner pursuant to this section, however a motor vehicle installment seller shall pay to the commissioner at the time of application a nonrefundable application fee not to exceed $300.
##### **§ 17:16C-9** Abatement in amount of fee; expiration of license {#sec-17-16c-9 omnilex-key=us-nj-statutes--title-17--17:16C-9}
No abatement in the amount of the said license fee shall be made if the license is issued for less than 1 year, nor if the license is surrendered, canceled or revoked prior to the expiration of the period for which such license was issued. Every license shall expire on December 31 of each year.
##### **§ 17:16C-10** Grounds for refusal to issue, revocation, suspension, refusal to renew license {#sec-17-16c-10 omnilex-key=us-nj-statutes--title-17--17:16C-10}
10. a. The commissioner may refuse to issue and may revoke, suspend or refuse to renew a license or impose a penalty pursuant to this act if the commissioner finds, after notice and an opportunity for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, that any person, applicant for or holder of the license has:
(1) violated any of the provisions of P.L.1960, c.40 (C.17:16C-1 et seq.) or any order, rule or regulation made or issued pursuant to that act;
(2) Withheld information or made a material misstatement in the application for the license;
(3) Been convicted of an offense involving breach of trust, moral turpitude or fraudulent or dishonest dealing, or had a final judgment entered against him in a civil action upon grounds of fraud, misrepresentation or deceit;
(4) Become insolvent, or failed to attain or maintain the required net worth;
(5) Demonstrated unworthiness, incompetence, bad faith or dishonesty in the transacting of business as a licensee; or
(6) Engaged in any other conduct which would be deemed by the commissioner to be the cause for denial of the license.
b. A license of a corporation, partnership, association or other entity may be suspended or revoked if any officer, director or member of the licensee has committed any act which would be cause for suspending or revoking a license to him as an individual.
c. No license issued under this act to a motor vehicle installment seller shall be valid unless such seller is the holder of a valid and subsisting license issued pursuant to chapter 10 of Title 39 of the Revised Statutes.
##### **§ 17:16C-11** Suspension, revocation or refusal to renew particular license or all licenses issued to licensee {#sec-17-16c-11 omnilex-key=us-nj-statutes--title-17--17:16C-11}
The commissioner may suspend, revoke or refuse to renew the particular license with respect to which grounds for revocation, suspension or refusal to renew may occur or exist, or, if he finds that such grounds for suspension or revocation are of general application to all offices, or more than 1 office, operated by the licensee, he may revoke, suspend or refuse to renew all of the licenses issued to the licensee or such number of licenses as such grounds apply to, as the case may be.
##### **§ 17:16C-12** Surrender of license; effect upon civil or criminal liability {#sec-17-16c-12 omnilex-key=us-nj-statutes--title-17--17:16C-12}
Any licensee may surrender his license by delivering the license to the commissioner with written notice that he thereby surrenders the license, but such surrender shall not affect the licensee's civil or criminal liability for acts committed prior to the surrender.
##### **§ 17:16C-13** Suspension, revocation or refusal to renew license not to impair obligation of lawful retail installment contract or retail charge account {#sec-17-16c-13 omnilex-key=us-nj-statutes--title-17--17:16C-13}
No suspension, revocation or refusal to renew any license shall impair or affect the obligation of any lawful retail installment contract or retail charge account acquired previously thereto by the licensee.
##### **§ 17:16C-14** Reinstatement of suspended licenses or issuance of new licenses after revocation {#sec-17-16c-14 omnilex-key=us-nj-statutes--title-17--17:16C-14}
Every license issued hereunder shall remain in force and effect until the same shall have expired or been surrendered, revoked or suspended in accordance with the provisions of this act, but the commissioner may reinstate suspended licenses or issue new licenses to a licensee whose license or licenses have been revoked, if the conditions under which such licenses were revoked have been corrected and the commissioner is satisfied as the result of an investigation that such conditions are not likely to reoccur.
##### **§ 17:16C-15** Investigations by commissioner {#sec-17-16c-15 omnilex-key=us-nj-statutes--title-17--17:16C-15}
The commissioner, if he has reasonable cause to believe that any licensee, or any other person, has violated any of the provisions of this act or of any other law relating to retail installment sales or contracts, shall have the power to make such investigations as he shall deem necessary, and may examine the books, accounts, records and files of such licensee or any other such person believed to have violated this act or any other law relating to retail installment sales or contracts.
##### **§ 17:16C-16** Subpoenas; oaths and affirmations; power to administer {#sec-17-16c-16 omnilex-key=us-nj-statutes--title-17--17:16C-16}
The commissioner shall have power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, records and other evidence before him in any matter over which he has jurisdiction, control or supervision pertaining to this act. The commissioner shall have the power to administer oaths and affirmations to any person whose testimony is required.
##### **§ 17:16C-17** Failure to comply with subpoena; order of superior court; contempt {#sec-17-16c-17 omnilex-key=us-nj-statutes--title-17--17:16C-17}
In case of a failure of any person to comply with any subpoena issued by the commissioner or to testify with respect to any matter concerning which he may be lawfully interrogated, the Superior Court, on application of the commissioner, may issue an order requiring the attendance of such person and the giving of testimony or production of evidence. Any person failing to obey the court's order may be punished by the court as for contempt.
##### **§ 17:16C-18** Maintenance of books, accounts and records. {#sec-17-16c-18 omnilex-key=us-nj-statutes--title-17--17:16C-18}
18. Every retail seller, sales finance company, motor vehicle installment seller and holder shall maintain at its place or places of business in this State such books, accounts and records relating to all transactions within this act as will enable the commissioner to enforce full compliance with the provisions of this act.
##### **§ 17:16C-19** Preservation of books, accounts, records, annual report; violations, penalties. {#sec-17-16c-19 omnilex-key=us-nj-statutes--title-17--17:16C-19}
19. All books, accounts and records of the licensee shall be preserved and kept available as provided herein for such period of time as the commissioner may by regulation require. The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning business conducted as a licensee in the preceding calendar year. The report shall be submitted under oath and in the form specified by the commissioner by regulation.
A licensee that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:16C-20** Information to be shown in books, accounts and records {#sec-17-16c-20 omnilex-key=us-nj-statutes--title-17--17:16C-20}
The commissioner is hereby authorized to prescribe the minimum information to be shown in such books, accounts and records of the licensee so that such records will enable the commissioner to determine compliance with the provisions of this act.
##### **§ 17:16C-21** Retail installment contract; writing required; agreements between retail buyer and seller; signatures {#sec-17-16c-21 omnilex-key=us-nj-statutes--title-17--17:16C-21}
Every retail installment contract shall be in writing and shall contain all of the agreements between the retail buyer and retail seller relating to the installment sale of the goods purchased and shall be signed both by the retail buyer and the retail seller.
##### **§ 17:16C-22** Contents of retail installment contract; blank spaces {#sec-17-16c-22 omnilex-key=us-nj-statutes--title-17--17:16C-22}
Every retail installment contract shall state the names and addresses of all parties thereto, the date when signed by the retail buyer, and shall contain a description of the goods sold which shall be sufficient for identification. No retail installment contract shall be signed by any party thereto when such contract contains blank spaces to be filled in after such contract has been signed; however, this provision shall not apply to serial numbers or other identifying marks which are not available for the description of the goods at the time of the execution of the contract.
##### **§ 17:16C-23** Copy of contract to be furnished to buyer {#sec-17-16c-23 omnilex-key=us-nj-statutes--title-17--17:16C-23}
A copy of the retail installment contract shall be furnished by the retail seller to the retail buyer at the time the retail buyer signs the contract except that such copy need not contain the signature of the retail seller. Such copy shall be furnished the retail buyer without charge.
##### **§ 17:16C-24** Notice to buyer in retail installment contract {#sec-17-16c-24 omnilex-key=us-nj-statutes--title-17--17:16C-24}
Every retail installment contract shall contain the following notice printed prominently, in the form herein indicated, in 10-point bold type or larger, directly above the notice required by section 25:
"NOTICE TO RETAIL BUYER
Do not sign this contract in blank.
You are entitled to a copy of the contract at the time you sign.
Keep it to protect your legal rights."
##### **§ 17:16C-25** Acknowledgment by buyer of receipt of copy of contract {#sec-17-16c-25 omnilex-key=us-nj-statutes--title-17--17:16C-25}
Any acknowledgment by the retail buyer of receipt of a copy of the contract shall be printed or written in a size equal to at least 10-point bold type and, if contained in the contract, shall appear directly above the space provided in the contract form for the signature of the retail buyer.
##### **§ 17:16C-26** Payment of time balances, terms; exceptions {#sec-17-16c-26 omnilex-key=us-nj-statutes--title-17--17:16C-26}
26. Every retail installment contract shall provide for the payment of the time balance in substantially equal amounts on dates separated by substantially equal payment-periods; except that the retail seller may defer the initial installment for any period of time up to one year from the date of the execution of the retail installment contract; and, provided further, that when appropriate for the purpose of facilitating payment, in accordance with a retail buyer's intermittent income, a contract may provide for payment on a schedule which reduces or omits payments over a period or periods not in excess of 93 days in any 12-month period or a contract may provide an installment schedule which reduces or omits payments over any period or periods of time during which period or periods the retail buyer's income is reduced or suspended. When a retail installment contract provides for unequal or irregular installments, the time price differential shall not exceed the effective rate provided in section 41 of P.L.1960, c.40 (C.17:16C-41), having due regard for the schedule of installments. When in any retail installment contract the purchase of goods is combined with the purchase of food, the time balance on which is stated as one amount, that part of the time balance on the sale of goods shall be subject to the provisions of this section, but that part of the time balance on the purchase of food may be payable in a shorter time and added to the equal payment installment on goods.
##### **§ 17:16C-27** Separate items to be set forth in retail installment contract {#sec-17-16c-27 omnilex-key=us-nj-statutes--title-17--17:16C-27}
Every retail installment contract shall set forth the following separate items:
(a) The cash price of the goods which are the subject matter of the retail installment contract;
(b) The down payment made by the retail buyer, indicating whether made in cash or in goods or partly in cash and partly in goods. The amount of the payment in cash and in goods shall be shown separately. A description of the goods, if any, sufficient for identification, shall be shown;
(c) The unpaid cash balance which shall be the difference between the cash price (subsection (a)) and the down payment (subsection (b));
(d) The amount, if any, if a separate charge is made therefor, included for insurance and other benefits, specifying the coverages and benefits;
(e) The amount of official fees;
(f) The principal balance, which is the sum of subsections (c), (d) and (e);
(g) The amount of the time price differential;
(h) The time balance, which is the sum of subsections (f) and (g), owed by the retail buyer to the retail seller, the number of installments required, the amount of each installment expressed in dollars and the due date or period thereof;
(i) The time sales price, which is the sum of subsections (b) and (h).
##### **§ 17:16C-28** Inclusion in retail installment contract of additional goods purchased after original agreement; additional statements {#sec-17-16c-28 omnilex-key=us-nj-statutes--title-17--17:16C-28}
Whenever a retail installment contract by its terms permits the inclusion of additional goods purchased after the original agreement, and such goods are so purchased and the amount due on the new purchase is combined with an unpaid balance on any prior purchase so as to permit the retail seller to retain title to or reserve a lien upon all goods under the combined agreement, the retail seller shall, at the time of the additional purchase, deliver to the retail buyer and attach to the original agreement:
(a) A statement containing all the information with respect to the additional purchase required to be included in a retail installment contract; and
(b) A statement showing the amount due on the agreement immediately previous to the new purchase, the amount due after the new purchase, the payments agreed to be made thereafter, and the number of additional months required to complete the payments.
##### **§ 17:16C-29** Allocation of payment on continuing agreement after addition of additional purchases; prepayment; redemption of separate purchases {#sec-17-16c-29 omnilex-key=us-nj-statutes--title-17--17:16C-29}
Whenever a payment is made on such a continuing agreement after additional purchases have been added, the payment shall be considered as allocated among each of the separate purchases included, in full to the purchase made earliest in time, and the retail seller before repossessing or attempting to repossess any goods under any such agreement shall actually allocate in such manner all such payments made to him by the retail buyer. When the amount owing on any separate purchase has been fully paid, the goods so paid for shall become the absolute property of the retail buyer and shall not be subject to repossession for any subsequent default on the agreement. The retail buyer under any such agreement may at any time prepay the amount due on any of the separate purchases and in case of repossession may redeem any of such separate purchases by payment of the amount due on such purchase alone.
##### **§ 17:16C-30** Insurance at retail buyer's expense; dual protection {#sec-17-16c-30 omnilex-key=us-nj-statutes--title-17--17:16C-30}
Where title to or a lien upon goods sold by the retail seller is retained or taken by the retail seller the retail buyer may be required to insure the goods at the retail buyer's expense for the protection of the retail seller or subsequent holder which insurance may be purchased by the holder. Such insurance shall be written for the dual protection of the retail buyer and the retail seller or subsequent holder to the extent of his interest in the goods and shall be limited to insurance against substantial risk of damage, destruction, or theft of such goods and shall be upon terms and conditions, which are reasonable and appropriate, considering the type and conditions of such goods. When the retail buyer fails or is unable to acquire insurance or the retail seller or subsequent holder is unable to purchase insurance covering the dual protection of the retail buyer and retail seller or subsequent holder, the retail seller or holder may purchase a single interest insurance policy on the goods and may collect the premium therefor from the retail buyer.
##### **§ 17:16C-31** Selection of insurer acceptable to retail seller; inclusion of premium in contract; cancellation of insurance by holder after repossession and sale {#sec-17-16c-31 omnilex-key=us-nj-statutes--title-17--17:16C-31}
The retail buyer shall have the privilege of supplying insurance on the goods through an agent or broker of his own selection and selecting an insurance company acceptable to the retail seller; provided, however, the inclusion of the premium for such insurance in the retail installment contract, when the retail buyer selects the company, agent or broker, shall be optional with the retail seller. The amount, if any, included for such insurance shall not exceed the premiums chargeable in accordance with the applicable rates filed with the commissioner for such insurance. The retail seller or holder, if the premium for dual insurance on the goods is included in a retail installment contract, shall within 25 days after the execution of the retail installment contract send or cause to be sent to the retail buyer a policy or policies or certificate of insurance, written by an insurance company authorized to do business in this State, clearly setting forth the amount of the premium, the kind or kinds of insurance and the scope of the coverage and all the terms, exceptions, limitations, restrictions and conditions of the contract or contracts of insurance. The holder of a retail installment contract shall, if the goods described therein have been repossessed and sold, cancel any insurance on the goods and any other insurance or other benefits then in force and shall credit the amount of the return premium thereon to the unpaid balance outstanding on the retail installment contract.
##### **§ 17:16C-32** Notice that policy required in sale of motor vehicle includes no liability or property damage coverage {#sec-17-16c-32 omnilex-key=us-nj-statutes--title-17--17:16C-32}
Whenever, in the sale of a motor vehicle, the retail buyer is required, under the provisions of this act, to provide a policy of insurance and such policy of insurance does not contain the liability insurance required by section 1 of P.L.1972, c. 197 (C. 39:6B-1), the retail installment contract shall contain, immediately following the statement therein concerning insurance, the following notice printed prominently, in the form herein indicated or in such other form as may be approved by the commissioner, in 10-point type or larger:
"THIS DOES NOT INCLUDE INSURANCE ON YOUR LIABILITY FOR BODILY INJURY OR PROPERTY DAMAGE. WITHOUT SUCH INSURANCE, YOU MAY NOT OPERATE THIS VEHICLE ON PUBLIC HIGHWAYS."
##### **§ 17:16C-33** Additional insurance; cancellation rights {#sec-17-16c-33 omnilex-key=us-nj-statutes--title-17--17:16C-33}
In addition to insurance on the goods, by agreement with the retail buyer, the retail seller may purchase such other insurance and other benefits as the retail buyer shall contract for; provided, however, that the retail buyer may cancel such additional insurance and other benefits, other than credit life and credit accident and health insurance, at any time prior to the expiration of such insurance contracts or benefits.
##### **§ 17:16C-34** Cancellation of insurance policies; crediting next maturing installment of contract with refund {#sec-17-16c-34 omnilex-key=us-nj-statutes--title-17--17:16C-34}
If any policy or policies or certificates of insurance or other benefits are canceled, or the premiums thereon adjusted, the unearned insurance premium refund or refund on other benefits received by the retail seller or subsequent holder of the retail installment contract shall be credited to the next maturing installments of the retail installment contract, except to the extent applied toward payment for similar insurance protecting the interest of the buyer and the retail seller or holder of the contract or any of them; provided that in the case of credit life or credit accident and health insurance, the refund to the buyer shall be made in accordance with chapter 169 of the laws of 1958, and provided further that if the amount of such refund is less than the minimum prescribed by the commissioner, no refund need be made.
##### **§ 17:16C-34.1** Retail charge account; terms; regulations; effective date of accounts {#sec-17-16c-34.1 omnilex-key=us-nj-statutes--title-17--17:16C-34.1}
(a) A retail charge account may be entered into between a retail buyer and a retail seller or a person wholly owned by or which wholly owns a retail seller or between a retail buyer and a sales finance company on its own behalf or on behalf of one or more retail sellers from whom the sales finance company may purchase or acquire the obligations of the retail buyer incurred pursuant to a retail charge account.
(b) A retail charge account shall be subject to such provisions not inconsistent with this act or otherwise prohibited by law which may be agreed upon, but shall be subject to the requirements for open end credit accounts as prescribed by regulations of the Board of Governors of the Federal Reserve System issued pursuant to Title I of the Consumer Credit Protection Act (Act of May 29, 1968, Public Law 90-321), referred to in this act as the "Truth in Lending Act and Regulations."
(c) A retail charge account shall become effective when an agreement is signed by the retail buyer or when the retail buyer or someone authorized by the retail buyer makes a purchase pursuant to the terms of the account.
##### **§ 17:16C-35** Prohibited contract provisions; acceleration clause {#sec-17-16c-35 omnilex-key=us-nj-statutes--title-17--17:16C-35}
No retail installment contract or retail charge account or separate instruments executed in connection therewith shall contain any acceleration clause under which any part or all of the balance, not yet matured, may be declared immediately due and payable because the retail seller or holder deems himself to be insecure and any such provision shall be void and unenforceable.
##### **§ 17:16C-36** Waiver of right of action by retail buyer against seller, holder, etc. {#sec-17-16c-36 omnilex-key=us-nj-statutes--title-17--17:16C-36}
No retail installment contract or retail charge account or separate instruments executed in connection therewith shall contain any provisions whereby the retail buyer waives any right of action or defense against the retail seller, sales finance company, holder or other person acting on his or her behalf for any illegal act committed in the collection of the payments under the contract or account or in the repossession of the goods, the subject of the retail installment contract or retail charge account and any such provision shall be void and unenforceable.
##### **§ 17:16C-37** Power of attorney to confess judgment; other powers of attorney {#sec-17-16c-37 omnilex-key=us-nj-statutes--title-17--17:16C-37}
No retail installment contract or retail charge account or separate instruments executed in connection therewith shall contain any power of attorney to confess judgment or any other power of attorney and any such provision shall be void and unenforceable.
##### **§ 17:16C-38** Relief of retail seller from liability under contract {#sec-17-16c-38 omnilex-key=us-nj-statutes--title-17--17:16C-38}
No retail installment contract or retail charge account or separate instruments executed in connection therewith shall contain any provision relieving the retail seller from liability for any legal remedies which the retail buyer may have against the retail seller under the contract or account and any such provision shall be void and unenforceable.
##### **§ 17:16C-38.1** Remedy of buyer against seller; provision relieving holder or other assignee from liability; prohibition {#sec-17-16c-38.1 omnilex-key=us-nj-statutes--title-17--17:16C-38.1}
No retail installment contract shall contain any provision relieving the holder, or other assignee, from liability for any civil remedy sounding in contract which the retail buyer may have against the retail seller under the retail installment contract or under any separate instrument executed in connection therewith.
##### **§ 17:16C-38.2** Form, terms of consumer notes {#sec-17-16c-38.2 omnilex-key=us-nj-statutes--title-17--17:16C-38.2}
3. No retail installment contract shall require or entail the execution of any note unless such note shall have printed the words "CONSUMER NOTE" in 10-point bold type or larger on the face thereof. Such a note with the words "CONSUMER NOTE" printed thereon shall be subject to the terms and conditions of the retail installment contract and shall not be a negotiable instrument within the meaning of chapter 3 (Negotiable Instruments) N.J.S.12A:3-101 et seq., or a security interest within the meaning of chapter 9 (Secured Transactions) N.J.S.12A:9-101 et seq. of the Uniform Commercial Code. Any subsequent holder of a consumer note shall be subject to all claims and defenses of the retail buyer against the retail seller arising out of the transaction but no such claim or defense may be asserted against such holder in excess of the time sales price under the retail installment contract for any sale, except that, in the case of the sale of a new motor vehicle, as defined in R.S.39:10-2, no claim or defense may be asserted against such holder in excess of the time balance under the retail installment contract. No claim or defense which the retail buyer may have against the retail seller arising otherwise than out of the retail installment contract or any separate instrument executed in connection therewith shall be asserted against any subsequent holder.
##### **§ 17:16C-38.3** Violations; penalty {#sec-17-16c-38.3 omnilex-key=us-nj-statutes--title-17--17:16C-38.3}
Any person who procures the execution of a note in violation of this act shall be liable to a penalty of not more than $500.00 for each offense.
##### **§ 17:16C-38.4** Execution of note in violation of act; disallowance of finance, collection, etc., charges {#sec-17-16c-38.4 omnilex-key=us-nj-statutes--title-17--17:16C-38.4}
In the event that a note is executed in connection with a retail installment contract in violation of this act, no finance, delinquency, collection, repossession or refinancing charges may be recovered in any action or proceeding based on the contract or the consumer note.
##### **§ 17:16C-39** Assignment of salary, wages, commissions or other compensation for services {#sec-17-16c-39 omnilex-key=us-nj-statutes--title-17--17:16C-39}
No retail seller, sales finance company or holder shall at any time take in a retail installment contract, a retail charge account or in a separate instrument, any assignment of or order for the payment of any salary, wages, commissions, or other compensation for services, or any part thereof, earned or to be earned and any such provision shall be void and unenforceable.
##### **§ 17:16C-39.1** Real property mortgage as additional security; prohibition {#sec-17-16c-39.1 omnilex-key=us-nj-statutes--title-17--17:16C-39.1}
No retail installment contract, retail charge account or separate instrument executed in connection therewith shall contain any provision whereby the retail seller, sales finance company or holder takes a real property mortgage as additional security in connection with a retail sale. Any such provision shall be void and unenforceable.
##### **§ 17:16C-40** Loan of money or advance of credit to retail buyer; rate of interest {#sec-17-16c-40 omnilex-key=us-nj-statutes--title-17--17:16C-40}
No retail seller, sales finance company or holder shall make any loan of money or advance of credit to a retail buyer on or in connection with any retail installment contract or retail charge account and charge, contract for or receive thereon a greater rate of interest than he would otherwise be permitted by law to charge except in accordance with the provisions of this act; provided, however, that nothing contained in this section shall prohibit a banking institution from making any loan which it otherwise is permitted by law to make.
##### **§ 17:16C-40.1** Loan secured by purchase money security interest to finance purchase of motor vehicle {#sec-17-16c-40.1 omnilex-key=us-nj-statutes--title-17--17:16C-40.1}
A sales finance company licensed under the provisions of the "Retail Installment Sales Act" of 1960 (P.L.1960, c. 40), as amended and supplemented, or any act replacing or succeeding thereto which regulates "retail installment sales," may loan to any one person any sum of money up to a maximum of $10,000.00 secured by a purchase money security interest to finance the purchase of a passenger motor vehicle not intended to be used for the transportation of passengers for hire or upon a contract basis. The principal amount of such loan may be repaid in not more than 48 substantially equal monthly installments. Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, the sales finance company may charge interest at a rate or rates agreed to by the sales finance company and the borrower. Such interest shall be computed on the full amount of such loan for the period from the making of the loan to the date of maturity of the final installment, and shall be added to the principal amount of the loan. For the purpose of this act, a purchase money security interest is hereby defined to be a security interest taken by a sales finance company, pursuant to the provisions of chapter 9 of Title 12A of the New Jersey Statutes, in connection with and as security for an advance of money on behalf of a retail buyer of a motor vehicle of the motor vehicle dealer in payment of the unpaid balance of the cash price.
Effective on the first day of the twelfth month following the effective date of this act, when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the association shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, an association may charge a prepayment penalty of not more than (a) $20.00 on any loan up to and including $2,000.00; (b) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any loan exceeding $5,000.00.
##### **§ 17:16C-40.2** Violation of provisions; revocation or suspension of license {#sec-17-16c-40.2 omnilex-key=us-nj-statutes--title-17--17:16C-40.2}
A violation of any provision of this act shall be cause for the revocation or suspension of the license of the sales finance company by the commissioner upon notice and opportunity to be heard in accordance with the provisions of P.L.1958, chapter 68.
##### **§ 17:16C-41** Time price differential; rates; computation {#sec-17-16c-41 omnilex-key=us-nj-statutes--title-17--17:16C-41}
A retail seller and a motor vehicle installment seller, under the provisions of this act, shall have authority to charge, contract for, receive or collect a time price differential as defined in this act, on any retail installment contract evidencing the sale of goods or services in an amount or amounts as agreed to by the retail seller or motor vehicle installment seller and the buyer on motor vehicles and on all other goods or services.
The retail installment contract may provide for an increase, or may provide for a decrease, or both, in the time price differential applicable to the contract. No increase during the entire loan term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period. The lender shall not be obligated to decrease the interest rate more than 6% over the term of the loan, nor more than 3% per annum during any 12-month period. If a rate increase is applied to the loan, the lender shall also be obligated to adopt and implement uniform standards for decreasing the rate. If the contract provides for the possibility of an increase or decrease, or both, in the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the contract. No rate increase shall take effect during the first 3 years of the term of the contract, or thereafter, (a) unless at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the retail buyer that clearly and conspicuously describes such increase, and (b) unless at least 365 days have elapsed without any increase. No increase during the entire contract term shall result in an interest rate of more than 6% per annum over the rate applicable initially, nor shall the rate be raised more than 3% per annum during any 12-month period.
If the retail installment contract does provide that the time price differential may be increased then, notwithstanding the provisions of section 43 of P.L.1960, c. 40 (C. 17:16C-43), when the unpaid balance owing upon a contract is paid in full or the maturity of the unpaid balance of such contract is accelerated before the date scheduled for the payment of the final installment, the holder of the contract shall allow a credit on account of the precomputed time price differential calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the contract is prepaid within 12 months after the first payment is due, a holder may charge a prepayment penalty of not more than (a) $20.00 on any contract up to and including $2,000.00; (b) an amount equal to 1% of the loan on any contract greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any contract exceeding $5,000.00. Effective on the first day of the twelfth month following the effective date of this act, if the retail installment contract does provide for a time price differential, then, notwithstanding the provisions of section 43 of P.L.1960, c. 40 (C. 17:16C-43), when the unpaid balance owing upon a contract is paid in full or the maturity of the unpaid balance of such contract is accelerated before the date scheduled for the payment of the final installment, the holder of the contract shall allow a credit on account of the precomputed time price differential calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the contract is prepaid within 12 months after the first payment is due, a holder may charge a prepayment penalty of not more than (a) $20.00 on any contract up to and including $2,000.00; (b) an amount equal to 1% of the loan on any contract greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any contract exceeding $5,000.00.
The time price differential shall be computed on the amount of the principal balance as determined in section 27(f), from the date of the contract to the due date of the final installment, notwithstanding the fact that the contract is to be repaid in installments.
If the time price differential so computed is less than $12.00, and if the due date of the last installment of the contract is more than 8 months after the date of the contract, a charge of not more than $12.00 may be made in lieu of the time price differential. If the time price differential so computed is less than $10.00, and if the due date of the last installment of the contract is 8 months or less after the date of contract, a charge of not more than $10.00 may be made in lieu of the time price differential.
##### **§ 17:16C-42** Delinquency or collection charge for default; attorney's fees; return check fee {#sec-17-16c-42 omnilex-key=us-nj-statutes--title-17--17:16C-42}
42. (a) The holder of any retail installment contract may collect a delinquency or collection charge for default in the payment of any such contract or any installment thereof, if provided for in the contract when such default shall have continued for a period of 10 days, such charge not to exceed $10. Such charge may be collected by the holder of the retail installment contract or charged to the buyer's retail installment contract account. If charged to the buyer's retail installment contract account, such charge shall be made within 35 days from the date of such default and then a written notification that such charge has been made shall be mailed to the retail buyer within 5 days from the date when such charge was made.
(b) The holder of any retail charge account may collect a delinquency or collection charge in an amount not to exceed $10, if provided for in the retail charge account agreement, on any minimum payment which has not been paid in full for a period of 10 days after its due date, as originally scheduled.
(c) A delinquency or collection charge under this section may be collected only once on each minimum payment due however long it remains in default. A delinquency charge may be collected at the time it accrues or at any time afterward.
(d) The retail installment contract or retail charge account may provide for the payment of attorney's fees not exceeding 20% of the first $500.00 and 10% on any excess of the amount due and payable under such contract or account when referred to an attorney, not a salaried employee of the holder of the contract or account, for collection.
(e) The retail installment contract or retail charge account may provide for a return check fee not to exceed $20 which the holder of the contract may charge the buyer if a check of the buyer is returned to the holder uncollected due to insufficient funds in the buyer's account.
##### **§ 17:16C-43** Prepayment; credit on account {#sec-17-16c-43 omnilex-key=us-nj-statutes--title-17--17:16C-43}
When the balance owing on a retail installment contract is repaid in full at any time before the end of the contract period, the holder of the contract shall allow a credit on account of the time price differential, the amount of which shall be determined by the application of the formula C = AN / D, in which "C" represents the amount of the credit to be given; "A" represents the amount of the time price differential, less an acquisition cost of $15.00; "D" represents an amount determined as follows: there shall be ascribed to each payment-period included in the contract period, beginning with the first payment-period scheduled by the contract, the cardinal number descriptive of the number of payment-periods scheduled by the contract to elapse from the beginning of each such payment-period to the end of the contract period, and the sum of all such cardinal numbers shall constitute the quantity "D" ; and "N" represents the difference between the quantity "D" and the sum of all the cardinal numbers ascribed to the payment-periods which have elapsed, in whole or in part, from the date of the contract to the date upon which such repayment is made. This section shall not apply when the amount of the credit is less than $1.00.
##### **§ 17:16C-44** Extending due date of contract or installment payment; options {#sec-17-16c-44 omnilex-key=us-nj-statutes--title-17--17:16C-44}
44. The holder of a retail installment contract may extend the scheduled due date of any retail installment contract and defer the scheduled due date of any or all installment payments, or reduce the amount of any or all installments and may, as a consideration therefor, make a total additional charge not to exceed the amount ascertained under either of the following methods of computation at the respective rates indicated by the following options:
Option 1. The additional charge shall be computed on the amount of the scheduled installment or installments extended, deferred or reduced for the period or periods for which each installment or part thereof is extended, deferred or reduced at the following rates on contracts originally in the respective classifications set forth in section 41 of this act:
Class I. 1% per month;
Class II. 1 1/2% per month;
Class III. 2% per month;
Class IV. 2% per month;
Option 2. The holder of a retail installment contract by written agreement may renew the entire unpaid balance on any retail installment contract and may make a charge therefor at the rates charged in the original contract from the date of renewal to the maturity of the final installment. The amount of the balance to be renewed shall be obtained by adding to the existing unpaid balance on the original contract, the cost of any insurance or other benefits for the period of the extension and any accrued default charges and refunding the unearned portion of the time price differential charged according to the formula provided in section 43 of this act; provided, however, that in computing the unearned time price differential charge no allowance shall be taken for the amount of the acquisition cost permitted therein.
##### **§ 17:16C-44.1** Retail charge account; time price differential; rate; computation {#sec-17-16c-44.1 omnilex-key=us-nj-statutes--title-17--17:16C-44.1}
(a) Notwithstanding any other law to the contrary, a retail seller, sales finance company, banking institution or other holder may charge, receive and collect a time price differential in each billing period on obligations incurred pursuant to any retail charge account, which shall be determined as specified in the terms of the account, subject to the limitations provided herein. Such time price differential for each monthly billing period shall not exceed the amount resulting from applying the periodic rates provided herein to the greater of the following amounts (including unpaid time price differentials):
(i) The average daily balance of the account for such billing period, or
(ii) The balance of the account at the beginning or end of such billing period.
The periodic rate or rates shall not exceed an amount agreed to by the retail seller, sales finance company, banking institution, or other holder and the retail buyer.
The terms of the retail charge account may provide that the time price differential may be increased or may be decreased or both from time to time; provided, however, that no increase shall be effective unless: (1) at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the retail buyer that clearly and conspicuously describes such change and the indebtedness to which it applies and states that the incurrence by the retail buyer or another person authorized by him of any further indebtedness under the plan to which the agreement relates on or after the effective date of the increase specified in the notice shall constitute acceptance of the increase and (b) either the retail buyer agrees in writing to the increase or the retail buyer or another person authorized by him incurs such further indebtedness on or after the effective date of the increase stated in the notice. The provisions of this paragraph permitting an increase in the time price differential shall not apply in the case of an agreement which expressly prohibits changing of the time price differential or which provides limitations on changing of the time price differential which are more restrictive than the requirements of this paragraph. If the terms of the retail charge account provide for the possibility of an increase or decrease, or both, in the time price differential, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the written notice.
Notwithstanding the foregoing limitation, if the terms of the account so provide, the time price differential may be computed on the median amount within a specified range. Such time price differential for each monthly billing period shall not exceed the amount resulting from applying the respective periodic rates specified above to the median amount within the specified range in which the greater of the amounts specified in (i) and (ii) is included; provided, subject to the classifications and differentiations as may reasonably be established by the retail seller, sales finance company, banking institution or other holder, the same time price differential is charged on all balances within the specified range and provided further that the time price differential determined by applying the respective periodic rates specified above to the median amount within the range does not exceed by more than 8% the amount of the time price differential determined by applying the respective periodic rates specified above to the lowest amount in the range.
(b) If the billing period is not monthly, the maximum periodic rate shall be that rate which bears the same relation to the respective periodic rates per month specified above as the number of days in the billing period bears to 30.
(c) Notwithstanding the limitation provided in (a) above, for any monthly billing period in which a time price differential may be charged pursuant to the terms of the account a minimum time price differential of not more than $0.50 may be charged; if the billing period is not monthly, a minimum time price differential may be charged in such amount which bears the same relation to $0.50 as the number of days in the billing period bears to 30.
##### **§ 17:16C-45** Limitation on sale, transfer or assignment of obligation or evidence of indebtedness by retail seller {#sec-17-16c-45 omnilex-key=us-nj-statutes--title-17--17:16C-45}
No retail seller under a retail installment contract, executed in this State, shall sell, transfer or assign the obligation represented by such contract or any evidence of indebtedness thereunder to any person who is not authorized as a sales finance company pursuant to the provisions of this act, except that such obligation or evidence of indebtedness may be sold, transferred or assigned to a State or national bank outside of this State if the retail installment contract is retained by the retail seller or sales finance company and collection of payments thereon is made to the retail seller or sales finance company.
##### **§ 17:16C-46** Sale, transfer or assignment without notice to retail buyer; payment or tender to last known holder {#sec-17-16c-46 omnilex-key=us-nj-statutes--title-17--17:16C-46}
If a retail installment contract is lawfully sold, transferred or assigned, pursuant to the provisions of this act, and a written notice of such sale, transfer or assignment setting forth the name and address of the new holder and of the person authorized to receive future payments on such contract is not given to the retail buyer, any payment or tender of payment made to and any service of notice on the last known holder by the retail buyer shall be binding upon any subsequent holder.
##### **§ 17:16C-47** Assignment of aggregation of retail installment contracts as collateral security for bona fide commercial loan {#sec-17-16c-47 omnilex-key=us-nj-statutes--title-17--17:16C-47}
The provisions of section 45 shall not apply to any assignment of an aggregation of retail installment contracts, which is executed by a retail seller or sales finance company as collateral security only for a bona fide commercial loan, and under which, in the absence of default or other bona fide breach of the contract, ownership of the assigned retail installment contracts remains vested in the retail seller or sales finance company, and collection of payments on such assigned contracts is made by the retail seller or sales finance company; and provided such assignment of contracts is not made for the purpose of evading or circumventing the provisions of this act.
##### **§ 17:16C-47.1** Purchases of retail installment contract or retail charge account by sales finance company; terms, conditions and price {#sec-17-16c-47.1 omnilex-key=us-nj-statutes--title-17--17:16C-47.1}
A sales finance company may purchase a retail installment contract or obligations incurred pursuant to a retail charge account from a retail seller or sales finance company on such terms and conditions and for such price as may be mutually agreed upon.
##### **§ 17:16C-48** Furnishing statement of retail buyer's account {#sec-17-16c-48 omnilex-key=us-nj-statutes--title-17--17:16C-48}
Upon written request from the retail buyer, the retail seller or holder of the retail installment contract shall give or forward to the retail buyer within 10 days from receipt of the written request a written statement of the retail buyer's account, showing the dates and amounts of all payments made or credited to the account and the total amount, if any, unpaid under such contract. No more than 2 such statements shall be required from a holder in any 12-month period.
##### **§ 17:16C-49** Receipt for payment; contents {#sec-17-16c-49 omnilex-key=us-nj-statutes--title-17--17:16C-49}
Whenever payment is made on account of any retail installment contract in cash, the person receiving such payment shall, at the time of receiving such payment, furnish to the retail buyer, or the person making such payment on behalf of the retail buyer, a complete written receipt therefor, showing the date, identification of the account and the amount paid.
##### **§ 17:16C-50** Additional charges prohibited; exceptions {#sec-17-16c-50 omnilex-key=us-nj-statutes--title-17--17:16C-50}
No retail seller, sales finance company, or holder shall charge, contract for, collect or receive from any retail buyer, directly or indirectly, any further or other amount for costs, charges, insurance premiums, examination, appraisal service, brokerage, commission, expense, interest, discount, fees, fines, penalties or other things of value in connection with retail installment contracts or retail charge accounts other than the charges permitted by this act, except court costs, attorney fees and the expenses of retaking and storing repossessed goods which are authorized by law.
##### **§ 17:16C-51** Collection of charges if sale not made prohibited; status of deposit on contemplated purchase of goods {#sec-17-16c-51 omnilex-key=us-nj-statutes--title-17--17:16C-51}
No retail seller shall collect or retain any amount whatsoever in connection with the contemplated sale of goods under a retail installment sales contract, if such sale is not made; provided, however, that nothing contained herein shall affect the legal status of a deposit paid by a prospective retail buyer to a retail seller as a binder on the contemplated purchase of goods.
##### **§ 17:16C-52** Payment in full of retail installment contract {#sec-17-16c-52 omnilex-key=us-nj-statutes--title-17--17:16C-52}
52. Upon payment in full by the retail buyer of the time balance and other amounts lawfully due under a retail installment contract, the holder shall:
(a) Return to the retail buyer either the original instruments evidencing indebtedness or constituting security under a retail installment contract, which were signed by the retail buyer or his sureties or guarantors in conjunction with such contract or a copy thereof, excepting such instruments as are filed or recorded with a public official and retained in the files of such official;
(b) Release all security interest in the goods or in any collateral security to the obligation of the retail buyer under such contract;
(c) Deliver to the retail buyer such good and sufficient assignments and certificates of title as may be necessary to vest the retail buyer with complete evidence of title.
##### **§ 17:16C-53** Certificate of ownership delivered to retail buyer upon final payment {#sec-17-16c-53 omnilex-key=us-nj-statutes--title-17--17:16C-53}
53. When the final payment on a retail installment contract is made in cash by the retail buyer, or his authorized representative, at the designated licensed office of the holder, the certificate of ownership and other evidence of lien, or a copy thereof, showing satisfaction of the encumbrance, unless otherwise provided by rule or regulation of the commissioner, shall be delivered at the time of such payment if demanded by the retail buyer, otherwise delivery may be made at a later date in person or by mail as may be arranged between retail buyer and holder; all other instruments, or a copy thereof, shall be delivered or mailed to the retail buyer within 35 days from the date of final payment.
##### **§ 17:16C-54** Unauthorized costs and charges {#sec-17-16c-54 omnilex-key=us-nj-statutes--title-17--17:16C-54}
Whenever, in any retail installment contract or retail charge account under this act, the retail seller, sales finance company or holder has knowingly charged, contracted for or received from the retail buyer any costs or charges not authorized by this act, all costs and charges in connection with such contract or account, other than for insurance authorized by this act, shall be void and unenforceable, and any such costs or charges other than for insurance authorized by this act shall be applied to the unpaid balance or, if the account has been fully paid, remitted to the retail buyer, and the retail buyer shall be entitled to recover all such costs or charges.
##### **§ 17:16C-55** Doing business without license; penalty {#sec-17-16c-55 omnilex-key=us-nj-statutes--title-17--17:16C-55}
Any person, and any director, officer, employee, agent, or representative thereof, who or which shall engage in this State in the business of a sales finance company or motor vehicle installment seller without having first obtained a license, as required by this act, shall be liable to a penalty of not more than $1,000.00 for each offense.
##### **§ 17:16C-56** Violations of act; penalty; enforcement by summary proceedings {#sec-17-16c-56 omnilex-key=us-nj-statutes--title-17--17:16C-56}
(a) Any person conducting business under this act and any director, officer, partner, member, employee, agent, or representative thereof who shall knowingly violate any provision of this act or shall directly or indirectly counsel, aid or abet such violation shall be liable to a penalty of not more than $500.00 for each offense.
(b) The penalties provided for by this act shall be sued for and recovered by and in the name of the commissioner and shall be collected and enforced by summary proceedings pursuant to the Penalty Enforcement Law (N.J.S. 2A:58-1 et seq.).
##### **§ 17:16C-57** Partial invalidity {#sec-17-16c-57 omnilex-key=us-nj-statutes--title-17--17:16C-57}
If any provision of this act or the application thereof to any person or circumstance is held unconstitutional, the remainder of the act and the application of such provision to other persons or circumstances shall not be affected thereby.
##### **§ 17:16C-58** Repeals {#sec-17-16c-58 omnilex-key=us-nj-statutes--title-17--17:16C-58}
Chapter 419, P.L.1948, entitled, "An act to define and regulate retail installment sales in the amount of or of the value of $3,000.00 or less and to license and regulate sales finance companies," approved September 29, 1948, is hereby repealed, and all laws and parts of laws which are inconsistent with or repugnant to the provisions of this act are hereby superseded; provided, however, that nothing herein contained shall be construed to impair or affect any rights, obligations, liabilities or criminal, civil or administrative proceedings arising under the aforesaid act.
##### **§ 17:16C-58.1** Date of application of act; validity of transactions prior to effective date of act {#sec-17-16c-58.1 omnilex-key=us-nj-statutes--title-17--17:16C-58.1}
(a) The provisions of this act relating to retail charge accounts shall apply to such accounts in existence on the effective date of this act.
(b) Nothing in this act shall be construed to make invalid any retail charge account or retail installment contract, or any transaction thereunder, made prior to the effective date of this act.
##### **§ 17:16C-59** Continuation of license under former act {#sec-17-16c-59 omnilex-key=us-nj-statutes--title-17--17:16C-59}
Any sales finance company holding a license under the provisions of chapter 419, P.L.1948, approved September 29, 1948, and doing business on the date this act takes effect, shall be considered to have been licensed under and subject to the provisions of this act for the period ending December 31, 1960, at which time it must obtain a license under the provisions of this act.
##### **§ 17:16C-60** Short title {#sec-17-16c-60 omnilex-key=us-nj-statutes--title-17--17:16C-60}
This act shall be known and may be cited as the "Retail Installment Sales Act of 1960."
##### **§ 17:16C-61** Effective date {#sec-17-16c-61 omnilex-key=us-nj-statutes--title-17--17:16C-61}
This act shall take effect 90 days from the date of its approval.
##### **§ 17:16C-61.1** Short title {#sec-17-16c-61.1 omnilex-key=us-nj-statutes--title-17--17:16C-61.1}
This act shall be known as, and may be cited as, the "Door-to-Door Retail Installment Sales Act of 1968."
##### **§ 17:16C-61.2** Remedial legislation; liberal construction {#sec-17-16c-61.2 omnilex-key=us-nj-statutes--title-17--17:16C-61.2}
This act deemed and hereby declared remedial legislation necessary for the protection of the consumers of this State, shall be liberally construed to effectuate the purposes and intent thereof.
##### **§ 17:16C-61.3** Legislative findings {#sec-17-16c-61.3 omnilex-key=us-nj-statutes--title-17--17:16C-61.3}
The Legislature hereby finds and declares that the consumer is frequently induced to enter into retail installment sales contracts for goods which he does not need through the unsolicited and often unethical persuasion of certain door-to-door sellers. It is the purpose of this act to enable the consumer to reconsider his purchase within a reasonable period of time and to rescind the sale if he acts before 5 p.m. of the third business day following the day on which the contract is executed.
##### **§ 17:16C-61.4** Definitions {#sec-17-16c-61.4 omnilex-key=us-nj-statutes--title-17--17:16C-61.4}
As used in this act, unless the context clearly indicates otherwise:
(a) "Business day" means any day other than a Saturday, Sunday or holiday.
(b) "Place of business" means the main or branch office or local address of a retail seller.
(c) "Purchase price" means the total price paid or to be paid for goods sold or to be sold pursuant to a retail installment contract, such amount to include all interest and service charges, including, without limitation, time sales price.
##### **§ 17:16C-61.5** Rescission; duties of buyer and seller; exception of certain sales; record of buyer's notice {#sec-17-16c-61.5 omnilex-key=us-nj-statutes--title-17--17:16C-61.5}
(a) Any retail installment sale of goods or retail installment contract for the sale of goods, other than a motor vehicle, a boat, and motor vehicle or boat accessories, for a purchase price in excess of $25.00, which is entered into at a place other than the place of business of the retail seller may be rescinded by the retail buyer if the retail buyer:
(1) Furnishes to the retail seller a notice of intent to rescind the retail installment sale or retail installment contract by certified mail, return receipt requested, postmarked not later than 5 p.m. of the third business day following the day on which the retail installment sale or retail installment contract is executed; and
(2) Gives up possession of any goods, subject to such retail installment sale or retail installment contract, delivered to the retail buyer prior to receipt by the retail seller of such notice of intent to rescind.
(b) Within 10 business days after receipt of such notice of intent to rescind the retail installment sale or retail installment contract, a retail seller shall:
(1) Pick up, at his own expense, any goods subject to such sale or contract, delivered to the retail buyer prior to receipt by the retail seller of such notice;
(2) Refund to the retail buyer all amounts of money paid by the retail buyer (less reasonable charges for any damage to such goods which occurred while in the possession of the retail buyer); and
(3) Redeliver to the retail buyer any goods traded-in to the retail seller on account of or in contemplation of the retail installment sale or retail installment contract (less any reasonable charges actually incurred in making the goods ready for sale).
(c) This section does not apply to mail order sales, telephone sales, catalog sales where an order is placed by mail or telephone, or sales in which the retail buyer has requested the retail seller to enter into the sale at a place other than the retail seller's place of business, but it does apply to sales in which the retail buyer has requested the retail seller to conduct a demonstration or exhibition at a place other than the retail seller's place of business and has not also requested to enter into a sale at that place at the same time he has requested such demonstration or exhibition.
(d) Each retail seller shall maintain a record of the receipt of any retail buyer's notice of intent to rescind a sale under this act for at least 18 months after the receipt of such notice of intent to rescind.
##### **§ 17:16C-61.6** Receipt; form and content {#sec-17-16c-61.6 omnilex-key=us-nj-statutes--title-17--17:16C-61.6}
(a) At the time of executing every retail installment sale or retail installment contract subject to the provisions of section 5 of this act, the retail seller shall deliver to the retail buyer two copies of a receipt which clearly and conspicuously sets forth:
(1) The retail seller's name and place of business;
(2) A description of the goods sold; and
(3) The amount of money paid by the retail buyer or the cash value of any goods delivered to the retail seller at the time the retail installment sale or retail installment contract was entered into.
(b) The receipt required to be delivered to the retail buyer shall also clearly and conspicuously bear, in at least 10-point bold type, the following statement:
"NOTICE TO RETAIL BUYER: YOU MAY RESCIND THIS SALE PROVIDED THAT YOU NOTIFY THE RETAIL SELLER OF YOUR INTENT TO DO SO BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTMARKED NOT LATER THAN 5 P.M. OF THE THIRD BUSINESS DAY FOLLOWING THE SALE. FAILURE TO EXERCISE THIS OPTION, HOWEVER, WILL NOT INTERFERE WITH ANY OTHER REMEDIES AGAINST THE RETAIL SELLER YOU MAY POSSESS. IF YOU WISH, YOU MAY USE THIS PAGE AS NOTIFICATION BY WRITING "I HEREBY RESCIND' AND ADDING YOUR NAME AND ADDRESS. A DUPLICATE OF THIS RECEIPT IS PROVIDED BY THE RETAIL SELLER FOR YOUR RECORDS."
(c) No receipt required to be delivered to the retail buyer shall contain, or be accompanied by any document which contains, provisions by which the retail buyer waives his rights under this act.
(d) A retail seller who in the ordinary course of business regularly uses a language other than English in any advertising or other solicitation of retail buyers, or in any printed forms for use by retail buyers, or in any face-to-face negotiations with retail buyers shall deliver the two copies of the receipt to a retail buyer whose principal language is such other language one in English and one in the other language.
(e) The receipt required to be delivered to the retail buyer, other than the notice provision required under subsection (b) of this section, shall be in a type-size less than 10 points high and in type other than bold.
##### **§ 17:16C-61.7** Action to recover amount paid {#sec-17-16c-61.7 omnilex-key=us-nj-statutes--title-17--17:16C-61.7}
When a retail seller, who has received notice of intent to rescind a retail installment sale or retail installment contract, fails to pick up the goods and refund any monies or goods paid by the retail buyer within 10 business days as provided in section 5 of this act, the retail buyer may bring suit against the retail seller in any court of competent jurisdiction and recover the amount paid by the retail buyer upon entering into such retail installment sale or retail installment contract. The court in such action shall, in addition to any judgment awarded to the plaintiff, require defendant to pay a plaintiff a reasonable attorney's fee and costs of the action.
##### **§ 17:16C-61.8** Violations by seller {#sec-17-16c-61.8 omnilex-key=us-nj-statutes--title-17--17:16C-61.8}
Any retail seller who willfully destroys, within 18 months after its receipt, record of a retail buyer's notice of intent to rescind a sale; or who willfully fails to pick up the goods and refund the purchase price within the 10 business days provided in section 5 of this act, or who willfully fails to deliver a receipt setting forth all the information required by section 6 of this act; or who willfully fails to set forth such information in the manner required by section 6 of this act; or who attempts to secure a waiver of the retail buyer's rights under this act in violation of section 6 of this act, shall be a disorderly person and, upon conviction thereof, shall be subject to a fine of not more than $500.00 for each offense.
##### **§ 17:16C-61.9** Rights and remedies of act are in addition to and cumulative of other rights {#sec-17-16c-61.9 omnilex-key=us-nj-statutes--title-17--17:16C-61.9}
The rights and remedies accorded a retail buyer by the provisions of this act are hereby declared to be in addition to and cumulative of any other right or remedy accorded him by the common law or statutes of this State, and nothing contained herein shall be construed to deny, abrogate or impair any such common law or statutory right or remedy.
##### **§ 17:16C-62** Definitions {#sec-17-16c-62 omnilex-key=us-nj-statutes--title-17--17:16C-62}
1. Unless the context otherwise indicates:
(a) "Goods" means all chattels personal which are furnished or used in the modernization, rehabilitation, repair, alteration or improvement of real property except those furnished or used for a commercial or business purpose or for resale, and except stoves, freezers, refrigerators, air conditioners other than those connected with a central heating system, hot water heaters and other appliances furnished for use in a home and designed to be removable therefrom without material injury to the structure, and except chattels personal under a contract in which the cash price is $300.00 or less and which is subject to the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.);
(b) "Services" means labor, equipment and facilities furnished or used in connection with the installation or application of goods in the modernization, rehabilitation, repair, alteration or improvement of real property;
(c) "Home repair contract" means an agreement, whether contained in one or more documents, between a home repair contractor and an owner to pay the time sales price of goods or services in installments over a period of time greater than 90 days;
(d) "Home repair contractor" means any person engaged in the business of selling goods or services pursuant to a home repair contract;
(e) "Commissioner" means the Commissioner of Banking and Insurance of New Jersey and includes any deputies or employees of the department designated by him to administer and enforce this act;
(f) "Official fees" means the fees to be paid to a public officer for obtaining any permit or filing any lien or mortgage taken or reserved as security pursuant to a home repair contract;
(g) "Cash price" means the cash sales price for which the home repair contractor would sell the goods or services which are the subject matter of a home repair contract if the sale were a sale for cash rather than an installment sale;
(h) "Down payment" means all payments made in cash to the home repair contractor and all allowances given by the home repair contractor to the owner prior to or substantially contemporaneous with the execution of the home repair contract;
(i) "Credit service charge" means that amount by which the time sales price exceeds the aggregate of the cash price and the amounts specifically included for official fees and, if a separate charge is made therefor, the amount included for insurance and other benefits as provided in paragraph (4) of subsection (a) of section 6 of P.L.1960, c.41 (C.17:16C-67);
(j) "Time sales price" means the total amount to be paid pursuant to the contract excluding default charges authorized under this act;
(k) "Owner" means a person, including a tenant, who buys goods or services pursuant to a home repair contract;
(l) "Home financing agency" means any person, other than a home repair contractor, engaged, directly or indirectly, in the business of purchasing, acquiring, soliciting or arranging for the acquisition of home repair contracts or any obligation in connection therewith by purchase, discount, pledge or otherwise;
(m) "Holder" means any person who is entitled to the rights of a home repair contractor under a home repair contract;
(n) "Home repair salesman" means any individual who obtains a bona fide home repair contract;
(o) "Payment-period" means the period of time scheduled by a home repair contract to elapse between the days upon which installment payments are scheduled to be made on such contract; except that, where installment payments are scheduled by the home repair contract to be omitted, "payment-period" means the period of time scheduled by the contract to elapse between the days upon which installment payments are scheduled to be made during that portion of the contract period in which no installment payment is scheduled to be omitted;
(p) "Contract period" means the period beginning on the date of a home repair contract and ending on the date scheduled by the contract for the payment of the final installment;
(q) "Actuarial method" means the method of applying payments made on a home repair contract between principal and credit service charge pursuant to which a payment is applied first to accumulated credit service charge and the remainder is applied to the unpaid principal balance of the home repair contract in reduction thereof;
(r) "Precomputed credit service charge" means an amount equal to the whole amount of credit service charge payable on a home repair contract for the period from the making of the contract to the date scheduled by the terms of the contract for the payment of the final installment;
(s) "Precomputed contract" means a home repair contract in which the face amount of the payment due consists of the balance so evidenced and the credit service charge thereon; and
(t) "Nonprecomputed contract" means a home repair contract in which the face amount of the payment due consists solely of the balance due on the contract, or a home repair contract in which the credit service charge is imposed on the outstanding balance from month to month.
##### **§ 17:16C-63** Home repair contracts; form and contents {#sec-17-16c-63 omnilex-key=us-nj-statutes--title-17--17:16C-63}
Every home repair contract:
(a) Shall be in writing and contain the entire agreement between the owner and the home repair contractor;
(b) Shall state the names and addresses of all parties, the dates when executed by the parties and contain a description of the goods and services;
(c) Shall be completed in full without any blank spaces to be filled in after the contract is signed by the owner, except for serial number or identifying marks which are not available for the description of the goods at that time;
(d) Shall contain the following notice in 10-point bold type or larger, directly above the space provided for the signature of the owner:
"NOTICE TO OWNER
Do not sign this contract in blank.
You are entitled to a copy of the contract at the time you sign.
Keep it to protect your legal rights.
Do not sign any completion certificate or agreement stating that you are satisfied with the entire project before this project is complete. Home repair contractors are prohibited by law from requesting or accepting a certificate of completion signed by the owner prior to the actual completion of the work to be performed under the home repair contract."
(e) Shall state that workmen's compensation and public liability insurance are carried by the home repair contractor and applicable to the work to be performed under the contract or if the home repair contractor is qualified as a self-insurer pursuant to Title 34; and
(f) If the home repair contractor is precluded from purchasing workmen's compensation under chapter 15 of Title 34 of the Revised Statutes, he shall state that he does not carry workmen's compensation insurance.
##### **§ 17:16C-64** Prohibited contract provisions {#sec-17-16c-64 omnilex-key=us-nj-statutes--title-17--17:16C-64}
No home repair contract shall contain:
(a) any acceleration clause under which any part or all of the time balance not yet matured may be declared due and payable because the holder deems himself to be insecure;
(b) any agreement to pay any amount other than the time sales price of the goods or services furnished under the contract, provided that a retail installment contract under the Retail Installment Sales Act of 1960 may be included in a home repair contract;
(c) any power of attorney to confess judgment or any other power of attorney;
(d) any provision relieving the home repair contractor from liability upon any claim which the owner may have under the contract;
(e) any provisions whereby the owner waives any right of action against the home repair contractor or holder or other person acting in his or their behalf for any act committed in the collection of the payments under the contract or in the repossession of the goods, the subject matter of the home repair contract;
(f) any assignment of or order for the payment of any salary wages, commissions or other compensation for services, or any part thereof, earned or to be earned;
(g) any provision for a payment or credit to any owner for the privilege of placing any sign on the premises where the work is being done or for recommending to the home repair contractor the names of any person or persons, who might be interested in making an installment home repair contract unless such provision has been approved by the commissioner.
##### **§ 17:16C-64.1** Relief from liability; prohibited contract provisions {#sec-17-16c-64.1 omnilex-key=us-nj-statutes--title-17--17:16C-64.1}
No home repair contract shall contain any provision relieving the holder, or other assignee, from liability for any civil remedy sounding in contract which the owner may have against the home repair contractor under the home repair contract or under any separate instrument executed in connection therewith.
##### **§ 17:16C-64.2** Form, terms of consumer notes; contractor's bond {#sec-17-16c-64.2 omnilex-key=us-nj-statutes--title-17--17:16C-64.2}
2. No home repair contract shall require or entail the execution of any note unless a home repair contractor obtains a bond in a form and amount prescribed by regulations of the commissioner, but said bond shall be in the amount of $25,000 or 1% of a home repair contractor's home improvement annual sales of the previous year, whichever is greater, and applies for a building permit, if required, within 10 business days of the execution of the home repair contract. The bond shall be obtained from a surety company authorized by law to do business in this State and shall be filed with the commissioner. The bond required by this section shall contain a provision that it shall not be canceled for any cause unless notice of intention to cancel is filed in the department at least 30 days before the day upon which cancellation shall take effect. That note shall have printed the words "CONSUMER NOTE" in 10-point bold type or larger on the face thereof. Such a note with the words "CONSUMER NOTE" printed thereon shall be subject to the terms and conditions of the home repair contract and shall not be a negotiable instrument within the meaning of chapter 3 (Negotiable Instruments) of the Uniform Commercial Code, N.J.S.12A:3-101 et seq.
##### **§ 17:16C-64.3** Unlawful procurement of consumer note; penalty {#sec-17-16c-64.3 omnilex-key=us-nj-statutes--title-17--17:16C-64.3}
Any person who procures the execution of a note in violation of this act shall be liable to a penalty of not more than $500.00 for each offense.
##### **§ 17:16C-64.4** Execution of note in violation of act; recovery of finance charges prohibited {#sec-17-16c-64.4 omnilex-key=us-nj-statutes--title-17--17:16C-64.4}
In the event that a note is executed in connection with a home repair contract in violation of this act, no finance, delinquency, collection, repossession or refinancing charges may be recovered in any action or proceeding based on the contract.
##### **§ 17:16C-65** Place of business within state; operation as individual, partnership or corporation; workmen's compensation and liability insurance; copy of contract {#sec-17-16c-65 omnilex-key=us-nj-statutes--title-17--17:16C-65}
(a) Every home repair contractor must own, rent or lease a place of business in the State of New Jersey; namely, an office, warehouse or store or any combination of these. The premise or premises, as the case may be, must be identified by a sign, as permitted by the laws of the local municipality. The sign shall be legible to a visitor entering the main entrance of the place of business and shall contain the words "licensed as a home repair contractor" .
(b) A home repair contractor, in lieu of the above, may operate from a private residence but in doing so must list such residence in the nearest post office, local telephone directory and with the commissioner as a business address.
(c) A home repair contractor may operate as an individual, partnership, limited partnership or corporation. In the event the business is conducted under a trade name, such trade name shall be made a matter of record as required by law.
(d) A home repair contractor must carry workmen's compensation and public liability insurance except if he qualifies as a self-insurer under Title 34 or if he is precluded from purchasing workmen's compensation under chapter 15 of Title 34 of the Revised Statutes.
(e) Every home repair contractor shall furnish without charge a completely executed copy of the home repair contract to the owner immediately after the owner signs such contract and the acknowledgment of receipt thereof by the owner shall be in 10-point bold type or larger.
##### **§ 17:16C-66** Certificate of completion; request or acceptance prior to completion of work prohibited; notice in certificate {#sec-17-16c-66 omnilex-key=us-nj-statutes--title-17--17:16C-66}
No home repair contractor shall request or accept a certificate of completion signed by the owner prior to the actual completion of the work to be performed under the home repair contract.
Every such home repair completion certificate or agreement shall contain the following notice in 10-point bold type or larger, directly above the space provided for the signature of the owner.
"NOTICE TO OWNER
Do not sign this completion certificate or any agreement stating that you are satisfied with the entire project before this project is complete. Home repair contractors are prohibited by law from requesting or accepting a certificate of completion signed by the owner prior to the actual completion of the work to be performed under the home repair contract."
##### **§ 17:16C-67** Separate disclosure statements in contract {#sec-17-16c-67 omnilex-key=us-nj-statutes--title-17--17:16C-67}
6. (a) Every home repair contract shall state separately:
(1) the cash price of the goods or services to be furnished;
(2) the down payment;
(3) the unpaid cash balance which is the difference between paragraphs (1) and (2) of this subsection (a);
(4) the amount, if any, if a separate charge is made therefor, included for credit life insurance and other benefits pursuant to N.J.S.17B:29-1 et seq., specifying the coverages and benefits;
(5) the official fees;
(6) the principal balance, which is the sum of paragraphs (3), (4) and (5) of this subsection (a);
(7) the credit service charge;
(8) the time balance, which is the sum of paragraphs (6) and (7) of this subsection (a), the number of installments required, the amount of each installment and the due dates thereof;
(b) In lieu of the disclosures specified in paragraphs (1) through (8) of subsection (a) of this section, a precomputed or a nonprecomputed home repair contract shall be deemed to be in compliance with the requirements of this section if the home repair contract provides the disclosures required by the federal "Truth in Lending Act," 15 U.S.C. s.1601 et seq. and the regulations implementing that act, 12 C.F.R. s.226 et seq., for open-end or closed-end loans, as applicable.
##### **§ 17:16C-68** Payment of time balance; extension of scheduled due date; options for computing additional charge {#sec-17-16c-68 omnilex-key=us-nj-statutes--title-17--17:16C-68}
(a) Every home repair contract shall provide for the payment of the time balance in substantially equal amounts on dates separated by substantially equal payment-periods; except that the home repair contractor may defer the initial installment for a period of 60 days or for a period of 180 days on seasonal goods sold out of season; and, provided further, that when appropriate for the purpose of facilitating payment, in accordance with an owner's intermittent income, a contract may provide for payment on a schedule which reduces or omits payments over a period or periods not in excess of 93 days in any 12-month period or a contract may provide an installment schedule which reduces or omits payments over any period or periods of time during which period or periods the owner's income is reduced or suspended. When a home repair contract provides for unequal or irregular installments, the credit service charge shall not exceed the effective rate provided in section 8, having due regard for the schedule of installments.
(b) The holder of a home repair contract may extend the scheduled due date of any home repair contract and defer the scheduled due date of any or all installment payments, or reduce the amount of any or all installments and may, as a consideration therefor, make a total additional charge not to exceed the amount ascertained under either of the following methods of computation at the respective rates indicated by the following options:
Option 1. The additional charge shall be computed on the amount of the scheduled installment or installments extended, deferred or reduced, for the period or periods for which each installment or part thereof is extended, deferred or reduced, at the rate of 1% per month.
Option 2. The holder of a home repair contract may, by written agreement, renew the entire unpaid balance owing on a home repair contract and may make a charge therefor at the rate charged in the contract so renewed, from the date of renewal to the maturity of the final installment.
(c) The unpaid balances owing on two or more home repair contracts held by the same holder may be consolidated, and the consolidated balance may be paid in such installments and over such period of time as the owner and the holder of such home repair contracts may agree upon in writing. A credit service charge may be made based upon such consolidated balance within the limits imposed by section 8.
(d) The consolidation of the unpaid balances owing on two or more home repair contracts shall be effected by an agreement in writing which shall identify the home repair contracts affected by such consolidation by reference to the dates of their execution, the names of the parties thereto, and the location of the property or properties in connection with which the goods and services were furnished pursuant to such contracts. Such agreement shall state as separate items
(1) The unpaid balance owing on each of the contracts affected by the consolidation, and the total of such balances;
(2) The amount, if any, of the charge made pursuant to subsection (d) of section 6;
(3) The official fees;
(4) The consolidated balance, which is the sum of the unpaid balances as shown pursuant to paragraph (1) of this subsection, and the amounts shown pursuant to paragraphs (2) and (3) of this subsection;
(5) The credit service charge, which shall be computed pursuant to section 8, except that such charge shall be based upon the consolidated balance as shown pursuant to paragraph (4) of this subsection, instead of upon the principal balance as provided in section 8;
(6) The time balance, which is the sum of the consolidated balance as shown pursuant to paragraph (4) of this subsection and the credit service charge, as shown pursuant to paragraph (5) of this subsection, the number of installments required, the amount of each installment, and the due dates thereof.
(e) For the purposes of this section, "unpaid balance owing" on a home repair contract means the amount which would be required to pay the contract in full if such payment were made on the day when an agreement is entered into pursuant to Option 2 of subsection (b) of this section, or a consolidation of balances is effected pursuant to paragraph (d) of this subsection. In computing the amount of the unpaid balance owing on a contract, a credit shall be allowed according to the formula provided by section 12, except that, in applying such formula, no deduction for an acquisition charge shall be taken.
##### **§ 17:16C-69** Credit service charge {#sec-17-16c-69 omnilex-key=us-nj-statutes--title-17--17:16C-69}
8. a. A home repair contractor may impose and receive a credit service charge in an amount or amounts agreed to by the home repair contractor and the owner on the amount owing on the unpaid principal balance of the contract. This section shall not limit or restrict the manner of contracting for the credit service charge, whether by way of add-on, discount, periodic rate or otherwise, so long as the charge does not exceed that permitted by this section. In the case of a precomputed contract, the charge may be computed on the assumption that all scheduled payments will be made when due, and all scheduled installment payments made on a precomputed contract may be applied as if they were received on their scheduled due dates. In the case of nonprecomputed loans, all installment payments shall be applied no later than the date of receipt, and a day shall be counted as 1/365 of a year.
b. Notwithstanding the provisions of section 12 of P.L.1960, c.41 (C.17:16C-73), when the unpaid balance owing upon a contract is paid in full or the maturity of the unpaid balance of such contract is accelerated, before the date scheduled for the payment of the final installment, the holder of a precomputed contract shall allow a credit on account of the credit service charge, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the contract is prepaid within 12 months after the first payment is due, a holder may charge a prepayment penalty of not more than (1) $20.00 on any contract up to and including $2,000.00; (2) an amount equal to 1% of the loan on any contract greater than $2,000.00 and up to and including $5,000.00; and (3) $100.00 on any contract exceeding $5,000.00.
c. With respect to nonprecomputed contracts, the regularly scheduled minimum monthly payments of principal and credit service charges, irrespective of any other charges permitted under P.L.1960, c.41 (C.17:16C-62 et seq.), for any debt incurred for the purchase of a home improvement shall result in positive amortization of the debt and shall not increase the amount of debt outstanding.
##### **§ 17:16C-70** Additional charges prohibited; exceptions {#sec-17-16c-70 omnilex-key=us-nj-statutes--title-17--17:16C-70}
No home repair contractor or any other person shall charge, collect or receive from any owner, directly or indirectly, any further or other amount for costs, charges, insurance premiums, examination, appraisal service, brokerage, commission, interest, discount, expense, fee, fine, penalty or other thing of value in connection with a home repair contract, other than the charges permitted by this act and chapter 169 of the laws of 1958, except court costs, attorney's fees and the expenses of retaking and storing repossessed goods which are authorized by law.
##### **§ 17:16C-71** Delinquency or collection charge for default in payment; attorney's fees {#sec-17-16c-71 omnilex-key=us-nj-statutes--title-17--17:16C-71}
(a) A home repair contract using a precomputed credit service charge may provide for a delinquency or collection charge for default in the payment of any such contract or any installment thereof, if such default continues for a period of 10 days. Such charge shall not exceed 5% of the amount of the installment in default or $5.00 whichever is the lesser and may be collected in cash or charged to the owner's account. If charged to the owner's account such charge shall be levied within 35 days from the date of such default and written notification that such charge has been made shall be mailed to the owner within 5 days from the date when such charge was made.
(b) The home repair contract may also provide for the payment of reasonable attorney's fees when a payment in default for a period of 10 days is referred to an attorney, not a salaried employee of the holder of the contract, for collection.
##### **§ 17:16C-72** Receipt for payment; payment or tender to last known holder in absence of notice of assignment {#sec-17-16c-72 omnilex-key=us-nj-statutes--title-17--17:16C-72}
Whenever payment is made in cash on account of any home repair contract, the person receiving such payment shall, at the time of receiving such payment, furnish to the person making such payment a written receipt therefor showing the date, identification of the account and the amount paid. Unless notice has been given to the owner of an assignment of a home repair contract, payment thereunder or tender thereof by the owner to the last known holder of such contract shall be binding upon any holder or assignee thereof.
##### **§ 17:16C-73** Prepayment; credit on account; payment without penalty {#sec-17-16c-73 omnilex-key=us-nj-statutes--title-17--17:16C-73}
(a) When the unpaid balance owing on a precomputed home repair contract is repaid in full at any time before the end of the contract period, the holder of the contract shall allow a credit on account of the precomputed credit service charge, the amount of which shall be determined by the application of the formula C = AN / D, in which "C" represents the amount of the credit to be given; "A" represents the amount of the credit service charge, less an acquisition cost of $15.00; "D" represents an amount determined as follows: there shall be ascribed to each payment-period included in the contract period, beginning with the first payment-period scheduled by the contract, the cardinal number descriptive of the number of payment-periods scheduled by the contract to elapse from the beginning of each such payment-period to the end of the contract period, and the sum of all such cardinal numbers shall constitute the quantity "D" ; and "N" represents the difference between the quantity "D" and the sum of all the cardinal numbers ascribed to the payment-periods which have elapsed, in whole or in part, from the date of the contract to the date upon which such repayment is made. This section shall not apply when the amount of the credit is less than $1.00.
(b) The unpaid balance of a nonprecomputed contract may be paid in full at any time without penalty.
##### **§ 17:16C-74** Furnishing statement of owner's account {#sec-17-16c-74 omnilex-key=us-nj-statutes--title-17--17:16C-74}
Upon written request from the owner, the holder of the home repair contract shall deliver to the owner within 10 days from receipt of the written request a statement of the owner's account showing the date and amount of all payments made or credited to the account and the total amount, if any, unpaid under the contract. Not more than 2 such statements shall be required in any 12-month period.
##### **§ 17:16C-75** Duties of holder upon payment in full of home repair contract {#sec-17-16c-75 omnilex-key=us-nj-statutes--title-17--17:16C-75}
14. With respect to contracts pursuant to which there is a lien, mortgage or encumbrance upon the goods or real property, upon payment in full by the owner of the time sales price and other amounts lawfully due under a home repair contract, the holder shall:
(a) return to the owner either the original instruments evidencing indebtedness under a home repair contract which were signed by the owner or his sureties or guarantors in connection with such contract or a copy thereof, excepting such instruments as are filed with a public official and retained in the files of such official;
(b) release all security interest in the goods or real property affected by the home repair contract; and
(c) deliver to the owner such good and sufficient assignments, releases of liens and mortgages on personal and real property and such other instruments of title as may be necessary to vest the owner with complete evidence of title.
With respect to all other contracts, the holder, upon payment in full by the retail buyer of the time sales price and other amounts lawfully due under a home repair contract, shall furnish the owner with such instruments as the commissioner may by regulation provide.
##### **§ 17:16C-76** Unauthorized costs and charges {#sec-17-16c-76 omnilex-key=us-nj-statutes--title-17--17:16C-76}
All costs and charges in connection with such contract which are not authorized by this act shall be unenforceable. Any payment of such costs or charges shall be applied to the next maturing installment or, if the contract has been fully paid, remitted to the owner and the owner shall be entitled to recover all such costs or charges.
##### **§ 17:16C-77** Doing business without license prohibited; home repair salesman's license; home financing agency; nontransferability of license {#sec-17-16c-77 omnilex-key=us-nj-statutes--title-17--17:16C-77}
(a) No person shall engage in the business of a home financing agency, home repair contractor, or a home repair salesman in this State without first obtaining a license from the commissioner as provided for in this act, except that an individual, partner or officer or director of a corporation licensed as a home repair contractor shall not be required to obtain a home repair salesman license.
(b) (Deleted by amendment.)
(c) No home repair contractor shall employ any home repair salesman to procure a home repair contract from an owner on behalf of the contractor until the home repair salesman is licensed under this act.
(d) Any bank, trust company or national bank or any State or Federally chartered savings and loan association authorized to do business in this State and any licensed sales finance company shall be authorized to transact business as a home financing agency and shall be deemed to be a home financing agency for the purpose of this act, subject to all of the provisions of this act, except that it shall not be required to obtain a license or pay a license fee hereunder.
(e) No license issued under this act shall be transferable or assignable.
(f) No home repair salesman may concurrently represent more than one contractor in the solicitation or negotiation of any one home repair contract from an owner. The use of a contract form which fails to disclose a named contractor principal, whether for the purpose of offering the contract to various contractors other than the one the salesman purported to represent in negotiation or otherwise, is prohibited. No salesman may be authorized to select a prime contractor on behalf of the owner.
(g) No home repair salesman shall accept or pay any compensation of any kind, for or on account of a home improvement transaction, from or for any person other than the contractor whom he represents with respect to the transaction.
##### **§ 17:16C-78** Application for license {#sec-17-16c-78 omnilex-key=us-nj-statutes--title-17--17:16C-78}
(a) Application for a license under this act shall be in writing, under oath, and shall be in the form prescribed by the commissioner.
(b) The application for a home repair contractor or home financing agency license shall state the name and residence and business addresses of the applicant, and if the applicant is a copartnership or association, of every member thereof, and if a corporation, of each officer and director thereof. It shall also state the address where the business is to be conducted, demonstrate the financial responsibility of the applicant and set forth any other information the commissioner may require.
(c) The application for a home repair salesman license shall state the name and residence address of the applicant, the name and business address of his employer, the names and addresses of each and every employer by whom the applicant was previously employed within the past 5 years and shall set forth any other information the commissioner may require.
##### **§ 17:16C-79** Issuance or refusal of license {#sec-17-16c-79 omnilex-key=us-nj-statutes--title-17--17:16C-79}
Within 60 days after the filing of the application and the payment of the fees herein set forth the commissioner shall:
(a) issue and deliver to the applicant a license to engage in the business of a home financing agency, home repair contractor, or a home repair salesman in accordance with the provisions of this act; or
(b) refuse to issue the license for any reason for which he may suspend, revoke or refuse to renew any license under this act.
##### **§ 17:16C-80** Notice and hearing upon refusal of license {#sec-17-16c-80 omnilex-key=us-nj-statutes--title-17--17:16C-80}
If the commissioner refuses to issue a license he shall:
(a) Notify the applicant of the denial and of his right to request a hearing within 10 days;
(b) If the applicant does not request a hearing, return the sum paid as a license fee;
(c) If the applicant requests such a hearing, give notice of the grounds for refusal and hold a hearing thereon, and within 30 days after such hearing the commissioner shall file a written decision containing his findings and conclusions and serve a copy thereof upon the applicant.
##### **§ 17:16C-81** Transaction of business under other names or at other locations; change of location or employer {#sec-17-16c-81 omnilex-key=us-nj-statutes--title-17--17:16C-81}
(a) No home repair contractor or home financing agency shall transact any business subject to this act under any other name or maintain an office at any other location than that designated in the license.
(b) No home repair salesman shall transact any business subject to this act for any employer except that designated in the license.
(c) In case such location or employer be changed, the licensee shall inform the commissioner of such change within 10 days and the commissioner shall indorse the change of location or change of employer on the license without charge.
##### **§ 17:16C-82** License fees payable by home financing agency. {#sec-17-16c-82 omnilex-key=us-nj-statutes--title-17--17:16C-82}
21. (a) With respect to a license fee imposed prior to the implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), every home financing agency shall pay to the commissioner at the time of making the application and biennially thereafter upon renewal a license fee for its principal place of business and for each additional place of business conducted in this State. The commissioner shall charge for a license such fee as he shall prescribe by rule or regulation. Each fee shall not exceed $600. The license shall run from the date of issuance to the end of the licensing period of not less than two years as set by the commissioner by regulation. Upon implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), a license fee shall no longer be imposed or collected by the commissioner pursuant to this section, however a home financing agency shall pay to the commissioner at the time of application a nonrefundable application fee not to exceed $600.
(b) With respect to a license fee imposed prior to the implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), every home repair contractor shall pay to the commissioner at the time of making the application and biennially thereafter upon renewal a license fee for its principal place of business and for each additional place of business conducted in this State. The commissioner shall charge for a license such fee as he shall prescribe by rule or regulation. Each fee shall not exceed $300. The license shall run from the date of issuance to the end of the licensing period of not less than two years as set by the commissioner by regulation. Upon implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), a license fee shall no longer be imposed or collected by the commissioner pursuant to this section, however a home repair contractor shall pay to the commissioner at the time of application a nonrefundable application fee not to exceed $300.
(c) With respect to a license fee imposed prior to the implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), every home repair salesman shall pay to the commissioner at the time of making the application and biennially thereafter upon renewal a license fee. The commissioner shall charge for a license such fee as he shall prescribe by rule or regulation, not to exceed $60. The license shall run from the date of issuance to the end of the licensing period of not less than two years as set by the commissioner by regulation. Upon implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), a license fee shall no longer be imposed or collected by the commissioner pursuant to this section, however a home repair salesman shall pay to the commissioner at the time of application a nonrefundable application fee not to exceed $60.
##### **§ 17:16C-83** Abatement in amount of license fee; expiration of license {#sec-17-16c-83 omnilex-key=us-nj-statutes--title-17--17:16C-83}
No abatement in the amount of the said license fee shall be made if the license is issued for less than 1 year, nor if the license is surrendered, canceled or revoked prior to the expiration of the period for which such license was issued. Every license shall expire on December 31 of each year.
##### **§ 17:16C-84** Suspension, revocation or refusal to renew license; notice; grounds {#sec-17-16c-84 omnilex-key=us-nj-statutes--title-17--17:16C-84}
The commissioner may suspend, revoke or refuse to renew any license issued hereunder, upon 10 days' notice in writing, forwarded by registered or certified mail to the principal place of business or residence of such licensee, stating the contemplated action and in general the grounds therefor, after reasonable opportunity to be heard, if he shall find that the licensee or any owner, director, officer, member, partner, employee or agent of such licensee has:
(a) Made any material misstatement in the application;
(b) Knowingly or without the exercise of due care failed to comply with or violated any provisions of this act;
(c) Defrauded any retail buyer or willfully failed to perform any written agreement with any owner;
(d) Willfully misrepresented or failed to disclose any of the material particulars or the nature thereof required to be stated or furnished to the owner under this act;
(e) Knowingly taken any instrument evidencing a home repair contract which was signed in blank; or
(f) Otherwise demonstrated lack of financial responsibility, unworthiness, bad faith or dishonesty.
##### **§ 17:16C-85** Investigations by commissioner; oaths and affirmations; power to administer {#sec-17-16c-85 omnilex-key=us-nj-statutes--title-17--17:16C-85}
The commissioner shall have power to make such investigations as he shall deem necessary, and may examine the books, accounts, records and files of any person who is a party to or holder of a home repair contract. The commissioner shall have power to administer oaths and affirmations to any person whose testimony is required.
##### **§ 17:16C-86** Issuance of subpoenas; failure to comply; order of superior court; contempt {#sec-17-16c-86 omnilex-key=us-nj-statutes--title-17--17:16C-86}
The commissioner shall have the power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, records and other evidence before him in any matter pertaining to this act.
In case of a failure of any person to comply with any subpoena issued by the commissioner or to testify to any matter concerning which he may be lawfully interrogated, the Superior Court, on application of the commissioner, may issue an order requiring the attendance of such person and the giving of testimony or production of evidence. Any person failing to obey the court's order may be punished as for contempt.
##### **§ 17:16C-87** Maintenance, preservation of books, accounts, records, annual report; violations, penalties. {#sec-17-16c-87 omnilex-key=us-nj-statutes--title-17--17:16C-87}
26. a. Every home repair contractor, home financing agency and holder of a home repair contract shall maintain at its place or places of business such books, accounts and records relating to all transactions under this act as will enable the commissioner to enforce full compliance with the provisions hereof. All such books, accounts and records shall be preserved and kept available for such period of time as the commissioner may by regulation require. The commissioner may prescribe the minimum information to be shown in such books, accounts and records of the licensee so that such records will enable the commissioner to determine compliance with the provisions of this act.
b. The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning business conducted as a licensee in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.
c. A licensee that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:16C-88** Sale, transfer or assignment of obligation or evidence {#sec-17-16c-88 omnilex-key=us-nj-statutes--title-17--17:16C-88}
(a) No holder shall sell, transfer or assign any obligation in connection with a home repair contract or any evidence of indebtedness thereunder to any person who is not authorized as a home financing agency, except that such obligation or evidence of indebtedness may be sold, transferred or assigned to a State or national bank outside of this State if the contract is retained by the holder and collection of payments thereon is made to the holder.
(b) No home financing agency shall knowingly purchase, buy, take by assignment, discount or otherwise accept any document, security, obligation or evidence of indebtedness executed in connection with a home repair contract from anyone except a home repair contractor licensed under this act or a home financing agency.
##### **§ 17:16C-89** Violations; penalties; enforcement {#sec-17-16c-89 omnilex-key=us-nj-statutes--title-17--17:16C-89}
(a) Any home repair contractor, home financing agency or holder of a home repair contract and any officer, partner, member, employee, agent or representative of either who shall knowingly violate any provision of this act or shall directly or indirectly counsel, aid or abet such violation shall be liable to a penalty of not more than $2,500.00 for each offense. Such penalties shall be enforced by summary proceedings pursuant to the Penalty Enforcement Law (N.J.S. 2A:58-1 et seq.).
(b) Any person failing to comply with or violating section 16 of this act shall be guilty of a misdemeanor.
##### **§ 17:16C-90** Partial invalidity {#sec-17-16c-90 omnilex-key=us-nj-statutes--title-17--17:16C-90}
If any provision of this act or the application thereof to any person or circumstances is held unconstitutional, the remainder of the act and the application of such provisions to other persons or circumstances shall not be affected thereby.
##### **§ 17:16C-93** Short title {#sec-17-16c-93 omnilex-key=us-nj-statutes--title-17--17:16C-93}
This act shall be known and may be cited as the "Home Repair Financing Act."
##### **§ 17:16C-94** Effective date {#sec-17-16c-94 omnilex-key=us-nj-statutes--title-17--17:16C-94}
This act shall take effect 90 days from the date of its approval and apply to contracts executed after the effective date of this act.
##### **§ 17:16C-95** Short title {#sec-17-16c-95 omnilex-key=us-nj-statutes--title-17--17:16C-95}
This act shall be known as, and may be cited as, the "Door-to-Door Home Repair Sales Act of 1968."
##### **§ 17:16C-96** Remedial legislation; liberal construction {#sec-17-16c-96 omnilex-key=us-nj-statutes--title-17--17:16C-96}
This act being deemed and hereby declared remedial legislation necessary for the protection of the consumers of this State, shall be liberally construed to effectuate the purposes and intent thereof.
##### **§ 17:16C-97** Legislative findings {#sec-17-16c-97 omnilex-key=us-nj-statutes--title-17--17:16C-97}
The Legislature hereby finds and declares that the consumer is frequently induced to enter into home repair contracts for goods and services which he does not need through the unsolicited and often unethical persuasion of certain door-to-door sellers. It is the purpose of this act to enable the consumer to reconsider his purchase within a reasonable period of time and to rescind the home repair contract if he acts before 5 p.m. of the third business day following the day on which the contract is executed.
##### **§ 17:16C-98** Definitions {#sec-17-16c-98 omnilex-key=us-nj-statutes--title-17--17:16C-98}
As used in this act, unless the context clearly indicates otherwise:
(a) "Business day" means any day other than a Saturday, Sunday or holiday.
(b) "Place of business" means the main or branch office or local address of a home repair contractor.
(c) "Purchase price" means the total price paid or to be paid for goods and services sold or to be sold pursuant to a home repair contract, such amount to include all interest and service charges, including, without limitation, time sales price.
##### **§ 17:16C-99** Rescission; duties of buyer and seller; exclusion of certain sales {#sec-17-16c-99 omnilex-key=us-nj-statutes--title-17--17:16C-99}
(a) Any home repair contract, for a purchase price in excess of $25.00, which is entered into at a place other than the place of business of the home repair contractor may be rescinded by the owner if the owner:
(1) Furnishes to the home repair contractor a notice of intent to rescind the home repair contract by certified mail, return receipt requested, postmarked not later than 5 p.m. of the third business day following the day on which the home repair contract is executed; and
(2) Gives up possession of any goods, subject to such home repair contract, delivered to the owner prior to receipt by the home repair contractor of such notice of intent to rescind.
(b) Within 10 business days after receipt of such notice of intent to rescind the home repair contract, a home repair contractor shall:
(1) Pick up, at his own expense, any goods subject to such contract, delivered to the owner prior to receipt by the home repair contractor of such notice;
(2) Refund to the owner all amounts of money paid by the owner (less reasonable charges for any damages to such goods which occurred while in the possession of the owner); and
(3) Redeliver to the owner any goods traded-in to the home repair contractor on account of or in contemplation of the home repair contract (less any reasonable charges actually incurred in making the goods ready for sale).
(c) This section does not apply to mail order sales, telephone sales, catalog sales where an order is placed by mail or telephone, or sales in which the owner has requested the home repair contractor to enter into the sale at a place other than the home repair contractor's place of business, but it does apply to sales in which the owner has requested the home repair contractor to conduct a demonstration or exhibition at a place other than the home repair contractor's place of business and has not also requested to enter into a sale at the place at the same time he has requested such demonstration or exhibition.
(d) Each home repair contractor shall maintain a record of the receipt of any owner's notice of intent to rescind a sale under this act for at least 18 months after the receipt of such notice of intent to rescind.
##### **§ 17:16C-100** Receipt; form and content {#sec-17-16c-100 omnilex-key=us-nj-statutes--title-17--17:16C-100}
(a) At the time of executing every home repair contract subject to the provisions of section 5 of this act, the home repair contractor shall deliver to the owner two copies of a receipt which clearly and conspicuously sets forth:
(1) The home repair contractor's name and place of business;
(2) A description of the goods and services sold; and
(3) The amount of money paid by the owner or the cash value of any goods delivered to the home repair contractor at the time the home repair contract was entered into.
(b) The receipt required to be delivered to the owner shall also clearly and conspicuously bear, in at least 10-point bold type, the following statement:
"NOTICE TO OWNER: YOU MAY RESCIND THIS SALE PROVIDED THAT YOU NOTIFY THE HOME REPAIR CONTRACTOR OF YOUR INTENT TO DO SO BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTMARKED NOT LATER THAN 5 P.M. OF THE THIRD BUSINESS DAY FOLLOWING THE SALE. FAILURE TO EXERCISE THIS OPTION, HOWEVER, WILL NOT INTERFERE WITH ANY OTHER REMEDIES AGAINST THE HOME REPAIR CONTRACTOR YOU MAY POSSESS. IF YOU WISH YOU MAY USE THIS PAGE AS NOTIFICATION BY WRITING "I HEREBY RESCIND' AND ADDING YOUR NAME AND ADDRESS. A DUPLICATE OF THIS RECEIPT IS PROVIDED BY THE HOME REPAIR CONTRACTOR FOR YOUR RECORDS."
(c) No receipt required to be delivered by the owner shall contain, or be accompanied by any document which contains, provisions by which the owner waives his rights under this act.
(d) A home repair contractor who in the ordinary course of business regularly uses a language other than English in any advertising or other solicitation of owners, or in any printed forms for use by owners, or in any face-to-face negotiations with owners shall deliver the two copies of the receipt to an owner whose principal language is such other language one in English and one in the other language.
(e) The receipt required to be delivered to the owner, other than the notice provision required under subsection (b) of this section, shall be in a type-size less than 10 points high and in type other than bold.
##### **§ 17:16C-101** Action to recover amount paid {#sec-17-16c-101 omnilex-key=us-nj-statutes--title-17--17:16C-101}
When a home repair contractor, who has received notice of intent to rescind a home repair contract, fails to pick up the goods and refund any monies or goods paid by the owner within 10 business days as provided in section 5 of this act, the owner may bring suit against the home repair contractor in any court of competent jurisdiction and recover the amount paid by the owner upon entering into such home repair contract. The court in such action shall, in addition to any judgment awarded to the plaintiff, require defendant to pay plaintiff a reasonable attorney's fee and costs of the action.
##### **§ 17:16C-102** Violations by home repair contractor {#sec-17-16c-102 omnilex-key=us-nj-statutes--title-17--17:16C-102}
Any home repair contractor who willfully destroys, within 18 months after its receipt, record of an owner's notice of intent to rescind a sale; or who willfully fails to pick up the goods and refund the purchase price within the 10 business days provided in section 5 of this act; or who willfully fails to deliver a receipt setting forth all the information required by section 6 of this act; or who willfully fails to set forth such information in the manner required by section 6 of this act, or who attempts to secure a waiver of the owner's rights under this act in violation of section 6 of this act, shall be a disorderly person and, upon conviction thereof, shall be subject to a fine of not more than $500.00 for each offense.
##### **§ 17:16C-103** Rights and remedies of act are in addition to or cumulative of other rights {#sec-17-16c-103 omnilex-key=us-nj-statutes--title-17--17:16C-103}
The rights and remedies accorded an owner by the provisions of this act are hereby declared to be in addition to and cumulative of any right or remedy accorded him by the common law or statutes of this State, and nothing contained herein shall be construed to deny, abrogate or impair any such common law or statutory right or remedy.
## **Chapter 16D** {#struct-chapter-16d}
##### **§ 17:16D-1** Short title {#sec-17-16d-1 omnilex-key=us-nj-statutes--title-17--17:16D-1}
This act shall be known and may be cited as the "Insurance Premium Finance Company Act."
##### **§ 17:16D-2** Definitions {#sec-17-16d-2 omnilex-key=us-nj-statutes--title-17--17:16D-2}
For the purposes of this act--
(a) "Insurance premium finance company" means a person engaged in the business of entering into insurance premium finance agreements or acquiring premium finance agreements from insurance agents or insurance brokers.
(b) "Insurance premium finance agreement" means an agreement by which an insured or prospective insured promises to pay to a premium finance company either directly or indirectly the amount advanced or to be advanced under the agreement by said premium finance company to an insurer or to an insurance agent or insurance broker in payment of premiums on an insurance contract together with a finance charge as authorized and limited by this act.
(c) "Licensee" means an insurance premium finance company holding a license issued by the commissioner under this act.
##### **§ 17:16D-3** Application {#sec-17-16d-3 omnilex-key=us-nj-statutes--title-17--17:16D-3}
The provisions of this act shall not apply with respect to:
(a) Any insurance company authorized to do business in the State of New Jersey,
(b) State associations and Federal associations, as defined in P.L.1963, chapter 144, section 5 (C. 17:12B-5),
(c) The inclusion or deduction of a charge for insurance made pursuant to any other law of this State expressly or impliedly authorizing the financing of insurance premiums in connection with transactions of loan or of the sale of goods or services, or both goods and services, including, but not limited to charges for premiums for either or both credit life insurance and credit accident and health insurance issued pursuant to "An act to provide for the regulation of credit life insurance and credit accident and health insurance, as defined, and supplementing Title 17 of the Revised Statutes," approved January 27, 1959 (P.L.1958, c. 169).
(d) The financing of insurance premiums in New Jersey in accordance with the provisions of Revised Statutes 31:1-1 relating to legal interest rate.
##### **§ 17:16D-4** Licenses. {#sec-17-16d-4 omnilex-key=us-nj-statutes--title-17--17:16D-4}
4. Licenses. No person shall engage in the business of financing insurance premiums in this State without first having obtained a license as a premium finance company from the Commissioner of Banking and Insurance, except that any State or national bank authorized to do business in this State shall be authorized to transact business as a premium finance company, subject to all of the provisions of this act, except that it shall not be required to obtain a license or pay a license fee hereunder. Any person who shall engage in the business of financing insurance premiums in this State without a valid license as provided hereunder shall, upon conviction as provided in R.S. 17:33-2, be subject to a fine of not more than $300. With respect to a license fee imposed prior to the implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), the commissioner shall charge for a license such fee as he shall prescribe by rule or regulation, not to exceed $1,000. Upon implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), a license fee shall no longer be imposed or collected by the commissioner pursuant to this section, however an insurance premium finance agency shall pay to the commissioner at the time of application a nonrefundable application fee not to exceed $1,000. The license shall run from the date of issuance to the end of the licensing period of not less than two years as set by the commissioner by regulation. The fee imposed prior to implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), for said license shall be paid to the commissioner for the use of the State. No portion of the license fee imposed prior to implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), shall be refunded if the license is surrendered by the licensee or suspended or revoked by the commissioner.
Before any licensee changes his address he shall return his license to the commissioner who shall indorse the license indicating the change.
The person to whom the license or the renewal thereof may be issued shall file sworn answers, subject to the penalties of perjury, to such interrogatories as the commissioner may require. The commissioner shall have authority, at any time, to require the applicant fully to disclose the identity of all stockholders, partners, officers and employees, and he may, in his discretion, refuse to issue or renew a license in the name of any firm, partnership, or corporation if he is not satisfied that any officer, employee, stockholder, or partner thereof who may materially influence the applicant's conduct meets the standards of this act.
##### **§ 17:16D-5** Action by commissioner on application {#sec-17-16d-5 omnilex-key=us-nj-statutes--title-17--17:16D-5}
Upon the filing of an application and the payment of the license fee the commissioner shall make an investigation of each applicant and shall issue a license if he finds the applicant is qualified in accordance with this act. If the commissioner does not so find, he shall, within 30 days after he has received such application, so notify the applicant and at the request of the applicant, give the applicant a full hearing.
The commissioner shall issue or renew a license as may be applied for when he is satisfied that the person to be licensed--
(a) Is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for,
(b) Has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied for, and
(c) If a corporation is a corporation incorporated under the laws of this State or a foreign corporation authorized to transact business in this State.
##### **§ 17:16D-6** Revocation and suspension of licenses {#sec-17-16d-6 omnilex-key=us-nj-statutes--title-17--17:16D-6}
The commissioner may revoke or suspend the license of any premium finance company when and if after investigation the commissioner finds that
(a) Any license issued to such company was obtained by fraud,
(b) There was any misrepresentation in the application for the license,
(c) The holder of such license has otherwise shown himself untrustworthy or incompetent to act as premium finance company, or
(d) Such company has violated any of the provisions of this act.
Before the commissioner shall revoke, suspend or refuse to renew the license of any premium finance company, he shall give to such person an opportunity to be fully heard and to introduce evidence in his behalf. In lieu of revoking or suspending the license for any of the causes enumerated in this section, after hearing as herein provided, the commissioner may subject such company to a penalty of not more than $200.00 for each offense when in his judgment he finds that the public interest would not be harmed by the continued operation of such company. The amount of any such penalty shall be paid by such company to the commissioner for the use of the State. At any hearing provided by this section, the commissioner shall have authority to administer oaths to witnesses. Anyone testifying falsely, after having been administered such oath, shall be subject to the penalty of perjury.
Any action of the commissioner in refusing to issue or renew a license shall be subject to review in the Superior Court by a proceeding in lieu of prerogative writ.
##### **§ 17:16D-7** Books and records; annual report; violations, penalties. {#sec-17-16d-7 omnilex-key=us-nj-statutes--title-17--17:16D-7}
7. Every licensee shall maintain records of its premium finance transactions which will enable the commissioner to enforce full compliance with this act and the said records shall be open to examination and investigation by the commissioner. The commissioner shall have the power to make such examination of the books, records and accounts of any licensee as he shall deem necessary. The expenses incurred in making any such examination shall be assessed against and paid by the licensee so examined. The commissioner may, at any time, require any licensee to bring such records as he may direct to the commissioner's office for examination.
Every licensee shall preserve its records of such premium finance transactions, including cards used in a card system for at least 3 years after making final entry in respect to any premium finance agreement. The preservation of records in photographic form shall constitute compliance with this requirement.
Each licensee shall file a report with the commissioner giving such information in the form and within the time as the commissioner may require by regulation concerning the licensee's business and operation during the preceding calendar year.
A licensee that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:16D-8** Power to make rules {#sec-17-16d-8 omnilex-key=us-nj-statutes--title-17--17:16D-8}
The commissioner may make and enforce such reasonable rules and regulations as may be necessary in making effective the provisions of this act, but such rules and regulations shall not be contrary to nor inconsistent with the provisions of this act.
##### **§ 17:16D-9** Form of premium finance agreement {#sec-17-16d-9 omnilex-key=us-nj-statutes--title-17--17:16D-9}
A premium finance agreement shall--
(a) Be dated, signed by or on behalf of the insured, and the printed portion thereof shall be in at least 8-point type,
(b) Contain the name and place of business of the insurance agent or insurance broker negotiating the related insurance contract, the name and residence or place of business of the insured as specified by him, the name and place of business of the premium finance company to which payments are to be made, a description of the insurance contracts involved and the amount of the premium therefor; and
(c) Set forth the following items where applicable:
(1) the total amount of the premiums,
(2) the amount of the down payment,
(3) the principal balance (the difference between items (1) and (2)),
(4) the amount of the finance charge, including the additional charge of $10.00,
(5) the balance payable by the insured (sum of items (3) and (4)), and
(6) the number of installments required, the amount of each installment expressed in dollars, and the due date or period thereof.
(d) Contain a notice reading as follows: Notice to Insured: (1) Read this agreement before you sign, (2) Do not sign this agreement if it contains blank spaces, (3) You are entitled to a copy of this agreement at the time you sign, (4) Keep your copy of this agreement to protect your legal rights.
The items set out in subsection (c) of this section need not be stated in the sequence or order in which they appear in such clause, and additional items may be included to explain the computations made in determining the amount to be paid by the insured.
The licensee or the insurance agent or insurance broker shall deliver to the insured, or mail to him at his address shown in the agreement, a complete copy of the agreement.
No premium finance agreement shall be signed by an insured when it contains any blank spaces to be filled in after it has been signed except that if the insurance contract involved has not yet been issued, the name of the insurer and the policy number may be left blank and later inserted in the original agreement.
No premium finance agreement shall contain a power of attorney to confess judgment in this State.
##### **§ 17:16D-10** Maximum finance charge {#sec-17-16d-10 omnilex-key=us-nj-statutes--title-17--17:16D-10}
A premium finance company shall not charge, contract for, receive, or collect a finance charge other than as permitted by this act.
The finance charge shall be computed, using the actuarial method on the balance of the premiums due (after subtracting the down payment made by the insured in accordance with the premium finance agreement) from the effective date of the insurance coverage, for which the premiums are being advanced, to and including the date when the final installment of the premium finance agreement is payable.
Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, the finance charge shall be computed at a rate or rates agreed to by the premium finance company and the insured plus an additional charge of $12.00 per premium finance agreement which additional charge need not be refunded upon prepayment. However, any insured may prepay his premium finance agreement in full at any time before due date of the final installment and in such event the unearned finance charge shall be refunded.
Effective on the first day of the twelfth month following the effective date of this act, when the unpaid balance of a premium finance agreement is paid in full, or the maturity of the unpaid balance of each agreement is accelerated before the date scheduled for the payment of the final installment, the holder of the agreement shall allow a credit on account of the finance charge, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the contract is prepaid within 12 months after the first payment is due, a holder may charge a prepayment penalty of not more than (a) $20.00 on any contract up to and including $2,000.00; (b) an amount equal to 1% of the loan on any contract greater than $2,000.00 and up to and including $5,000.00; and (c) $100.00 on any contract exceeding $5,000.00.
##### **§ 17:16D-11** Statement of accounts; receipts {#sec-17-16d-11 omnilex-key=us-nj-statutes--title-17--17:16D-11}
Upon the request of an insured a premium finance company shall give to the insured a written statement of his account. No more than 2 such statements shall be required in any 12-month period. An insured shall be given a written receipt for any payment made in cash. When the premium finance agreement has been paid in full, the licensee shall, upon request of the insured, return to the insured the premium finance agreement marked paid or canceled.
##### **§ 17:16D-12** Delinquency charges {#sec-17-16d-12 omnilex-key=us-nj-statutes--title-17--17:16D-12}
12. a. Delinquency charges. A premium finance agreement may provide for the payment by the insured of a delinquency charge of $1.00 to a maximum of 5% of the delinquent installment but not to exceed $5.00 on any installment which is in default for a period of 10 days or more, except that, if the loan is primarily for other than personal, family or household purposes, the delinquency charge may be 1.5% of the amount of the delinquent installment, but there may be a minimum delinquency charge of $25. If the default results in the cancellation of any insurance contract listed in the agreement, the agreement may provide for the payment by the insured of a cancellation charge; such charge shall be $5.00, less any delinquency charge on the installment in default.
b. A delinquency charge under this section may be collected only once on any installment, however long it remains in default. A delinquency charge may be collected at the time it accrues or at any time afterward.
c. No delinquency charge may be collected under this section on an installment which is paid in full within 10 days after its scheduled due date even though an earlier maturing installment or a delinquency charge on an earlier installment has not been paid in full.
##### **§ 17:16D-13** Cancellation of insurance contract upon default {#sec-17-16d-13 omnilex-key=us-nj-statutes--title-17--17:16D-13}
(a) When a premium finance agreement contains a power of attorney enabling the premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled by the premium finance company unless such cancellation is effectuated in accordance with this section.
(b) Not less than 10 days' written notice shall be mailed to the insured of the intent of the premium finance company to cancel the insurance contract unless the default is cured within such 10-day period. A copy of said notice shall also be sent to the insurance agent or insurance broker indicated on the premium finance agreement.
(c) After expiration of such 10-day period, the premium finance company may thereafter request in the name of the insured, cancellation of such insurance contract or contracts by mailing to the insurer a notice of cancellation, and the insurance contract shall be canceled as if such notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract or contracts. The premium finance company shall also mail a notice of cancellation to the insured at his last known address and to the insurance agent or insurance broker indicated on the premium finance agreement. The effective date of such cancellation shall not be earlier than 3 days after the date of mailing of such notice to the insured and to the insurance agent or insurance broker.
(d) All statutory, regulatory, and contractual restrictions providing that the insurance contract may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party shall apply where cancellation is effected under the provisions of this section. The insurer shall give the prescribed notice in behalf of itself or the insured to any governmental agency, mortgagee, or other third party on or before the second business day after the day it receives the notice of cancellation from the premium finance company and shall determine the effective date of cancellation taking into consideration the number of days notice required to complete the cancellation.
##### **§ 17:16D-14** Application of unearned premiums {#sec-17-16d-14 omnilex-key=us-nj-statutes--title-17--17:16D-14}
(a) Whenever a financed insurance contract is canceled, the insurer on notice of such financing shall return whatever gross unearned premiums are due under the insurance contract to the premium finance company for the account of the insured or insureds within a reasonable time, not to exceed 60 days after the effective date of cancellation, or 60 days after the completion of any payroll audit necessary to determine the amount of premium earned while the policy was in force. Such audit shall be performed within 30 days after the effective date of cancellation.
(b) In the event that the crediting of return premiums to the account of the insured results in a surplus over the amount due from the insured, the premium finance company shall refund such excess to the insured provided that no such refund shall be required if it amounts to less than $1.00.
(c) In the event that the premium finance company fails to return the amount due to the insured within the period designated, the company shall, as a penalty, in addition to the amount due to the insured, return to the insured an additional amount equal to 5% of the amount due to the insured computed on a monthly basis for each month or part thereof past the final date on which the refund was due.
##### **§ 17:16D-15** Exemption from any filing requirements {#sec-17-16d-15 omnilex-key=us-nj-statutes--title-17--17:16D-15}
No filing of the premium finance agreement shall be necessary to perfect the validity of such agreement as a secured transaction as against creditors, subsequent purchasers, pledgees, encumbrancers, successors, or assigns.
##### **§ 17:16D-16** Severability {#sec-17-16d-16 omnilex-key=us-nj-statutes--title-17--17:16D-16}
If any provision of this act is held invalid, the invalidity thereof shall not affect other provisions of the act which can be given effect without the invalid provision and to this end the provisions of this act are severable. L.1968, c. 221, s. 16.
## **Chapter 16E** {#struct-chapter-16e}
##### **§ 17:16E-1** Purpose {#sec-17-16e-1 omnilex-key=us-nj-statutes--title-17--17:16E-1}
The purpose of this act is to further fair competition among financial institutions by prohibiting certain interlocking relationships among institutions located in the same municipality, or in contiguous or adjacent municipalities.
##### **§ 17:16E-1.1** Compliance of bank, savings bank with prohibition on interlocking relationships {#sec-17-16e-1.1 omnilex-key=us-nj-statutes--title-17--17:16E-1.1}
25. Any bank or savings bank that is in compliance with the federal "Depository Institution Management Interlocks Act," 12 U.S.C. s.3201 et seq. and the federal regulations effectuating that act, 12 C.F.R. s.348, is deemed to be in compliance with the provisions of sections 1 through 6 of P.L.1975, c.265 (C.17:16E-1 et seq.).
##### **§ 17:16E-2** Definitions {#sec-17-16e-2 omnilex-key=us-nj-statutes--title-17--17:16E-2}
For the purposes of this act:
a. "Financial institution" shall include State or National bank, trust company, savings bank, State or Federal savings and loan association, State or Federal credit union and bank holding company.
b. "Municipality" means a municipality located in the State of New Jersey and shall include city, town, township, village, borough, and any municipality governed by a board of commissioners or improvement commission.
c. Municipalities shall be considered contiguous when their boundaries touch or coincide at any point.
d. Municipalities shall be considered adjacent when they are located in such close proximity to one another or within the same market area as shall be determined to be adjacent by the Commissioner of Banking.
e. "Manager" means a member of a board of directors or a member of a board of managers of a savings bank.
##### **§ 17:16E-3** Mutual directors, officers or managers of financial institutions in same, adjacent, or contiguous municipalities; prohibition {#sec-17-16e-3 omnilex-key=us-nj-statutes--title-17--17:16E-3}
Except as otherwise provided in section 6 of this act no person who is a director, officer or manager of a financial institution which has a principal or branch office in a particular municipality shall serve as a director, officer or manager of another financial institution which has a principal or branch office in the same municipality or in a contiguous or adjacent municipality.
##### **§ 17:16E-4** Rules and regulations; waiver of prohibition; determination of adjacent municipalities {#sec-17-16e-4 omnilex-key=us-nj-statutes--title-17--17:16E-4}
The Commissioner of Banking shall, in accordance with the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), make and issue such rules and regulations as are necessary or appropriate to enforce the provisions of this act and effectuate its purpose. The Commissioner of Banking may, upon formal application and for good cause shown, waive the application of this prohibition if special circumstances warrant such action and when such waiver is in the public interest, for a period of 2 years. In establishing criteria for determining when municipalities are adjacent to one another for the purposes of section 2(d) of this act, the Commissioner of Banking shall consider the prohibition on interlocking relationships among banks which is imposed by Federal law, regulation, rule or practice on banks which are members of the Federal reserve system.
##### **§ 17:16E-5** Interlocking relationships existing prior to this act; termination {#sec-17-16e-5 omnilex-key=us-nj-statutes--title-17--17:16E-5}
Any interlocking relationship prohibited by section 3 of this act which existed prior to the effective date of this act may continue for such a reasonable period of time as may be necessary to terminate one or more of the relationships involved in an orderly manner, but all such interlocking relationships shall be terminated within 1 year after the effective date of this act.
##### **§ 17:16E-6** Bank holding companies and financial institutions with common ownership; inapplicability of act {#sec-17-16e-6 omnilex-key=us-nj-statutes--title-17--17:16E-6}
Nothing in this act shall prevent a person who is a director or officer of a bank holding company from being a director or officer of any one or more banks which are subsidiaries of such company, nor shall anything in this act prevent a person who is a director or officer of a bank which is a subsidiary of a bank holding company from being a director or officer of any one or more other banks which are subsidiaries of such holding company. When there are two or more financial institutions in which more than 50% of the stock is owned directly by the same persons, a person who is a director or officer of any one of such financial institutions may be a director or officer of any one or more of such other institutions.
## **Chapter 16F** {#struct-chapter-16f}
##### **§ 17:16F-1** Legislative findings and declarations {#sec-17-16f-1 omnilex-key=us-nj-statutes--title-17--17:16F-1}
The Legislature hereby finds and declares that depository institutions have sometimes failed to provide adequate home financing on a nondiscriminatory basis for all neighborhoods within the communities from which these institutions receive deposits. The Legislature further finds that neighborhood discrimination on the part of depository institutions results in the arbitrary denial of loans to creditworthy persons; substantially reduces the availability of funds from the private sector for urban housing investments; accelerates the physical decline of the affected neighborhoods; and undercuts publicly supported programs for the preservation and revival of urban neighborhoods. The purposes of this act are to prohibit the arbitrary denial of mortgage loans on the basis of the location of the property to be mortgaged; to encourage an increase in the availability or mortgage capital to neighborhoods to which such investment capital has generally been denied; and to provide the citizens and public officials of the State of New Jersey with sufficient information to enable them to determine which depository institutions are fulfilling their obligations to serve the housing needs of the communities and neighborhoods in which they are located.
##### **§ 17:16F-2** Definitions {#sec-17-16f-2 omnilex-key=us-nj-statutes--title-17--17:16F-2}
As used in this act:
a. "Depository institution" means any banking institutions as defined in section 1 of the Banking Act of 1948, P.L.1948, c. 67 (C. 17:9A-1), any association as defined in the Savings and Loan Act (1963), P.L.1963, c. 144 (C. 17:12B-1 et seq.), and any State or Federal credit union but the provisions of section 4 of this act shall not apply to any depository institution which had total assets of $10,000,000.00 or less as of the last day of its last full fiscal year.
b. "Mortgage loan" means a loan which is secured by residential real property or a home improvement loan.
c. "Applicant" means any person who files with a depository institution a written, or oral in-person, request containing such information as is reasonably required by the depository institution for a mortgage loan as defined in this act.
##### **§ 17:16F-3** Discrimination in acceptance of applications, grants, modification, etc., or discouragement or refusal to allow application or inquiry; prohibition {#sec-17-16f-3 omnilex-key=us-nj-statutes--title-17--17:16F-3}
a. No depository institution shall discriminate by intent or in effect, on a basis that is arbitrary or unsupported by a reasonable analysis of the lending risks associated with the applicant for a given loan or the condition of the property to secure it, in the accepting of applications, granting, withholding, extending, modifying or renewing, or in the fixing of the rates, terms, conditions, or provisions of any mortgage loan on real property located in the municipality in which a depository institution has a home or branch office, or in any municipality contiguous to such municipality, merely because such property is located in a specific neighborhood or geographical area; provided, however, that it shall not be a violation of this section if the mortgage loan is made pursuant to a specific public or private program, the purpose of which is to increase the availability of mortgage loans within a specific neighborhood or geographical area.
b. No depository institution may discourage, or refuse to allow, receive, or consider, any application, request, or inquiry regarding a mortgage loan, or discriminate in imposing conditions upon, or in processing, any such application, request, or inquiry on any basis prohibited by law.
##### **§ 17:16F-7** Action for violations; damages; amount {#sec-17-16f-7 omnilex-key=us-nj-statutes--title-17--17:16F-7}
Any person or applicant who has been discriminated against as a result of a violation of section 3 of this act may bring an action in New Jersey in a court of competent jurisdiction. Upon finding that a depository institution is in violation of this act, the court may award actual damages, reasonable attorneys' fees and court costs.
##### **§ 17:16F-8** Investigations; power of commissioner; subpenas and orders to testify; enforcement {#sec-17-16f-8 omnilex-key=us-nj-statutes--title-17--17:16F-8}
The commissioner of banking shall have the power to make such investigations into any matter pertaining to this act as he shall deem necessary, including the power to hold hearings, issue subpenas to compel the attendance of witnesses and the production of documents, papers, books, records, and other evidence before him. In case of a failure of any person to comply with any subpena issued by the commissioner or to testify to any matter concerning which he may be lawfully interrogated, the Superior Court, on application of the commissioner, may issue an order requiring the attendance of such person and the giving of testimony or production of evidence. Any person failing to obey the court's order may be punished for contempt.
##### **§ 17:16F-9** Order to cease and desist {#sec-17-16f-9 omnilex-key=us-nj-statutes--title-17--17:16F-9}
If the commissioner finds that a depository institution is violating the provisions of this act, he shall order the institution to cease its unlawful practices. Such order shall be subject to review, hearing and relief in the Superior Court by a proceeding in lieu of prerogative writ.
##### **§ 17:16F-10** Violations after cease and desist order; penalty {#sec-17-16f-10 omnilex-key=us-nj-statutes--title-17--17:16F-10}
A depository institution which continues to violate the provisions of this act after having been ordered by the commissioner to cease such practices shall be liable to a penalty of $5,000.00 for each offense to be recovered with costs by the State in any court of competent jurisdiction in a civil action prosecuted by the Attorney General. The penalty provided by this section shall be in addition to and not in lieu of any other provision of law applicable upon a depository institution's failure to comply with an order of the commissioner.
##### **§ 17:16F-11** Regulations {#sec-17-16f-11 omnilex-key=us-nj-statutes--title-17--17:16F-11}
The Commissioner of Banking is authorized and empowered to promulgate such regulations as he may deem necessary, consistent with sound banking practice, for the proper operation and enforcement of this act.
##### **§ 17:16F-11.1** Certain offenses shall not cause discrimination when applying for mortgage; violations, penalties. {#sec-17-16f-11.1 omnilex-key=us-nj-statutes--title-17--17:16F-11.1}
16. a. A person that makes a mortgage loan in this State shall not discriminate against an applicant in accepting an application, granting, withholding, extending, modifying or renewing, or in the fixing of the rates, terms, conditions, or provisions of any mortgage loan based on an applicant's arrest, charge, conviction, or adjudication of delinquency, for manufacturing, distributing, or dispensing, or possessing or having under control with intent to manufacture, distribute, or dispense, marijuana or hashish in violation of paragraph (11) of subsection b. of N.J.S.2C:35-5,or a lesser amount of marijuana or hashish in violation of paragraph (12) of subsection b. of that section, or a violation of either of those paragraphs and a violation of subsection a. of section 1 of P.L.1987, c.101 (C.2C:35-7) or subsection a. of section 1 of P.L.1997, c.327 (C.2C:35-7.1) for distributing, dispensing, or possessing with intent to distribute or dispense, on or within 1,000 feet of any school property, or on or within 500 feet of the real property comprising a public housing facility, public park, or public building, or obtaining, possessing, using, being under the influence of, or failing to make lawful disposition of marijuana or hashish in violation of paragraph (3) or (4) of subsection a., or subsection b., or subsection c. of N.J.S.2C:35-10, or a violation involving marijuana or hashish as described herein and a violation of N.J.S.2C:36-2 for using or possessing with intent to use drug paraphernalia with that marijuana or hashish, or an arrest, charge, conviction, or adjudication of delinquency under the laws of another state or of the United States of a crime or offense, which, if committed in this State, would be a violation of any of the aforementioned crimes or offenses, regardless of when any such arrest, charge, conviction, or adjudication of delinquency occurred.
b. Any applicant who has been discriminated against as a result of a violation of this section may bring an action in New Jersey in a court of competent jurisdiction. Upon finding that a person is in violation of this section, the court may award actual damages, reasonable attorneys' fees, and court costs.
c. The Commissioner of Banking and Insurance shall have the power to:
(1) Make such investigations into any matter pertaining to this section, including the power to hold hearings and issue subpoenas to compel the attendance of witnesses and the production of evidence. In case of a failure of any person to comply with any subpoena, the Superior Court may issue an order requiring the attendance of such person and the giving of testimony or production of evidence. Any person failing to obey the court's order may be punished for contempt.
(2) Order a person found to be in violation of this section to cease its unlawful practices, subject to review, hearing, and relief in the Superior Court. A person that continues to violate the provisions of this act after having been ordered by the commissioner to cease such practices shall be liable to a penalty of $10,000 for each offense instead of the penalty for a continuous violation set forth in section 10 of P.L.1977, c.1 (C.17:16F-10). This penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). Except as set forth herein, the penalty provided by this section shall be in addition to and not in lieu of any other provision of law applicable upon a person's failure to comply with an order of the commissioner.
##### **§ 17:16F-12** Findings, declarations {#sec-17-16f-12 omnilex-key=us-nj-statutes--title-17--17:16F-12}
The Legislature finds and declares that:
a. The decision by a person to assume a mortgage loan in order to buy a home is one of the most significant decisions that person will make, the impact of which will last over the person's lifetime.
b. In the 1980s the mortgage loan application, commitment and closing process has become very complex: in most cases it is no longer a simple transaction between a local lender and a borrower, but often involves several parties on the lending side, a wide variety of settlement activities to be performed and paid for, considerable disclosure requirements on the part of the lender, and detailed information requirements on the part of the borrower, which together often create confusion on the part of the borrower, misunderstanding between the borrower and the lender and borrower frustration with the whole process.
c. In addition to becoming more complex, the mortgage loan application, commitment and closing process and the interest rates associated with mortgage loans are constantly changing, requiring lenders to respond quickly to these changes.
d. Given the complexity of and the constant changes to interest rates and the mortgage loan application, commitment and closing process, it is appropriate that any requirements regarding this process be provided by rules and regulations promulgated by the Commissioner of Banking.
##### **§ 17:16F-13** Rules, regulations {#sec-17-16f-13 omnilex-key=us-nj-statutes--title-17--17:16F-13}
The Commissioner of Banking shall, in addition to other regulatory powers, have the authority to promulgate rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), applicable to the mortgage loan application and commitment process of lenders making mortgage loans to borrowers secured by properties located in New Jersey, including the regulation of lock-in agreements and fees associated therewith, to assure that borrowers are treated fairly in the process and are afforded adequate protection from arbitrary changes in the commitment terms or interest rates on their mortgage loans.
##### **§ 17:16F-14** Annual report to the Legislature {#sec-17-16f-14 omnilex-key=us-nj-statutes--title-17--17:16F-14}
The Commissioner of Banking shall report annually to the appropriate committees of the Legislature regarding existing and suggested regulations which assure that borrowers are treated fairly and are afforded adequate protection from arbitrary changes in commitment terms, interest rates, lock-in agreements and fees related to their mortgage loans.
##### **§ 17:16F-15** Definitions {#sec-17-16f-15 omnilex-key=us-nj-statutes--title-17--17:16F-15}
As used in this act:
"Commissioner" means the Commissioner of Community Affairs.
"Duplicate copy" means a duplicate of the original property tax bill which duplicate is generated by the collector of a taxing district.
"Mortgagee" means the holder of a mortgage loan.
"Mortgage escrow account" or "escrow account" means an account which is part of a mortgage loan agreement, whether incorporated into the agreement or as part of a separately executed document, whereby: the mortgagor is obligated to make periodic payment to the mortgagee or his agent for taxes, insurance premiums, or other charges with respect to the real property which secures the mortgage loan; and the mortgagee or his agent is obligated to make payments for taxes, insurance premiums or other charges with respect to the real property which secures the mortgage loan.
"Mortgage loan" means a loan made to a natural person or persons to whom credit is offered or extended primarily for personal, family or household purposes which is secured by a mortgage constituting a lien upon real property located in this State on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes, in the making of which the mortgagee relies primarily upon the value of the mortgaged property.
"Mortgagor" includes any person liable for the payment of a mortgage loan, and the owner of real property which secures the payment of a mortgage loan.
"Original tax bill" means the property tax bill as originally prepared and mailed by the collector of a taxing district pursuant to subsection a. of R.S.54:4-64.
"Property tax processing organization" means an organization which, under contract with a mortgagee or a servicing organization, collects and processes property tax information with respect to properties securing mortgage loans.
"Purchasing servicing organization" means a person or entity to whom or which a mortgagee or a selling servicing organization sells, assigns or transfers the servicing of a mortgage loan.
"Replacement bill" means a property tax bill made or generated by a mortgagee, servicing organization or tax processing organization subject to the restrictions provided pursuant to subsection a. of section 5 of this act and regulations promulgated by the Commissioner of Community Affairs pursuant to subsection a. of section 5 of this act.
"Selling servicing organization" means a person or entity who sells, assigns or transfers the servicing of a mortgage loan.
"Servicing organization" means a mortgagee or an agent of the mortgagee, pursuant to a written agreement between the agent and the mortgagee, which is responsible for one or more mortgage escrow accounts.
"Tax authorization form" means a form approved by the Commissioner of Community Affairs whereby the mortgagor authorizes the municipal tax collector to send the original municipal tax bill to the mortgagee or the mortgagee's servicing organization pursuant to R.S.54:4-64.
##### **§ 17:16F-17** Transfer of mortgage loan to purchasing servicing organization {#sec-17-16f-17 omnilex-key=us-nj-statutes--title-17--17:16F-17}
3. If the servicing of a mortgage loan for which a mortgage escrow account has been established is sold, assigned or transferred to a purchasing servicing organization:
a. (Deleted by amendment, P.L.1997, c.33.)
b. The selling servicing organization shall notify the tax collector of the taxing district in which the mortgaged property is located of the sale, assignment or transfer not more than 45 days after the actual date of the sale, assignment or transfer or not less than 10 days before the date the next payment of property taxes is due, whichever is earlier. The notification provided to the tax collector shall be on a form approved by the commissioner. The selling servicing organization shall also forward to the purchasing servicing organization the tax bill and stubs for the property securing the mortgage loan.
c. The purchasing servicing organization shall issue corrected coupon or payment books, if such are used, not later than 20 days after the first mortgage escrow payment to the purchasing servicing organization is due.
d. The purchasing servicing organization shall notify the tax collector of the taxing district in which the mortgaged property is located of the sale, assignment or transfer of the servicing of the mortgage loan not later than 45 days after the actual date of the sale, assignment or transfer or not less than 10 days prior to the date the next payment of property taxes is due, whichever is earlier. This notice shall include the purchasing servicing organization's procedure for responding to questions regarding a mortgage escrow account it manages.
e. A mortgagee or servicing organization which has been authorized to receive the original tax bill from the tax collector of the taxing district in which the mortgagor's property is located pursuant to R.S.54:4-64, may request the tax collector to send the original tax bill to its property tax processing organization. This request shall be made in writing on a form approved by the commissioner.
For the purposes of this section, "the date the next payment of property taxes is due" means either the first day of February, May, August or November, as applicable, and shall not include any grace period.
For the purposes of this section, the terms, "purchasing servicing organization" and "selling servicing organization" shall not include the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Resolution Trust Corporation, or the Federal Deposit Insurance Corporation, if the assignment, sale, or transfer of the servicing of the mortgage loan is preceded by:
(1) Termination of the contract for servicing the loan for cause;
(2) Commencement of proceedings for bankruptcy of the servicer; or
(3) Commencement of proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership of the servicer, or an entity by which the servicer is owned or controlled.
##### **§ 17:16F-18** Disbursement of escrow funds by mortgagee or servicing organization {#sec-17-16f-18 omnilex-key=us-nj-statutes--title-17--17:16F-18}
a. Each mortgagee or servicing organization requiring a mortgagor to make payments into an escrow account shall make each disbursement from the escrow account before the amount due becomes delinquent, provided that funds paid into the escrow account by the mortgagor are sufficient for the disbursement. If there is a shortage of funds which will result in a failure to make a payment on behalf of the mortgagor, the mortgagee or servicing organization shall promptly notify the mortgagor of the shortage. The mortgagee or servicing organization is permitted, but not required, to make a payment on behalf of the mortgagor even though there are not sufficient funds in the particular escrow account to cover the payment. Penalties or interest, or both, for late payments for amounts due and payable from an escrow account shall be paid, but shall not be charged to the mortgagor unless it can be shown that the penalty was a direct result of the mortgagor's error or omission.
b. A mortgagee or servicing organization shall notify a mortgagor in writing within 30 days after his escrow account is charged a penalty for late payment.
c. If a mortgagor is aggrieved by a violation of this section, which violation is not remedied in a reasonable, timely, and good faith manner by the mortgagee or the servicing organization, after a good faith effort to resolve the dispute is made by the mortgagor, the mortgagor may bring an action in a court of competent jurisdiction, and, if the court finds that actual damages have occurred, the court shall award, in addition to actual damages, the amount of $500, together with court costs and reasonable attorneys' fees. No selling servicing organization shall be liable under this section for any act or omission of the purchasing servicing organization.
##### **§ 17:16F-19** Payment of mortgagor's property tax {#sec-17-16f-19 omnilex-key=us-nj-statutes--title-17--17:16F-19}
a. Payments for a mortgagor's property tax shall be made using the original tax bill, a duplicate copy thereof, or a replacement bill containing at least the lot and block number, street address, name of the property owner and amount of tax due and which replacement bill is subject to regulations promulgated by the commissioner establishing procedures for its use.
b. A mortgagee, servicing organization or property tax processing organization which requests a duplicate copy of a tax bill from the tax collector of the taxing district and which is charged for the duplicate pursuant to subsection d. of R.S.54:4-64, shall not assess a mortgagor for the cost of obtaining a duplicate copy of the tax bill except under the conditions set forth in subsection d. of this section.
c. The cost of each duplicate tax bill shall be set by municipal ordinance in accordance with subsection d. of R.S.54:4-64 and shall be borne by the party requesting the duplicate.
d. Notwithstanding the provisions of subsection b. of this section, the mortgagor's escrow account may be charged for a duplicate bill if:
(1) The bill as originally prepared contained the mortgagor's name and was mailed to the mortgagor at his last known address; and
(2) The mortgagor did not forward the original tax bill to the mortgagee or the servicing organization in time for the mortgagee or the servicing organization to prepare the property tax payment for disbursement to meet the requirements of section 4 of this act.
##### **§ 17:16F-23** Written notice of property tax delinquency payment {#sec-17-16f-23 omnilex-key=us-nj-statutes--title-17--17:16F-23}
a. The tax collector of a taxing district shall send a written notice of a property tax delinquency to the mortgagor and the applicable servicing organization within 60 days after the tax payment on the property is delinquent. However, the validity of the tax delinquency and the time it is due shall not be affected by the failure of the mortgagor or the servicing organization to receive the notice.
b. If the tax payments of the mortgagor are to be made by the mortgagee or its servicing organization from an escrow account; the mortgagee or its servicing organization has been authorized to receive and has been sent the original tax bill in time to make the property tax payment without being delinquent; the mortgagor has made escrow account payments in accordance with the schedule provided by the mortgagee or its servicing organization; the mortgagor and the mortgagee or its servicing organization have received notice pursuant to subsection a. of this section; and at least 21 days have elapsed since the mortgagor and the mortgagee or its servicing organization have received that notice, a mortgagor may:
(1) Pay the delinquent property taxes including interest using the copy of the tax bill sent him pursuant to R.S.54:4-64;
(2) Notify the mortgagee or its servicing organization in writing that payment for the mortgagor's property taxes has been made and include a copy of the paid tax bill which includes the interest paid; and
(3) Stop making scheduled payments into the escrow account until the total amount paid by the mortgagor pursuant to paragraph (1) of this subsection is equaled.
c. If the mortgagor makes a tax payment and notifies the mortgagee or servicing organization pursuant to paragraphs (1) and (2) of subsection b. of this section, the mortgagee or its servicing organization, upon receipt of the notice and a copy of the paid tax bill, shall credit the mortgagor's mortgage escrow account in an amount equal to the interest paid by the mortgagor and provide the mortgagor a notice to that effect.
##### **§ 17:16F-24** Notification to mortgagee of tax delinquency {#sec-17-16f-24 omnilex-key=us-nj-statutes--title-17--17:16F-24}
a. If a mortgagor's property taxes remain unpaid so as to subject the mortgagor's property to a tax sale pursuant to Article 4 of the "tax sale law" (R.S.54:5-19 et seq.), and if the property tax payments are to be made or are made by the mortgagee or a servicing organization which receives the original tax bill, the tax collector of the taxing district shall send a written notice by mail to the mortgagee or the servicing organization, of the tax delinquency status. This notice shall include the mortgagor's name, an identification of the property, the total amount of property taxes and interest due and an attachment which contains the provisions of section 12 of this act and an interpretive statement of that section provided by the commissioner.
b. A copy of the notice required by subsection a. of this section shall be mailed to the mortgagor at the same time it is mailed to the mortgagee or the servicing organization.
##### **§ 17:16F-25** Failure to resolve tax payment delinquency {#sec-17-16f-25 omnilex-key=us-nj-statutes--title-17--17:16F-25}
a. Upon failure by the mortgagee or its servicing organization to resolve the tax payment delinquency within 30 days of the date of the notice provided pursuant to section 11 of P.L.1990, c.69 (C.17:16F-24) a mortgagor may:
(1) Pay the delinquent property taxes including interest using the notice sent the mortgagor pursuant to subsection b. of section 11 of P.L.1990, c.69 (C.17:16F-24); and
(2) Make arrangements to make all future payments for property taxes, insurance and other charges with respect to the real property which secures the mortgage loan, and make payments to the mortgagee or its servicing organization only for the principal, interest and other non-escrow charges required by the mortgage loan documents.
b. If a mortgagor takes the actions permitted under subsection a. of this section, the mortgagor shall:
(1) Send a copy of the paid tax bill to the mortgagee or its servicing organization along with a notice that, pursuant to subsection a. of this section:
(a) The mortgagor is no longer required to make payments into the mortgage escrow account; and
(b) The mortgagor will make all future payments for property taxes, insurance and other charges with respect to the real property which secures the mortgage loan, and will make payments to the mortgagee or its servicing organization only for the principal, interest and other non-escrow charges required by the mortgage loan documents.
(2) Forward to the mortgagee or its servicing organization, on at least an annual basis, copies of paid tax, insurance and other charges with respect to the real property which secures the mortgage loan.
c. Within 10 days of receipt of the copy of the paid tax bill and the notice required pursuant to subsection b. of this section, the mortgagee or its servicing organization shall remit the existing escrow account balance to the mortgagor;
d. If, subsequent to taking the actions permitted under subsection a. and required under subsection b. of this section, the mortgagor fails to pay property taxes, insurance or other charges with respect to the real property which secures the mortgage loan, the mortgagee or its servicing organization may, at its sole discretion, pay any delinquent property taxes, insurance or other charges with respect to the real property which secures the mortgage loan and recover from the mortgagor any amount so paid with interest. Such payment by the mortgagee or its servicing organization shall be without prejudice to the rights the mortgagee may have, by contract or law, with regard to the enforcement of its mortgage agreement concerning nonpayment of property taxes, insurance or other charges with respect to the real property which secures the mortgage loan.
##### **§ 17:16F-26** Unpaid property taxes, mortgagor may sue mortgagee {#sec-17-16f-26 omnilex-key=us-nj-statutes--title-17--17:16F-26}
If a mortgagor's property taxes remain unpaid so as to subject the mortgagor's property to a tax sale pursuant to Article 4 of the "tax sale law" (R.S.54:5-19 et seq.), and if the mortgagor's property tax payments are made by a mortgagee or a servicing organization which receives the original tax bill, and a mortgagor's name appears in the notice which the collector of taxes is required to print pursuant to R.S.54:5-25 due to the failure of the mortgagee or the servicing organization to resolve the delinquency, the mortgagor may sue the mortgagee or the servicing organization in a court of competent jurisdiction for damages, including court costs and attorneys' fees and the cost of printing a correction in the same newspaper or newspapers in which the notice of tax delinquency appeared.
##### **§ 17:16F-27** Short title. {#sec-17-16f-27 omnilex-key=us-nj-statutes--title-17--17:16F-27}
1. This act shall be known and may be cited as the "Mortgage Servicers Licensing Act."
##### **§ 17:16F-28** Definitions relative to mortgage servicers. {#sec-17-16f-28 omnilex-key=us-nj-statutes--title-17--17:16F-28}
2. As used in this act:
"Branch office" means a location other than the main office at which a licensee or any person on behalf of a licensee acts as a mortgage servicer.
"Commissioner" means the Commissioner of Banking and Insurance.
"Control" means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract or otherwise.
"Control person" means an individual that directly or indirectly exercises control over any person that:
(1) is a director, general partner or executive officer;
(2) in the case of a corporation, directly or indirectly has the right to vote 10 percent or more of a class of any voting security or has the power to sell or direct the sale of 10 percent or more of any class of voting securities;
(3) in the case of a limited liability company, is a managing member; or
(4) in the case of a partnership, has the right to receive upon dissolution, or has contributed, 10 percent or more of the capital, shall be presumed to be a control person.
"Department" means the Department of Banking and Insurance.
"Individual" means a natural person.
"Mortgage servicer" means:
(1) any person, wherever located, who, for the person or on behalf of the holder of a residential mortgage loan, receives payments of principal and interest in connection with a residential mortgage loan, records the payments on the person's books and records and performs the other administrative functions as may be necessary to properly carry out the mortgage holder's obligations under the mortgage agreement including, when applicable, the receipt of funds from the mortgagor to be held in escrow for payment of real estate taxes and insurance premiums and the distribution of the funds to the taxing authority and insurance company; and
(2) includes a person who makes payments to borrowers pursuant to the terms of a home equity conversion mortgage or reverse mortgage.
"Mortgagee" means the grantee of a residential mortgage, provided if the residential mortgage has been assigned of record, "mortgagee" means the last person to whom the residential mortgage has been assigned of record.
"Mortgagor" means any person obligated to repay a residential mortgage loan.
"Office" means a main office or branch office.
"Residential mortgage loan" means a loan made to a natural person or persons to whom credit is offered or extended primarily for personal, family or household purposes which is secured by a mortgage constituting a lien upon real property located in this State on which there is erected or to be erected a structure containing one, two, three, four, five, or six dwelling units, a portion of which structure may be used for nonresidential purposes, in the making of which the mortgagee relies primarily upon the value of the mortgaged property.
"Residential mortgage lender" means the same as "residential mortgage lender" as defined in section 3 of P.L.2009, c.53 (C.17:11C-53).
##### **§ 17:16F-29** Licensure for mortgage servicer required; exceptions. {#sec-17-16f-29 omnilex-key=us-nj-statutes--title-17--17:16F-29}
3. a. On and after the effective date of this act, no person shall act as a mortgage servicer, directly or indirectly, without first obtaining a license under section 4 of this act from the commissioner for its main office, which shall be designated by the mortgage servicer, and each branch office where business is conducted, unless the person is exempt from licensure pursuant to subsection b. of this section.
b. The following persons shall be exempt from mortgage servicer licensing requirements:
(1) any bank, out-of-state bank, credit union chartered in New Jersey, federal credit union, or out-of-state credit union, provided the bank or credit union is federally insured;
(2) any wholly-owned subsidiary of the bank or credit union;
(3) any operating subsidiary in situations in which each owner of the operating subsidiary is wholly owned by the same bank or credit union;
(4) any person licensed as a residential mortgage lender pursuant to the "New Jersey Residential Mortgage Lending Act," P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89) while acting as a mortgage servicer, provided that:
(a) the person meets the supplemental mortgage servicer surety bond, fidelity bond, and errors and omissions coverage requirements under section 8 of this act; and
(b) during any period that the license of the residential mortgage lender in this State has been suspended, the exemption shall not be effective; and
(5) the New Jersey Housing and Mortgage Finance Agency.
c. The provisions of sections 9 through 12 of this act shall apply to any person, including a person exempt from licensure pursuant to subsection b. of this section, who acts as a mortgage servicer in this State on or after the effective date of this act.
##### **§ 17:16F-30** Issuance of mortgage servicer license; requirements. {#sec-17-16f-30 omnilex-key=us-nj-statutes--title-17--17:16F-30}
4. a. The commissioner shall issue a mortgage servicer license to an applicant if the commissioner finds that:
(1) the applicant has identified a qualified individual for its main office, and a branch manager for each branch office where the business is conducted, provided the qualified individual and branch manager have supervisory authority over the mortgage servicer activities at the respective office location and at least three years' experience in the mortgage servicing business within the five years immediately preceding the date of the application for licensure;
(2) the applicant, the control persons of the applicant, the qualified individual and any branch manager with supervisory authority at the office for which the license is sought, have not been convicted of or pled guilty or nolo contendere to, in a domestic, foreign, or military court, a felony during the seven-year period preceding the date of the application for licensing, or a felony involving an act of fraud or dishonesty, a breach of trust or money laundering at any time preceding the date of application, except that any pardon or expungement of a conviction shall not be a conviction for purposes of this paragraph;
(3) the applicant demonstrates that the financial responsibility, character and general fitness of the applicant, the control persons of the applicant, the qualified individual and any branch manager having supervisory authority over the office for which the license is sought, warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of this act. Financial responsibility shall be demonstrated by submission of the applicant's most recent audited financial statements and by such other information and documents as the commissioner may require by regulation;
(4) the applicant has met the surety bond, fidelity bond, and errors and omissions coverage requirement under section 8 of this act;
(5) the applicant has not made a material misstatement in the application; and
(6) the applicant has met any other similar requirements as determined by the commissioner.
If the commissioner fails to make the findings, the commissioner shall not issue a license, and shall notify the applicant of the denial and the reasons for the denial. For purposes of this subsection, the level of offense of the crime and the status of any conviction, pardon, or expungement shall be determined by reference to the law of the jurisdiction where the case was prosecuted. In the event the jurisdiction does not use the term "felony," "pardon," or "expungement," the terms shall include legally equivalent events. For purposes of paragraph (1) of this subsection, "experience in the mortgage servicing business" means paid experience in the:
(a) servicing of mortgage loans;
(b) accounting, receipt and processing of payments on behalf of mortgagees or creditors; or
(c) supervision of these activities, or any other relevant experience as determined by the commissioner.
b. An application for a license as a mortgage servicer or renewal of the license shall be filed with the department, in a form prescribed by the commissioner, and shall be accompanied by the fees required by section 7 of this act. The applicant shall, at a minimum, furnish to the department information concerning the identity of the applicant, any control person of the applicant, the qualified individual and any branch manager, including personal history and experience in a form prescribed by the commissioner, and information related to any administrative, civil or criminal findings by any governmental jurisdiction. The applicant shall notify the department of any change to the information submitted in connection with its most recent application for licensure not later than 15 days after the applicant has reason to know of the change. For the purpose of this subsection, evidence of experience of the qualified individual and any branch manager shall include:
(1) a statement specifying the duties and responsibilities of the person's employment, the term of employment, including month and year, and the name, address and telephone number of a supervisor, employer or, if self-employed, a business reference; and
(2) if required by the commissioner, copies of W-2 forms, 1099 tax forms or, if self-employed, 1120 corporate tax returns, signed letters from the employer on the employer's letterhead verifying the person's duties and responsibilities and term of employment including month and year, and, if the person is unable to provide the letters, other proof satisfactory to the commissioner that the person meets the experience requirement. The commissioner may conduct a criminal history records check of the applicant, any control person of the applicant, the qualified individual and any branch manager with supervisory authority at the office for which the license is sought and require the applicant to submit the fingerprints of those persons as part of the application. The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility for the applicant, any control person of the applicant, the qualified individual and any branch manager. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the commissioner in the event any person who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed, whether the person is a prospective new licensee, or subsequently, a current license holder.
c. (1) The minimum standards for license renewal for a mortgage servicer shall include the following:
(a) the applicant continues to meet the minimum standards under subsection a. of this section, including, but not limited to, the financial responsibility requirement of paragraph (3) of subsection a. of this section ; and
(b) the mortgage servicer has paid all required fees for renewal of the license.
(2) The license of a mortgage servicer that fails to satisfy the minimum standards for license renewal shall expire. The commissioner may adopt procedures for the reinstatement of expired licenses. The commissioner may suspend a mortgage servicer license if the licensee is in violation of any provision of this act. After a license has been suspended pursuant to this section, the commissioner shall give the licensee notice of the suspension, pending proceedings for revocation or refusal to renew pursuant to sections 14 and 15 of this act and an opportunity for a hearing on the action and require the licensee to take or refrain from taking any action that, in the opinion of the commissioner, is necessary to effectuate the purposes of this act.
d. (1) Withdrawal of an application for a license filed under this section shall become effective upon receipt by the commissioner of a notice of intent to withdraw the application. The commissioner may deny a license up to one year after the effective date of withdrawal.
(2) If the license of a mortgage servicer expires due to the licensee's failure to renew, the commissioner may institute a revocation or suspension proceeding or issue an order suspending or revoking the license pursuant to subsection a. of section 14 of this act not later than one year after the date of the expiration.
e. The commissioner may deem an application for a license under this section abandoned if the applicant fails to respond to any request for information required under this act, or the regulations adopted pursuant to this act. The commissioner shall notify the applicant that if the information is not submitted within 60 days from the date of the request, the application shall be deemed abandoned. An application filing fee paid prior to the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application pursuant to this subsection shall not preclude the applicant from submitting a new application for a license.
##### **§ 17:16F-31** Filing of information relative to mortgages serviced. {#sec-17-16f-31 omnilex-key=us-nj-statutes--title-17--17:16F-31}
5. At least annually, a mortgage servicer shall file with the commissioner the following information with respect to mortgages that it services in this State:
a. a current schedule of the ranges of costs and fees it charges mortgagors for its servicing-related activities;
b. a report in a form and format acceptable to the commissioner detailing the mortgage servicer's activities in the State, including:
(1) the number of residential mortgage loans the mortgage servicer is servicing; and
(2) the type and characteristics of the residential mortgage loans the mortgage servicer is servicing;
c. the number of serviced residential mortgage loans in default, along with a breakdown of 30, 60, and 90-days of delinquency;
d. a description of the mortgage servicer's loss mitigation activities, including details on workout arrangements undertaken; and
e. the number of foreclosures commenced.
##### **§ 17:16F-32** License not transferable or assignable; surrender; name change. {#sec-17-16f-32 omnilex-key=us-nj-statutes--title-17--17:16F-32}
6. a. A mortgage servicer license shall not be transferable or assignable. A licensee shall not use any name other than its legal name or a fictitious name approved by the commissioner, provided the licensee shall not use its legal name if the commissioner disapproves use of the name. Any licensee who intends to permanently cease acting as a mortgage servicer at any time during a license period for any cause, including, but not limited to, bankruptcy or voluntary dissolution, shall file with the department a request to surrender the license for each office at which the licensee intends to cease to do business, not later than 15 days after the date of the cessation. A surrender shall not be effective until accepted by the commissioner.
b. A mortgage servicer licensee may change the name of the licensee or address of any office specified on the most recent filing with the department if:
(1) at least 30 calendar days prior to the change, the licensee files the change with the department and, in the case of a main office or branch office, provides, directly to the commissioner, a bond rider or endorsement, or addendum, as applicable, to any bond or evidence of errors and omissions coverage on file with the commissioner that reflects the new name or address of the main office or branch office; and
(2) the commissioner does not disapprove the change, in writing, or request further information within the 30-day period.
c. The mortgage servicer licensee shall notify the department, in writing, not later than five business days after the licensee has reason to know of the occurrence of any of the following events:
(1) a material change of financial condition, filing for bankruptcy, or the consummation of a corporate restructuring, of the licensee;
(2) filing of a criminal indictment against the licensee or receiving notification of the filing of any criminal felony indictment or felony conviction of any of the licensee's officers, directors, members, partners or shareholders owning ten percent or more of the outstanding stock;
(3) receiving notification of the institution of license denial, cease and desist, suspension or revocation procedures, or other formal or informal regulatory action by any governmental agency against the licensee and the reasons for the action;
(4) receiving notification of the initiation of any action by the Attorney General or the attorney general of any other state and the reasons for the action;
(5) suspension or termination of the licensee's status as an approved seller or servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or Government National Mortgage Association;
(6) receiving notification that certain servicing rights of the licensee will be rescinded or cancelled, and the reasons provided therefor;
(7) receiving notification of filing for bankruptcy of any of the licensee's officers, directors, members, partners or shareholders owning ten percent or more of the outstanding stock of the licensee; or
(8) receiving notification of the initiation of a class action lawsuit on behalf of consumers against the licensee that is related to the operation of the licensed business.
##### **§ 17:16F-33** Expiration of initial license; renewals; fees. {#sec-17-16f-33 omnilex-key=us-nj-statutes--title-17--17:16F-33}
7. a. An initial mortgage servicer license shall expire at the close of business on December 31 of the year in which it is approved, except that any license that is approved on or after November 1 shall expire at the close of business on December 31 of the year following the year in which it is approved. An application for renewal of a license shall be filed between November 1 and December 31 of the year in which the license expires and a renewal license shall expire at the close of business on December 31 of the third year after the year in which it was approved. Each applicant for an initial license or renewal of a license as a mortgage servicer shall pay to the department any required fees or charges and a license fee of $1,000. Each applicant for a renewal license shall pay to the department any required fees or charges and a license fee of $3,000.
b. All fees paid pursuant to this section, including fees paid in connection with an application that is denied or withdrawn prior to the issuance of the license, shall be nonrefundable. A fee paid pursuant to this section shall not be prorated if the license is surrendered, revoked or suspended prior to the expiration of the period for which it was approved.
##### **§ 17:16F-34** Exemptions from licensure; required filings. {#sec-17-16f-34 omnilex-key=us-nj-statutes--title-17--17:16F-34}
8. a. A mortgage servicer applicant or licensee and any person exempt from mortgage servicer licensure pursuant to paragraph (4) of subsection b. of section 3 of this act shall file with the commissioner:
(1) a surety bond, written by a surety authorized to write the bonds in this State, covering its main office and any branch office from which it acts as mortgage servicer, in a penal sum of $100,000 per office location in accordance with subsection b. of this section;
(2) a fidelity bond, written by a surety authorized to write the bonds in this State, in accordance with the requirements of subsection c. of this section; and
(3) evidence of errors and omissions coverage, written by an entity authorized to write the coverage in this State, in accordance with the requirements of subsection c. of this section. A mortgage servicer licensee and a person otherwise exempt from mortgage servicer licensure pursuant to paragraph (4) of subsection b. of section 3 of this act shall not act as a mortgage servicer in this State without maintaining the surety bond, fidelity bond and errors and omissions coverage required by this section.
b. The surety bond required by subsection a. of this section shall be:
(1) in a form approved by the Attorney General; and
(2) conditioned upon the mortgage servicer licensee or person exempt from mortgage servicer licensure pursuant to paragraph (4) of subsection b. of section 3 of this act performing any and all written agreements or commitments with or for the benefit of mortgagors and mortgagees, accounting for all funds received from a mortgagor or mortgagee in the person's capacity as a mortgage servicer, and conducting the mortgage business consistent with the provisions of this act. Any mortgagor damaged by the failure of a mortgage servicer licensee or person exempt from mortgage servicer licensure pursuant to paragraph (4) of subsection b. of section 3 of this act to perform any written agreements or commitments, or by the wrongful conversion of funds paid by a mortgagor to the licensee or person, may proceed on the bond against the principal or surety thereon, or both, to recover damages. The commissioner may proceed on the bond against the principal or surety on the bond, or both, to collect any appropriate civil penalty. The proceeds of the bond, even if commingled with other assets of the principal, shall be deemed by operation of law to be held in trust for the benefit of claimants against the principal in the event of bankruptcy of the principal and shall be immune from attachment by creditors and judgment creditors. The surety bond shall run concurrently with the period of the license for the main office of the mortgage servicer or residential mortgage lender and the aggregate liability under the bond shall not exceed the penal sum of the bond. The principal shall notify the commissioner of the commencement of an action on the bond. When an action is commenced on a principal's bond, the commissioner may require the filing of a new bond and immediately on recovery on any action on the bond, the principal shall file a new bond.
c. The fidelity bond and errors and omissions coverage required by subsection a. of this section shall name the Department of Banking and Insurance as an additional loss payee on drafts the surety issues to pay for covered losses directly or indirectly incurred by mortgagors of residential mortgage loans serviced by the mortgage servicer. The fidelity bond shall cover losses arising from dishonest and fraudulent acts, embezzlement, misplacement, forgery and similar events committed by employees of the mortgage servicer. The errors and omissions coverage shall cover losses arising from negligence, errors and omissions by the mortgage servicer with respect to the payment of real estate taxes and special assessments, hazard and flood insurance or the maintenance of mortgage and guaranty insurance. The fidelity bond and errors and omissions coverage shall each be in the following principal amounts based on the mortgage servicer's volume of servicing activity most recently reported to the department:
(1) If the amount of the residential mortgage loans serviced is $100,000,000 or less, the principal amount shall be $300,000; or
(2) If the amount of the loans exceeds $100,000,000, the principal amount shall be $300,000 plus:
(a) three-twentieths of one percent of the amount of residential mortgage loans serviced greater than $100,000,000 but less than or equal to $500,000,000;
(b) plus one-eighth of one percent of the amount of residential mortgage loans serviced greater than $500,000,000 but less than or equal to $100,000,000,000; and
(c) plus one-tenth of one percent of the amount of residential mortgage loans serviced greater than $100,000,000,000.
The fidelity bond and errors and omissions coverage may provide for a deductible amount not to exceed the greater of $100,000 or five percent of the principal amount.
d. A surety shall have the right to cancel the surety bond, fidelity bond and errors and omissions coverage required by this section at any time by a written notice to the principal stating the date cancellation shall take effect. The notice shall be sent by certified mail to the principal at least 30 days prior to the date of cancellation. A surety bond, fidelity bond or errors and omissions coverage shall not be cancelled unless the surety notifies the commissioner, in writing, not less than 30 days prior to the effective date of cancellation. After receipt of the notification from the surety, the commissioner shall give written notice to the principal of the date the cancellation shall take effect. The commissioner shall suspend the license of a mortgage servicer on that date. A suspension or inactivation shall not occur if, prior to the date that the bond or errors and omissions coverage cancellation shall take effect:
(1) the principal submits a letter of reinstatement of the bond or errors and omissions coverage, or a new bond or errors and omissions policy; or
(2) the mortgage servicer licensee has ceased business in this State and has surrendered all licenses in accordance with section 5 of this act. After a mortgage servicer license has been suspended pursuant to this section, the commissioner shall give the licensee notice of the suspension, pending proceedings for revocation or refusal to renew pursuant to section 14 of this act and an opportunity for a hearing on the action and require the licensee to take or refrain from taking the action as in the opinion of the commissioner will effectuate the purposes of this section. A person licensed as a residential mortgage lender in this State acting as a mortgage servicer from a location licensed as a main office or branch office shall cease to be exempt from mortgage servicer licensing requirements in this State upon cancellation of any surety bond, fidelity bond or errors and omissions coverage required by this section.
e. If the commissioner finds that the financial condition of a mortgage servicer or residential mortgage lender licensee so requires, as evidenced by the reduction of tangible net worth, financial losses or potential losses as a result of a violation of this act, the commissioner may require one or more additional bonds meeting the standards set forth in this section. The licensee shall file any the additional bonds not later than ten days after receipt of the commissioner's written notice of the requirement. A mortgage servicer or residential mortgage lender licensee shall file, as the commissioner may require, any bond rider or endorsement or addendum, as applicable, to any bond or evidence of errors and omissions coverage on file with the commissioner to reflect any changes necessary to maintain the surety bond, fidelity bond and errors and omissions coverage required by this section.
##### **§ 17:16F-35** Exemptions to maintain adequate records. {#sec-17-16f-35 omnilex-key=us-nj-statutes--title-17--17:16F-35}
9. a. A mortgage servicer licensee and person exempt from licensure pursuant to paragraph (4) of subsection b. of section 3 of this act shall maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer or residential mortgage lender license, or, if requested by the commissioner, shall make the records available at the office or send the records to the commissioner by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, not later than five business days after requested by the commissioner to do so. Upon request, the commissioner may grant a licensee additional time to make the records available or send them to the commissioner. The records shall provide the following information:
(1) a loan history for residential mortgage loans upon which payments are received or made by the mortgage servicer, itemizing the amount and date of each payment and the unpaid balance at all times;
(2) the original or an exact copy of the note, residential mortgage or other evidence of indebtedness;
(3) the name and address of the residential mortgage lender, and mortgage broker, if any, involved in the residential mortgage loan transaction;
(4) copies of any disclosures or notifications provided to the mortgagor required by State or federal law;
(5) a copy of any bankruptcy plan approved in a proceeding filed by the mortgagor or a co-owner of the property subject to the residential mortgage loan;
(6) a communications log that documents all verbal communications with the mortgagor or the mortgagor's representative; and
(7) a copy of all notices sent to the mortgagor related to any foreclosure proceeding filed against the encumbered property.
b. Every mortgage servicer licensee and person exempt from licensure pursuant to paragraph (4) of subsection b. of section 3 of this act shall retain the records of each residential mortgage loan serviced for not less than two years following the final payment on the residential mortgage loan, or the assignment of the residential mortgage loan, whichever occurs first, or a longer period as may be required by any other provision of law. Every mortgage servicer licensee and person exempt from licensure pursuant to paragraph (4) of subsection b. of section 3 of this act shall keep and use in its business books, accounts and records that will enable the commissioner to determine whether the mortgage servicer is complying with the provisions of this act.
##### **§ 17:16F-36** Disclosures to mortgagor. {#sec-17-16f-36 omnilex-key=us-nj-statutes--title-17--17:16F-36}
10. Upon assignment of servicing rights on a residential mortgage loan, the mortgage servicer shall disclose to the mortgagor:
a. any notice required by the "Real Estate Settlement Procedures Act of 1974" (12 U.S.C. s.2601 et seq.), and the regulations promulgated thereunder, and within the time periods prescribed therein; and
b. a schedule of the ranges and categories of its costs and fees for its servicing-related activities, which shall comply with State and federal law and, if the disclosure is made by a mortgage servicer licensee, shall not exceed those reported to the commissioner in accordance with section 5 of this act.
##### **§ 17:16F-37** Compliance with federal laws, regulations. {#sec-17-16f-37 omnilex-key=us-nj-statutes--title-17--17:16F-37}
11. a. A mortgage servicer shall comply with all applicable federal laws and regulations relating to mortgage loan servicing, including, but not limited to:
(1) the "Real Estate Settlement Procedures Act of 1974" (12 U.S.C. s.2601 et seq.); and
(2) the "Truth-in-Lending Act" (15 U.S.C. s.1601 et seq.).
b. In addition to any other remedies provided by law, a violation of any federal law or regulation shall be deemed a violation of this section and a basis upon which the commissioner may take enforcement action pursuant to section 14 of this act.
##### **§ 17:16F-38** Schedule of fees. {#sec-17-16f-38 omnilex-key=us-nj-statutes--title-17--17:16F-38}
12. a. A mortgage servicer shall maintain and keep current a schedule of fees that it charges mortgagors for its servicing-related activities. The schedule shall identify each fee, provide a plain English explanation of the fee and state the amount of the fee or range of amounts or, if there is no standard fee, how the fee is calculated or determined. A mortgage servicer shall make its schedule available to the mortgagor or the mortgagor's authorized representative upon request.
b. A mortgage servicer shall not impose any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period. Late charges shall not be:
(1) based on an amount greater than the past due amount;
(2) collected from the escrow account or from escrow surplus without the approval of the mortgagor; or
(3) deducted from any regular payment.
##### **§ 17:16F-39** Prohibited actions. {#sec-17-16f-39 omnilex-key=us-nj-statutes--title-17--17:16F-39}
13. A mortgage servicer shall not:
a. directly or indirectly employ any scheme, device or artifice to defraud or mislead mortgagors or mortgagees or to defraud any person;
b. engage in any unfair or deceptive practice toward any person or misrepresent or omit any material information in connection with the servicing of a residential mortgage loan, including, but not limited to, misrepresenting the amount, nature or terms of any fee or payment due or claimed to be due on a residential mortgage loan, the terms and conditions of the servicing agreement or the mortgagor's obligations under the residential mortgage loan;
c. obtain property by fraud or misrepresentation;
d. knowingly misapply or recklessly apply residential mortgage loan payments to the outstanding balance of a residential mortgage loan;
e. knowingly misapply or recklessly apply payments to escrow accounts;
f. place hazard, homeowner's or flood insurance on the mortgaged property when the mortgage servicer knows or has reason to know that the mortgagor has an effective policy for the insurance;
g. knowingly or recklessly provide inaccurate information to a credit bureau, thereby harming a mortgagor's creditworthiness;
h. fail to report both the favorable and unfavorable payment history of the mortgagor to a nationally recognized consumer credit bureau at least annually if the mortgage servicer regularly reports information to a credit bureau;
i. collect private mortgage insurance beyond the date for which private mortgage insurance is required;
j. fail to issue a release of mortgage in accordance with the provisions of P.L.1975, c.137 (C.46:18-11.2 et seq.);
k. fail to provide written notice to a mortgagor upon taking action to place hazard, homeowner's or flood insurance on the mortgaged property, including a clear and conspicuous statement of the procedures by which the mortgagor may demonstrate that the mortgagor has the required insurance coverage and by which the mortgage servicer shall terminate the insurance coverage placed by it and refund or cancel any insurance premiums and related fees paid by or charged to the mortgagor;
l. place hazard, homeowner's, or flood insurance on a mortgaged property, or require a mortgagor to obtain or maintain that insurance, in excess of the replacement cost of the improvements on the mortgaged property as established by the property insurer;
m. fail to provide to the mortgagor a refund of unearned premiums paid by a mortgagor or charged to the mortgagor for hazard, homeowner's, or flood insurance placed by a mortgagee or the mortgage servicer if the mortgagor provides reasonable proof that the mortgagor has obtained coverage so that the forced placement insurance is no longer necessary and the property is insured. If the mortgagor provides reasonable proof that no lapse in coverage occurred so that the forced placement is not necessary, the mortgage servicer shall promptly refund the entire premium;
n. require any amount of funds to be remitted by means more costly to the mortgagor than a bank or certified check or attorney's check from an attorney's account to be paid by the mortgagor;
o. refuse to communicate with an authorized representative of the mortgagor who provides a written authorization signed by the mortgagor, provided the mortgage servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the mortgagor;
p. conduct any business covered by this act, without holding a valid license as required under this act, or assist or aid and abet any person in the conduct of business without a valid license as required under this act; or
q. negligently make any false statement or knowingly and willfully make any omission of a material fact in connection with any information or reports filed with a governmental agency or the department or in connection with any investigation conducted by the commissioner or another governmental agency.
##### **§ 17:16F-40** Authority of commissioner. {#sec-17-16f-40 omnilex-key=us-nj-statutes--title-17--17:16F-40}
14. a. The commissioner shall have the authority to conduct investigations and examinations as follows:
(1) For purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this act, the commissioner may access, receive and use any books, accounts, records, files, documents, information or evidence including, but not limited to:
(a) criminal, civil and administrative history information;
(b) financial statements and any other records of financial condition of the licensee, any control person of the licensee, and any business entity exerting control over the licensee;
(c) personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in Section 603(p) of the "Fair Credit Reporting Act" (15 U.S.C. s.1681a(p)); and
(d) any other documents, information or evidence the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of the documents, information or evidence; and
(2) For the purposes of investigating violations or complaints arising under this act, or for the purposes of examination, the commissioner may review, investigate, or examine any mortgage servicer licensee or person subject to the act as often as necessary in order to carry out the purposes of the act. The commissioner may direct, subpoena, or order the attendance of and examine under oath all persons whose testimony may be required about the residential mortgage loans or the business or subject matter of any examination or investigation, and may direct, subpoena or order the person to produce books, accounts, records, files and any other documents the commissioner deems relevant to the inquiry.
b. A mortgage servicer licensee or any person subject to this act shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this section including accounting compilations, information lists and data concerning residential mortgage loan transactions in a format prescribed by the commissioner or any other information the commissioner deems necessary to carry out the purposes of this act.
c. In making an examination or investigation authorized by this section, the commissioner may control access to any documents and records of the mortgage servicer licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of the mortgage servicer licensee or person have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of this act, the mortgage servicer licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs.
d. In order to carry out the purposes of this section, the commissioner may:
(1) retain attorneys, accountants or other professionals and specialists as examiners, auditors or investigators to conduct or assist in the conduct of examinations or investigations;
(2) enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burdens by sharing resources, standardized or uniform methods or procedures, and documents, records, information or evidence obtained under this section;
(3) use, hire, contract or employ public or privately available analytical departments, methods or software to examine or investigate the mortgage servicer licensee or person subject to this act;
(4) accept and rely on examination or investigation reports made by other government officials, within or without this State; and
(5) accept audit reports made by an independent certified public accountant for the mortgage servicer licensee or person subject to this act, in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of examination, report of investigation or other writing of the commissioner.
e. The authority of this section shall remain in effect, whether the mortgage servicer licensee or person subject to this act, acts or claims to act under any licensing or registration law of this State, or claims to act without the authority.
f. A mortgage servicer licensee or person subject to investigation or examination under this section shall not knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records, computer records or other information.
##### **§ 17:16F-41** Suspension, revocation, failure to renew license. {#sec-17-16f-41 omnilex-key=us-nj-statutes--title-17--17:16F-41}
15. a. The commissioner may suspend, revoke or refuse to renew any mortgage servicer license or take any other action for any reason which would be sufficient grounds for the commissioner to deny an application for the license under section 4 of this act, or if the commissioner finds that the licensee, any control person of the licensee, the qualified individual or any branch manager with supervisory authority, trustee, employee or agent of the licensee has done any of the following:
(1) made any material misstatement in the application;
(2) committed any fraud or misrepresentation or misappropriated funds;
(3) become insolvent;
(4) violated any of the provisions of this act or of any regulations adopted pursuant thereto, or any other law or regulation applicable to the conduct of its business; or
(5) failed to perform any agreement with a mortgagee or a mortgagor.
b. Whenever it appears to the commissioner that any person has violated, is violating, or is about to violate any of the provisions of this act or of any regulations adopted pursuant thereto, or any licensee has failed to perform any agreement with a mortgagee or mortgagor, committed any fraud, made any misrepresentation or misappropriated funds, the commissioner may:
(1) issue an order directing a person or licensee to cease and desist from engaging in any act or practice that is in violation of this act;
(2) issue an order directing a person or licensee to perform corrective actions; and
(3) bring an action in any court of competent jurisdiction to enjoin the acts or practices and to enforce compliance with any provision of this act.
##### **§ 17:16F-42** Violators barred from acting as residential mortgage servicer. {#sec-17-16f-42 omnilex-key=us-nj-statutes--title-17--17:16F-42}
16. The commissioner may order that any person who has been found to have knowingly violated any provision of this act, or of the rules and regulations issued pursuant hereto, and has thereby caused financial harm to consumers, be barred from acting as a residential mortgage servicer, residential mortgage lender, residential mortgage broker, or mortgage loan originator, or a stockholder, an officer, director, partner or other owner, or an employee of a licensee, or acting in any other capacity pursuant to this act. A violation of this final order shall be considered a crime of the third degree.
##### **§ 17:16F-43** Civil penalty. {#sec-17-16f-43 omnilex-key=us-nj-statutes--title-17--17:16F-43}
17. The commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of this act. Each violation of this act, including any order, rule or regulation made or issued pursuant to this act, shall constitute a separate offense. Additionally, each violation of this act which constitutes a knowing violation shall be considered a crime of the third degree.
##### **§ 17:16F-44** Construction of act. {#sec-17-16f-44 omnilex-key=us-nj-statutes--title-17--17:16F-44}
18. The rights, remedies and prohibitions accorded by the provisions of this act are in addition to and cumulative of any right, remedy or prohibition accorded by the common law or any statute of this State and nothing contained herein shall be construed to deny, abrogate, or impair any common law or statutory right, remedy or prohibition. The Attorney General and the Division of Consumer Affairs in the Department of Law and Public Safety shall continue to have the authority to enforce civil and criminal violations of the consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.), or any other applicable law, rule or regulation in connection with the activities of mortgage servicers.
##### **§ 17:16F-45** Inapplicability. {#sec-17-16f-45 omnilex-key=us-nj-statutes--title-17--17:16F-45}
19. The provisions of sections 3 through 12 of this act shall not apply to:
(1) a person exempt from licensure as a residential mortgage lender pursuant to the "New Jersey Residential Mortgage Lending Act," P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89), while servicing residential mortgage loans made pursuant to the exemption;
(2) a person servicing five or fewer residential mortgage loans within any period of twelve consecutive months;
(3) any agency of the federal government, any state or municipal government or any quasi-governmental agency servicing residential mortgage loans under the specific authority of the laws of any state or the United States; and
(4) a person exempt from licensure as a mortgage servicer pursuant to paragraphs (1), (2), and (3) of subsection b. of section 3 of this act.
##### **§ 17:16F-46** Rules, regulations. {#sec-17-16f-46 omnilex-key=us-nj-statutes--title-17--17:16F-46}
20. The Commissioner of Banking and Insurance may adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), including any fines or penalties, necessary to effectuate the provisions of this act.
## **Chapter 16G** {#struct-chapter-16g}
##### **§ 17:16G-1** Definitions. {#sec-17-16g-1 omnilex-key=us-nj-statutes--title-17--17:16G-1}
1. As used in this act:
a. "Nonprofit social service agency" or "nonprofit consumer credit counseling agency" means any corporation duly organized under Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes, no part of the assets, income or profit of which is distributable to, or enures to the benefit of its members, directors or officers, except to the extent permitted under this act, and which is engaged in debt adjustment.
b. "Credit counseling" means any guidance or educational program or advice offered by a nonprofit social service agency or nonprofit consumer credit counseling agency for the purpose of fostering the responsible use of credit and debt management.
c. (1) "Debt adjuster" means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of settling, compounding, or otherwise altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.
(2) The following persons shall not be deemed debt adjusters: (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts; or (f) a person who is: (i) certified by the United States Secretary of Housing and Urban Development as a housing counseling organization or agency pursuant to section 106 of Pub.L.90-448 (12 U.S.C. s.1701x); (ii) participating in a counseling program approved by the New Jersey Housing and Mortgage Finance Agency; and (iii) not holding or disbursing the debtor's funds.
d. "Debtor" means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.
##### **§ 17:16G-2** Debt adjuster {#sec-17-16g-2 omnilex-key=us-nj-statutes--title-17--17:16G-2}
a. No person other than a nonprofit social service agency or a nonprofit consumer credit counseling agency shall act as a debt adjuster.
b. It shall be unlawful for any nonprofit social service agency or nonprofit consumer credit counseling agency to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking pursuant to this act.
c. A licensee is authorized to offer credit counseling.
##### **§ 17:16G-3** Application for licensure {#sec-17-16g-3 omnilex-key=us-nj-statutes--title-17--17:16G-3}
Application for said license shall be made on forms prescribed by the commissioner, who shall be empowered to require information deemed necessary to demonstrate that the applicant is qualified to be licensed and possesses the necessary financial resources to sustain its operation.
##### **§ 17:16G-4** Duties of commissioner; fees {#sec-17-16g-4 omnilex-key=us-nj-statutes--title-17--17:16G-4}
The commissioner shall promulgate procedures and standards for the issuance or denial of licenses, shall promulgate grounds for and procedures under which licenses may be revoked, suspended, or reinstated, and shall establish fees necessary to meet administrative costs under this act.
##### **§ 17:16G-5** Bond; financial records; annual audit; filing; examination of agency; annual reports; violations, penalties. {#sec-17-16g-5 omnilex-key=us-nj-statutes--title-17--17:16G-5}
5. a. Any nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall be bonded to the satisfaction of the commissioner for each location pursuant to regulation. In setting the bonding requirements for each location, the commissioner shall consider the number of debtors provided credit counseling and debt adjustment services at that location, and the balance of funds in the trust account required to be maintained pursuant to section 3 of P.L.2005, c.287 (C.17:16G-9).
b. The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning activities conducted as a licensee in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.
c. The commissioner may require a high-cost home loan counselor to file an annual report containing that information required by the commissioner by regulation concerning activities conducted pursuant to subsection g. of section 5 of P.L.2003, c.64 (C.46:10B-26) as a registrant in the preceding calendar year. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.
d. Each licensee shall file with the commissioner on or before April 1 of each year a copy of its annual report, containing the information required by the commissioner by regulation pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) and section 3 of P.L.2005, c.287 (C.17:16G-9). A licensee or high-cost home loan counselor that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
e. Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant, which audit shall be filed with the commissioner. Such an audit shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar services.
f. After reviewing the annual report and audit, the Commissioner of Banking and Insurance may cause an examination of the licensee to be made, the actual expenses of such an examination shall be paid by the licensee, and the commissioner may maintain any action against any licensee to recover the fees and expenses herein provided for.
g. The licensee shall make a copy of the annual report and audit available for public inspection at each of the licensee's locations.
##### **§ 17:16G-6** Debt adjustment fee {#sec-17-16g-6 omnilex-key=us-nj-statutes--title-17--17:16G-6}
a. A licensee may charge a fee to cover the cost of providing debt adjustment and credit counseling.
b. The fee for debt adjustment shall not exceed 1% of the gross monthly income of the person to whom the service is rendered, but in no case more than $15.00 in any one month, except as may be otherwise provided by rule or regulation promulgated by the commissioner. This fee may be waived in the discretion of the licensee.
c. The commissioner is authorized to establish the maximum fee that may be charged for credit counseling.
##### **§ 17:16G-7** Board of directors of agency {#sec-17-16g-7 omnilex-key=us-nj-statutes--title-17--17:16G-7}
Every nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall establish a board of directors whose function shall be to establish the policies of such agency. No more than 40% of the members of the board of directors shall have as their principal employer any corporation, association or institution which offers credit to the general public.
##### **§ 17:16G-8** Penalties; summary action; civil action. {#sec-17-16g-8 omnilex-key=us-nj-statutes--title-17--17:16G-8}
8. Any person who violates any provisions of this act shall be subject to a penalty of $1,000 for the first offense and not more than $5,000 for the second and each subsequent offense to be collected by and in the name of the commissioner in a summary proceeding under the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
If the commissioner has reason to believe that any person or licensee has engaged in or is engaging in any practice or transaction prohibited by P.L.1979, c.16 (C.17:16G-1 et seq.), the commissioner may, in addition to any remedies available, bring a summary action in the name of and on behalf of the State against the person or licensee and any other person concerned or in any way participating in or about to participate in those practices or transactions, to enjoin the person or licensee from continuing those practices or engaging in or doing any act in furtherance of those practices or in violation of that act. In addition to any other remedies or penalties available for a violation of P.L.1979, c.16 (C.17:16G-1 et seq.), any debtor injured by a violation of P.L.1979, c.16 (C.17:16G-1 et seq.) may bring a civil action for recovery of damages.
##### **§ 17:16G-9** Responsibilities of licensee acting as debt adjuster. {#sec-17-16g-9 omnilex-key=us-nj-statutes--title-17--17:16G-9}
3. Every licensee acting as a debt adjuster shall:
a. disburse to the appropriate creditors all funds received from a debtor, less any fees permitted by section 6 of P.L.1979, c.16 (C.17:16G-6), within 10 days of receipt of those funds; b. maintain a separate trust account in a qualified bank as defined in paragraph (12) of section 1 of P.L.1948, c.67 (C.17:9A-1), in the name of the debt adjuster for the benefit of the debtors serviced by the debt adjuster; and
c. maintain an appropriate ledger book for the trust account required by subsection b. of this section, having at least one single page for each debtor, with appropriate entries of all deposits into and disbursements from each debtor's account, including copies of all records showing disbursements to creditors and receipts from debtors, which ledger book and records shall be maintained in accordance with generally accepted accounting principles for not less than six years following the close of each debtor's account.
## **Chapter 16H** {#struct-chapter-16h}
##### **§ 17:16H-1** Definitions. {#sec-17-16h-1 omnilex-key=us-nj-statutes--title-17--17:16H-1}
1. As used in this act:
a. "Financial institution" shall mean any bank, savings bank, state association, credit union, residential mortgage lender, residential mortgage broker, consumer lender or any other institution, corporation, partnership or individual subject to the supervision, regulation or licensing by the Department of Banking and Insurance.
b. "Commissioner" shall mean the Commissioner of Banking and Insurance of New Jersey.
##### **§ 17:16H-2** Prohibited advertisements, announcements or statements {#sec-17-16h-2 omnilex-key=us-nj-statutes--title-17--17:16H-2}
No financial institution shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of banking, lending or being a financial institution or with respect to any person in the conduct of such business, which is inaccurate, untrue, deceptive or misleading, or which negatively affects the public's confidence in such financial institution or financial institutions in general.
##### **§ 17:16H-3** Enforcement; regulations {#sec-17-16h-3 omnilex-key=us-nj-statutes--title-17--17:16H-3}
The commissioner shall enforce the provisions of this act and shall promulgate such regulations as he deems necessary for the effective implementation of this act, including regulations establishing standards for advertising by financial institutions.
##### **§ 17:16H-4** Cease and desist order; notice and hearing; penalty for failure to comply {#sec-17-16h-4 omnilex-key=us-nj-statutes--title-17--17:16H-4}
The commissioner may, after notice and opportunity for a hearing, order any financial institution to cease and desist from violations of this act. Any financial institution which fails to comply with an order of the commissioner shall be subject to a penalty not to exceed $500.00 for each violation. Any penalty imposed by the commissioner shall be enforced and collected pursuant to the penalty enforcement law (N.J.S. 2A:58-1 et seq.).
## **Chapter 16I** {#struct-chapter-16i}
##### **§ 17:16I-1** Short title {#sec-17-16i-1 omnilex-key=us-nj-statutes--title-17--17:16I-1}
This act shall be known and may be cited as the "Multiple-party Deposit Account Act" .
##### **§ 17:16I-2** Definitions {#sec-17-16i-2 omnilex-key=us-nj-statutes--title-17--17:16I-2}
As used in this act unless the context otherwise requires:
a. "Account" means a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, savings account, certificate of deposit, share account and other like arrangement;
b. "Beneficiary" means a person named in a trust account as one for whom a party to the account is named as trustee;
c. "Financial institution" means any organization authorized to do business under State or Federal laws relating to financial institutions, including, without limitation, banks and trust companies, savings banks, building and loan associations, savings and loan associations;
d. "Joint account" means an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship, and regardless whether the names of the parties are stated in the conjunctive or in the disjunctive;
e. A "multiple-party account" is any of the following types of account: (1) a joint account, (2) a P.O.D. account, or (3) a trust account. It does not include accounts established for deposit of funds of a partnership, joint venture, or other association for business purposes, or accounts controlled by one or more persons as the duly authorized agent or trustee for a corporation, unincorporated association, charitable or civic organization or a regular fiduciary or trust account where the relationship is established other than by deposit agreement;
f. "Net contribution" of a party to a joint account as of any given time is the sum of all deposits thereto made by or for him, less all withdrawals made by or for him which have not been paid to or applied to the use of any other party, plus a pro rata share of any interest or dividends included in the current balance. The term includes, in addition, any proceeds of deposit life insurance added to the account by reason of the death of the party whose net contribution is in question;
g. "Party" means a person who, by the terms of the account, has a present right, subject to request, to payment from a multiple-party account. A P.O.D. payee or beneficiary of a trust account is a party only after the account becomes payable to him by reason of his surviving the original payee or trustee. Unless the context otherwise requires, it includes a guardian, conservator, personal representative, or assignee, including an attaching creditor, of a party. It also includes a person identified as a trustee of an account for another whether or not a beneficiary is named, but it does not include any named beneficiary unless he has a present right of withdrawal;
h. "Payment" of sums on deposit includes withdrawal, payment on check or other directive of a party, and any pledge of sums on deposit by a party of any setoff, or reduction or other disposition of all or part of an account pursuant to a pledge;
i. "Proof of death" includes a certified or authenticated copy of a death certificate purporting to be issued by an official or agency of the place where the death purportedly occurred, and a certified or authenticated copy of any judgment or record or report of a court or a governmental agency, domestic or foreign, that a person is dead;
j. "P.O.D. account" means an account payable on request to one person during lifetime and on his death to one or more P.O.D. payees, or to one or more persons during their lifetimes and on the death of all of them to one or more P.O.D. payees;
k. "P.O.D. payee" means a person designated on a P.O.D. account as one to whom the account is payable on request after the death of one or more persons;
l . "Request" means a proper request for withdrawal, or a check or order for payment, which complies with all conditions of the account, including special requirements concerning necessary signatures and regulations of the financial institution; but if the financial institution conditions withdrawal or payment on advance notice, for purposes of this part the request for withdrawal or payment is treated as immediately effective and a notice of intent to withdraw is treated as a request for withdrawal;
m. "Sums on deposit" means the balance payable on a multiple-party account including interest, dividends, and in addition any deposit life insurance proceeds added to the account by reason of the death of a party;
n. "Trust account" means an account in the name of one or more parties as trustee for one or more beneficiaries where the relationship is established by the form of the account and the deposit agreement with the financial institution and there is no subject of the trust other than the sums on deposit in the account; it is not essential that payment to the beneficiary be mentioned in the deposit agreement. A trust account does not include a regular trust account under a testamentary trust or a trust agreement which has significance apart from the account, or a fiduciary account arising from a fiduciary relation such as attorney-client;
o . "Withdrawal" includes payment to a third person pursuant to check or other directive of a party; and
p. "Written notice or order" received by a financial institution is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction.
##### **§ 17:16I-3** Ownership as between parties and others; protection of financial institutions {#sec-17-16i-3 omnilex-key=us-nj-statutes--title-17--17:16I-3}
The provisions of sections 4 to 6 concerning beneficial ownership as between parties, or as between parties and P.O.D. payees or beneficiaries of multiple-party accounts, are relevant only to controversies between these persons and their creditors and other successors, and have no bearing on the power of withdrawal of these persons as determined by the terms of account contracts. The provisions of sections 8 to 13 govern the liability of financial institutions who make payments pursuant thereto, and their setoff rights.
##### **§ 17:16I-4** Ownership during lifetime {#sec-17-16i-4 omnilex-key=us-nj-statutes--title-17--17:16I-4}
Unless a contrary intent is manifested by the terms of the contract, or the deposit agreement, or there is other clear and convincing evidence of a different intent at the time the account is created:
a. A joint account belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit. In the absence of proof of net contributions, the account belongs in equal shares to all parties having present right of withdrawal. This subsection shall not be construed to affect the right of the court to effectuate an equitable distribution of property between the parties in an action for divorce pursuant to N.J.S. 2A:34-23.
b. A P.O.D. account belongs to the original payee during his lifetime and not to the P.O.D. payee or payees; if two or more parties are named as original payees, during their lifetimes rights as between them are governed by subsection a. of this section.
c. A trust account belongs beneficially to the trustee during his lifetime, and if two or more parties are named as trustee on the account, during their lifetimes beneficial rights as between them are governed by subsection a. of this section. If there is an irrevocable trust, the account belongs beneficially to the beneficiary.
##### **§ 17:16I-5** Right of survivorship {#sec-17-16i-5 omnilex-key=us-nj-statutes--title-17--17:16I-5}
a. Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created. If there are two or more surviving parties, their respective ownerships during lifetime shall be in proportion to their previous ownership interests under section 4 augmented by an equal share for each survivor of any interest the decedent may have owned in the account immediately before his death; and the right of survivorship continues between the surviving parties.
b. If the account is a P.O.D. account;
(1) On death of one of two or more original payees the rights to any sums remaining on deposit are governed by subsection "a" ;
(2) On death of the sole original payee or of the survivor of two or more original payees, any sums remaining on deposit belong to the P.O.D. payee or payees if surviving, or to the survivor of them if one or more die before the original payee; if two or more P.O.D. payees survive, there is no right of survivorship in the event of death of a P.O.D. payee thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.
c. If the account is a trust account;
(1) On death of one of two or more trustees, the rights to any sums remaining on deposit are governed by subsection "a" ;
(2) On death of the sole trustee or the survivor of two or more trustees, any sums remaining on deposit belong to the person or persons named as beneficiaries, if surviving, or to the survivor of them if one or more die before the trustee, unless there is clear evidence of a contrary intent; if two or more beneficiaries survive, there is no right of survivorship in event of death of any beneficiary thereafter unless the terms of the account or deposit agreement expressly provide for survivorship between them.
d. In other cases, the death of any party to a multiple-party account has no effect on beneficial ownership of the account other than to transfer the rights of the decedent as part of his estate.
e. A right of survivorship arising from the express terms of the account or under this section, a beneficiary designation in a trust account, or a P.O.D. payee designation, cannot be changed by will.
##### **§ 17:16I-6** Determination of rights at death of party; alteration of form of account; notice or order to financial institution {#sec-17-16i-6 omnilex-key=us-nj-statutes--title-17--17:16I-6}
The provisions of section 5 as to rights of survivorship are determined by the form of the account at the death of a party. This form may be altered by written notice or order given by a party to the financial institution to change the form of the account or to stop or vary payment under the terms of the account. The order or request must be signed by a party, received by the financial institution during the party's lifetime, and not countermanded by other written order of the same party during his lifetime.
##### **§ 17:16I-7** Rights of creditors {#sec-17-16i-7 omnilex-key=us-nj-statutes--title-17--17:16I-7}
No multiple-party account will be effective against an estate of a deceased party to transfer to a survivor sums needed to pay debts, taxes, and expenses of administration, if other assets of the estate are insufficient. A surviving party, P.O.D. payee, or beneficiary who receives payment from a multiple-party account after the death of a deceased party shall be liable to account to his personal representative for amounts the decedent owned beneficially immediately before his death to the extent necessary to discharge the claims and charges mentioned above remaining unpaid after application of the decedent's estate. No proceeding to assert this liability shall be commenced unless the personal representative has received a written demand by a creditor, and no proceeding shall be commenced later than 2 years following the death of the decedent. Sums recovered by the personal representative shall be administered as part of the decedent's estate. This section shall not affect the right of a financial institution to make payment on multiple-party accounts according to the terms thereof, or make it liable to the estate of a deceased party unless before payment the institution has been served with an order of court restraining the payment.
##### **§ 17:16I-8** Multiple-party accounts; payments; notice {#sec-17-16i-8 omnilex-key=us-nj-statutes--title-17--17:16I-8}
8. Financial institutions may enter into multiple-party accounts to the same extent that they may enter into single-party accounts. The following payments from a multiple-party account by the financial institution, including payment of the entire account balance, are deemed authorized by all parties to, and any other person with an interest in, the multiple-party account, without any duty on the part of the financial institution to consider the net contributions of the parties to the account:
a. Payments, on request, to any one or more of the parties;
b. Payments pursuant to any statutory or common law right of set off, levy, attachment or other valid legal process or court order, relating to the interest of any one or more of the parties; and
c. Payments, on request, to a trustee in bankruptcy, receiver in any state or federal insolvency proceeding, or other duly authorized insolvency representative of any one or more of the parties.
A financial institution shall not be required to inquire as to the source of funds received for deposit to a multiple-party account, or to inquire as to the proposed application of any sum withdrawn from an account, for purposes of establishing net contributions.
Notice that the entire account balance is subject to subsections b. and c. of this section shall be given to the parties by the financial institution, either in the account agreement or by separate document, in the manner the Commissioner of Banking may direct by regulation. Any account for which notice is not given shall not be subject to the terms of subsection b. or c. of this section.
##### **§ 17:16I-9** Financial institution protection; payment after death or disability; joint account {#sec-17-16i-9 omnilex-key=us-nj-statutes--title-17--17:16I-9}
Any sums in a joint account may be paid, on request, to any party without regard to whether any other party is incapacitated or deceased at the time the payment is demanded; but payment may not be made to the personal representative or heirs of a deceased party unless proofs of death are presented to the financial institution showing that the decedent was the last surviving party or unless there is no right of survivorship under section 5.
##### **§ 17:16I-10** Payment of P.O.D. account {#sec-17-16i-10 omnilex-key=us-nj-statutes--title-17--17:16I-10}
Any P.O.D. account may be paid, on request, to any original party to the account. Payment may be made, on request, to the P.O.D. payee or to the personal representative or heirs of a deceased P.O.D. payee upon presentation to the financial institution of proof of death showing that the P.O.D. payee survived all persons named as original payees. Payment may be made to the personal representative or heirs of a deceased original payee if proof of death is presented to the financial institution showing that his decedent was the survivor of all other persons named on the account either as an original payee or as P.O.D. payee.
##### **§ 17:16I-11** Payment of trust account {#sec-17-16i-11 omnilex-key=us-nj-statutes--title-17--17:16I-11}
Any trust account may be paid, on request, to any trustee. Unless the financial institution has received written notice that the beneficiary has a vested interest not dependent upon his surviving the trustee, payment may be made to the personal representative or heirs of a deceased trustee if proof of death is presented to the financial institution showing that his decedent was the survivor of all other persons named on the account either as trustee or beneficiary. Payment may be made, on request, to the beneficiary upon presentation to the financial institution of proof of death showing that the beneficiary or beneficiaries survived all persons named as trustees.
##### **§ 17:16I-12** Beneficial ownership of funds in multiple-party accounts {#sec-17-16i-12 omnilex-key=us-nj-statutes--title-17--17:16I-12}
a. Payment made pursuant to subsection b. of this section, or pursuant to section 8, 9, 10 or 11 of this act or section 89, 90 or 91 of P.L. 1963, c. 144 (C. 17:12B-89 through C. 17:12B-91) discharges the financial institution from all claims for amounts so paid, whether or not the payment is consistent with the beneficial ownership of the account as between parties, P.O.D. payees, or beneficiaries, or their successors. The protection here given does not extend to payments made after a financial institution has received written notice from any party able to request present payment to the effect that withdrawals in accordance with the terms of the account should not be permitted. Unless the notice is withdrawn by the person giving it, the successor of any deceased party must concur in any demand for withdrawal, if the financial institution is to be protected under this section. No other notice or any other information shown to have been available to a financial institution shall affect its right to the protection provided here. The protection here provided shall have no bearing on the rights of parties in disputes between themselves or their successors concerning the beneficial ownership of funds in, or withdrawn from, multiple-party accounts. Financial institutions refusing or altering payment pursuant to written notice or order from any party able to request present payment shall not be liable to any other party to the account, or beneficiary thereof, by reason of such action.
b. When a beneficiary of a trust account, or a P.O.D. account payee, is under the age of 18 when the beneficiary or payee becomes entitled to payment as provided in this act, a state or federally chartered bank or savings bank in which the trust account or P.O.D. account is maintained shall make such payment (1) if a certificate of appointment of a guardian is filed with the bank or savings bank, to the guardian of the estate or to the guardian of the beneficiary or payee; or (2) if a certificate of appointment of a guardian is not filed with the bank or savings bank, the bank or savings bank shall prioritize payment as follows: (a) to the beneficiary or payee, if married; (b) to a parent or parents of the beneficiary or payee or to any person having the care and custody of the beneficiary or payee, with whom the beneficiary or payee resides; or (c) to the beneficiary or payee, when the beneficiary or payee attains the age of 18.
##### **§ 17:16I-13** Setoff {#sec-17-16i-13 omnilex-key=us-nj-statutes--title-17--17:16I-13}
Without qualifying any other right to setoff or lien and subject to any contractual provision, if a party to a multiple-party account is indebted to a financial institution, the financial institution has a right to setoff against the account in which the party has or had immediately before his death a present right of withdrawal. The amount of the account subject to setoff is that proportion to which the debtor is, or was immediately before his death, beneficially entitled, and in the absence of proof of net contributions, to an equal share with all parties having present rights of withdrawal.
##### **§ 17:16I-14** Effect of transfer by right of survivorship {#sec-17-16i-14 omnilex-key=us-nj-statutes--title-17--17:16I-14}
Any transfers resulting from the application of section 5 are effective by reason of the account contracts involved and this act, and are not to be considered as testamentary. The right of any surviving party to a joint account, or of any beneficiary, or of any P.O.D. payee, to the sums on deposit on the death of any party to a multiple-party account maintained in any financial institution, shall not be denied, abridged or in anywise affected because such right has not been created by a writing executed in accordance with the laws of this State prescribing the requirements to effect a valid testamentary disposition of property.
##### **§ 17:16I-15** Trusts created in fraud of creditors or laws governing transfer inheritance or estate taxes {#sec-17-16i-15 omnilex-key=us-nj-statutes--title-17--17:16I-15}
Nothing in this act shall validate any trust created in fraud of creditors of the fiduciary nor affect any law of this State governing transfer inheritance or estate taxes, nor shall anything herein relieve any financial institution of its duty to conform with the provisions of the law imposing transfer inheritance taxes with respect to decedents' estates.
##### **§ 17:16I-16** Deposit contracts; form and content {#sec-17-16i-16 omnilex-key=us-nj-statutes--title-17--17:16I-16}
The Commissioner of Banking shall prescribe by rule or regulation the form and content of deposit contracts applicable to deposits of funds which may be subject to this act for the object of assuring to the extent possible that each such contract bears out the intentions of the persons who are named in the account, particularly in respect to the rights of survivorship and whether or not such rights of survivorship are intended to be created.
##### **§ 17:16I-17** Application of act {#sec-17-16i-17 omnilex-key=us-nj-statutes--title-17--17:16I-17}
This act shall apply only to accounts opened after its effective date and accounts opened prior thereto shall be governed by the law in effect when such accounts were opened.
## **Chapter 16J** {#struct-chapter-16j}
##### **§ 17:16J-1** Definitions {#sec-17-16j-1 omnilex-key=us-nj-statutes--title-17--17:16J-1}
For the purposes of this act:
a. "Acquired depository" is a depository which is acquired as a result of a supervisory acquisition as provided in this act;
b. "Acquiring company" is a company which acquires one or more depositories as a result of a supervisory acquisition as provided in this act;
c. "Acquiring depository" is a depository which acquires one or more depositories as a result of a supervisory acquisition as provided in this act;
d. "Association" means a state chartered or federally chartered mutual savings and loan association or building and loan association which has its principal office in this State;
e. "Bank" means a state chartered or federally chartered bank which has its principal office in this State;
f. "Capital stock association" means an association organized pursuant to the provisions of P.L.1974, c. 137 (C. 17:12B-244 et seq.), or a federally chartered capital stock association which has its principal office in this State;
g. "Capital stock savings bank" means a savings bank organized pursuant to the provisions of P.L.1982, c. 9 (C. 17:9A-8.1 et seq.), or a federally chartered capital stock savings bank with its principal office in this State;
h. "Commissioner" means the Commissioner of Banking;
i. "Company" means (1) a corporation which is approved by the Board of Governors of the Federal Reserve System as a bank holding company, the operations of whose banking subsidiary or subsidiaries are principally conducted in this State, and which owns at least 25% of the stock of a bank in this State, or (2) a corporation which is approved by the Federal Home Loan Bank Board as a capital stock association holding company, the operations of whose subsidiary association or associations are principally conducted in this State, and which owns at least 25% of the stock of a capital stock association in this State;
j. "Department" means the Department of Banking;
k. "Depository" and "depository institution" mean a state chartered and a federally chartered corporation with its principal office in this State, which is authorized by the laws of this State or of the United States to receive deposits, and include only banks, savings banks, associations, capital stock savings banks, and capital stock associations;
l. "Foreign depository" means a state chartered or federally chartered depository with its principal office in a state other than this State (1) which is empowered to receive deposits; (2) whose deposits are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, any other instrumentality of the United States, or any other state-approved insurance program, which is organized for the purpose of insuring time and demand deposits; and (3) which is empowered by the laws of the United States or the state of its domicile to merge into or acquire similar institutions organized under the laws of the other states of the United States;
m. "Merging depository" means a depository which merges into or is to be merged into one or more other depositories as provided in this act;
n. "Mutual depository" means an association or a savings bank as defined in subsection d. or q. of this section;
o. "Receiving depository" means a depository into which one or more depositories are merged or are to be merged as provided in this act;
p. "Resulting depository" is a depository which is created by the merger of two or more depositories;
q. "Savings bank" means a state chartered or federally chartered mutual savings bank which has its principal office in this State;
r. "Supervisory acquisition" means the acquisition of a depository to be operated as a subsidiary pursuant to the provisions of section 2 or 3 of this act;
s. "Supervisory merger" means a merger, consolidation or purchase of assets and assumption of liabilities effected under the conditions prescribed by section 2 or 3 of this act.
##### **§ 17:16J-2** Authorization; supervisory acquisition or merger {#sec-17-16j-2 omnilex-key=us-nj-statutes--title-17--17:16J-2}
The commissioner may, if he deems it to be in the public interest, authorize a supervisory acquisition by a company or a supervisory acquisition or supervisory merger between two or more depositories under the terms and conditions established by this act if at least one of the depositories to be merged or acquired:
a. Has, in the opinion of the commissioner, a ratio of capital stock, surplus, undivided profits, and reserves to total assets which is declining to the extent that the ratio would reach a level of 2% or less within the ensuing 12 months; or
b. Does not have sufficient funds, as determined by the commissioner, to meet the liabilities and obligations of the depository during the ensuing 12 months.
##### **§ 17:16J-3** Directing of acquisition or merger; authority of commissioner {#sec-17-16j-3 omnilex-key=us-nj-statutes--title-17--17:16J-3}
The commissioner shall have the authority to direct a depository to merge into or be acquired by another depository or a company only if the depository to be merged or acquired meets one of the following tests:
a. The depository has, in the opinion of the commissioner, a ratio of capital stock, surplus, undivided profits, and reserves to total assets which is declining to the extent that the ratio would reach a level of 1% or less within the ensuing 12 months; or
b. The depository does not have sufficient funds, as determined by the commissioner, to meet the liabilities and obligations of the depository during the ensuing 6 months.
##### **§ 17:16J-4** Priority; supervisory acquisition or merger {#sec-17-16j-4 omnilex-key=us-nj-statutes--title-17--17:16J-4}
a. The commissioner shall give priority to a proposal for supervisory acquisition of a depository over a proposal for supervisory merger, if the acquisition would be deemed by him to be feasible and to result in the successful operation of the acquired depository.
b. The commissioner shall give priority to supervisory acquisitions by or supervisory mergers with like institutions, without regard as to whether the like institutions are stock or mutual, if the acquisition or merger is deemed by him to be feasible and to result in the successful operation of the acquired or resulting depository.
c. In the case of a supervisory merger or supervisory acquisition involving two or more depositories, the commissioner shall take into account the relative sizes of the depositories involved.
##### **§ 17:16J-5** Plan; supervisory acquisition; authorization of execution; contents {#sec-17-16j-5 omnilex-key=us-nj-statutes--title-17--17:16J-5}
If a supervisory acquisition is to take place, two-thirds of the members of the board of directors or managers of each company or depository which seeks to acquire another depository pursuant to this act, and two-thirds of the members of the board of directors or managers of a depository which is to be acquired shall authorize the execution of a plan of acquisition, which shall be submitted to the commissioner and which shall contain:
a. The name and address of the acquiring company or depository;
b. The name and address of the depository or depositories to be acquired;
c. The name by which the acquired depository will be known after the acquisition is effected;
d. The names of the persons who are directors or managers of the acquiring company or depository;
e. The names of the persons who will be directors or managers of the acquiring company or depository;
f. The names of the persons who will be directors of the acquired depository;
g. The names of the persons who will be officers of the acquired depository;
h. The locations then occupied by the principal offices and branches of the acquired depository;
i. The locations at which the principal office and the branch offices of the acquired depository are to be maintained;
j. The effective date of the acquisition;
k. If the acquired depository will be a stock depository, the amount of the capital stock, the classes of stock to be issued, the number of shares into which it will be divided, the par value, if any, of each share, and the amount of surplus which the acquired depository will have after the acquisition is effected;
l. If the acquired depository is to be a mutual depository, the amount of reserves, surplus, and capital deposits which it will have after the acquisition is effected;
m. The terms and conditions of the acquisition, and the mode of carrying it into effect, including the manner of exchanging the shares, capital notes, or cash of the acquired depository or the means of effecting the bulk purchase of assets of the acquired depository;
n. If an acquiring mutual depository or an acquired mutual depository is to convert to stock as an incident of the acquisition, the basis upon which the conversion will be effected;
o. The names and addresses of all depositories, some or all of whose shares of capital stock are owned by the acquiring depository or company, with the total number of shares of each depository issued and outstanding, and the number of shares of each depository owned by the acquiring company or acquiring depository;
p. Any other provision which may be necessary to effect the acquisition.
The commissioner, if he deems the supervisory acquisition to be in the public interest, may waive the provisions of any law or regulation pertaining thereto, including, but not limited to, any regulation which would restrict the purchasing institution's ability to make the purchase because the cost of the acquisition would exceed an established percentage of the purchasing institution's capital stock and surplus. The acquired depository shall be a subsidiary and shall be governed by any laws under which organized.
If, after the initial acquisition, the parent depository or company desires to effect a merger with the subsidiary depository, it shall make application for a merger, which may be approved by the commissioner if he deems it to be in the public interest. The merger shall be effected pursuant to the provisions of this act, except that the subsidiary depository need not meet the test established by section 2 of this act.
##### **§ 17:16J-6** Agreement; supervisory merger; authorization of execution; contents {#sec-17-16j-6 omnilex-key=us-nj-statutes--title-17--17:16J-6}
If a supervisory merger pursuant to section 2 or 3 of this act is to take place, two-thirds of the members of the board of directors of a bank, association, or a capital stock association, or two-thirds of the members of the board of managers or directors of a savings bank or a capital stock savings bank, as the case may be, who are parties to the merger, shall authorize the execution of the merger agreement, which shall be submitted to the commissioner and which shall contain:
a. The name of each merging depository, and the location of its principal office and branch offices;
b. The name of the receiving depository and the location of its principal office and branch offices;
c. The name by which the resulting depository will be known after the merger is effected;
d. The names of the persons who will be directors or managers of the resulting depository;
e. The names of the persons who will be officers of the resulting depository;
f. The location at which the principal office of the resulting depository is to be maintained;
g. The locations then occupied by the principal offices and branch offices of the merging and receiving depositories which will be continued as branch offices of the resulting depository;
h. The effective date of the merger;
i. If the resulting depository will be a capital stock depository, the amount of the capital stock, the classes of stock to be issued, the number of shares into which it will be divided, the par value, if any, of each share, and the amount of surplus which the resulting depository will have after the merger is effected;
j. If the resulting depository will be a mutual depository, the amount of reserves, surplus, and capital deposits which the resulting depository will have after the merger is effected;
k. If the resulting depository is to be a capital stock depository, the basis upon which the bulk transfer of assets or shares of each merging depository will be exchanged for shares of the capital stock of a depository or a company, or for capital notes, or for cash, or for any one or more or all of the foregoing, as the case may be;
l. If the resulting depository is a mutual depository, the basis upon which a sale or bulk transfer of assets is to be accomplished;
m. If a mutual depository is to convert to a stock depository attendant to the merger, the basis upon which the conversion will be effected;
n. Any other provisions which may be necessary or appropriate to effectuate the merger.
##### **§ 17:16J-7** Mutual depository as party; supervisory merger agreement or plan of acquisition; contents {#sec-17-16j-7 omnilex-key=us-nj-statutes--title-17--17:16J-7}
If a mutual depository is a party to a supervisory merger or a supervisory acquisition, the merger agreement or plan of acquisition shall also contain:
a. A provision that each depositor of a mutual depository shall have an account in the resulting or acquired depository equal in amount to the depositor's account in the mutual depository;
b. If the supervisory merger or supervisory acquisition results in the conversion of a mutual depository to a stock depository, a provision setting forth the participation, if any, by officers, directors, and employees of the mutual depository and their associates in the cash, capital stock or capital notes of the receiving, resulting, or acquired depository or company or in other products of the merger or acquisition, which shall be subject to the approval of the commissioner. The term "associate," as used in this paragraph, means parents, spouse, sisters, brothers, children, and the spouse of any of the foregoing persons; any corporation of which the person is an officer, director or owner of more than 10% of the outstanding voting stock of the corporation; any trust of which the person is a trustee or substantial beneficiary; and any partnership in which the person is a general or limited partner. The interests of the directors, officers, employees, and associates shall be disclosed in the application for merger or acquisition filed with the commissioner. Each depositor of the merging mutual depository as of the date of merger or acquisition shall receive any rights with respect to the capital stock of the receiving, resulting, or acquired depository or company, or other products of the merger or acquisition as may be approved by the commissioner, and these rights shall be consistent with the provisions of federal law for federally chartered mutual depositories.
##### **§ 17:16J-8** Liquidated account; merger of mutual depositories {#sec-17-16j-8 omnilex-key=us-nj-statutes--title-17--17:16J-8}
In the event of a merger of two mutual depositories or the conversion of a mutual depository to a capital stock depository which is related to a supervisory merger or supervisory acquisition, the merger agreement or plan of acquisition may provide for the establishment and maintenance of a liquidation account for the benefit of the account holders of the merging or converted mutual depository in the event of the subsequent liquidation of the resulting or acquiring depository. The account shall be in an amount approved by the commissioner, and shall be maintained by the resulting or acquiring depository for a length of time determined by the commissioner. Payment to depositors entitled to an interest in the liquidation account shall be made in a manner prescribed by the commissioner.
##### **§ 17:16J-9** Methods; supervisory merger {#sec-17-16j-9 omnilex-key=us-nj-statutes--title-17--17:16J-9}
A merger agreement shall provide for supervisory mergers by any one, or by any combination of, or by all of the following methods:
a. The exchange of shares of capital stock of each merging depository for shares of capital stock of the receiving or resulting depository;
b. The exchange of shares of capital stock of each merging depository for shares of capital stock of a company;
c. The exchange of shares of capital stock of each merging depository for capital notes or mutual capital certificates of the receiving or resulting depository;
d. The exchange of shares of capital stock of each merging depository for cash or mutual capital certificates received from the receiving or resulting depository or company;
e. The exchange of shares of capital stock of each merging depository for the capital notes of a company when the receiving depository is a subsidiary of the company;
f. The transfer, sale, or exchange of all or any part of the assets of a depository to the receiving depository for cash, capital stock, mutual capital certificates, or accounts;
g. Any other method approved by the commissioner.
##### **§ 17:16J-10** Executed merger agreement or plan of acquisition {#sec-17-16j-10 omnilex-key=us-nj-statutes--title-17--17:16J-10}
Each depository which is a party to a supervisory merger or a supervisory acquisition shall submit to the commissioner: a. an executed merger agreement or plan of acquisition approved by resolution of the board of directors or board of managers; and b. any other information which the commissioner deems necessary to complete the application for a supervisory merger or a supervisory acquisition. Upon the approval of the merger agreement or plan of acquisition by the commissioner, the merger agreement or plan of acquisition, endorsed by each party to the merger or acquisition as being duly approved by the board, shall be filed with the department. Each depository which is a bank, capital stock savings bank, or capital stock savings and loan association shall mail a copy of the merger agreement or plan of acquisition to each of its stockholders.
##### **§ 17:16J-11** Shareholders; approval of agreement or plan; rights {#sec-17-16j-11 omnilex-key=us-nj-statutes--title-17--17:16J-11}
If the commissioner approves the merger agreement or plan of acquisition, it shall be submitted to the stockholders of each merging party or each party to an acquisition which is a bank, a capital stock savings bank, or a capital stock association, at separate meetings called for that purpose within a time period established by the commissioner. The merger agreement or plan of acquisition shall be approved by the stockholders of each capital stock depository holding at least two-thirds of the capital stock entitled to vote, and that fact shall be certified to the commissioner by the president or vice president.
A stockholder of a depository which is a bank or capital stock savings bank which is a party to a supervisory merger shall have the same rights afforded to stockholders by sections 140 through 145 of P.L. 1948, c. 67 (C. 17:9A-140 to 17:9A-145). A member of an association or a stockholder of a capital stock association which is a party to a supervisory merger shall have the same rights afforded to members of associations and stockholders of capital stock associations by section 199 of P.L. 1963, c. 144 (C. 17:12B-199) and section 36 of P.L. 1974, c. 137 (C. 17:12B-266). A stockholder of a bank or capital stock savings bank which is a party to a supervisory acquisition shall have the same rights afforded to stockholders by sections 6 through 15 of P.L. 1969, c. 118 (C. 17:9A-360 to 17:9A-369).
##### **§ 17:16J-12** Effective date; merger {#sec-17-16j-12 omnilex-key=us-nj-statutes--title-17--17:16J-12}
The merger shall become effective upon the last to occur of the following:
a. In the case of a mutual depository, on the date the approved merger agreement or plan of acquisition is filed with the department as provided in section 10 of this act;
b. In the case of a capital stock depository, on the date the stockholders' vote is certified to the commissioner as provided in section 11 of this act; or
c. Where required, all necessary federal approvals have been obtained or waived.
##### **§ 17:16J-13** Effect; merger {#sec-17-16j-13 omnilex-key=us-nj-statutes--title-17--17:16J-13}
Upon the merger of one depository institution into another, and after the merger agreement is approved, endorsed and filed:
a. The corporate existence of the merging depository shall be merged into that of the receiving depository, and all its rights, privileges and franchises, and its right, title and interest in and to all property of whatever kind, whether real, personal or mixed, and things in action, and every right, privilege, interest or asset of value or benefit then existing which would inure to it under an unmerged existence, shall be transferred to and vested in the depository into which it has merged, without further act or deed and without any right of reversion. The resulting depository shall have and hold the same in its own right as fully as the same was possessed and held by the merging depository;
b. The rights, liabilities, obligations and relations of the merging depository to any person shall remain unimpaired, and the resulting depository shall, by the merger, succeed to all the relations, obligations, and liabilities, as though it had itself assumed or incurred them. No obligation or liability of a member, depositor, or stockholder of a depository which is a party to a merger shall be affected by the merger, but the obligations and liabilities shall continue as they existed before the merger;
c. A pending action or other judicial proceeding to which a merging depository is a party shall not abate or be discontinued by reason of the merger, but may be prosecuted to final judgment, order or decree as if the merger has not been effected, or the resulting depository may be substituted as a party to the action or proceeding, and any judgment, order or decree may be rendered for or against it that might have been rendered for or against the other depository if the merger had not occurred;
d. Notwithstanding the provisions of any other law, the resulting depository shall, unless otherwise authorized by the commissioner, establish and maintain its principal office and branch offices at the locations specified in the merger agreement; and
e. If the merging depository provides trust services, all fiduciary and agency duties and relationships of the merging depository shall vest in the resulting depository and be performed by it in the same manner as though the resulting depository itself originally assumed the fiduciary agencies and relationships.
##### **§ 17:16J-14** Foreign depositories; acquisition {#sec-17-16j-14 omnilex-key=us-nj-statutes--title-17--17:16J-14}
Any state chartered depository may purchase or otherwise acquire one or more foreign depositories to the same extent and in the same manner that a federally chartered depository having its principal office in this State may purchase or otherwise acquire one or more foreign depositories. This acquisition shall be subject to the approval of the commissioner, who in so doing shall apply standards similar to those to be applied by the applicable federal regulatory authority in the event of acquisition by a federal depository.
##### **§ 17:16J-15** Federally chartered depository; supervisory merger {#sec-17-16j-15 omnilex-key=us-nj-statutes--title-17--17:16J-15}
In the case of a supervisory merger, the commissioner may authorize a state chartered depository to merge into, consolidate with, or sell its assets and transfer its liabilities to a federally chartered depository which has its principal office in this State, pursuant to the provisions of federal law, and notwithstanding any restriction or prohibition under the laws of this State. The provisions of sections 5 through 14 of this act shall not apply to a supervisory merger pursuant to the provisions of this section.
##### **§ 17:16J-16** Protection of depositors; stockholder voting {#sec-17-16j-16 omnilex-key=us-nj-statutes--title-17--17:16J-16}
To protect the interest of the depositors of any depository in a supervisory merger or acquisition, the commissioner may waive the provisions of this or any other law or regulation if he deems it necessary to effectuate the purposes of this act. With respect to stockholders of a depository which is a party to a supervisory merger or supervisory acquisition, if the commissioner waives the stockholder voting provisions of this act, he shall require that the merger agreement include a provision which will provide stockholders with substantially the same right of dissent and appraisal of their shares which they would have had if the merger or acquisition had been effected without a waiver of the stockholders' vote.
##### **§ 17:16J-17** Foreign depository; limitations on acquisition or merger {#sec-17-16j-17 omnilex-key=us-nj-statutes--title-17--17:16J-17}
Nothing in this act is intended to authorize the merger by or the acquisition of stock or the assets of a depository by a foreign depository, or a company other than as defined in subsection i. of section 1 of this act.
##### **§ 17:16J-18** Commissioner; depository; powers {#sec-17-16j-18 omnilex-key=us-nj-statutes--title-17--17:16J-18}
Nothing in this act shall be deemed to limit any power otherwise granted to the commissioner or to any depository by law.
##### **§ 17:16J-19** Commissioner; civil liability or penalty {#sec-17-16j-19 omnilex-key=us-nj-statutes--title-17--17:16J-19}
The commissioner shall not be subject to any civil liability or penalty nor to any criminal prosecution for any error in judgment or discretion in any action taken or omitted by him in good faith under the provisions of this act.
##### **§ 17:16J-20** Rules and regulations {#sec-17-16j-20 omnilex-key=us-nj-statutes--title-17--17:16J-20}
The commissioner may promulgate rules and regulations necessary to effectuate the purposes of this act.
##### **§ 17:16J-21** Annual report {#sec-17-16j-21 omnilex-key=us-nj-statutes--title-17--17:16J-21}
The commissioner shall provide a written annual report to the chairmen of the Assembly Banking and Insurance Committee and the Senate Labor, Industry and Professions Committee, or their successors, setting forth the nature and general terms and conditions of any supervisory merger or supervisory acquisition effectuated pursuant to the provisions of this act during the preceding year. The report shall be provided to the chairmen each year following the effective date of this act.
## **Chapter 16K** {#struct-chapter-16k}
##### **§ 17:16K-1** Short title {#sec-17-16k-1 omnilex-key=us-nj-statutes--title-17--17:16K-1}
This act shall be known and may be cited as the "Electronic Fund Transfer Privacy Act."
##### **§ 17:16K-2** Definitions {#sec-17-16k-2 omnilex-key=us-nj-statutes--title-17--17:16K-2}
As used in this act:
a. "Access device" means a card, code, or other means of access to a consumer's account, or any combination thereof, that may be used by the consumer for the purpose of initiating electronic fund transfers.
b. "Account" means a demand, time, or savings deposit, or other consumer asset account, other than an occasional or incidental credit balance, held either directly or indirectly by a financial institution and established for personal, family or household purposes.
c. "Electronic fund transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, that is initiated through an electronic terminal, telephone, or computer or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account. The term includes, but is not limited to point-of-sale transfers, automated teller machine transfers, direct deposits or withdrawals of funds and transfers initiated by telephone. The term does not include payments made by check, draft, or similar paper instrument at an electronic terminal or any transaction which is exempt, by statute or regulation, from the provisions of Title IX of the Federal Consumer Credit Protection Act.
d. "Financial institution" means a State or National Bank, a State or Federal Savings and Loan Association, a State or Federal Mutual Savings Bank, a State or Federal Credit Union, or any other person who, directly or indirectly, holds an account belonging to a consumer. The term also includes any person who issues an access device and agrees with a consumer to provide electronic fund transfer services.
e. "Government agency" means any federal, State, or local unit of government or any agency or instrumentality thereof.
f. "Supervisory agency" means the New Jersey Department of Banking and any other State or federal agency which has statutory authority to examine the financial condition or business operations of a particular financial institution.
##### **§ 17:16K-3** Disclosure of information by financial institution to third party {#sec-17-16k-3 omnilex-key=us-nj-statutes--title-17--17:16K-3}
A financial institution may disclose information relative to an electronic fund transfer or account to a third party when:
a. The disclosure is necessary for the completion of an electronic fund transfer;
b. The possessor of the account gives written permission to the financial institution to disclose the information;
c. The disclosure is for the purpose of verifying the existence and condition of an account for a third party, including, but not limited to, a credit bureau or a merchant;
d. The disclosure is necessary to resolve an error or an inquiry as to an alleged error;
e. The disclosure is made to a supervisory agency in the exercise of its supervisory and regulatory examination functions with respect to a financial institution; or
f. The disclosure is made to a government agency in the exercise of its statutory functions with respect to a person applying for or receiving public assistance.
##### **§ 17:16K-4** Government agencies; obtaining information; necessity of search warrant or subpena {#sec-17-16k-4 omnilex-key=us-nj-statutes--title-17--17:16K-4}
No government agency, except as provided for in subsections e. and f. of section 3 of this act, may obtain information from an electronic fund transfer account without first obtaining a search warrant or subpena.
##### **§ 17:16K-5** Interception by government agency; court order {#sec-17-16k-5 omnilex-key=us-nj-statutes--title-17--17:16K-5}
a. No government agency shall intercept an electronic fund transfer without first obtaining a court order.
b. The judge, upon consideration of an application, may enter an ex parte order, as requested or as modified, authorizing the interception of an electronic fund transfer, if the court determines on the basis of the facts submitted by the applicant that there is or was probable cause for belief that:
(1) The person whose electronic fund transfer is to be intercepted is engaging or was engaged over a period of time as a part of a continuing criminal activity or is committing, has or had committed or is about to commit an offense;
(2) Particular communications concerning such offense may be obtained through such interception;
(3) Normal investigative procedures with respect to such offense have been tried and have failed or reasonably appear to be unlikely to succeed if tried or to be too dangerous to employ;
c. To effect an order issued pursuant to this section, the governmental agency shall deliver a true copy of the order to the financial institution which shall promptly carry out the terms of the order under the direct supervision of the investigative law enforcement officers or agency authorized to intercept the electronic fund transfer.
##### **§ 17:16K-6** Negligent, willful or reckless violation of act by financial institution or government agency; penalties {#sec-17-16k-6 omnilex-key=us-nj-statutes--title-17--17:16K-6}
If a court of competent jurisdiction determines that a financial institution or a government agency acted negligently, willfully, or recklessly in violating this act, the financial institution or government agency shall be liable to the aggrieved person for actual damages sustained by him; reasonable litigation costs; reasonable attorneys' fees; and only in cases where a financial institution or government agency acted willfully or recklessly, a court of competent jurisdiction may award punitive damages where appropriate. L.1983, c. 466, s. 6, eff. Jan. 12, 1984.
##### **§ 17:16K-7** Definitions {#sec-17-16k-7 omnilex-key=us-nj-statutes--title-17--17:16K-7}
1. As used in this act:
"Access area" means any paved walkway or sidewalk which is within 50 feet of an automated teller machine or the entrance of an automated teller machine facility and is used by the public to access the machine or facility. The term does not include publicly maintained sidewalks or roads.
"Access device" means a card, code, or other means of access to a customer's credit or deposit account, or any combination thereof, that may be used by the customer for the purpose of effecting a transaction at an automated teller machine.
"Automated teller machine" means any electronic information processing device located in the State of New Jersey which accepts or dispenses cash in connection with a credit or deposit account. The term does not include tellers' stations staffed by a person or other manned facilities.
"Automated teller machine facility" means an enclosed area, the principal purpose of which is the housing of one or more operating automated teller machines to which customers have access to conduct transactions with respect to a credit or deposit account.
"Candlefoot power" means the light intensity of candles on a horizontal plane at 36 inches above ground level and five feet in front of the area to be measured.
"Control" of an access area or defined parking area means the present authority to determine how, when, and by whom any such area is to be used, and how it is to be maintained, lighted, and landscaped.
"Customer" means a natural person to whom an access device has been issued for personal, family, or household use.
"Defined parking area" means that portion of any parking area open for customer parking which is (1) contiguous to an access area; (2) regularly, principally, and lawfully used for parking by users of an automated teller machine or automated teller machine facility while conducting automated teller machine transactions during hours of darkness; and (3) owned or leased by the operator of an automated teller machine or owned or controlled by the party leasing an automated teller machine or automated teller machine facility site to the operator. The term does not include any parking area which is not open or regularly used for parking by users who are conducting automated teller machine transactions during hours of darkness. A parking area is not open if it is physically closed to access or if conspicuous signs indicate that it is closed. If a multiple level parking area satisfies the conditions of this definition of "defined parking area" and would therefore otherwise be a defined parking area, only the single parking level deemed by the operator of an automated teller machine or automated teller machine facility to be the most directly accessible to users shall be a defined parking area.
"Hours of darkness" means the period that commences 30 minutes after sunset and ends 30 minutes before sunrise.
"Operator" means any State or federally chartered bank, savings bank, savings and loan association, credit union, or other entity, which operates an automated teller machine.
"User" means any person to whom an access device has been issued.
"Video camera" includes any image recording device which is capable of recording a clear image of the required areas of coverage as provided in section 3 of this act.
##### **§ 17:16K-8** Evaluation of automated teller machines for safety {#sec-17-16k-8 omnilex-key=us-nj-statutes--title-17--17:16K-8}
2. a. Operators of all automated teller machines in operation after the effective date of this act shall evaluate the safety of automated teller machines. This evaluation shall include consideration of:
(1) The extent to which the lighting for the automated teller machine or automated teller machine facility complies with the standards required by section 4 of this act.
(2) The presence of landscaping, vegetation, or structures in the area of an automated teller machine or automated teller machine facility, the access area, or a defined parking area which might obstruct views so as to adversely affect the safety of users.
b. It is not the intent of the Legislature in enacting this section to impose a duty to close, relocate or modify automated teller machines or automated teller machine facilities upon the occurrence of any particular events or circumstances, but rather to establish a standard of good faith for the evaluation thereof.
##### **§ 17:16K-9** Video camera required {#sec-17-16k-9 omnilex-key=us-nj-statutes--title-17--17:16K-9}
3. Every automated teller machine facility shall contain a video camera which at least shall view and record all persons entering the facility or all persons who effect a transaction.
##### **§ 17:16K-10** Minimum lighting requirements {#sec-17-16k-10 omnilex-key=us-nj-statutes--title-17--17:16K-10}
4. Each operator and any person or entity controlling an access area or defined parking area in operation after the effective date of this act shall provide:
a. A minimum of 10 candlefoot power at the face of an unenclosed automated teller machine and extending in an unobstructed direction outward five feet.
b. A minimum of two candlefoot power within 50 feet in all unobstructed directions from the face of the automated teller machine or the entrance of an automated teller machine facility. In the event any such automated teller machine or automated teller machine facility is located within 10 feet of the corner of the building in which it is located and the automated teller machine or automated teller machine facility is generally accessible from the adjacent side of such building, there shall be a minimum of two candlefoot power along the first 40 unobstructed feet of the adjacent side of the building, measured from the corner.
c. A minimum of two candlefoot power in that portion of the defined parking area within 60 feet of an automated teller machine or the entrance to an automated teller machine facility.
d. With respect to the interior of an automated teller machine facility, sufficient lighting to permit a person entering the facility to readily and easily see all persons occupying the facility, and to permit a person inside the facility to readily and easily see all persons entering the facility.
##### **§ 17:16K-11** Basic safety precaution information to customers {#sec-17-16k-11 omnilex-key=us-nj-statutes--title-17--17:16K-11}
5. a. Each customer receiving an access device shall be furnished by the respective issuer thereof with written notice of basic safety precautions to be employed while using an automated teller machine. This information shall be furnished by personally delivering or by mailing the information to each customer whose mailing address as to the account to which the access device relates is in the State of New Jersey. This information shall be furnished to each customer who has an access device on the day prior to the effective date of this act, within 60 days after the effective date of this act and to each customer provided with an access device on or after the effective date of this act, at the same time the customer is provided with the access device. Only one notice need be furnished per household; and if an access device is furnished to more than one customer for a single account or set of accounts or on the basis of a single application or other request for more than one access device, only a single notice need be furnished in satisfaction of the notification responsibilities as to all such customers. The information may be included with other disclosures related to the access device furnished to the customer, such as with any initial or periodic disclosure statement or notice furnished pursuant to the federal "Electronic Fund Transfer Act," 15 U.S.C. s.1693 et seq., and shall be furnished annually thereafter.
b. An issuer of an access device shall be deemed to be in compliance with the requirement of subsection a. of this section to provide a customer with basic safety precaution information if the notice advises customers of the following:
(1) To be alert to their surroundings and to defer transactions if circumstances cause them to be apprehensive for their safety;
(2) To close the entry door of any automated teller machine facility equipped with a door;
(3) To place withdrawn cash securely upon the person before exiting any automated teller machine facility;
(4) To direct complaints concerning automated teller machine security to an appropriate department of the operator or to the Department of Banking; and
(5) The telephone number of the operator and the Department of Banking.
c. Operators shall maintain, in the vicinity of an automated teller machine, and in any automated teller machine facility, a clearly visible sign, which shall be deemed to comply with the requirements of this section if it includes the information contained in paragraphs (1) through (5) of subsection b. of this section.
##### **§ 17:16K-12** Provisions; enforcement, penalty for violation {#sec-17-16k-12 omnilex-key=us-nj-statutes--title-17--17:16K-12}
6. a. The Department of Banking shall enforce the provisions of this act.
b. Any party responsible hereunder found to be in violation of any provision of this act shall correct the violation within five business days after such finding. Failure to correct the violation within five business days after such finding may subject the party to a civil penalty of not more than $250 which may be collected by summary proceedings instituted by the Commissioner of Banking in accordance with "the penalty enforcement law" (N.J.S.2A:58-1 et seq.).
##### **§ 17:16K-13** Other laws applicable {#sec-17-16k-13 omnilex-key=us-nj-statutes--title-17--17:16K-13}
7. Nothing contained in this act shall be construed to exempt or relieve any operator, owner or other person responsible hereunder from complying with all relevant provisions of the State Uniform Construction Code, P.L.1975, c.217 (C.52:27D-119 et seq.), and all other applicable provisions of law.
##### **§ 17:16K-14** Nonapplicability to certain ATM's {#sec-17-16k-14 omnilex-key=us-nj-statutes--title-17--17:16K-14}
8. The provisions of this act shall not apply to any automated teller machine or automated teller machine facility located in any building, structure or space the primary purposes or function of which is: unrelated to the provision of financial services to the general public, including but not limited to office buildings, supermarkets, airports and school buildings; to provide automated teller machine services to persons employed in such building; or installed for a temporary purpose for a period of not more than thirty days.
##### **§ 17:16K-15** Supersedure, preemption of local rules, regulations, etc. {#sec-17-16k-15 omnilex-key=us-nj-statutes--title-17--17:16K-15}
9. This act supersedes and preempts all rules, regulations, codes, or ordinances of any county or municipality with regard to customer safety at automated teller machines or automated teller machine facilities.
##### **§ 17:16K-16** Definitions relative to automated teller machines. {#sec-17-16k-16 omnilex-key=us-nj-statutes--title-17--17:16K-16}
1. As used in this act:
"Automated teller machine" means any electronic information processing device located in the State of New Jersey which accepts or dispenses cash in connection with a credit or deposit account.
"Operator" means any State or federally chartered bank, savings bank, savings and loan association, credit union, or other entity, which owns or operates an automated teller machine.
##### **§ 17:16K-17** Required display on automated teller machine. {#sec-17-16k-17 omnilex-key=us-nj-statutes--title-17--17:16K-17}
2. Every automated teller machine located in this State shall have displayed on it, in a conspicuous place, a permanent, affixed label or notice that appears on the automated teller machine screen that clearly indicates the name and contact telephone number of the operator of the automated teller machine.
##### **§ 17:16K-18** Enforcement; violations, penalties. {#sec-17-16k-18 omnilex-key=us-nj-statutes--title-17--17:16K-18}
3. a. The Department of Banking and Insurance shall enforce the provisions of this act.
b. Any party found to be in violation of this act shall be subject to a civil penalty of not more than $1,000 per day for each day that the party is in violation of this act, which penalty may be collected by summary proceedings instituted by the Commissioner of Banking and Insurance in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). An operator of an automated teller machine shall not be subject to a civil penalty pursuant to this section if the label or notice has been removed or defaced without notice to the operator unless the operator knew or reasonably should have known of the removal or defacement.
c. Any provision of any agreement contrary to the provisions of this act and against public policy shall be void and unenforceable.
## **Chapter 16L** {#struct-chapter-16l}
##### **§ 17:16L-1** Definitions {#sec-17-16l-1 omnilex-key=us-nj-statutes--title-17--17:16L-1}
1. As used in this act:
a. "Banking institution" means any state or federally chartered bank, savings bank, or savings and loan association, including a federally chartered savings bank;
b. "Commissioner" means the Commissioner of Banking and Insurance;
c. "Deposit account" means an account in a banking institution used by the account holder for personal or family purposes, but does not include an account as defined in the federal "Expedited Funds Availability Act," 12 U.S.C.s.4001 et seq., which account is subject to the disclosure of funds availability policy requirements as set forth in 12 U.S.C. s.4004.
##### **§ 17:16L-2** Bank policy disclosure {#sec-17-16l-2 omnilex-key=us-nj-statutes--title-17--17:16L-2}
Every banking institution shall provide a written disclosure to every deposit account holder on the effective date of this act and to every applicant for a deposit account, describing the institution's policy with respect to when an account holder may draw against deposits, and shall notify in writing all of its deposit account holders of any change in the policy. All disclosures and notifications required by this act shall be made in a manner consistent with regulations promulgated by the commissioner.
##### **§ 17:16L-3** Penalty for violation {#sec-17-16l-3 omnilex-key=us-nj-statutes--title-17--17:16L-3}
Any banking institution which willfully violates any provision of this act or any regulation promulgated in accordance therewith shall be subject to a fine of not more than $1,000.00 for each violation, up to a maximum of $5,000.00 in any one year, to be recovered in a summary proceeding under "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.).
## **Chapter 16M** {#struct-chapter-16m}
##### **§ 17:16M-1** Definitions {#sec-17-16m-1 omnilex-key=us-nj-statutes--title-17--17:16M-1}
As used in this act:
"Capital stock association" shall have the meaning ascribed to it in section 15 of P.L.1974, c.137 (C.17:12B-244).
"Capital stock savings bank" shall have the meaning ascribed to it in section 1 of P.L.1982, c.9 (C.17:9A-8.1).
"Commissioner" means the Commissioner of Banking.
"Department" means the Department of Banking.
"Federal Deposit Insurance Corporation" means the corporation so named, organized pursuant to an Act of Congress, or any federal corporation, instrumentality or agency which succeeds to the powers and functions of the Federal Deposit Insurance Corporation or undertakes to discharge the purposes for which said corporation was created.
"Mutual savings bank" means any savings bank organized pursuant to the provisions of P.L.1948, c.67 (C.17:9A-1 et seq.) without capital stock.
"State association" and "mutual association" shall have the meanings ascribed to those terms in section 5 of P.L.1963, c.144 (C.17:12B-5).
"Savings bank" shall have the meaning ascribed to it in section 1 of P.L.1948, c.67 (C.17:9A-1).
##### **§ 17:16M-2** Conversion of mutual association to mutual savings bank; capital stock association to capital stock savings bank {#sec-17-16m-2 omnilex-key=us-nj-statutes--title-17--17:16M-2}
Any mutual association may apply to the commissioner to convert itself to a mutual savings bank by organizing and transferring its assets and liabilities to a newly-chartered mutual savings bank, and any capital stock association may apply to the commissioner to convert itself to a capital stock savings bank by organizing and transferring its assets and liabilities to a newly-chartered capital stock savings bank, and the proceedings to effect either application for conversion shall be as follows:
a. When in the judgment of the board of such State association it shall be deemed advisable and in the best interests of its members or stockholders that the same shall be converted into a savings bank of this State, the board of directors shall adopt a resolution to that effect.
b. After the adoption of such resolution, a meeting of the members or stockholders, as the case may be, of the State association shall be held upon not less than 10 days' written notice to the members or stockholders by mail, postage prepaid, directed to their addresses appearing on the books of the State association, which notice shall contain a statement of the time, place and purpose for which such meeting is called.
c. At such meeting, the members or stockholders may by the affirmative vote of 2/3 of the members present, or shares eligible to be voted which are represented at the meeting, either in person or by proxy, declare by resolution the determination to convert the State association into a savings bank of this State.
d. If the authority for the proposed conversion has been approved by the board of directors and by the members or stockholders as required by this section, the board of directors of the State association may apply to the commissioner to convert to a savings bank.
##### **§ 17:16M-3** Application for conversion to savings bank {#sec-17-16m-3 omnilex-key=us-nj-statutes--title-17--17:16M-3}
An application by a State association to convert to a savings bank shall contain the following:
a. Duplicate copies of the minutes of the proceedings of the meeting of the members or stockholders, verified by the affidavit of the president or vice-president, and the secretary of the meeting;
b. A certified copy of the resolution of the board of directors authorizing the conversion;
c. A certificate of incorporation meeting the requirements set forth in section 7 of P.L.1948, c.67 (C.17:9A-7) or section 2 of P.L.1982, c.9 (C.17:9A-8.2);
d. Copies of all applications and approvals required from federal regulators incident to the conversion; and
e. Such other information or materials as the commissioner may require by regulation.
##### **§ 17:16M-4** Approval of conversion by commissioner {#sec-17-16m-4 omnilex-key=us-nj-statutes--title-17--17:16M-4}
The commissioner shall not approve an application of a State association to convert to a savings bank unless the commissioner finds, after appropriate investigation, and a public hearing if deemed by the commissioner to be necessary, that the following requirements have been met:
a. The application is complete;
b. The converting State association was insured by the Federal Deposit Insurance Corporation, and the resulting savings bank will also be insured by that agency;
c. The converting State association satisfies all capital maintenance requirements for State associations set forth by the Federal Deposit Insurance Corporation, any other federal regulator and the department;
d. The converting State association is not subject to any outstanding supervisory order, agreement or memorandum of understanding of the Federal Deposit Insurance Corporation, any other federal regulator or the department;
e. The proposed conversion will result in a savings bank that will satisfy all capital maintenance requirements for savings banks set forth by the Federal Deposit Insurance Corporation, any other federal regulator and the department;
f. Directors or managers designated in the certificate of incorporation possess the qualifications, experience and character required for the duties and responsibilities with which they will be charged; and
g. The interests of the State association's depositors and creditors, and the public generally, will not be jeopardized by the proposed conversion.
##### **§ 17:16M-5** Approval of application of State association not satisfying certain requirements {#sec-17-16m-5 omnilex-key=us-nj-statutes--title-17--17:16M-5}
The commissioner may approve the application of a State association which does not satisfy the capital maintenance requirements set forth in subsection c. of section 4 of this act or which is subject to an outstanding supervisory order, agreement or memorandum of understanding, as provided by subsection d. of section 4 of this act, relating only to its capital condition or which fails to meet both requirements, to convert to a savings bank when the following requirements, in addition to the requirements set forth in section 4 of this act other than the requirements set forth in subsections c. and d. of section 4 relating to the capital condition of the converting State association, have been met:
a. Simultaneous with the conversion to a savings bank, the converting State association shall merge with and into, or be acquired by a savings bank; and
b. The resulting savings bank immediately after the conversion and merger or acquisition will satisfy all capital maintenance requirements for savings banks set forth by the Federal Deposit Insurance Corporation, any other federal regulator and the department.
##### **§ 17:16M-6** Notification of applicant {#sec-17-16m-6 omnilex-key=us-nj-statutes--title-17--17:16M-6}
a. Within 60 days of receiving all of the information and documents specified in section 3 of this act and such other information as the commissioner may require, the commissioner shall notify the applicant as to whether the commissioner intends to approve the application, or whether it is denied. The intent of approval may be conditioned upon the applicant satisfying conditions set by the commissioner. If the commissioner denies the application, the commissioner shall notify the applicant in writing and shall state the basis for the denial.
b. Upon a finding that the applicant has met all of the requirements of this act and all conditions imposed on the commissioner's intent of approval, the commissioner shall issue a certificate of approval of the conversion which shall be endorsed upon or annexed to the certificate of incorporation.
##### **§ 17:16M-7** Filing of certificate of incorporation {#sec-17-16m-7 omnilex-key=us-nj-statutes--title-17--17:16M-7}
The certificate of incorporation with the commissioner's approval endorsed thereon or annexed thereto shall be filed in the department, and shall be recorded within 30 days after such approval in the same manner and places as required by section 12 of P.L.1948, c.67 (C.17:9A-12). Upon the approval by the commissioner and the filing of the certificate of incorporation as aforesaid, the State association shall cease to be a State association. Upon the conversion of the State association, the legal existence of the State association shall terminate and the newly-chartered savings bank shall succeed to all the obligations and relations of the State association, and to all property of the State association, including the right, title and interest in and to all property of whatsoever kind and nature, whether real, personal or mixed and things, and choses in action, and every right, privilege, interest and asset of every conceivable value or benefit then existing or pertaining to it, or which would inure to it, immediately by operation of law and without the necessity for any conveyance or transfer and without any further act or deed, shall vest in the savings bank into which the State association has been converted. The savings bank shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the State association. All pending actions and other judicial or administrative proceedings to which the State association was a party shall not be discontinued by reason of the conversion, but may be prosecuted to final judgment or order in the same manner as if the conversion had not been made and the savings bank resulting from the conversion may continue such actions in its name after conversion. Any judgment or order may be rendered for or against it which might have been rendered for or against the State association theretofore involved in the judicial proceedings.
##### **§ 17:16M-8** Conversion of savings bank to State association {#sec-17-16m-8 omnilex-key=us-nj-statutes--title-17--17:16M-8}
Any savings bank chartered pursuant to the laws of this State may apply to the commissioner to convert to a State association by complying with the procedures and standards set forth in rules and regulations promulgated by the commissioner pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). These procedures and standards shall be at least equivalent to those established in sections 2 through 7 of this act concerning conversion of a State association into a savings bank, and may include any additional procedures and standards the commissioner may establish by regulation.
##### **§ 17:16M-9** Rules, regulations {#sec-17-16m-9 omnilex-key=us-nj-statutes--title-17--17:16M-9}
The commissioner may promulgate and adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary to effectuate the purposes of this act.
## **Chapter 16N** {#struct-chapter-16n}
##### **§ 17:16N-1** Findings, declarations {#sec-17-16n-1 omnilex-key=us-nj-statutes--title-17--17:16N-1}
1. a. The Legislature hereby finds and declares that:
(1) The depository institutions in New Jersey should meet the basic banking needs of the communities in which they are authorized to operate by assuring the availability of essential financial services to all people in the community;
(2) In recent years, due to increased costs, many of the State's consumers, particularly young, low-income and elderly consumers, have been finding it increasingly difficult to afford basic checking services;
(3) Those without access to banking and financial services due to increased cost are forced to operate on a cash-only basis and are therefore at greater risk for their personal safety and well-being;
(4) The lack of access to banking and financial services forces many low-income and elderly consumers to use relatively high cost check-cashing services to cash their social security or welfare benefit checks, a practice that undermines the effectiveness of these vital public assistance programs.
b. The Legislature declares that it is the purpose of this act to make a New Jersey Consumer Checking Account available to consumers by requiring depository institutions which offer regular checking accounts to offer a New Jersey Consumer Checking Account at low cost to all consumers who abide by the requirements established for such accounts by this act.
##### **§ 17:16N-2** Definitions {#sec-17-16n-2 omnilex-key=us-nj-statutes--title-17--17:16N-2}
2. As used in this act:
"Account" means an account in a depository institution with respect to which the account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others, including a demand deposit account, negotiable order of withdrawal account, draft account, savings deposit account subject to automatic transfers, share draft account, and all savings deposit and share accounts other than time deposit accounts.
"Business day" means any day other than a Saturday, Sunday or legal holiday.
"Check" means any check as defined in N.J.S.12A:3-104, share draft, negotiable order of withdrawal, or similar means of making payment or transfers to third parties or others which is drawn on an account in a depository institution and is payable on demand.
"Consumer" means a natural person who resides in this State.
"Commissioner" means the Commissioner of Banking.
"Depository institution" means a State or federally chartered bank, savings bank, savings and loan association or credit union doing business in this State.
"Electronic branch" means automatic teller machines (ATMs) and similar technology which may be used by customers of a depository institution in connection with a customer's account.
"New Jersey Consumer Checking Account" means a deposit account established pursuant to section 3 of this act and with respect to which the account holder is permitted to make payments to third parties or others by check.
"Office" includes the home office of a depository institution and any office approved as a branch of the depository institution by its federal or State supervisory agency, but excludes free-standing electronic branches.
"Periodic account statement" means any written statement provided on a regular basis at the end of each periodic cycle by a depository institution to an account holder that reflects all debits and credits to an account held by the account holder during a periodic cycle.
"Periodic cycle" means a period of time which is equal to or shorter than a calendar quarter and, if shorter than a calendar quarter, divides a calendar quarter into approximately equal units of time.
"Regular checking account" means that type of checking, demand deposit, negotiable order of withdrawal, share draft account, or similar account, other than a New Jersey Consumer Checking Account, offered by the depository institution, which is held by more consumers than any other such account offered by the depository institution.
##### **§ 17:16N-3** New Jersey Consumer Checking Accounts {#sec-17-16n-3 omnilex-key=us-nj-statutes--title-17--17:16N-3}
3. a. Every depository institution that maintains regular checking accounts in this State shall make available to consumers a New Jersey Consumer Checking Account at all offices of that depository institution where regular checking accounts are offered or available. A New Jersey Consumer Checking Account shall be used primarily for personal, family, or household purposes. No depository institution shall be required to offer a New Jersey Consumer Checking Account at a cost which is below its actual cost to provide such an account. The calculation made by a depository institution of the actual cost of providing a New Jersey Consumer Checking Account shall be determinative in the absence of mathematical error or a request from the commissioner for other data and information deemed relevant or appropriate for evaluating the actual cost of providing a New Jersey Consumer Checking Account. New Jersey Consumer Checking Accounts shall contain the features specified in subsection c. of this section or be an account the features and terms of which have been approved by the commissioner pursuant to subsection d. of this section.
b. An applicant for a New Jersey Consumer Checking Account shall provide the depository institution with the same information an applicant for a regular checking account is required to provide at that depository institution.
c. The commissioner shall establish by regulation pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), all of the following features of a New Jersey Consumer Checking Account which may be stated in terms of a range of options rather than a specific number:
(1) the initial deposit amount, if any, necessary to open a New Jersey Consumer Checking Account;
(2) the maximum amount, if any, permitted to be required by a depository institution as a minimum balance necessary to maintain the account;
(3) the number of checks, if any, that may be used within a periodic cycle without charge to withdraw funds from the account;
(4) the number of other withdrawals, if any, that may be made by a method other than check within a periodic cycle without charge;
(5) a maximum amount, if any, that may be charged per periodic cycle for maintaining the account;
(6) the maximum number of deposits, if any, that may be made in a periodic cycle without charge; and
(7) a maximum amount that may be charged per transaction in excess of the number permitted under paragraphs (3), (4) and (6) of this subsection.
d. (1) Notwithstanding the provisions of subsection c. of this section, a depository institution may establish a New Jersey Consumer Checking Account by submitting an account to the commissioner for approval as a New Jersey Consumer Checking Account by providing the commissioner information which details the features and terms of the account.
(2) The commissioner shall approve or reject the account as a New Jersey Consumer Checking Account within 30 business days of receipt of the information from a depository institution.
(3) If the commissioner does not approve an account as a New Jersey Consumer Checking Account, the commissioner shall provide to the depository institution, in writing, the reasons for the commissioner's decision.
e. The commissioner shall, prior to promulgating regulations pursuant to subsection c. of this section or accepting any account for approval pursuant to subsection d. of this section, review the terms and conditions of the low cost personal checking accounts currently available to consumers in this State and shall consider those terms and conditions in complying with the provisions of subsections c. and d. of this section.
f. The holder of a New Jersey Consumer Checking Account shall:
(1) have no less access to mail or electronic banking services, including direct deposits to the account by payors, than that offered to holders of regular checking accounts at that depository institution;
(2) not be assessed any fee in excess of the usual fee or charge made by the depository institution to its regular checking account holders.
g. A depository institution shall provide a periodic account statement to every holder of a New Jersey Consumer Checking Account.
h. A depository institution may close a New Jersey Consumer Checking Account under the same standards for fraudulent activity and overdrafts as it applies to holders of regular checking accounts at the depository institution or close or refuse to open a New Jersey Consumer Checking Account if the consumer:
(1) has a regular checking account or another New Jersey Consumer Checking Account in that depository institution or in any other depository institution; or
(2) makes an intentional material misrepresentation in the information provided to the depository institution to open the account.
i. A depository institution shall not require any holder of a New Jersey Consumer Checking Account to have any other account at that or any other depository institution or have a credit card issued by it or any other depository institution as a condition to opening or maintaining a New Jersey Consumer Checking Account.
##### **§ 17:16N-4** Products, services offered to holders of New Jersey Consumer Checking Account {#sec-17-16n-4 omnilex-key=us-nj-statutes--title-17--17:16N-4}
4. Except as otherwise provided in this act, a depository institution shall offer all of its products and services to a consumer who holds a New Jersey Consumer Checking Account on the same basis that it offers those products and services to consumers who hold regular checking accounts.
##### **§ 17:16N-5** Consumers to be informed of availability of New Jersey Consumer Checking Account {#sec-17-16n-5 omnilex-key=us-nj-statutes--title-17--17:16N-5}
5. Every depository institution required to offer a New Jersey Consumer Checking Account shall post a conspicuous notice in a public area of each office and make material available in the public area that informs consumers of the availability of a New Jersey Consumer Checking Account. The notice and material shall explain the material features and limitations of such an account.
##### **§ 17:16N-6** Noncompliance {#sec-17-16n-6 omnilex-key=us-nj-statutes--title-17--17:16N-6}
6. a. A depository institution that fails to comply with any provision of this act may be enjoined in any court of competent jurisdiction.
b. Nothing in this act shall be construed to limit the rights or remedies which are otherwise available to the holder of a New Jersey Consumer Checking Account under any other law.
##### **§ 17:16N-7** Violation, penalty {#sec-17-16n-7 omnilex-key=us-nj-statutes--title-17--17:16N-7}
7. Upon a finding by the commissioner, after notice and an opportunity for hearing, of a violation by any depository institution of any provision of this act, or any regulation or order of the commissioner issued pursuant thereto, the commissioner may order the depository institution to cease any violation or to pay a civil penalty not in excess of $500 for each day that the violation has continued, or both, the penalty being recoverable under "the penalty enforcement law" (N.J.S.2A:58-1 et seq.).
## **Chapter 16P** {#struct-chapter-16p}
##### **§ 17:16P-1** Borrower may choose own attorney; payment of fees regulated; secured loan {#sec-17-16p-1 omnilex-key=us-nj-statutes--title-17--17:16P-1}
2. a. No banking institution, other financial institution or other lender, which is licensed or authorized under the laws of this State or of the United States to engage in the business of making loans secured by personal property, or which has an office in this State for that purpose, shall require a borrower to employ the services of the institution's or lender's counsel or an attorney specified by the institution or lender with respect to such a loan from the institution or lender to the borrower if some or all of the collateral is located in this State at the time of the loan.
b. If a loan is secured by personal property, the institution or lender and borrower may agree that the borrower shall reimburse the institution or lender or pay directly for all or any part of the fees and expenses incurred with respect to the loan transaction, including, but not limited to, the fees and expenses of the institution's or lender's attorney.
c. If, pursuant to the provisions of this section, a borrower is required to reimburse or pay the fees and expenses for the institution's or lender's attorney for services performed in connection with a loan secured by personal property, all such fees and expenses shall be reasonable as defined by the Rules of Professional Conduct adopted by the Supreme Court of New Jersey.
d. The provisions of this section shall not be deemed to permit any attorney's fee or charge or other charge or permit any action otherwise prohibited or limited by any other applicable law or regulation, including, but not limited to, the "Consumer Loan Act," R.S.17:10-1 et seq., the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), the "pawnbroking law," R.S.45:22-1 et seq., Article 12 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-53 et seq.) and P.L.1959, c.91 (C.17:9A-59.1 et seq.).
##### **§ 17:16P-2** Payment of fees to lender's attorney; unsecured loan {#sec-17-16p-2 omnilex-key=us-nj-statutes--title-17--17:16P-2}
3. a. If a banking institution, other financial institution or other lender, which is licensed or authorized under the laws of this State or of the United States to engage in the business of making unsecured loans, or which has an office in this State for that purpose, requires a borrower to reimburse or pay the fees and expenses for the institution's or lender's attorney for services performed in connection with an unsecured loan, all such fees and expenses shall be reasonable as defined by the Rules of Professional Conduct adopted by the Supreme Court of New Jersey.
b. The provisions of this section shall not be deemed to permit any attorney's fee or charge or other charge or permit any action otherwise prohibited or limited by any other applicable law or regulation, including, but not limited to, the "Consumer Loan Act," R.S.17:10-1 et seq., the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), the "pawnbroking law," R.S.45:22-1 et seq., Article 12 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-53 et seq.) and P.L.1959, c.91 (C.17:9A-59.1 et seq.).
## **Chapter 16Q** {#struct-chapter-16q}
##### **§ 17:16Q-1** Definitions {#sec-17-16q-1 omnilex-key=us-nj-statutes--title-17--17:16Q-1}
1. As used in this act:
"Appropriate federal financial supervisory agency" means:
a. The Comptroller of the Currency with respect to federally chartered banks;
b. The Board of Governors of the Federal Reserve System with respect to bank holding companies and State chartered banks which are members of the Federal Reserve System;
c. The Federal Deposit Insurance Corporation with respect to State chartered banks and savings banks which are not members of the Federal Reserve System; and
d. The Director of the Office of Thrift Supervision with respect to associations whose deposits are insured by the Federal Deposit Insurance Corporation, and association holding companies.
"Board" means the Community Financial Services Advisory Board established pursuant to section 3 of this act.
"Commissioner" means the Commissioner of Banking.
"CRA" means the "Community Reinvestment Act of 1977," Pub.L. 95-128 (12 U.S.C. s.2901 et seq.).
"Depository institution" means a State or federally chartered bank, savings bank or savings and loan association located in this State.
##### **§ 17:16Q-2** CRA rating; receipt; public availability {#sec-17-16q-2 omnilex-key=us-nj-statutes--title-17--17:16Q-2}
2. Beginning on the effective date of this act, each time a depository institution receives a CRA rating on and after July 1, 1990, from its appropriate federal financial supervisory agency, it shall send a copy of the public section of the written evaluation to the commissioner and the board within 45 calendar days of receipt. The commissioner shall make these reports available to the public for inspection, copying, or both, and may set a reasonable fee to be charged for inspection, copying, or both.
##### **§ 17:16Q-3** Community Financial Services Advisory Board. {#sec-17-16q-3 omnilex-key=us-nj-statutes--title-17--17:16Q-3}
3. There is created in the Department of Banking and Insurance a Community Financial Services Advisory Board. The board shall consist of the commissioner or his designee, who shall be ex officio the chair of the board, the Commissioner of Community Affairs or his designee, who shall be ex officio the vice-chair of the board, the Commissioner of Commerce and Economic Development or his designee, who shall serve ex officio, and 11 members to be appointed by the Governor with the advice and consent of the Senate for a term of three years, except that of the 11 members initially appointed by the Governor, four shall be appointed for three years, four shall be appointed for two years, and three shall be appointed for one year. Each member shall hold office for the term of appointment and until his successor is appointed and qualified. A member is eligible to be reappointed to the board. A member appointed to fill a vacancy occurring in the membership of the board for any reason other than the expiration of the term shall have a term of appointment for the unexpired term only. All vacancies shall be filled in the same manner as the original appointment. Any appointed member of the board may be removed from office by the Governor, for cause, after a hearing and may be suspended by the Governor pending the completion of the hearing. Members of the board shall serve without compensation, but shall be reimbursed for necessary expenses incurred in the performance of their duties as members. Action may be taken and motions and resolutions may be adopted by the board at a board meeting by an affirmative vote of not less than eight members. Of the 11 appointed members, five shall each have had, at the time of appointment, not less than five years of practical experience as an active executive officer in a depository institution located in the State of New Jersey; and six shall be public members who are not salaried officers, directors or employees of any depository institution, at least four of whom shall be selected from nonprofit organizations which have had experience in developing low and moderate income housing programs, assisting low and moderate income consumers in securing credit from depository institutions in this State, or developing programs to educate consumers regarding the credit and lending practices of depository institutions in this State. At no time shall there be more than one representative on the board from any one depository institution or group of depository institutions which form a holding company. Of the five members specified to have had practical executive experience, at least three shall have had responsibility for a depository institution's community reinvestment activities and, at least one each shall be appointed from the following groups: savings banks; banks located in the Second Federal Reserve District; banks located in the Third Federal Reserve District; and savings and loan associations.
##### **§ 17:16Q-4** Board duties {#sec-17-16q-4 omnilex-key=us-nj-statutes--title-17--17:16Q-4}
4. a. The board shall review the CRA reports submitted to it pursuant to section 2 of this act.
b. The board shall act as a resource to the commissioner by developing and recommending to the commissioner ideas and programs to assist:
(1) depository institutions in meeting community credit needs; and
(2) consumers in understanding and using credit opportunities available through depository institutions in the State.
##### **§ 17:16Q-5** Regulations {#sec-17-16q-5 omnilex-key=us-nj-statutes--title-17--17:16Q-5}
5. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
## **Chapter 16R** {#struct-chapter-16r}
##### **§ 17:16R-1** Substitution of fiduciaries {#sec-17-16r-1 omnilex-key=us-nj-statutes--title-17--17:16R-1}
1. A qualified fiduciary (herein "successor fiduciary") may be substituted in the place and stead of another qualified fiduciary (herein "original fiduciary") which is desirous of being discharged from acting further as fiduciary for one or more fiduciary accounts, provided that the successor fiduciary obtains the approval of the Superior Court pursuant to the terms of this act.
##### **§ 17:16R-2** Application to become successor fiduciary {#sec-17-16r-2 omnilex-key=us-nj-statutes--title-17--17:16R-2}
2. a. The qualified fiduciary desiring to become the successor fiduciary shall make application to the Superior Court, which application may be made ex parte. The application shall contain information sufficient for the court to apply the standards set forth in subsection b. of this section and shall include a certification by the original fiduciary that it understands and agrees that it shall be bound as a party to any order entered by the court in the proceeding on the application.
b. Upon such application, the Superior Court, except for good cause shown, shall grant the application for substitution if it finds either:
(1) that the fiduciary accounts subject to the substitution constitute all, or substantially all, of a fiduciary category, or categories, and the successor fiduciary has adequate facilities, personnel and locations to provide fiduciary services to those persons with an interest in the fiduciary accounts; or
(2) that the primary bank regulator for each fiduciary has approved the transfer as being in the best interest of the fiduciary which the regulator regulates, and that the transfer will not be a disadvantage to the interest of the public.
##### **§ 17:16R-3** Appointment of successor fiduciary {#sec-17-16r-3 omnilex-key=us-nj-statutes--title-17--17:16R-3}
3. a. If the Superior Court approves the application, it shall make an order appointing the applicant qualified fiduciary as successor fiduciary in respect to the fiduciary capacities and relationships set forth in the application, with the same powers and duties in respect to the fiduciary capacities and relationships as those possessed by the original fiduciary. After the order of substitution has been entered, every instrument executed or otherwise effected before or after the entry, which purports to appoint the original fiduciary to any fiduciary capacity or relationship for which a successor fiduciary has been appointed pursuant to this section, shall be deemed to constitute an appointment of the successor fiduciary. The original fiduciary, which has been succeeded by a successor fiduciary as provided in this section, may present an accounting, in which the successor fiduciary may join, of its administration of the fiduciary capacities or relationships to which the successor fiduciary has been appointed.
b. Written notice of the substitution shall be given to those persons or entities to whom the original fiduciary would have in due course provided periodic account statements at the address shown on the current account records. The notice may be included with the periodic account statements and in any event shall be mailed within 60 days of the date of the order approving the substitution. The notice shall include the name and telephone number of a person or persons representing the substitute fiduciary to whom questions regarding the substitution may be directed.
##### **§ 17:16R-4** Definitions relative to qualified fiduciaries. {#sec-17-16r-4 omnilex-key=us-nj-statutes--title-17--17:16R-4}
4. For the purpose of this act:
a. "Qualified fiduciary" means a bank or savings bank authorized to exercise fiduciary powers pursuant to section 28 of P.L.1948, c.67 (C.17:9A-28), a federally chartered bank authorized to exercise fiduciary powers pursuant to section 1 of Pub.L.87-722 (12 U.S.C. 92a), a savings and loan association authorized to exercise fiduciary powers pursuant to section 48 of P.L.1963, c.144 (C.17:12B-48) or a federally chartered association authorized to exercise fiduciary powers pursuant to subsection (n) of 12 U.S.C. 1464.
b. "Fiduciary category" means one of the following three types of fiduciary accounts or relationships:
(1) A guardian, executor, administrator with the will annexed, substituted administrator, administrator, trustee, substituted trustee, or non testamentary trustee, all as referred to in N.J.S.3B:18-8, 3B:18-12 and 3B:18-23; a conservator appointed pursuant to P.L.1983, c.192 (C.3B:13A-1 et seq.); and a custodian if a gift to a minor pursuant to P.L.1963, c.177 (C.46:38-13 et seq.).
(2) Trustee of a qualified retirement plan maintained pursuant to 26 U.S.C. 401(k); trustee or custodian under an individual retirement account or annuity created pursuant to 26 U.S.C. 408(a) and (b); or as custodian under an annuity plan maintained pursuant to 26 U.S.C. 403(a) or (b).
(3) All other fiduciary relationships and capacities not included in the preceding paragraphs (1) and (2) of this subsection.
c. "Substantially all" of any category shall mean all accounts in that category except: (1) those in which substitution pursuant to this act is specifically prohibited by the document or documents creating the fiduciary relationship, or (2) those accounts for which there is a unique relationship or are special circumstances which distinguish the account from others in the same category or which make it impractical to effect the substitution.
## **Chapter 16S** {#struct-chapter-16s}
##### **§ 17:16S-1** Definitions relative to complying with discovery or production of documents; costs; reimbursement {#sec-17-16s-1 omnilex-key=us-nj-statutes--title-17--17:16S-1}
21. a. For the purposes of this section:
"Financial institution" means an entity chartered or licensed by the United States of America or by any state to accept deposits of funds or make loans.
"Governmental unit" means the United States of America, the State of New Jersey and all its counties, municipalities and school districts, and any authority or other entity established by any of those governmental units to fulfill a governmental function.
b. A person, other than a governmental unit, who is a party to an action and is seeking discovery or production of evidence as permitted by and pursuant to the Rules Governing the Courts of the State of New Jersey or other State authority or the Federal Rules of Civil Procedure requiring or requesting access to financial records pertaining to a customer of the financial institution shall pay to the financial institution that assembles or provides the financial records a fee for reimbursement of reasonably necessary costs, directly incurred, as follows:
(1) Reimbursement of search and processing costs, including the total amount of personnel direct time incurred in locating and retrieving, reproducing, packaging and preparing financial records for shipment, costs for analysis of material or for managerial or legal advise, expertise, research, or time spent for any of these activities. Search and processing costs may include the actual cost of extracting information stored by computer in the format in which it is normally produced, based on computer time and necessary supplies.
(2) Reimbursement for reproduction costs incurred in making copies of documents required or requested. The rate for reproduction costs for making copies of required or requested documents shall be the institution's usual rate charged to its customers for reproducing copies, including copies produced by reader-printer reproduction processes. Photographs, films, and other materials shall be reimbursed at actual cost.
(3) Reimbursement of transportation costs, including transport of personnel to locate and retrieve the information or material required or requested and including all other reasonably necessary costs to convey the information or material to the place of examination.
c. Payment for reasonably necessary, directly incurred costs to financial institutions shall be limited to material required or requested.
d. Payment shall be made only for costs that are both directly incurred and reasonably necessary, and search and processing, reproduction, and transportation costs shall be considered separately.
e. A financial institution may require an advance payment, based on the institution's good faith estimate or the charges permitted by this act. Any payment in excess of the actual charge shall be promptly refunded by the financial institution.
f. If a party to a lawsuit making the request for materials or information withdraws the legal process or formal written request, or if the customer revokes the authorization for release of materials or information, or if the legal process or request has been successfully challenged by the customer, the party shall promptly notify the financial institution of these facts. The party shall be responsible only for the costs directly incurred prior to the time that the financial institution receives this notice.
g. A financial institution is not entitled to reimbursement under this section for costs incurred in assembling or providing financial records provided as an incident to perfecting a security interest, proving a claim in bankruptcy, or otherwise collecting on a debt owing to the financial institution itself or to the institution in its role as a fiduciary.
##### **§ 17:16S-2** Bank service fee on orders of execution; definitions {#sec-17-16s-2 omnilex-key=us-nj-statutes--title-17--17:16S-2}
22. A depository institution which is presented with an execution on an account pursuant to N.J.S.2A:17-57 et seq., may deduct from the amount levied and retain for itself as compensation for its expenses and services, a service fee, provided that the deposit agreement between the depository institution and the depositor provides for such a fee. The portion of any service fee which has priority over an execution pursuant to this section shall not exceed $60 or such greater or lesser amount as the Commissioner of Banking and Insurance may establish from time to time by regulation.
Nothing herein shall affect the validity or priority of any lien or other right of set-off that the depository institution may have with respect to the account which is levied upon.
For purposes of this section:
"Account" means a checking account, savings account or other deposit account of a type which is insured by the Federal Deposit Insurance Corporation.
"Depository institution" means any state or federally chartered bank, savings bank, savings and loan association or credit union which accepts deposits of funds.
## **Chapter 16T** {#struct-chapter-16t}
##### **§ 17:16T-1** Findings, declarations relative to release of certain account information of senior or vulnerable customers. {#sec-17-16t-1 omnilex-key=us-nj-statutes--title-17--17:16T-1}
1. The Legislature finds and declares that many customers of financial institutions have worked diligently to accumulate savings and other resources deposited in, or managed by, financial institutions. Some of these customers are vulnerable to fraudulent or other illegal schemes because of advanced years or because of physical or mental illness, disability or deficiency, or because they lack sufficient understanding of and do not have the capacity to make, communicate or carry out decisions concerning the management of their savings or resources. Financial institutions, in the course of conducting business with these vulnerable customers and senior customers, suspect, from time to time, that these customers are targets of illegal schemes but choose not to act because they are unclear about the conditions under which they may release account information, how much information may be released, and the entities to whom they may release such information. Therefore, the Legislature finds that it is appropriate to provide statutory guidance to financial institutions in this situation.
##### **§ 17:16T-2** Definitions relative to release of certain account information. {#sec-17-16t-2 omnilex-key=us-nj-statutes--title-17--17:16T-2}
2. As used in this act:
"Account" means a deposit or fiduciary account maintained with a financial institution in the senior or vulnerable customer's name.
"Community setting" means a private residence or any noninstitutional setting in which a person may reside alone or with others, but shall not include residential health care facilities, rooming houses or boarding homes or any other facility or living arrangement subject to licensure by, operated by, or under contract with, a State department or agency.
"County adult protective services provider" means a county Board of Social Services or other public or nonprofit agency with experience as a New Jersey provider of protective services for adults, designated by the county and approved by the Commissioner of Human Services pursuant to the "Adult Protective Services Act," P.L.1993, c.249 (C.52:27D-406 et seq.).
"Financial institution" means a state or federally chartered bank, savings bank, savings and loan association or credit union.
"Financial record" means an original of, a copy of, or information known to have been derived from, any record held by a financial institution pertaining to a senior or vulnerable customer's account or relationship with the financial institution.
"Law enforcement agency" means a law enforcement agency of the State or of a local government unit.
"Senior customer" means a natural person, who, to the financial institution acting in good faith, appears to be at least 60 years of age, who utilized or is utilizing any service of a financial institution, or for whom a financial institution is acting or has acted as a fiduciary, in relation to an account maintained in the person's name.
"Vulnerable customer" means a natural person, who is at least 18 years of age, resides in a community setting, and, to a financial institution acting in good faith, appears to have a physical or mental illness, disability or deficiency, or lacks a sufficient understanding of, and the capacity to make, communicate or carry out decisions concerning, the management of the customer's savings or resources, who utilized or is utilizing any service of a financial institution, or for whom a financial institution is acting or has acted as a fiduciary, in relation to an account maintained in the person's name.
##### **§ 17:16T-3** Release of financial records to law enforcement agency, county adult protective services provider. {#sec-17-16t-3 omnilex-key=us-nj-statutes--title-17--17:16T-3}
3. Notwithstanding any other law, regulation or common law to the contrary, a financial institution may release the financial records regarding a customer's account to a law enforcement agency, a county adult protective services provider, or both if:
a. A vulnerable customer or a senior customer has a beneficial interest in the account either wholly or in part; and
b. The financial institution suspects that illegal activity is, or will be, taking place which involves the account including, but not limited to, defrauding any vulnerable or senior customer who has a beneficial interest in the account.
##### **§ 17:16T-4** Immunity from liability for financial institution. {#sec-17-16t-4 omnilex-key=us-nj-statutes--title-17--17:16T-4}
4. a. Any financial institution, or officer, employee, or agent thereof, making a disclosure of information pursuant to this act, shall not be liable to the customer under any law or regulation or common law of this State for that disclosure or for any failure to notify the customer of that disclosure.
b. A financial institution, or officer, employee, or agent thereof, which decides in good faith not to disclose information which it is permitted to disclose under this act regarding the account or relationship of a senior or vulnerable customer shall not be liable under any law or regulation or common law of this State for that decision.
## **Chapter 16U** {#struct-chapter-16u}
##### **§ 17:16U-1** Findings, declarations relative to voluntary compliance reviews by depository institutions {#sec-17-16u-1 omnilex-key=us-nj-statutes--title-17--17:16U-1}
1. The Legislature finds and declares that it is in the public interest for depository institutions in this State to conduct voluntary internal reviews and audits of their operations, practices and procedures for the purpose of discovering and correcting any operations, practices or procedures which do not comply with applicable law or regulation or which do not comply with recognized industry standards or with the institution's own standards and for the purpose of preventing continuing and more serious violations. However, if studies and reports beyond those legally required are available to third parties and potentially can result in liabilities and penalties to the institution, the institution is discouraged from making these additional efforts. A legal structure that promotes self-policing programs can achieve improved compliance effectively at less cost to the State and to the depository institutions. Voluntary compliance review, when properly conducted and implemented, results not only in better compliance with law, but in the adoption of procedures and policies by the depository institutions that exceed minimum legal requirements, and that save money by benefiting customers, lowering costs and reducing potential liabilities.
The Legislature therefore determines that it is the public policy of the State to encourage depository institutions to participate in voluntary compliance reviews and corrective action programs by protecting the results of voluntary compliance reviews from third parties. This privilege is intended to apply only to efforts beyond the normal processing of customer transactions of the institution, to protect reports newly created for the purpose of testing and monitoring compliance, which otherwise might not be undertaken. Information required to be maintained pursuant to any federal or State law or regulation or in the normal processing of customer transactions will not become privileged just because it is utilized or incorporated in a voluntary compliance review report.
##### **§ 17:16U-2** Definitions relative to voluntary compliance reviews by depository institutions {#sec-17-16u-2 omnilex-key=us-nj-statutes--title-17--17:16U-2}
2. As used in this act:
"Affiliate" shall have the meaning given it pursuant to section 2 of the federal "Bank Holding Company Act of 1956," 12 U.S.C. s.1841.
"Department" means the Department of Banking and Insurance.
"Depository institution" means a state or federally chartered bank, savings bank, savings and loan association or credit union that is authorized to maintain deposit or share accounts.
"Enforcement action" means a criminal investigation or prosecution, or an administrative proceeding or order by a governmental unit or authority which is intended to ensure the safe and sound operation of a depository institution.
"Voluntary compliance review" means review, project, testing program, assessment, audit or evaluation instituted by the governing body of the depository institution or an affiliate of the depository institution to collect information or prepare analyses, not required by statute or regulation and which would not be collected, maintained or prepared in the normal processing of customer transactions, of the transactions, activities, records or policies of the depository institution for the purposes of identifying and correcting procedural and operational problems of compliance with applicable laws and regulations, including without limitation, safe, sound and fair lending practices, financial reporting to federal and state regulatory agencies, compliance with all applicable state and federal laws and regulatory requirements, and compliance with industry standards of due care.
"Voluntary compliance review report" means any document or documents prepared or assembled by any person or group of persons, committee or entity conducting a voluntary compliance review, including without limitation, supporting information and documents such as notes, records of observations, findings, conclusions, drafts, memoranda, drawings, photographs, charts, graphs and surveys, provided, however, that the documents and supporting information are collected or developed for the purpose of and in the course of a voluntary compliance review.
##### **§ 17:16U-3** Report deemed privileged {#sec-17-16u-3 omnilex-key=us-nj-statutes--title-17--17:16U-3}
3. A voluntary compliance review report shall be privileged and neither it nor its existence shall be discoverable or admissible as evidence in any legal action or administrative proceeding of any nature involving the depository institution or an affiliate of the depository institution, except as provided in section 5 or 6 of this act.
##### **§ 17:16U-4** Privilege of persons involved in preparation of report {#sec-17-16u-4 omnilex-key=us-nj-statutes--title-17--17:16U-4}
4. Persons involved in the preparation of a voluntary compliance review report shall not be required to give answers to any questions or provide testimony regarding the existence, contents or conclusions of any voluntary compliance review report, except as provided in section 5 or 6 of this act.
##### **§ 17:16U-5** Privileges not applicable, conditions {#sec-17-16u-5 omnilex-key=us-nj-statutes--title-17--17:16U-5}
5. a. The provisions of sections 3 and 4 of this act shall not apply if:
(1) an enforcement action is taken, that enforcement action is contested, and a court of competent jurisdiction, by order in accordance with the rules of discovery set forth in the Rules Governing the Courts of the State of New Jersey, requires disclosure of materials and documents pertaining to that enforcement action;
(2) there is a statutory requirement that the violation identified or discovered as a result of the voluntary compliance review be reported.
b. The disclosure authorized under paragraphs (1) and (2) of subsection a. of this section shall apply only to those sections and portions of the voluntary compliance review report that pertain to the specific violation which is the subject of the enforcement action. All other sections and portions of the voluntary compliance review report shall remain privileged.
c. If there is a dispute concerning the sections or portions of the voluntary compliance review report subject to disclosure, a court of competent jurisdiction, upon petition of either party, shall conduct an in camera review of those sections or portions subject to dispute.
##### **§ 17:16U-6** Certain materials not considered privileged {#sec-17-16u-6 omnilex-key=us-nj-statutes--title-17--17:16U-6}
6. Materials described in this section shall not become privileged pursuant to the provisions of sections 3 and 4 of this act because they are utilized or incorporated in a voluntary compliance review report:
a. Documents, communications, data, reports or other information required to be collected, developed, maintained, reported or made available to a regulatory agency pursuant to any federal or State law, regulation, permit or order or in the normal processing of customer transactions.
b. Information obtained by observation, sampling or monitoring by any regulatory agency.
c. Information obtained from a source independent of the voluntary compliance review.
d. Information exchanged by and among the department and other appropriate regulators pursuant to an agreement between or among the regulatory agencies; provided, however, that notwithstanding this permitted exchange of information by the regulatory agencies, sections 3 and 4 of this act shall continue to apply with respect to a person who is not a regulatory agency.
##### **§ 17:16U-7** Use of privileged information prohibited; limited disclosure {#sec-17-16u-7 omnilex-key=us-nj-statutes--title-17--17:16U-7}
7. No person shall use any information privileged pursuant to this act to discover any other information and any information so discovered shall be inadmissible in any action or proceeding. If a court or an administrative law judge determines that any information is not privileged, it shall by the entry of appropriate protective orders ensure that information is disclosed only to the extent required for the proper conduct of the subject action or proceeding.
##### **§ 17:16U-8** Other privileges unaffected {#sec-17-16u-8 omnilex-key=us-nj-statutes--title-17--17:16U-8}
8. Nothing in this act shall limit, waive or abrogate the scope or nature of any statutory or common law privilege, including, without limitation, the work product doctrine and the attorney-client privilege.
##### **§ 17:16U-9** Circumvention of privilege prohibited {#sec-17-16u-9 omnilex-key=us-nj-statutes--title-17--17:16U-9}
9. No regulatory agency shall adopt a rule for the purpose of circumventing the privilege established in this act by requiring disclosure of a voluntary compliance review report.
##### **§ 17:16U-10** Information remains privileged; exceptions {#sec-17-16u-10 omnilex-key=us-nj-statutes--title-17--17:16U-10}
10. If a depository institution voluntarily discloses information it obtained from a voluntary compliance review to the department or to another appropriate regulatory agency, that information and the voluntary compliance review which resulted in the information shall remain subject to sections 3 and 4 of this act except that the agency receiving the information may use it with respect to an enforcement action. The regulatory agency, in deciding on the appropriate penalty or sanction for a violation shall consider the disclosure as a mitigating factor if the violation is disclosed within 60 days of completion of the voluntary compliance review and the depository institution responsible for the violation demonstrates and the regulator determines that the violation is not the result of knowing, purposeful, reckless or criminally negligent conduct, and that the institution has made or is making a good-faith effort to prevent similar violations.
##### **§ 17:16U-11** Access of third party restricted {#sec-17-16u-11 omnilex-key=us-nj-statutes--title-17--17:16U-11}
11. Nothing in this act shall be construed to permit any third party access to any voluntary compliance review report subject to the provisions of this act. For the purpose of this section, "third party" means a person other than a State or local enforcing agency.
## **Chapter 16V** {#struct-chapter-16v}
##### **§ 17:16V-1** Short title. {#sec-17-16v-1 omnilex-key=us-nj-statutes--title-17--17:16V-1}
1. This act shall be known and may be cited as the "Collateral Protection Insurance Act."
##### **§ 17:16V-2** Definitions relative to collateral protection insurance. {#sec-17-16v-2 omnilex-key=us-nj-statutes--title-17--17:16V-2}
2. As used in this act:
"Collateral" means all personal property used to secure payment or performance pursuant to a credit transaction.
"Collateral protection insurance" means insurance purchased by a creditor in which the creditor is made the loss payee or beneficiary providing coverage against loss or damage to collateral as a result of fire, theft, damage or other risks that would impair the creditor's interest in the collateral, which insurance is purchased as a result of the debtor's failure to provide evidence of insurance or failure to maintain insurance covering the collateral as required in a credit agreement. "Collateral protection insurance" shall not include (1) insurance to protect the creditor following completion of foreclosure and sale or repossession and sale of the collateral, (2) credit insurance or mortgage protection insurance, (3) credit life insurance or credit health insurance as defined in N.J.S.17B:29-2, (4) insurance issued to cover personal or real property of the debtor which is not required by the creditor and is purchased by the creditor voluntarily, or (5) title insurance. The fact that the insurance may have some other designation or title, such as "creditor placed insurance," shall not mean it is not collateral protection insurance as defined in this act.
"Cost of collateral protection insurance" or "cost" means the premium paid which premium includes all commissions and fees paid by the insurer, whether the commission is paid to the creditor, to a person or entity that is an affiliate of the creditor or to a person or entity that is unrelated to the creditor, or whether such commissions are for a fixed percentage. "Cost" shall also include all fees, penalties and administrative costs charged to the creditor upon cancellation of the collateral protection insurance but shall not include any placement charges or fees for the collateral protection insurance charged by the creditor.
"Credit agreement" means the open-end or closed-end loan agreement, promissory note, security agreement, sales agreement, line of credit agreement, contract or other document or documents that set forth the terms of the credit transaction.
"Credit transaction" means any transaction pursuant to which a creditor gives consideration for an obligation by a debtor to make payment or repayment at a future date or dates, which obligation is secured in whole or in part by collateral. "Credit transaction" includes, but is not limited to, an advance of money, opening a line of credit, a letter of credit and an installment sale.
"Creditor" means any entity chartered, licensed or otherwise authorized by law to provide credit through a credit transaction and includes successors and assignees of the original creditor.
"Debtor" means a natural person obligated to a creditor pursuant to a credit transaction in which the money, property or services which are the subject of the transaction are primarily for personal, family or household purposes, whether the obligation is primary or secondary, and includes all persons who are successors to a debtor.
##### **§ 17:16V-3** Collateral protection insurance, purchase by creditor. {#sec-17-16v-3 omnilex-key=us-nj-statutes--title-17--17:16V-3}
3. a. If the terms of the credit agreement require the debtor to obtain and continue to maintain insurance which designates the creditor as loss payee or beneficiary protecting against loss or damage to the collateral and the debtor has not obtained or does not maintain that insurance, a creditor may purchase collateral protection insurance as of the date of the debtor's failure to provide evidence of insurance or failure to maintain insurance covering the collateral, or at a later date at the option of the creditor, with the cost to be paid or reimbursed by the debtor.
b. Collateral protection insurance purchased by the creditor shall be effective: as of the date of the initial credit transaction, if insurance designating the creditor as loss payee or beneficiary protecting against loss or damage to the collateral is not purchased by the debtor; as of the date the required coverage lapsed, if purchased initially but not maintained by the debtor; or at a later date as determined by the creditor.
c. Within 14 calendar days following the placement of the collateral protection insurance, the creditor shall mail or cause a notice to be mailed to the debtor at the address on file with the creditor, by United States mail, first class, postage prepaid, informing the debtor that:
(1) as of (insert date), evidence that you have purchased or maintained the insurance required by the terms of your credit agreement has not been provided to the creditor, (name of creditor);
(2) collateral protection insurance has been purchased by the creditor from the following insurer (insert name of insurer), with respect to the following credit transaction: (insert type of credit transaction);
(3) you are responsible for the cost of the collateral protection insurance purchased by the creditor, which cost is $ for 12 months;
(4) the amount stated under paragraph (3) of this notice has been added to the principal balance in your account as of (indicate date); you will be required to pay interest on this amount at the same rate that is applied pursuant to your credit agreement. We estimate that this coverage will cost you an estimated: (insert total cost of collateral protection insurance and interest paid on that cost, based on the debtor making minimum required payments) over the duration of the loan. This cost is intended as a good faith estimate, and may not be accurate if you repay more quickly or slowly than the estimated term;
(5) all or part of the cost of the collateral protection insurance stated under paragraph (3) of this notice may be paid by you at any time and amounts paid will be applied to your account;
(6) the effective date of coverage of the collateral protection insurance purchased by the creditor is the date of the initial credit transaction, if you failed to obtain insurance coverage initially, or the date of the lapse of coverage, if you failed to maintain or renew your coverage, or on (specify date if on a later date as determined by the creditor pursuant to subsection b. of this section);
(7) the cost of the collateral protection insurance purchased by the creditor may be considerably more expensive than insurance you can obtain on your own;
(8) the amount of coverage will not be greater than the outstanding principal balance in your account as of the effective date of the collateral protection insurance purchased by the creditor, which may be less than the value of your property, and as a result, you may be underinsured;
(9) the coverage purchased by the creditor will not include any liability coverage for claims made against you and will not satisfy any mandatory liability insurance law or financial responsibility law of this or any other state;
(10) if you provide us with evidence that you have the required insurance, we shall cause the collateral protection insurance to be canceled as of the effective date of the coverage which you provide (as shown on the policy or other evidence of coverage sent to us), and any unearned premium, costs and interest applicable to the collateral protection insurance after that date will be applied to the balance of your account, and the excess, if any, will be paid to you;
(11) if you have insurance coverage in place, or if you have replaced the coverage, and it has been in place without any lapse in the coverage but you have failed to provide the creditor with evidence of that coverage, you may, within 30 days after this notice was mailed, provide the creditor evidence of the insurance coverage showing the creditor as loss payee or beneficiary, and the collateral protection insurance coverage placed by the creditor will be canceled and the creditor will deduct from your principal balance all costs of the collateral protection insurance purchased by the creditor, including any interest charged to your account as a result of the costs of that insurance being added to your principal balance;
(12) to provide us with evidence that you have the required insurance, send a copy of the policy or other evidence to: (insert the physical and electronic address of creditor); and
(13) the collateral protection insurance purchased on your behalf may be cancelled at any time. In order to cancel the collateral protection insurance without incurring any additional costs, you must provide us with evidence that you have the required insurance within 30 days following the date that this notice was mailed. The creditor-placed collateral protection insurance may be cancelled at any time after the 30 days have elapsed, but you will be required to pay for any period of time in which the creditor-placed collateral protection insurance was in place.
d. Paragraph (9) of the notice required in subsection c. of this section shall be in a larger type size than the other paragraphs in that notice, and in bold type.
e. The creditor shall inform the debtor, in the notice, that if the debtor has insurance coverage naming the creditor as loss payee or beneficiary in place, or has replaced the insurance coverage, without a lapse in coverage the debtor may provide the creditor with evidence of the required insurance at any time and the creditor shall cause the collateral protection insurance to be canceled as of the effective date of the coverage provided by debtor, and any unearned premium, costs and interest applicable to the collateral protection insurance after that date shall be applied to the balance of the debtor's account, and the excess, if any, shall be paid to the debtor.
f. If, within 30 days after the notice required by subsection c. of this section was mailed to the debtor, the debtor provides evidence of insurance coverage to the creditor and evidence that the insurance coverage required by the credit agreement is in place or has been replaced, without any lapse in the coverage, and the only failure to comply with the credit agreement was the failure to provide evidence of that coverage to the creditor in a timely fashion, then the creditor shall cancel the coverage placed by the creditor and, if the costs of purchasing collateral protection insurance have been added to the obligation of the borrower, deduct those costs from the debtor's obligation, including interest, and no costs for the purchase of collateral protection insurance by the lender shall be assessed against the borrower.
g. The costs charged to the debtor shall not be excessive or discriminatory. Any cost or element of cost which is approved by the Department of Banking and Insurance or filed with the department and not disapproved, pursuant to P.L.1944, c.27 (C.17:29A-1 et seq.) or P.L.1982, c.114 (C.17:29AA-1 et seq.), shall not be deemed to be excessive or discriminatory for the purposes of this act.
h. Within 60 days of the receipt of evidence of coverage, a creditor shall send the debtor a notice of receipt, a confirmation of cancellation of any creditor-placed insurance, and a revised scheduled payment that reflects the requirements of this section.
i. No creditor shall enter into a credit agreement that includes charges on the debtor for collateral protection insurance coverage, unless the following or substantially similar warning is provided on a separate document accompanying the credit agreement and signed by the debtor:
WARNING
UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS REQUIRED BY OUR CREDIT AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPER COVERAGE ELSEWHERE.
YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR LOAN BALANCE. IF THE COST IS ADDED TO THE LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING LOAN WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE OF COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.
THE COVERAGE WE PURCHASE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN AND WILL NOT SATISFY NEW JERSEY'S MANDATORY LIABILITY INSURANCE LAWS.
##### **§ 17:16V-4** Collateral protection insurance; effective date, face amount, term. {#sec-17-16v-4 omnilex-key=us-nj-statutes--title-17--17:16V-4}
4. a. The effective date of the collateral protection insurance policy purchased by the creditor shall not be sooner than the earlier of the date the debtor's insurance lapsed or the date that the debtor failed to provide evidence of insurance on the collateral.
b. The face amount of the collateral protection insurance policy shall not exceed the outstanding balance of the obligation as of the effective date of the coverage purchased by the creditor even though the coverage may exceed the actual cash value or cost of repair.
c. A collateral protection insurance policy term may, but need not, extend to the full life of the credit transaction.
##### **§ 17:16V-5** Termination, cancellation conditions. {#sec-17-16v-5 omnilex-key=us-nj-statutes--title-17--17:16V-5}
5. a. Collateral protection insurance shall terminate on the earliest of the following dates:
(1) the date other acceptable insurance coverage becomes effective, subject to the debtor providing evidence of the other insurance to the creditor, without regard to when such evidence is received by the creditor;
(2) the date the collateral is subject to the completion of foreclosure, including sale, or repossession or similar event, including sale, unless the property is returned to the debtor within 10 days;
(3) the date that there is no further balance due from the debtor to the creditor;
(4) the date specified in the collateral protection insurance policy; or
(5) the date the collateral is determined by the insurer to be a total loss.
b. If the collateral protection insurance is canceled and there is any unearned premium paid by the debtor which is refunded to the creditor, the creditor shall pay or credit the debtor with the amount of the refund pursuant to paragraph (10) of subsection c. of section 3 of P.L.1999, c.44 (C.17:16V-3). All statements of the loan balance and activity provided by the creditor to the debtor shall include all amounts debited or credited to the obligation due to the purchase and cancellation of collateral protection insurance.
##### **§ 17:16V-6** Obtaining insurance. {#sec-17-16v-6 omnilex-key=us-nj-statutes--title-17--17:16V-6}
6. Collateral protection insurance may be obtained from an insurance carrier chosen by the creditor which is licensed or otherwise authorized to provide such insurance in this State, and shall be set forth in an individual policy or certificate of insurance.
##### **§ 17:16V-7** Cause of action not created to debtor or third party; remedy; notification; exempt transactions. {#sec-17-16v-7 omnilex-key=us-nj-statutes--title-17--17:16V-7}
7. a. (1) A creditor that places, or a person that receives commissions or fees arising out of, collateral protection insurance shall not be liable to any debtor, guarantor or other party for the placement of collateral protection insurance, except:
(a) if the purchase of collateral protection insurance is the result of error by the creditor; or
(b) as provided in subsection f. of this section.
(2) If the creditor does not substantially comply with the provisions of this act in purchasing collateral protection insurance:
(a) the sole and exclusive remedy of the debtor is that the debtor does not have to pay for the insurance and any associated creditor fees or costs; and
(b) the commissioner may assess an administrative fee as provided in subsection e. of this section.
(3) A creditor is not, by virtue of this act, required to purchase collateral protection insurance or otherwise insure collateral.
b. This act shall not create a cause of action to the debtor or any third party:
(1) for the purchase or placement of collateral protection insurance in substantial compliance with the terms of this act;
(2) for not purchasing collateral protection insurance;
(3) as a result of the amount or level of coverage, geographical scope of coverage or deductible associated with collateral protection insurance purchased by the creditor;
(4) because the creditor purchases collateral protection insurance that protects only the interest of the creditor or less than all of the interest of the debtor; or
(5) nondisclosure of commissions or fees included in costs.
c. The list under subsection b. of this section does not imply that a cause of action is otherwise created by this act.
d. This act shall not apply to credit transactions involving extensions of credit primarily for business, commercial or agricultural purposes, and shall not be deemed to regulate or limit the rights of the parties to a business, commercial or agricultural transaction to contract for terms and provisions regarding insurance otherwise not prohibited by law.
e. (1) A creditor that fails to provide any notice to a debtor required pursuant to section 3 of P.L.1999, c.44 (C.17:16V-3) shall be liable to an administrative penalty not exceeding $25,000.
(2) A creditor that willfully violates any requirement of P.L.1999, c.44 (C.17:16V-1 et al.) shall be liable to an administrative penalty not exceeding $50,000.
(3) The administrative penalty authorized pursuant to this section may be recovered in a summary proceeding in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
f. If a creditor places collateral protection insurance on a debtor or fails to remove collateral protection insurance on a debtor, and the creditor has received evidence of coverage of the debtor as provided in section 3 of P.L.1999, c.44 (C.17:16V-3), the debtor shall have a civil cause of action in a court of competent jurisdiction for the premium, interest, and all related fees paid by the debtor, including attorney's fees. If the duplicative charges result in delinquency of the credit agreement or repossession of the collateral, the debtor shall be entitled to treble damages.
##### **§ 17:16V-8** Fiduciary relationship not imposed. {#sec-17-16v-8 omnilex-key=us-nj-statutes--title-17--17:16V-8}
8. Neither this act nor the purchase of collateral protection insurance nor receipt of commission or other consideration by the creditor shall impose a fiduciary relationship between the creditor and debtor. Placement of collateral protection insurance is for the purpose of protection of the interest of the creditor when the debtor fails to insure collateral as required by the credit transaction agreement.
##### **§ 17:16V-9** Remedies, rights, options unimpaired. {#sec-17-16v-9 omnilex-key=us-nj-statutes--title-17--17:16V-9}
9. This act shall not impair any other remedies, rights or options available to a creditor pursuant to law, regulation, ruling or contract.
##### **§ 17:16V-10** Notices to primary debtor. {#sec-17-16v-10 omnilex-key=us-nj-statutes--title-17--17:16V-10}
10. If a credit transaction involves more than one debtor, notices or warnings required to be mailed under this act, shall be mailed to any primary debtor.
##### **§ 17:16V-11** Applicability when debtor resides in State. {#sec-17-16v-11 omnilex-key=us-nj-statutes--title-17--17:16V-11}
11. This act shall apply to all credit transactions entered into in this State or if the debtor resides in this State, provided, however, that if the debtor resides in another state, compliance with that state's requirements regarding notice of purchase by the creditor of collateral protection insurance shall be deemed compliance with the notice provisions of this act.
##### **§ 17:16V-12** Transactions to which act applies. {#sec-17-16v-12 omnilex-key=us-nj-statutes--title-17--17:16V-12}
12. This act shall apply to all credit transactions whether entered into prior or subsequent to the effective date of this act but shall apply only to collateral protection insurance purchased after the effective date of this act.
## **Chapter 16W** {#struct-chapter-16w}
##### **§ 17:16W-1** Declaration regarding records retention {#sec-17-16w-1 omnilex-key=us-nj-statutes--title-17--17:16W-1}
1. The Legislature declares that it is in the public interest to require State chartered financial institutions to retain certain records for specified periods of time. Creating record retention requirements will assist financial institution regulators in their supervisory role and in the examination of financial institutions, help resolve disputes between financial institutions and others, and prevent fraud against financial institutions. This act is intended to promote simplification of financial institution administration by acting as a basis for parity and uniformity with respect to record retention requirements.
##### **§ 17:16W-2** Definitions regarding records retention {#sec-17-16w-2 omnilex-key=us-nj-statutes--title-17--17:16W-2}
2. As used in this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Date of the passbook" means the date of the last entry by the financial institution of a transaction with respect to the passbook account, or if the form of the passbook is such that it does not provide for entry of transactions, the last date for which the financial institution has a record of an account transaction. If there is no record of activity with respect to a passbook account subsequent to the issuance of the passbook, the date of issuance shall be the date of the passbook.
"Financial institution" means a State chartered bank, savings bank or savings and loan association.
"Owner" means the person or persons in whose name the account was opened.
"Passbook" means a document or record issued by a financial institution, which document or record represents an obligation of the financial institution, which obligation either has no fixed maturity or due date or which by its term is subject to automatic renewal or renewals for an indefinite time or indefinite number of times. Neither a periodic account statement nor any obligation for which applicable law provides a time by which the payment is due is a passbook for the purposes of this act.
"Passbook account" means an account which is evidenced by a passbook, certificate of deposit or similar document.
"Statement account" means an account which is not a passbook account and for which a financial institution supplies a periodic statement of the account's activity, balance or both, or supplies any other statement of the account as the owner and financial institution may agree.
"Termination of the loan account" means: (1) with respect to a closed-end loan, the date on which the loan is paid; or (2) with respect to an open-end loan, the date on which the outstanding balance on the account is brought to zero and the account is closed so that the borrower has no right to borrow additional funds under the loan agreement; or (3) the date upon which, pursuant to action or policy of the governing board of a financial institution or committee thereof, a loan is charged-off or the loan file is otherwise closed by the financial institution.
##### **§ 17:16W-3** Statement accounts, certificates of deposit, passbook accounts; records {#sec-17-16w-3 omnilex-key=us-nj-statutes--title-17--17:16W-3}
3. A financial institution shall retain records of its accounts as follows:
a. Statement accounts:
(1) Records of transactions in a statement account sufficient to reconstruct the account and to trace checks, drafts and other orders shall be retained for not less than six years.
(2) Account opening records shall be retained for as long as the account is open, plus not less than six years after the closing of the account.
(3) Account closing records shall be retained for not less than six years after the closing of the account.
(4) A record of the last transaction or contact with the owner, pursuant to section 1 of P.L.1989, c.58 (C.46:30B-18), shall be retained for not less than 10 years after the date of the transaction or contact, as applicable.
b. Certificates of deposit which have a specific maturity date and which are not automatically renewed:
(1) Records of the account opening, transactions regarding the account, if any, and the closing of the account shall be retained for not less than six years following the stated maturity date.
(2) A record of the most recent transaction shall be retained for not less than 10 years after the date of the transaction.
c. Passbook accounts:
(1) Records of transactions in a passbook account sufficient to reconstruct the account shall be retained for a period of not less than six years.
(2) Account opening records shall be retained for as long as the account is open, plus not less than six years after the closing of the account.
(3) Account closing records shall be retained for not less than 15 years after the closing of the account.
(4) A record of the last transaction or contact with the owner, pursuant to section 1 of P.L.1989, c.58 (C.46:30B-18), shall be retained for not less than 10 years after the date of the transaction or contact, as applicable.
##### **§ 17:16W-4** Passbook payment with no financial institution records {#sec-17-16w-4 omnilex-key=us-nj-statutes--title-17--17:16W-4}
4. The following rules shall apply if a passbook is presented to a financial institution for payment and the financial institution has no record of the account and there is no record of payment of the account to the State pursuant to any applicable escheat or unclaimed property act:
a. If the presentation of the passbook is made by a successor of the owner more than 15 years after the date of the passbook, there shall be a rebuttable presumption that the account was paid in full to or on behalf of the owner or to a successor of the owner. The passbook itself does not rebut this presumption.
b. If the presentation of the passbook is made by a successor of the owner within 15 years after the date of the passbook, there shall be a rebuttable presumption that the account exists and the financial institution is obligated to the owner's heirs, successors or personal representatives. An affidavit of lost passbook by the owner or successor to the owner made prior to the presentation of the passbook shall rebut the presumption of nonpayment and shall create a presumption that the account was duly paid in full to or on behalf of the owner or to a successor to the owner by the financial institution.
c. If the presentation of the passbook is made by the owner, and the presentation is accompanied by a sworn certificate of the owner that the owner never received payment of the account nor transferred the account, there shall be a rebuttable presumption that the account exists and that the financial institution is holding the account for the benefit of the owner. An affidavit of lost passbook by the owner or successor to the owner made prior to the presentation of the passbook shall rebut the presumption of nonpayment and shall create a presumption that the account was duly paid in full to or on behalf of the owner or to a successor to the owner by the financial institution.
##### **§ 17:16W-5** Loan, collateralized loans; records {#sec-17-16w-5 omnilex-key=us-nj-statutes--title-17--17:16W-5}
5. A financial institution shall retain records relating to the making, collection and administration of loans as follows:
a. For all loans:
(1) Records of dispositive or final judgments in bankruptcies or other litigation involving a loan, and termination of loan accounts shall be retained for at least six years after the termination of the loan account.
(2) (Deleted by amendment, P.L.2001, c.169.)
(3) Records of approval of loans or credit shall be retained for not less than six years after the closing of the loan or credit files.
(4) Records of denials of loan applications shall be retained for not less than 25 months after the date of the denial.
(5) Loan files, including copies of records regarding collateral and the perfection of security interests, guarantees and other records from time to time specified for retention by regulation adopted by the commissioner, shall be retained for not less than six years after the termination of the loan account. For lines of credit and open-end loans, records of transactions shall be retained for six years after the date of a transaction.
(6) Loan committee minutes shall be retained for not less than six years after the date of the committee meeting.
(7) Record of compliance with all applicable State and federal regulatory requirements shall be retained for the period specified in the applicable State or federal law or regulation. If no record retention period is specified in the law or regulation, the financial institution shall retain the records necessary to show compliance for not less than six years.
b. Collateralized loans:
(1) Records identifying the collateral perfection of the financial institution's security interest in the collateral and, for tangible personal property, the place and method of possession of the collateral shall be retained for not less than six years after the termination of the loan account.
(2) Records of the disposition by a financial institution of collateral that is personal property shall be retained for not less than six years after the date of disposition.
(3) For collateral that is real estate, records regarding the transfer of title by the financial institution shall be retained for at least six years after the date of transfer of title. Records of dispositive or final judgments or orders in foreclosure proceedings shall be retained for not less than six years after the date of the judgment of foreclosure or if no judgment, from the date of the termination of those proceedings.
(4) Records of escrow analyses and statements and of transactions in escrow accounts shall be retained for not less than six years.
##### **§ 17:16W-6** Records of checks, drafts, etc., six year retention {#sec-17-16w-6 omnilex-key=us-nj-statutes--title-17--17:16W-6}
6. A financial institution shall retain records of checks, drafts, money orders and cashier's checks issued by it for not less than six years after the date of issue. Records of certified checks and electronic transfers and of other means of transferring funds from the financial institution shall be retained for not less than six years after the date of transfer of the funds.
##### **§ 17:16W-7** Other records, records retention {#sec-17-16w-7 omnilex-key=us-nj-statutes--title-17--17:16W-7}
7. A financial institution shall maintain records relating to safe deposit boxes, which records include access records, access agreements, lease agreements, signature cards, records of payment for the rental or use of the box, power of attorney and records of abandoned property, for a period of not less than six years after the date of termination of the lease or access agreement. Correspondence which is not included as a record shall be retained for not less than three years after the date of the correspondence.
##### **§ 17:16W-8** Retention time period {#sec-17-16w-8 omnilex-key=us-nj-statutes--title-17--17:16W-8}
8. If any records are subject to the provisions of more than one of the time periods for the retention of records specified in sections 3 through 7 of this act, the longest time period for which those records are required to be retained shall be applicable.
##### **§ 17:16W-9** Retention period for records not covered by this act {#sec-17-16w-9 omnilex-key=us-nj-statutes--title-17--17:16W-9}
9. For any records not specifically covered by this act and for which there is no applicable state or federal retention period prescribed, the Commissioner of Banking and Insurance may, by regulation, establish minimum record retention requirements. Any regulations shall be consistent with retention periods for federally chartered banks and savings banks and should reflect the legislative intent of this act to provide parity and uniformity among financial institutions.
##### **§ 17:16W-10** Claims where records not required to be retained, statutes of limitations not affected; requirements {#sec-17-16w-10 omnilex-key=us-nj-statutes--title-17--17:16W-10}
10. a. In the event of any claim against a financial institution where the claimant relies in any way on records of the financial institution, which records are not required to be retained by the financial institution by the terms of this act or by other applicable State or federal record retention statutes or regulations and the records have not been retained by the financial institution, the fact that the financial institution does not have the records shall not give rise to any inference or presumption against the financial institution as to the content of the records nor shall the lack of the records shift any burden of proof from the claimant to the financial institution.
b. Nothing in this act shall be deemed to amend or alter any statute of limitations.
c. Nothing in P.L.1999, c.257 (C.17:16W-1 et seq.) shall be interpreted to require a financial institution to create any data or, except as specifically provided in that act, to retain any records that would not otherwise be created or retained. Records required to be retained by P.L.1999, c.257 (C.17:16W-1 et seq.) may be preserved in any form permitted by section 247 of P.L.1948, c.67 (C.17:9A-247).
##### **§ 17:16W-11** Applicability {#sec-17-16w-11 omnilex-key=us-nj-statutes--title-17--17:16W-11}
11. The provisions of this act shall apply to all financial institutions chartered by this State and to the records of out-of-State banks, savings banks and savings and loan associations which relate to accounts, loans or other transactions which are made or located in this State. The provisions of section 4 of P.L.1999, c.257 (C.17:16W-4) shall apply to federally chartered banks and savings banks in this State to the extent that they are not inconsistent with applicable federal law.
## **Chapter 16X** {#struct-chapter-16x}
##### **§ 17:16X-1** Definitions regarding subsidiary mergers {#sec-17-16x-1 omnilex-key=us-nj-statutes--title-17--17:16X-1}
1. For purposes of this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Financial institution" means a bank, savings bank or savings and loan association.
"Subsidiary" means a corporation, limited liability company, partnership or other entity in which a financial institution owns not less than 80% of that entity's equity.
##### **§ 17:16X-2** Conditions of merger {#sec-17-16x-2 omnilex-key=us-nj-statutes--title-17--17:16X-2}
2. A financial institution may merge with any one or more of its subsidiaries, so long as the financial institution is the entity that survives the merger as the continuing entity, subject to the terms and conditions set forth in this act.
##### **§ 17:16X-3** Merger's legal compliance {#sec-17-16x-3 omnilex-key=us-nj-statutes--title-17--17:16X-3}
3. Mergers of a financial institution and a subsidiary of a financial institution pursuant to this act shall comply with and require the commissioner's approval pursuant to the provisions of law applicable to a merger of the surviving financial institution.
##### **§ 17:16X-4** Merger plan contents {#sec-17-16x-4 omnilex-key=us-nj-statutes--title-17--17:16X-4}
4. The governing board of the financial institution shall adopt a plan of merger for a merger pursuant to this act between the financial institution and a subsidiary other than a financial institution setting forth:
a. The name of the financial institution and the name and type of business entity of each subsidiary which proposes to merge into the financial institution which is to be the surviving entity;
b. The terms and conditions of the proposed merger, including a statement of any amendments in the certificate of incorporation of the financial institution;
c. The manner and basis of converting the shares or other interests in the subsidiary or subsidiaries into shares of the financial institution, or the basis for payment of interests which are not to be so converted; and
d. Such other provisions with respect to the proposed merger as are deemed necessary or desirable by the commissioner.
##### **§ 17:16X-5** Adoption of merger plan {#sec-17-16x-5 omnilex-key=us-nj-statutes--title-17--17:16X-5}
5. The governing board of a subsidiary shall adopt a plan of merger pursuant to the provisions of the law under which the subsidiary was created.
##### **§ 17:16X-6** Application for commissioner's approval {#sec-17-16x-6 omnilex-key=us-nj-statutes--title-17--17:16X-6}
6. A financial institution shall apply for the commissioner's approval to merge with a subsidiary other than a financial institution, and shall provide the information as required by this act and by rules and regulations adopted by the commissioner. An application shall be deemed approved on the 30th day after receipt by the commissioner, unless approved or disapproved earlier by the commissioner in writing.
##### **§ 17:16X-7** Merger deemed effective from filing of certification {#sec-17-16x-7 omnilex-key=us-nj-statutes--title-17--17:16X-7}
7. A merger between a financial institution and a subsidiary other than a financial institution shall be effective from the filing with the commissioner of a certification of the president or a vice president of the financial institution setting forth that all of the conditions and requirements of this act and the commissioner's approval, if applicable, have been satisfied. When the merger has become effective:
a. The parties to the merger shall be a single corporation, which shall be the financial institution.
b. The separate existence of the subsidiary or subsidiaries which are parties to the plan of merger shall cease.
c. The financial institution shall possess all the rights, privileges, powers, immunities, purposes and franchises of each merging subsidiary except for any power or authority of a subsidiary which is not permitted to the financial institution by law.
d. All the real property and personal properties, tangible and intangible, of every kind and description belonging to each of the parties merged, and any action existing or proceeding pending by or against any such party, may be enforced as if the merger had not taken place. Neither the rights of any creditors nor any liens upon, or security interest in, the property of any party to the merger shall be impaired by the merger.
##### **§ 17:16X-8** Dissention from the merger {#sec-17-16x-8 omnilex-key=us-nj-statutes--title-17--17:16X-8}
8. Any holder of an interest in a subsidiary to be merged, including a shareholder, partner or member, shall have the right to dissent from the merger as set forth in this section.
a. A holder of an interest may not dissent as to less than all of the holder's interest owned beneficially by the holder. A nominee or fiduciary may not dissent on behalf of any beneficial owner as to less than all of the interest of each such owner with respect to which the right of dissent exists.
b. If a subsidiary party to a plan of merger is a corporation subject to the provisions of N.J.S.14A:1-1 et seq., except as now or hereafter may be provided therein, the shareholder of the subsidiary shall have the rights of a dissenting shareholder, including the right to accept a fair value for the stock all as set forth in N.J.S.14A:11-1 et seq., and the procedure to obtain fair value as set forth therein shall be followed. Holders of interests in other entities which are subsidiaries shall have the same dissenter's rights, if any, as provided in the statutes governing those entities. If the applicable statutes do not provide a right to dissent and obtain fair value, nothing in this act shall be deemed to provide such a remedy.
## **Chapter 16Y** {#struct-chapter-16y}
##### **§ 17:16Y-1** Use of trade name, trademark of depository institution. {#sec-17-16y-1 omnilex-key=us-nj-statutes--title-17--17:16Y-1}
1. No person shall use or reference the trade name or trademark of a depository institution, its affiliate or subsidiary or a trade name or trademark similar to that of a depository institution, its affiliate or subsidiary in any solicitation for services or products without the consent of the depository institution, affiliate or subsidiary.
##### **§ 17:16Y-2** Use of consumer's loan information. {#sec-17-16y-2 omnilex-key=us-nj-statutes--title-17--17:16Y-2}
2. No person shall use or reference a consumer's loan number, loan amount or other specific loan information, whether publicly available or not, in any solicitation for services or products without the consent of the depository institution, affiliate or subsidiary.
##### **§ 17:16Y-3** Use of depository institution trade name, trademark to deceive consumer. {#sec-17-16y-3 omnilex-key=us-nj-statutes--title-17--17:16Y-3}
3. No person shall use the trade name or trademark of a depository institution, its affiliate or subsidiary or a trade name or trademark similar to that of a depository institution, its affiliate or subsidiary in any advertisement or solicitation for services or products when that use could cause any reasonable person to be confused, mistaken or deceived, initially or otherwise, as to the sponsorship, affiliation, connection or association of that person using the trade name or trademark with the depository institution, affiliate or subsidiary or as to the approval of that person using the trade name or trademark by the depository institution, affiliate or subsidiary.
##### **§ 17:16Y-4** Violations, penalties. {#sec-17-16y-4 omnilex-key=us-nj-statutes--title-17--17:16Y-4}
4. a. A person who violates the provisions of this act shall be liable to a penalty of $1,000 for each violation. The penalty shall be collected by the Commissioner of Banking and Insurance in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). The penalty provided by this section shall be in addition to any other penalty provided under applicable law.
b. In addition to the penalties of subsection a. of this section, the Commissioner of Banking and Insurance shall order any person in violation of this act to cease their unlawful practices.
##### **§ 17:16Y-5** Regulations. {#sec-17-16y-5 omnilex-key=us-nj-statutes--title-17--17:16Y-5}
5. The Commissioner of Banking and Insurance shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as necessary to effectuate the purposes of this act.
## **Chapter 16Z** {#struct-chapter-16z}
##### **§ 17:16Z-1** Short title. {#sec-17-16z-1 omnilex-key=us-nj-statutes--title-17--17:16Z-1}
1. This act shall be known and may be cited as the "Banking Development District Act."
##### **§ 17:16Z-2** Definitions relative to banking development districts. {#sec-17-16z-2 omnilex-key=us-nj-statutes--title-17--17:16Z-2}
2. As used in this act:
"Bank" means a State or federally chartered bank, savings bank, savings and loan association, or credit union doing business in the State.
"Banking services" means deposit taking, check cashing, sale of money orders, and origination of residential or commercial mortgages, consumer loans, and commercial loans.
"Branch" means a full service branch office of a bank, providing banking services with tellers, customer service representatives, and loan officers available at least 40 hours per week.
"Commissioner" means the Commissioner of Banking and Insurance.
"Department" means the Department of Banking and Insurance.
"District" means a banking development district approved under this act.
"Program" means the Banking Development District Program established pursuant to this act.
##### **§ 17:16Z-3** Banking Development District Program. {#sec-17-16z-3 omnilex-key=us-nj-statutes--title-17--17:16Z-3}
3. There is established in the department, the Banking Development District Program. The commissioner shall administer and monitor the program to encourage the establishment of bank branches in geographic locations in this State where there is a demonstrated need for banking services by the establishment of banking development districts.
##### **§ 17:16Z-4** Rules, regulations setting forth criteria for establishment of banking development districts. {#sec-17-16z-4 omnilex-key=us-nj-statutes--title-17--17:16Z-4}
4. The department shall promulgate rules and regulations which set forth the criteria for the establishment of banking development districts. The criteria shall include, but not be limited to, the following:
a. The location, number, and proximity of sites where banking services are currently available within the district;
b. The identification of consumer needs for banking services within the district;
c. The economic viability and local credit needs of the community within the district;
d. The existing commercial development within the district;
e. The impact additional banking services would have on potential economic development in the district; and
f. Such other criteria that the commissioner shall identify as appropriate.
##### **§ 17:16Z-5** Application for designation of banking development district. {#sec-17-16z-5 omnilex-key=us-nj-statutes--title-17--17:16Z-5}
5. a. A municipality, in conjunction with a bank, may submit an application to the commissioner for the designation of a banking development district within a specified geographic area.
b. The commissioner shall issue a determination as to an application for designation as a district within 60 days of receipt of the application. If an application is approved, the commissioner shall transmit notification of the approval to the municipality requesting the district, the State Treasurer, and any bank which has or will have a branch located in the district.
c. A bank may submit an application to open a branch in the requested banking development district, subject to all applicable federal and State laws regarding the establishment of branch offices, simultaneously with the submission of the application for the designation of a banking development district.
##### **§ 17:16Z-6** Selection of bank as depository for public moneys, funds. {#sec-17-16z-6 omnilex-key=us-nj-statutes--title-17--17:16Z-6}
6. a. Notwithstanding the provisions of section 1 of P.L.1956, c.174 (C.52:18-16.1) or any other law to the contrary, the State Treasurer may select a bank in a district as a depository for public moneys or funds that are otherwise in the custody of the State Treasurer.
b. Subject to an agreement between the State Treasurer and the bank, funds of the State deposited in the bank may earn a fixed rate of interest which is at or below the bank's posted rate for a mutually agreeable depository product, for a mutually agreeable term.
##### **§ 17:16Z-7** Selection of bank as depository of funds of municipality. {#sec-17-16z-7 omnilex-key=us-nj-statutes--title-17--17:16Z-7}
7. a. The governing body of a municipality in which a banking development district has been designated by the commissioner may, by resolution, select a bank in the district as a depository for funds of the municipality, provided the bank shall be subject to the requirements for a public depository established pursuant to P.L.1970, c.236 (C.17:9-41 et seq.). The resolution shall state the maximum amount which may be on deposit at any time with the bank and such other terms and conditions as are determined to be necessary by the governing body of the municipality.
b. Subject to an agreement between the governing body of the municipality and the bank, funds of the municipality deposited in the bank may earn a fixed rate of interest which is at or below the bank's posted rate for a mutually agreeable depository product, for a mutually agreeable term.
c. The selection of a bank, deposit amount, and the terms and conditions of a deposit may be changed at any time by the governing body of the municipality by further resolution.
##### **§ 17:16Z-8** Rules, regulations. {#sec-17-16z-8 omnilex-key=us-nj-statutes--title-17--17:16Z-8}
8. The Department of Banking and Insurance shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.
## **Chapter 16ZZ** {#struct-chapter-16zz}
##### **§ 17:16ZZ-1** Definitions relative to regulation of student loan servicers. {#sec-17-16zz-1 omnilex-key=us-nj-statutes--title-17--17:16ZZ-1}
1. As used in this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"National Mortgage Licensing System and Registry" means the licensing system owned and operated by the State Regulatory Registry LLC, a wholly owned subsidiary of the Conference of State Bank Supervisors, which functions as a system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and United States Territories of Puerto Rico, the United States Virgin Islands, and Guam, where it is the official system for companies and individuals seeking to apply for, amend, renew and surrender license authorities.
"Ombudsman" means the Student Loan Ombudsman appointed pursuant to section 2 of this act.
"Servicing" means:
a. receiving any scheduled periodic payments from a student loan borrower or notification of such payments, and applying payments to the borrower's account pursuant to the terms of the student education loan or the contract governing the servicing of the loan;
b. during a period when no payment is required on the student education loan, maintaining account records for the loan and communicating with the student loan borrower regarding the loan, on behalf of the holder of the loan; or
c. interacting with a student loan borrower to facilitate the loan servicing as described in this definition, including activities to help prevent loan default on obligations arising from a student education loan.
"Student education loan" means a loan that is extended to a student loan borrower expressly to finance postsecondary education expenses or other school-related expenses and shall not include open-end credit or any loan secured by real property.
"Student loan borrower" means any resident of this State who has received or agreed to pay a student education loan; or any person who shares responsibility with a resident for repaying a student education loan.
"Student loan servicer" means any person, wherever located, responsible for the servicing of any student education loan to any student loan borrower.
##### **§ 17:16ZZ-2** Student Loan Ombudsman. {#sec-17-16zz-2 omnilex-key=us-nj-statutes--title-17--17:16ZZ-2}
2. a. The commissioner shall designate a Student Loan Ombudsman within the Department of Banking and Insurance to carry out the duties and activities set forth in section 3 of this act. Contingent on the availability of funding, the department may hire additional staff as necessary to implement this act.
b. The ombudsman shall receive and review complaints from student loan borrowers. Any complaint received by the ombudsman in regard to a student loan servicer shall be referred to the commissioner. The ombudsman and the commissioner shall confer annually regarding student loan servicer complaints, the proper referral process for the complaints, and the ombudsman reporting requirement established pursuant to section 3 of this act.
##### **§ 17:16ZZ-3** Duties of the ombudsman; education course; reports. {#sec-17-16zz-3 omnilex-key=us-nj-statutes--title-17--17:16ZZ-3}
3. a. The commissioner shall ensure that the ombudsman:
(1) receive, review, and attempt to resolve any complaints from student loan borrowers, including, but not limited to, attempts to resolve those complaints in collaboration with institutions of higher education, student loan servicers, and any other participants in student education loan lending;
(2) compile and analyze data on student loan borrower complaints as described in paragraph (1) of this subsection;
(3) assist student loan borrowers to understand their rights and responsibilities under the terms of student education loans;
(4) provide information to the public, agencies, legislators, and others regarding the problems and concerns of student loan borrowers, and make recommendations for resolving those problems and concerns;
(5) analyze and monitor the development and implementation of federal, State, and local laws, regulations, and policies relating to student loan borrowers and recommend any changes the Student Loan Ombudsman deems necessary;
(6) review the complete student education loan history for any student loan borrower who has provided written consent for review;
(7) disseminate information concerning the availability of the Student Loan Ombudsman to assist student loan borrowers and potential student loan borrowers, including disseminating the information to institutions of higher education, student loan servicers, and any other participant in student education loan lending, with any student loan servicing concerns; and
(8) take any other actions necessary to fulfill the duties of the Student Loan Ombudsman as set forth in this section.
b. No later than October 1, 2020, the commissioner shall ensure that the Student Loan Ombudsman and the Higher Education Student Assistance Authority establish and maintain a student loan borrower education course that shall include educational presentations and materials regarding student education loans. The program shall include, but not be limited to, key loan terms, documentation requirements, monthly payment obligations, income-based repayment options, loan forgiveness, and disclosure requirements.
c. No later than 12 months following the date of appointment of the ombudsman pursuant to section 2 of this act, and annually thereafter, the Student Loan Ombudsman shall submit a report to the Commissioner of Banking and Insurance and the Secretary of Higher Education. The ombudsman shall report on: (1) the implementation of this section; (2) the overall effectiveness of the Student Loan Ombudsman position; and (3) additional steps that need to be taken for the Department of Banking and Insurance to gain regulatory control over the licensing and enforcement of student loan servicers.
##### **§ 17:16ZZ-4** Licensure for student loan servicers. {#sec-17-16zz-4 omnilex-key=us-nj-statutes--title-17--17:16ZZ-4}
4. a. (1) No person shall act as a student loan servicer, directly or indirectly, without first obtaining a license from the commissioner under subsection b. of this section, unless that person is exempt from licensure pursuant to paragraph (2) of this subsection.
(2) The following persons are exempt from subsection a. of this section: (a) any State or federally chartered bank, savings bank, savings and loan association, or credit union; (b) any wholly owned subsidiary of any bank or credit union; and (c) any operating subsidiary where each owner of the operating subsidiary is wholly owned by the same bank or credit union.
b. Any person seeking to act within this State as a student loan servicer shall make a written application to the commissioner for an initial license in the form prescribed by the commissioner utilizing the Nationwide Mortgage Licensing System and Registry. The application shall be accompanied by:
(1) a financial statement prepared by a certified public accountant or a public accountant, the accuracy of which is sworn to under oath before a notary public by the applicant, proprietor, a general partner or a corporate officer, or a member duly authorized to execute those documents;
(2) (a) the history of criminal convictions of the: (i) applicant; (ii) partners, if the applicant is a partnership; (iii) members, if the applicant is a limited liability company or association; or (iv) officers, directors and principal employees, if the applicant is a corporation; and
(b) sufficient information pertaining to the history of criminal convictions of that applicant, partners, members, officers, directors or principal employees as the commissioner deems necessary to make the findings under subsection c. of this section;
(3) a nonrefundable license fee of $5,000;
(4) a nonrefundable investigation fee in such amount as determined by the commissioner; and
(5) a fee paid to the Nationwide Mortgage Licensing System and Registry as established by that entity.
The commissioner may conduct a State and national criminal history records check of the applicant and of each partner, member, officer, director and principal employee of the applicant.
c. Upon the filing of an application for an initial license and the payment of the fees for license and investigation, the commissioner shall investigate the financial condition and responsibility, financial and business experience, character and general fitness of the applicant. The commissioner may issue a license if the commissioner finds that:
(1) the applicant's financial condition is sound;
(2) the applicant's business will be conducted honestly, fairly, equitably, carefully and efficiently within the purposes and intent of this act, and in a manner commanding the confidence and trust of the community;
(3) (a) if the applicant is an individual, the individual is in all respects properly qualified and of good character;
(b) if the applicant is a partnership, each partner is in all respects properly qualified and of good character;
(c) if the applicant is a corporation or association, the president, chairperson of the executive committee, senior officer responsible for the corporation's business and chief financial officer or any other person who performs similar functions as determined by the commissioner, each director, each trustee and each shareholder owning 10 percent or more of each class of the securities of the corporation is in all respects properly qualified and of good character; or
(d) if the applicant is a limited liability company, each member is in all respects properly qualified and of good character;
(4) neither the applicant nor any person on behalf of the applicant knowingly has made any incorrect statement of a material fact in the application, or in any report or statement made pursuant to this act;
(5) neither the applicant nor any person on behalf of the applicant knowingly has omitted to state any material fact necessary to give the commissioner any information lawfully required by the commissioner;
(6) the applicant has paid the investigation fee and the license fee required under subsection b. of this section; and
(7) the applicant has met any other similar requirements as determined by the commissioner.
d. A license issued pursuant to subsection c. of this section shall expire at the close of business on December 31 of the year of its issuance, unless renewed or earlier surrendered, suspended or revoked pursuant to this act. Not later than 15 days after a licensee ceases to engage in the business of student loan servicing in this State for any reason, including a business decision to terminate operations in this State, license revocation, bankruptcy or voluntary dissolution, the licensee shall provide written notice of surrender to the commissioner and shall surrender to the commissioner its license for each location in which the licensee has ceased to engage in business. The written notice of surrender shall identify the location where the records of the licensee will be stored and the name, address and telephone number of an individual authorized to provide access to the records. The surrender of a license does not reduce or eliminate the licensee's civil or criminal liability arising from acts or omissions occurring prior to the surrender of the license, including any administrative actions undertaken by the commissioner to revoke or suspend a license, assess a civil penalty, order restitution or exercise any other authority provided to the commissioner.
e. A license may be renewed for the ensuing 12-month period upon the filing of an application containing all required documents and fees as provided in subsection b. of this section. The renewal application shall be filed on or before December 1 of the year in which the license expires. Any renewal application filed with the commissioner after December 1 shall be accompanied by a late fee of $100 per day. A license will not be renewed until the license fee and any applicable late fees have been received. If an application for a renewal license has been filed with the commissioner on or before the date the license expires, the license sought to be renewed shall continue in full force and effect until the issuance by the commissioner of the renewal license applied for or until the commissioner has notified the licensee in writing of the commissioner's refusal to issue the renewal license together with the grounds upon which that refusal is based. The commissioner may refuse to issue a renewal license on any ground on which the commissioner might refuse to issue an initial license.
f. The applicant or licensee shall notify the commissioner, in writing, of any change in the information provided in its initial application for a license or its most recent renewal application for the license, as applicable, not later than 10 business days after the occurrence of the event that results in the information becoming inaccurate.
g. The commissioner may deem an application for a license abandoned if the applicant fails to respond to any request for information required under this act. The commissioner shall notify the applicant, in writing, that if the applicant fails to submit any information not later than 60 days after the date on which the request for information was made, the application shall be deemed abandoned. An application filing fee paid prior to the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application pursuant to this subsection shall not preclude the applicant from submitting a new application for a license under the provisions of this act.
##### **§ 17:16ZZ-5** Issuance of license. {#sec-17-16zz-5 omnilex-key=us-nj-statutes--title-17--17:16ZZ-5}
5. The commissioner shall automatically issue a limited, irrevocable license to any person servicing a student loan under contract with the United States Department of Education as follows:
a. Any person seeking to act within this State as a student loan servicer is exempt from the application procedures established pursuant to subsection b. of section 4 of this act, other than the requirements of paragraph (3) and paragraph (4), to the extent that the student loan servicing performed in this State is conducted pursuant to a contract awarded by the United States Secretary of Education under 20 U.S.C. s.1087f. The procedure to document eligibility for the exemption shall be prescribed by the commissioner.
b. Any person deemed exempt by the commissioner pursuant to subsection a. of this section shall be issued a license by the commissioner for the servicing of student loans under contract with the United States Department of Education and shall be considered by the commissioner to have met all requirements established in subsection c. of section 4 of this act.
c. The provisions of subsections d. through g. of section 4 of this act and subsection a. of section 10 of this act shall not be applicable to a person issued a limited license pursuant to this section to the extent that the person is servicing federal student loans. A person shall not be exempt from subsections d. through g. of section 4 of this act or subsection a. of section 10 to the extent that the person is also servicing non-federal loans.
d. Any person issued a license pursuant to this section shall provide the commissioner with written notice within seven days following the notification of the expiration, revocation, or termination of any contract awarded by the United States Secretary of Education under 20 U.S.C s.1087f. The person shall have 30 days to satisfy all requirements established under this act in order to continue to act within this State as a student loan servicer unless the person is also licensed to service non-federal loans in New Jersey. At the expiration of the 30-day period, if the person has not satisfied the requirements established pursuant to this act, the commissioner shall immediately suspend any license granted under this section.
e. In the case of student loan servicing that is not conducted pursuant to a contract awarded by the United States Secretary of Education under 20 U.S.C. s.1087f, nothing in this section shall prevent the commissioner from issuing an order to temporarily or permanently prohibit any person from acting as a student loan servicer.
f. In the case of student loan servicing conducted pursuant to a contract awarded by the United States Secretary of Education under 20 U.S.C s.1087f, nothing in the section shall prevent the commissioner from issuing a cease and desist or injunction against any student loan servicer to cease activities in violation of this act or the New Jersey consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.).
##### **§ 17:16ZZ-6** Student loan servicer to use name, location on license; surety bond. {#sec-17-16zz-6 omnilex-key=us-nj-statutes--title-17--17:16ZZ-6}
6. a. No person licensed to act within this State as a student loan servicer shall do so under any other name or at any other place of business than that named in the license. Any change of location of a place of business of a licensee shall require prior written notice to the commissioner. Not more than one place of business shall be maintained under the same license but the commissioner may issue more than one license to the same licensee upon compliance with the provisions of this act as to each new licensee. A license shall not be transferable or assignable.
b. A student loan servicer shall keep on file with the commissioner a surety bond obtained from a surety company authorized to transact business in this State in an amount of not less than $30,000. The commissioner shall, by regulation, provide who shall be eligible to receive the protection afforded by the bond and may increase the required bond amount, if he determines it to be necessary. When an action is commenced on the bond, the commissioner may require the filing of a new bond and immediately on recovery of any action on the bond, the student loan servicer shall file a new bond.
##### **§ 17:16ZZ-7** Maintenance, availability of records. {#sec-17-16zz-7 omnilex-key=us-nj-statutes--title-17--17:16ZZ-7}
7. a. Except as otherwise required pursuant to federal law, a federal student education loan agreement, or a contract between the federal government and a licensee, each student loan servicer licensee and persons exempt from licensure pursuant to paragraph (2) of subsection a. of section 4 of this act shall maintain adequate records of each student education loan transaction for not less than two years following the final payment on that student education loan or the assignment of that student education loan, whichever occurs first.
b. If requested by the commissioner, each student loan servicer shall make records available or send records to the commissioner by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, not later than five business days after requested by the commissioner to do so. Upon request, the commissioner may grant a licensee additional time to make records available or send the records to the commissioner.
##### **§ 17:16ZZ-8** Response to borrower; payments; transfer of loan. {#sec-17-16zz-8 omnilex-key=us-nj-statutes--title-17--17:16ZZ-8}
8. Except as otherwise provided pursuant to federal law, federal student education loan agreements, or a contract between the federal government and a student loan servicer, a student loan servicer shall:
a. Upon receipt of a written inquiry from a student loan borrower or the representative of a student loan borrower, a student loan servicer shall respond by:
(1) acknowledging receipt of the inquiry within 10 business days; and
(2) providing information relating to the inquiry, and, if applicable, the action the student loan servicer will take to correct the account, or an explanation of the student loan servicer's position that the borrower's account is correct, within 30 business days.
b. A student loan servicer shall inquire of a student loan borrower how to apply an overpayment to a student education loan. A borrower's instruction on how to apply an overpayment to a student education loan shall stay in effect for any future overpayments during the term of the student education loan until the borrower provides different instructions. For purposes of this subsection, "overpayment" means a payment on a student education loan in excess of the monthly amount due from the student loan borrower on a student education loan, commonly referred to as a prepayment.
c. A student loan servicer shall apply partial payments in a manner that minimizes late fees and negative credit reporting. If there are multiple loans on a borrower's account with an equal stage of delinquency, a student loan servicer shall satisfy the requirements of this subsection by applying partial payments to satisfy as many individual loan payments as possible on a borrower's account. For purposes of this subsection, "partial payment" means a payment on a student education loan account that contains multiple individual loans in an amount less than the amount necessary to satisfy the outstanding payment due on all loans in the student education loan account, commonly referred to as an underpayment.
d. The following requirements shall be applicable to a student loan servicer in the event of the sale, assignment, or other transfer of the servicing of a student education loan that results in a change in the identity of the person to whom a student loan borrower is required to send payments or direct any communication concerning the student education loan:
(1) as a condition of a sale, an assignment, or any other transfer of the servicing of a student education loan, a student loan servicer shall require the new student loan servicer to honor all benefits originally represented as available to a student loan borrower during the repayment of the student education loan and preserve the availability of those benefits, including any benefits for which the student loan borrower has not yet qualified;
(2) a student loan servicer shall transfer to the new student loan servicer for the student education loan all information regarding the student loan borrower, the account of the borrower, and the student education loan of the borrower. The information shall include the repayment status of the student loan borrower and any benefits associated with the student education loan of the borrower;
(3) the student loan servicer shall complete the transfer of information required pursuant to paragraph (2) of this subsection within 45 calendar days after the sale, assignment, or other transfer of the servicing of the student education loan; and
(4) the sale, assignment, or other transfer of the servicing of a student education loan shall be completed at least seven calendar days before the next payment on the student education loan is due.
e. A student loan servicer who obtains the right to service a student education loan shall adopt policies and procedures to verify that the student loan servicer has received all information regarding the student loan borrower, the account of the student loan borrower, and the student education loan of the student loan borrower including, but not limited to, the repayment status of the student loan borrower and any benefits associated with the student education loan of the student loan borrower.
f. A student loan servicer shall evaluate a student loan borrower for eligibility for an income-driven repayment program prior to placing the borrower in forbearance or default, if an income-driven repayment program is available to the borrower.
##### **§ 17:16ZZ-9** Prohibited actions. {#sec-17-16zz-9 omnilex-key=us-nj-statutes--title-17--17:16ZZ-9}
9. No student loan servicer shall:
a. directly or indirectly employ any scheme, device or artifice to defraud or mislead student loan borrowers;
b. engage in any unfair or deceptive practice toward any person or misrepresent or omit any material information in connection with the servicing of a student education loan, including, but not limited to, misrepresenting the amount, nature or terms of any fee or payment due or claimed to be due on a student education loan, the terms and conditions of the loan agreement or the borrower's obligations under the loan;
c. obtain property by fraud or misrepresentation;
d. misapply student education loan payments to the outstanding balance of a student education loan;
e. provide inaccurate information to a credit bureau, thereby harming a student loan borrower's creditworthiness;
f. fail to report both the favorable and unfavorable payment history of the student loan borrower to a nationally recognized consumer credit bureau at least annually if the student loan servicer regularly reports information to a credit bureau;
g. refuse to communicate with an authorized representative of the student loan borrower who provides a written authorization signed by the student loan borrower, provided the student loan servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the student loan borrower;
h. make any false statement or knowingly and willfully make any omission of a material fact in connection with any information or reports filed with a governmental agency or in connection with any investigation conducted by the commissioner or another governmental agency;
i. fail to respond within 15 business days to communications from the Department of Banking and Insurance, or within such shorter, reasonable period of time as may be requested by the department; or
j. fail to respond within 15 business days to a consumer complaint submitted to the student loan servicer by the department. If necessary, the student loan servicer may request additional time to respond to the complaint, up to a maximum of 45 business days, provided that the request is accompanied by an explanation on why additional time is reasonable and necessary.
##### **§ 17:16ZZ-10** Additional authority of the commissioner. {#sec-17-16zz-10 omnilex-key=us-nj-statutes--title-17--17:16ZZ-10}
10. a. In addition to any authority provided under Title 17 of the Revised Statutes, the commissioner shall have the authority to conduct investigations and examinations as follows:
(1) For purposes of initial licensing, license renewal, license suspension, license revocation or termination, or general or specific inquiry or investigation to determine compliance with this act, the commissioner may access, receive and use any books, accounts, records, files, documents, information or evidence including, but not limited to: (a) criminal, civil and administrative history information; (b) personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in Section 603(p) of the "Fair Credit Reporting Act" (15 U.S.C. s.1681a); and (c) any other documents, information or evidence the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of documents, information or evidence.
(2) For the purposes of investigating violations or complaints arising under this act or for the purposes of examination, the commissioner may review, investigate or examine any student loan servicer licensee or person subject to this act. The commissioner may direct, subpoena or order the attendance of and examine under oath all persons whose testimony may be required about the student education loan or the business or subject matter of any examination or investigation, and may direct, subpoena or order any person subject to this act to produce books, accounts, records, files and any other documents the commissioner deems relevant to the inquiry.
b. In making any examination or investigation authorized by this section, the commissioner may control access to any documents and records of the student loan servicer licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of the student loan servicer licensee or person have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of this act, the student loan servicer licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs.
c. When making an examination or investigation under this act, the commissioner may:
(1) retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the cost of which shall be borne by the company which is the subject of the examination or investigation;
(2) enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information or evidence obtained under this section;
(3) use, hire, contract or employ public or privately available analytical systems, methods or software to examine or investigate the student loan servicer licensee or any person subject to this act;
(4) accept and rely on examination or investigation reports made by other government officials, within or without this State; and
(5) accept audit reports made by an independent certified public accountant for the student loan servicer licensee or person subject to this act in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of examination, report of investigation or other writing of the commissioner.
d. The authority of this section shall remain in effect, whether the student loan servicer licensee or person subject to this act, acts or claims to act under any licensing or registration law of this State, or claims to act without that authority.
e. No student loan servicer licensee or person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records, computer records or other information.
##### **§ 17:16ZZ-11** Suspension, revocation, refusal to renew license; violations, penalties. {#sec-17-16zz-11 omnilex-key=us-nj-statutes--title-17--17:16ZZ-11}
11. a. The commissioner may suspend, revoke or refuse to renew any license issued under the provisions of subsection c. of section 4 of this act, or take any other action, if the commissioner finds that: (1) the licensee has violated any provision of this act or any regulation made pursuant to this act; or (2) any fact or condition exists which, if it had existed at the time of the original application for the license, clearly would have warranted a denial of the license. No abatement of the license fee shall be made if the license is surrendered, revoked, or suspended prior to the expiration of the period for which it was issued.
b. (1) Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any of the provisions of this act, or any regulation adopted pursuant to this act, or any licensee or any owner, director, officer, member, partner, shareholder, trustee, employee or agent of a licensee has committed any fraud, engaged in dishonest activities or made any misrepresentation, the commissioner may bring a civil suit in a court of competent jurisdiction to enjoin the violation or potential violation, seek civil penalties pursuant to paragraph (2) of this subsection, or both.
(2) Any person who violates any provision of this act shall be liable, in a civil action brought by the commissioner in a court of competent jurisdiction, for a penalty of not more than $10,000 for the first violation, and $20,000 for the second and each subsequent offense. The penalty shall be paid to the commissioner to be used in accordance with this act and shall be collected pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). The court shall also award court costs and reasonable attorneys' fees to the commissioner.
##### **§ 17:16ZZ-12** Actions, counterclaims by borrower. {#sec-17-16zz-12 omnilex-key=us-nj-statutes--title-17--17:16ZZ-12}
12. A student loan borrower who suffers any ascertainable loss of moneys as a result of the use or employment by a student loan servicer of any method, act, or practice declared unlawful under this act may bring an action or assert a counterclaim therefor in any court of competent jurisdiction. In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by the student loan borrower. In all actions under this section, the court shall also award reasonable attorneys' fees, filing fees, and reasonable costs of suit.
##### **§ 17:16ZZ-13** Remedies not exclusive. {#sec-17-16zz-13 omnilex-key=us-nj-statutes--title-17--17:16ZZ-13}
13. The remedies provided in this act are not intended to be the exclusive remedies available to a student loan borrower, and a student loan borrower shall not be required to exhaust administrative remedies established pursuant to this act or any other applicable law prior to proceeding under this act.
##### **§ 17:16ZZ-14** Compliance with federal laws and regulations. {#sec-17-16zz-14 omnilex-key=us-nj-statutes--title-17--17:16ZZ-14}
14. A student loan servicer shall comply with all applicable federal laws and regulations relating to student loan servicing, including, but not limited to, the "Truth in Lending Act" (15 U.S.C. s.1601 et seq.). In addition to any other remedies provided by law, a violation of any federal law or regulation shall be deemed a violation of this section and a basis upon which the commissioner may take enforcement action pursuant to section 11 of this act.
##### **§ 17:16ZZ-15** Reports. {#sec-17-16zz-15 omnilex-key=us-nj-statutes--title-17--17:16ZZ-15}
15. a. (1) A student loan servicer licensee shall annually file a report with the commissioner, which shall set forth any information as the commissioner shall require concerning the business conducted as a licensee during the preceding calendar year. The report shall be under oath and in a form and within the time specified by the commissioner by regulation.
(2) A student loan servicer licensee shall additionally submit to the Nationwide Mortgage Licensing System and Registry a student loan servicer call report of condition, in the form and manner, and with any information, at any time as may be required by that entity, and any other report to, or through, the entity pursuant to any arrangement for reporting and sharing information as may be required by law or regulation.
b. Any negligently made false statement or knowing omission of material fact in connection with any report or supporting information filed with the commissioner, the Nationwide Mortgage Licensing System and Registry, through that entity with any federal or State agency, shall be deemed a violation of this act.
c. A licensee that fails to make and file its annual report with the commissioner, or any report with or through the Nationwide Mortgage Licensing System and Registry, in the form and within the time provided in this section, shall be subject to a penalty payable to the commissioner of not more than $100 for each day's failure concerning the annual report, and any penalty for a failure concerning a report to be filed with or through the Nationwide Mortgage Licensing System and Registry, payable to that entity, and the commissioner, as authorized pursuant to section 11 of this act may revoke or suspend the licensee's authority to do business in this State. The penalty shall be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
##### **§ 17:16ZZ-16** Annual assessment. {#sec-17-16zz-16 omnilex-key=us-nj-statutes--title-17--17:16ZZ-16}
16. Student loan servicer licensees shall be assessed annually an amount sufficient to cover annual costs of the implementation of this act. Assessments shall be effectuated in accordance with P.L.2005, c.199 (C.17:1C-33 et seq.) as amended by P.L.2019, c.200 (C.17:16ZZ-1 et al.), and its implementing rules. Moneys collected from license fees, inspections, or violations pursuant to this act shall be expended by the commissioner for the purpose of administering the provisions of this act.
##### **§ 17:16ZZ-17** Rules, regulations. {#sec-17-16zz-17 omnilex-key=us-nj-statutes--title-17--17:16ZZ-17}
18. The Commissioner of Banking and Insurance shall, in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt the rules and regulations necessary to implement the provisions of this act.
##### **§ 17:16ZZ-18** Severability. {#sec-17-16zz-18 omnilex-key=us-nj-statutes--title-17--17:16ZZ-18}
19. If any provision of this act or the application thereof to any person or circumstance is held invalid for any reason in a court of competent jurisdiction, the invalidity shall not affect other provisions or any other application of this act which can be given effect without the invalid provision or application, and for this purpose the provisions of this act are declared severable.
## **Chapter 17** {#struct-chapter-17}
##### **§ 17:17-1** Kinds of insurance {#sec-17-17-1 omnilex-key=us-nj-statutes--title-17--17:17-1}
Ten or more persons may form a corporation for the purpose of making of any kinds of insurance, as follows:
a. Against direct or indirect loss or damage to property, including loss of use or occupancy by fire, smoke; smudge; lightning; tempest on land, including windstorm, tornado and cyclone; earthquake; collapse of buildings; hail; frost or snow; weather or climatic conditions, including excess or deficiency of moisture, flood, rain or drought, rising of the waters of the ocean or its tributaries; bombardment; invasion; insurrection; riot; civil war or commotion; military or usurped power; vandalism or malicious mischief; striking employees; explosion, whether fire ensues or not, except explosion of steam boilers and flywheels; and arising from the use of elevators, aircraft, automobiles or other vehicles; against loss or damage by insects or disease to farm crops or products and loss of rental value of land used in producing the crops or products.
b. Against any kinds of loss or damage to: Vessels, craft, aircraft, cars, automobiles and vehicles of every kind, including all kinds of automobile and aircraft insurance (excepting insurance against loss by reason of bodily injury to the person), as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidence of debt, valuable papers, bottomry and respondentia interests, and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment or reshipment incident thereto, including marine builder's risk and all personal property floater risks, and to person or to property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of the insurance (but not including life insurance or surety bonds) but, except as herein specified, not against loss by reason of bodily injury to the person.
c. Upon the lives or health of persons, and every insurance appertaining thereto, and to grant, purchase or dispose of annuities.
d. Against bodily injury or death by accident, and upon the health of persons, including a funeral benefit to an amount not exceeding $100 or against loss or damage to automobiles or motor vehicles, or to wagons or vehicles propelled by a horse or team of any description, resulting from collision with moving or stationary objects, against perils to property arising from the use of elevators, aircraft, automobiles or other motor vehicles, or against loss by legal liability for damage to persons or property (including, if the insured is a state or a political subdivision of a state or a municipal corporate instrumentality of one or more states, loss by voluntary payments made by the insured under circumstances where the insured would have legal liability if it were a private corporation) resulting from collision of automobiles, aircraft, or motor vehicles, or of wagons or vehicles propelled by a horse or team with moving or stationary objects.
e. Against loss or damage resulting from accident to or injury suffered by any person for which loss or damage the insured is liable, including, if the insured is a state or a political subdivision of a state or a municipal corporate instrumentality of one or more states, loss or damage resulting from accident to or injury suffered by any person for which loss or damage the insured would be liable if it were a private corporation.
f. Against damage to property of the insured or loss of life or damage to the person or property of others for which the insured is liable (including, if the insured is a state or a political subdivision of a state or a municipal corporate instrumentality of one or more states, loss of life or damage to the person or property of others for which the insured would be liable if it were a private corporation), caused by the explosion of steam boilers, pipes, engines, motors and machinery connected therewith or operated thereby.
g. Against loss from the defaults of persons in positions of trust, public or private, or against loss or damage on account of neglect or breaches of duty or obligations guaranteed by the insurer; and against loss by banks, bankers, brokers, financial or moneyed corporations or associations, of any bills of exchange, notes, checks, drafts, acceptances of drafts, bonds, securities, evidences of debt, deeds, mortgages, documents, gold or silver, bullion, currency, money, platinum and other precious metals, refined or unrefined and articles made therefrom, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, and also against loss resulting from damage, except by fire, to the insured's premises, furnishings, fixtures, equipment, safes and vaults therein caused by burglary, robbery, hold-up, theft or larceny, or attempt thereat. No such indemnity indemnifying against loss of any property as specified herein shall indemnify against the loss of any such property occurring while in the mail or in the custody or possession of a carrier for hire for the purpose of transportation, except for the purpose of transportation by an armored motor vehicle accompanied by one or more armed guards.
h. Against loss or damage on account of encumbrances upon or defects in titles to real property. Any company organized or operating under this paragraph shall have the right, in addition to its other powers, to make searches, abstracts, examine titles to real property and chattels, and procure and furnish information in relation thereto.
i. Against loss from bad debts, commonly known as credit insurance.
j. Against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism or malicious mischief, or any one or more of such hazards; and against any and all kinds of loss or destruction of or damage to moneys, securities, currencies, scrip, coins, bullion, bonds, notes, drafts, acceptances of drafts, bills of exchange and other valuable papers or documents, except while in the custody or possession of and being transported by a carrier for hire or in the mail; and against loss or damage to automobiles and aircraft by burglary, larceny, or theft, vandalism or malicious mischief, confiscation or wrongful conversion, disposal or concealment, whether held under conditional sale contract or subject to chattel mortgages, or otherwise, or any one or more of such hazards.
k. Against loss of and damage to glass, including lettering and ornamentation thereon, and the frame in which the glass is set resulting from breakage of the insured glass.
l. Against loss or damage by water or other fluid to any goods or premises arising from the breaking or leakage of sprinklers, pumps, or other apparatus erected for extinguishing fires, or of other conduits or containers, or by water entering through leaks or openings in buildings, and of water pipes and against accidental injury to such sprinklers, pumps, conduits, containers, water pipes and other apparatus; including loss of use or occupancy of the property so damaged.
m. Upon the lives of horses, cattle and other livestock or against loss by theft of any such property or both.
n. Against loss or damage to property by smoke or smudge, or both.
o. Any specified kinds of insurance not included in any of the foregoing subsections and which are proper subjects of insurance.
Any company, which, by its charter, is authorized to make insurance against loss or damage to property caused by fire, lightning, or tempest on land, may, without amending its charter, be authorized by the Commissioner of Insurance to transact all of the kinds of insurance described in subsections a., b. and l. of this section, if it is possessed of the capital stock and surplus or cash premiums required by R.S.17:17-6 and R.S.17:17-7; and any company which, by its charter, is authorized to make insurance against loss or damage to private dwelling property and contents thereof under subsection a. of this section, may, without amending its charter, be permitted to transact all of the kinds of insurance described in subsections f., k. and l. of this section, limited, however, to extending fire or casualty insurance policies to provide such coverages on private dwellings and contents thereof, if it possesses the capital and surplus or cash premiums required by R.S.17:17-6 and R.S.17:17-7; or any company which, by its charter, is authorized to make any kinds of insurance described in subsections a. through o. of this section, inclusive, except subsection c. of this section, may, without amending its charter, if it is possessed of a capital stock of at least $3,500,000 and surplus of at least $2,750,000 or, if a mutual company, it is possessed of net cash assets (excess of allowable assets over all liabilities) of at least $6,250,000, be authorized by the Commissioner of Insurance to transact any other kind or kinds of insurance that may be proper subjects of insurance, except upon the lives of persons or the granting of annuities.
##### **§ 17:17-2** Stock or mutual plan {#sec-17-17-2 omnilex-key=us-nj-statutes--title-17--17:17-2}
Companies may be formed upon the stock or mutual plan to transact any kind of insurance authorized by section 17:17-1 of this Title, subject to the limitations specified in section 17:17-3 of this Title.
##### **§ 17:17-3** Purposes permitted {#sec-17-17-3 omnilex-key=us-nj-statutes--title-17--17:17-3}
A company may be formed:
a. For the purposes specified in any or all of the paragraphs of section 17:17-1 of this Title except paragraph "c" ; or
b. For the purposes specified in paragraph "c" and for the purpose of making insurances against bodily injury or death by accident as specified in paragraph "d" of said section 17:17-1.
In addition, a company authorized to do the business specified in paragraph "c" and insure against bodily injury or death by accident as specified in paragraph "d" may reinsure the legal liability of an airline arising out of the death or injury of any person resulting from an airline accident and may undertake to pay the ceding insurer stipulated amounts in the event of the death or injury of any person whether or not such undertaking is directly related to the liability of the ceding insurer or is subject to aggregate or other limitations.
Any reinsurance authorized by this section or any reinsurance of blanket accident insurance referred to in section 4 of P.L.1939, chapter 305 (C. 17:38-17) may be provided through pooling arrangements with other insurers for purposes of spreading the reinsurance risk, provided such arrangements have been approved in writing by the commissioner of insurance upon findings that the arrangements do not impair the protection of policyholders of the ceding and assuming reinsurers and do not substantially restrain competition in the business of insurance or reinsurance or create a monopoly therein.
##### **§ 17:17-4** Certificate of incorporation {#sec-17-17-4 omnilex-key=us-nj-statutes--title-17--17:17-4}
The persons so proposing to incorporate shall sign a certificate stating their intention to form a corporation under chapters 17 to 33 of this Title (17:17-1 et seq.), and setting forth:
a. The name of the company, which shall contain the words "insurance company," except that a company which may be formed for any or all of the purposes specified in paragraphs "d" to "o" of section 17:17-1 of this Title may adopt a name containing the words "insurance company," "indemnity company," "casualty company," "surety company" or "guaranty company." The name shall not so closely resemble that of any existing corporation as to be likely to mislead the public, and shall be approved by the commissioner;
b. The place where its principal office in this State is to be located;
c. The kind or kinds of insurance proposed to be transacted by the company, stating the paragraphs of section 17:17-1 of this Title authorizing the same;
d. Whether the company is to be a stock company or a mutual company;
e. If a stock company, the amount of its capital stock, which shall not be less than $200,000.00, the number of shares into which it is divided, and the par value of each share, which shall not be less than $1.00, except that if such company proposes to transact the kinds of insurance set forth in paragraphs "c" and "d" of section 17:17-1 of this Title, the amount of its capital stock shall not be less than the minimum capital stock requirement set forth in section 17:17-6 of this Title; and
f. The period, if any, limited for the duration of the company.
The certificate may contain such other particulars as may be necessary to explain and make manifest or limit the objects and purposes of the corporation, and such other provisions not inconsistent with chapters 17 to 33 of this Title (17:17-1 et seq.), or the Constitution or laws of this State, which the corporators may choose to insert for the conduct of the affairs of the company, the regulation of its business, or for defining, regulating and limiting the powers of the directors or stockholders.
##### **§ 17:17-5** Approval by attorney general; recording and filing certificate {#sec-17-17-5 omnilex-key=us-nj-statutes--title-17--17:17-5}
The certificate of incorporation shall be proved or acknowledged as required for deeds of real estate and be submitted to, and examined by, the attorney general, and if found by him to be in accordance with this subtitle and not inconsistent with the constitution and laws of this state, he shall indorse thereon or annex thereto his certificate to that effect. The certificate of incorporation shall then be recorded in a book kept for that purpose in the office of the clerk of the county wherein the principal office and place of business of the corporation is to be located, and after being so recorded, filed in the department. Thereupon, such persons, their successors and assigns, shall, from the date of the filing, be a corporation by the name set forth in the certificate.
The certificate, or copies thereof, duly certified by the commissioner, shall be evidence in all courts and places.
##### **§ 17:17-6** Capital and surplus required for stock company; temporary waiver {#sec-17-17-6 omnilex-key=us-nj-statutes--title-17--17:17-6}
No stock insurance company organized under chapters 17 to 33 of Title 17 of the Revised Statutes (17:17-1 et seq.), shall commence or continue business unless it has a capital stock of at least the greater of $500,000, actually paid in cash, or capital stock of $200,000, actually paid in cash, for each kind of insurance more than one which it may transact as specified in subsections a., b., f., i., j., k., l., m., n. and o. of R.S.17:17-1; $1,000,000 for the kinds of insurance specified in subsection e. of R.S.17:17-1; and $500,000 for the kinds specified in subsection g. of R.S.17:17-1; and, in addition, a surplus, actually paid in cash, of at least the greater of $250,000 or $100,000 for each kind of insurance more than one which it may transact as specified in subsections a., b., f., i., j., k., l., m., n. and o. of R.S.17:17-1; $1,000,000 for the kinds of insurance specified in subsection e. of R.S.17:17-1; and $750,000 for the kinds specified in subsection g. of R.S.17:17-1.
A stock insurance company authorized to transact the kinds of business specified in R.S.17:17-1 or eligible to insure surplus lines risks pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45) as of the effective date of this 1993 amendatory and supplementary act may apply to the commissioner for a temporary waiver of the applicable capital and surplus requirements set forth in this section. The commissioner may, in his discretion, temporarily waive the applicable capital and surplus requirements for that insurance company for a period of no more than five years, except that the insurance company shall remain subject to capital and surplus requirements of no less amounts than those in effect immediately prior to the effective date of this 1993 amendatory and supplementary act. In considering such a temporary waiver, the commissioner shall consider the size of the insurance company's deficiency in meeting the applicable capital and surplus requirements; the adequacy of the insurance company's financial plan to meet the applicable capital and surplus requirements; and any other factors deemed appropriate by the commissioner.
##### **§ 17:17-7** Assets required for mutual company; temporary waiver {#sec-17-17-7 omnilex-key=us-nj-statutes--title-17--17:17-7}
No mutual insurance company organized under chapters 17 to 33 of Title 17 of the Revised Statutes ( s.17:17-1 et seq.), shall commence business until bona fide applications have been made for insurance with the company of the kind or kinds it may transact, as specified in R.S.17:17-3, and premiums thereon have been paid into the company in cash in such sum, which, together with any other funds that may be legally available, will result in the company having unencumbered assets over and above all required reserves and other liabilities of at least 50 percent of the capital and surplus required of a stock company transacting the same kind or kinds of insurance. A company shall not commence or continue the business of liability insurance, as comprised in subsection e. of R.S.17:17-1 unless it has net cash assets of at least $2,000,000 and shall not commence or continue the writing of fidelity and surety bonds as comprised in subsection g. of R.S.17:17-1 unless it has net cash assets of at least $1,250,000.
A mutual insurance company authorized to do the kind of business specified in R.S.17:17-1 or eligible to insure surplus lines risks pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45) as of the effective date of this 1993 amendatory and supplementary act may apply to the commissioner for a temporary waiver of the applicable capital and surplus requirements set forth in this section. The commissioner may, in his discretion, temporarily waive the applicable capital and surplus requirements for that insurance company for a period of no more than five years, except that the insurance company shall remain subject to capital and surplus requirements of no less amounts than those in effect immediately prior to the effective date of this 1993 amendatory and supplementary act. In considering such a temporary waiver, the commissioner shall consider the size of the insurance company's deficiency in meeting the applicable capital and surplus requirements; the adequacy of the insurance company's financial plan to meet the applicable capital and surplus requirements; and any other factors deemed appropriate by the commissioner.
##### **§ 17:17-8** Examination before commencing business {#sec-17-17-8 omnilex-key=us-nj-statutes--title-17--17:17-8}
Before granting authority to a company to issue policies or make contracts of insurance, the commissioner shall be satisfied, by such examination and evidence as he sees fit to make and require, that the whole amount of the capital stock set forth in the certificate of incorporation and the required minimum surplus of the company, if a stock company, has been actually paid in cash, and is possessed by the company in money, or in the stocks, bonds, or bonds and mortgages authorized for insurance companies by chapter two (s. 17:2-1 et seq.), and chapter twenty-four (s. 17:24-1 et seq.), of this Title; or, if a mutual company, that it has received and is in possession of the cash premiums, and bona fide engagements for insurance to the extent and of the value hereinbefore required. This section shall not apply to insurance companies incorporated by certificates filed in the department prior to March twenty-seventh, one thousand nine hundred and twenty-eight.
In determining the financial condition of any corporation organized under paragraph "h" of section 17:17-1 of this Title, the commissioner shall allow as admitted assets such assets as are authorized in chapters two (s. 17:2-1 et seq.) and twenty-four (s. 17:24-1 et seq.) of this Title, and may allow as an asset on account of the required surplus, the title plant of such company at its fair value as determined by the commissioner, less such charge-offs as he may require.
##### **§ 17:17-9** Deposit prerequisite to authorization {#sec-17-17-9 omnilex-key=us-nj-statutes--title-17--17:17-9}
No company organized under chapters 17 to 33 of this title (s. 17:17-1 et seq.), other than a mutual company organized to make insurance solely against loss or damage to property belonging to the insured member, shall be authorized to transact any business of insurance until it has been made the deposit required by, and has otherwise complied with, section 17:20-1 of this title.
##### **§ 17:17-10** Certificates authorizing company to commence business; issuance, surrender; replacement carrier. {#sec-17-17-10 omnilex-key=us-nj-statutes--title-17--17:17-10}
a. When satisfied that a company has complied with all the requirements of this subtitle to entitle it to engage in business and that the proposed methods of operation of the company are not such as would render its operation hazardous to the public or its policyholders, the commissioner shall issue to the company a certificate authorizing it to commence business, specifying in the certificate the particular kind or kinds of insurance it is authorized to transact. The commissioner may refuse to issue a certificate of authority if he finds that any of the company's directors or officers has been convicted of a crime involving fraud, dishonesty, or like moral turpitude or that said persons are not persons of good character and integrity. Any applicant for a license pursuant to this section and any officer, director, partner or owner of a controlling interest of a corporation or partnership for licensure shall submit to the commissioner the applicant's name, address, fingerprints and written consent for a criminal history record background check to be performed. The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the commissioner in the event a current holder of a license or prospective applicant, who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed. No company shall transact the business for which it is incorporated until it has received the certificate from the commissioner. If any company fails to obtain the certificate of authority within one year from the date of the certificate of the Attorney General to its certificate of incorporation, as provided in R.S.17:17-5, the company shall, ipso facto, be dissolved and its certificate of incorporation be null and void.
b. No company licensed to transact insurance business in this State pursuant to chapter 17 of Title 17 of the Revised Statutes may surrender its certificate of authority or discontinue writing or renewing any kind or kinds of insurance specified in the certificate, except in accordance with an informational filing submitted to the commissioner, which filing shall be subject to the following provisions regarding any withdrawals:
(1) the company shall send a notice to policyholders of the proposed withdrawal no later than thirty days following the submission of the informational filing to the commissioner, which shall state that the insurer intends to withdraw and has filed its intention to withdraw with the commissioner, the terms of the withdrawal, including the date of the proposed commencement of nonrenewal of policies, and the proposed duration of the nonrenewal of the company's book of business;
(2) nonrenewals shall not commence prior to one calendar year and ninety days following the submission of the informational filing;
(3) the company shall send a notice of nonrenewal to every policyholder (a) no later than one calendar year preceding the date of nonrenewal and (b) a subsequent notice of nonrenewal in accordance with any time limit otherwise established by law for that line of insurance;
(4) nonrenewals shall take place in a manner so as to be applicable to all insureds on an equitable basis with respect to risk classification and territorial or other form of rating factor, and shall be effectuated at a uniform rate over a period not exceeding three calendar years, commencing with the date established in paragraph (2) of this subsection; provided, however, that if more than one company files for withdrawal for the same line of business and the companies, in the aggregate, write more than 25% of the market share for that line of business, the commissioner may extend the period of withdrawal provided for herein to five years.
The commissioner's authority with respect to withdrawals as provided for herein shall be limited to enforcing compliance with this subsection and enforcing the terms of the withdrawal plan proposed in the informational filing.
c. Upon receiving the informational filing provided for in subsection b. of this section, the commissioner shall consider, and may require as a condition of approval, whether some or all of the company's other certificates of authority issued pursuant to Title 17 of the Revised Statutes held by the company or other companies within the same holding company system as the company submitting the plan shall be required to be surrendered.
d. Notwithstanding the provisions of subsection b. of this section, if the company finds a replacement carrier for the business that will not be renewed as the result of the withdrawal either prior to or after the date of the informational filing, the insurer may apply to the commissioner for approval to transfer the business to a replacement carrier or carriers. If the commissioner approves the replacement carrier or carriers, notwithstanding the provisions of paragraphs (1), (2), and (3) of subsection b. of this section, the notice of nonrenewal shall be in compliance with the time limits provided by law for that line of insurance, and the company shall offer every insured coverage with the replacement carrier prior to the effective date of the nonrenewal. The commissioner shall not withhold approval of a replacement carrier or carriers if that insurer is authorized to do business in the same line of business in New Jersey and has the financial and business capability to write and service the business being transferred to it by the withdrawing company. The commissioner shall approve or disapprove the replacement carrier or carriers within 60 days of (1) the date of the filing by both the withdrawing insurer requesting approval of a replacement carrier or carrier or (2) the filing by the replacement carrier or carriers requesting to be a replacement carrier, whichever is later.
e. Notwithstanding the provisions of subsection b. of this section, the commissioner may waive the requirements of paragraph (2) of that subsection, and the one-year nonrenewal notice of paragraph (3) of that subsection, as well as the three-year minimum nonrenewal period provided in paragraph (4) of that subsection if the commissioner deems a waiver to be necessary to protect the solvency of the insurer making the informational filing or if the commissioner deems the withdrawal to have a limited impact on the market.
##### **§ 17:17-11** Transacting business before authority given; liability of directors and corporators {#sec-17-17-11 omnilex-key=us-nj-statutes--title-17--17:17-11}
The directors and corporators of any company organized under chapters 17 to 33 of this title (s. 17:17-1 et seq.), shall be jointly and severally liable for all obligations incurred by the company by reason of its having transacted any business before it has received legal authority so to do.
##### **§ 17:17-12** Misdemeanor to do business unless authorized {#sec-17-17-12 omnilex-key=us-nj-statutes--title-17--17:17-12}
No person by himself, or by his brokers, agents, solicitors, surveyors, canvassers or other representatives of whatever designation, nor any such broker, agent, solicitor, surveyor, canvasser, or other representative, shall solicit, negotiate or effect any contract of insurance of any kind, including all kinds of insurance described in chapters seventeen to thirty-three of this Title (17:17-1 et seq.), and including annuities involving life contingencies, or sign, deliver or transmit, by mail or otherwise, any policy, annuity contract involving life contingencies, certificate of membership, or certificate of renewal thereof, on any property or thing, or on the life, health or safety of any person, or receive any premium, commission, fee or other payment thereon, or maintain or operate any office in this State for the transaction of the business of insurance, or in any manner, directly or indirectly, transact the business of insurance of any kind whatsoever, within this State, unless specifically authorized under the laws of this State. Any person violating any of the provisions of this section shall be guilty of a misdemeanor.
This section shall not prohibit the granting of annuities by corporations or associations organized without capital stock or not for profit whose funds are derived principally from gifts or bequests and which are used for eleemosynary or charitable purposes, nor shall it prohibit any person or corporation acting as a broker, without being licensed as such, from soliciting or negotiating for others than themselves contracts of insurance against loss or damage on account of encumbrances upon, or defects in, title to real estate with insurance companies duly qualified under the laws of this State to make such insurance.
##### **§ 17:17-13** Application of subtitle limited {#sec-17-17-13 omnilex-key=us-nj-statutes--title-17--17:17-13}
The provisions of this subtitle, other than those specifically made applicable thereto, shall not apply to corporations authorized to transact business in this state under the provisions of chapter 35 (17:35-1 et seq.), or chapters 39 to 44 (s. 17:39-1 et seq.) of this title.
##### **§ 17:17-14** Assessments required when liabilities of mutual company, other than fire or life, exceed assets {#sec-17-17-14 omnilex-key=us-nj-statutes--title-17--17:17-14}
When the liabilities of any mutual insurance company, other than fire or life, organized under the laws of this State and now doing business, shall exceed its assets, or hereafter organized shall exceed the net assets as provided in section 17:17-7 of this Title for the commencement of business, its board of directors shall raise money by assessment to restore such excess, and on neglect or refusal so to do after sixty days' notice from the treasurer or the Commissioner of Banking and Insurance of such excess of liabilities over assets, the directors so neglecting or failing shall be personally liable to pay the liabilities to the persons to whom the same are due and the Commissioner of Banking and Insurance shall take possession of the property and business of the company, as provided in section 17:30-1 of this Title.
This section shall not apply to stockholders of mutual companies having a capital stock.
##### **§ 17:17-15** Rules, regulations on solvency standards {#sec-17-17-15 omnilex-key=us-nj-statutes--title-17--17:17-15}
5. The commissioner may promulgate rules and regulations with respect to solvency standards and tests, including, but not limited to: the ratio of policyholder surplus to net premiums; the ratio of policyholder surplus to net claim reserves; the concentration of the insurer's exposures, geographic or otherwise; and transactions which could affect the companies' solvency.
##### **§ 17:17-16** Increase in amount of required capital, surplus {#sec-17-17-16 omnilex-key=us-nj-statutes--title-17--17:17-16}
6. The commissioner may increase the amount of capital or surplus required of any insurer pursuant to R.S.17:17-6 or R.S.17:17-7, or subsequently revise or redetermine such increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner in order to provide adequate protection against risks affecting the insurer's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstance shall an insurer's capital or surplus be less than the capital or surplus required pursuant to R.S.17:17-6 or, if applicable, R.S.17:17-7; provided, however, that any increase of capital or surplus pursuant to this section, including any increase required by a subsequent revision or redetermination, shall be made only after a formal departmental hearing, on a record, unless that hearing is waived by the affected insurer. All matters pertaining to a hearing or to an increase of capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the insurer. Any decision regarding an increase of capital or surplus pursuant to this section, including an increase required by a subsequent revision or redetermination, shall contain findings specifying the factors deemed significant in regard to the particular insurer, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, beyond or below the levels contemplated by the rates that it charged for insurance and beyond or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, beyond or below the levels contemplated by the rates that it charged for insurance and beyond or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, beyond or below those levels anticipated under normal conditions;
d. Changes in economic, social and market conditions that could adversely or favorably affect the financial condition of the insurer, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sale of assets; and
e. Any other contingencies, including reinsurance and unfunded or extracontractual obligations, which may affect the insurer's financial condition.
##### **§ 17:17-17** Factors for determining increase, revision, redetermination of capital, surplus {#sec-17-17-17 omnilex-key=us-nj-statutes--title-17--17:17-17}
7. In determining any increase, revision or redetermination in the capital or surplus of an insurer pursuant to the provisions of section 6 of P.L.1993, c.234 (C.17:17-16), the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 6 of P.L.1993, c.234 (C.17:17-16);
c. The extent to which the risks described in section 6 of P.L.1993, c.234 (C.17:17-16) are independent or interrelated, and whether any dependency is direct or inverse;
d. The insurer's financial history, projections of profits or losses and other operational characteristics;
e. The extent to which the insurer has provided protection against contingencies in ways other than the establishment of surplus including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves, and diversification of assets and underwriting risks; and
f. Any other relevant factors, including National Association of Insurance Commissioners' reports and independent judgments of the soundness of the insurer's financial condition as evidenced by ratings and reports of reliable professional financial services.
##### **§ 17:17-18** Maintenance of reserves {#sec-17-17-18 omnilex-key=us-nj-statutes--title-17--17:17-18}
8. Every insurance company transacting the business of insurance in this State shall, at all times, maintain reserves in an amount estimated in the aggregate to provide for the payment of all losses and claims incurred, whether reported or unreported, which are unpaid and for which such company may be liable, and to provide for the expenses of adjustments or settlement of such losses or claims.
##### **§ 17:17-19** Suspension, revocation of authority to do business {#sec-17-17-19 omnilex-key=us-nj-statutes--title-17--17:17-19}
9. The commissioner may suspend or revoke the authority to do business in this State of any insurer that does not comply with the provisions of R.S.17:17-1, R.S.17:17-6, R.S.17:17-7, R.S.17:17-9 and sections 5 through 8 of P.L.1993, c.234 (C.17:17-15 through C.17:17-18).
##### **§ 17:17-20** Change of domicile for insurers {#sec-17-17-20 omnilex-key=us-nj-statutes--title-17--17:17-20}
1. a. An insurer that is formed under the laws of another state and is admitted to transact the business of insurance in this State may become a domestic insurer upon the commissioner's determination that the company has complied with all applicable requirements of Title 17 of the Revised Statutes relating to the formation of a domestic insurer of the same type. If the commissioner approves the domestication of a foreign insurer pursuant to this section, the insurer shall be entitled to a certificate of authority equivalent to that which was previously held as a foreign insurer and the insurer shall be subject to the authority and jurisdiction of this State. The newly domesticated insurer shall amend its articles of incorporation to provide that the corporation is a continuation of the corporate existence of the original foreign corporation through the adoption of this State as its corporate domicile, and that the original date of incorporation in its original domiciliary state is the date of incorporation of such domestic insurer. For purposes of the premium tax laws, pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.), however, the date of licensure shall be the date on which the commissioner approves the domestication in this State.
b. Any domestic insurer may, upon the written approval of the commissioner, transfer its domicile to any other state in which it is admitted to transact the business of insurance. The company shall cease to be a domestic insurer as of the effective date of the transfer approved by the commissioner. Such a company shall be admitted to transact the business of insurance in this State if the company is otherwise qualified as a foreign insurer pursuant to the applicable requirements of Title 17 of the Revised Statutes.
c. Every insurer authorized to transact business in the State shall notify the commissioner of the details of any proposed transfer of domicile at least 60 days prior to the effective date of the proposed transfer, however, the commissioner may approve a shorter period for providing such notice. Such an insurer shall file promptly any resulting amendments to corporate documents filed or required to be filed with the commissioner.
d. Prior to granting approval for any foreign insurer to become a domestic insurer, or for a domestic insurer to transfer its domicile to another state, the commissioner may conduct whatever investigations, examinations or hearings he deems necessary, and may subject the issuance of his approval to the conditions and restrictions that he determines are reasonable and necessary for the protection of the company's policyholders or the public.
e. The transfer of domicile of an insurer pursuant to the provisions of this section shall not be construed to alter either the existing rights, franchises and interests, or the duties, obligations and liabilities of the insurer transferring domicile, except as otherwise provided by law. Insurers who transfer domicile shall continue to be subject to all the liabilities, claims and demands against the company which were in existence prior to the transfer of domicile. Any action or proceeding pending at the time of the consummation of the process by which the domicile is transferred in which the company is a party shall not abate or discontinue by reason of the transfer of domicile, but shall be prosecuted to a final resolution in the same manner as if the transfer of domicile had not taken place.
f. The certificate of authority, insurance producer appointments and licenses, rating systems and other documents required to be maintained for regulatory purposes, which are in existence and approved for use in this State at the time any insurer licensed to transact the business of insurance in this State transfers its corporate domicile to this or any other state by merger, consolidation, transfer, or any other lawful method, shall continue in full force and effect upon such transfer if the commissioner is satisfied that the insurer remains duly qualified to transact the business of insurance in this State. All outstanding policies of any transferring insurer shall remain in full force and effect and need not be endorsed as to the new name of the company or its new location unless so ordered by the commissioner. To the extent required by law, every transferring insurer shall file new policy forms with the commissioner on or before the effective date of the transfer, but may use existing policy forms with appropriate endorsements if allowed by, and under such conditions as approved by, the commissioner.
g. When two foreign insurers of the same insurance holding company system domiciled in different states are approved for domestication pursuant to subsection a. of this section during the calendar year following enactment of P.L.1994, c.189 (C.17:17-20 et al.), these insurers shall thereafter file financial statements in this State pursuant to R.S. 17:23-1 that are consistent with the financial statements filed by each other with respect to the same or similar financial transactions notwithstanding any inconsistent financial statements filed previously as required by insurance regulators of the prior respective domiciles. Any dividends previously paid by these insurers pursuant to the laws of the former domiciliary states in excess of the earned surplus of these insurers shall, to the extent of such excess, be reported on the financial statements filed by each insurer after domestication in this State as a return of capital distributed from gross paid in and contributed surplus rather than as negative earnings.
## **Chapter 17A** {#struct-chapter-17a}
##### **§ 17:17A-1** Insurer may acquire stock of or have common management with other insurers; restrictions {#sec-17-17a-1 omnilex-key=us-nj-statutes--title-17--17:17A-1}
Any domestic insurer may retain, invest in or acquire the whole or any part of the capital stock of any other insurer or insurers, or have a common management with any other insurer or insurers; provided, such retention, investment, acquisition or common management is not inconsistent with any other provisions of subtitle three of Title 17 of the Revised Statutes of New Jersey; and provided further, that by reason of such retention, investment or acquisition of such capital stock, or common management, the business of such insurers with the public shall not be conducted in a manner which substantially lessens competition generally in the business of insurance or creates a monopoly therein.
##### **§ 17:17A-2** Interlocking directorate {#sec-17-17a-2 omnilex-key=us-nj-statutes--title-17--17:17A-2}
Any person otherwise qualified may be a director of two or more insurers having a common management but no such interlocking directorate shall be used as a means of substantially lessening competition generally in the business or of creating a monopoly therein.
##### **§ 17:17A-3** Violations; notice of hearing; cease and desist order {#sec-17-17a-3 omnilex-key=us-nj-statutes--title-17--17:17A-3}
Whenever the Commissioner of Banking and Insurance has reason to believe that there is a violation of this act, he shall serve upon the insurer or insurers and the director or directors, as the case may be, a notice of a hearing before the Commissioner of Banking and Insurance to be held not less than thirty days after the service of such notice, and requiring such insurer or insurers and such director or directors, as the case may be, to show cause why an order should not be made by the Commissioner of Banking and Insurance directing such insurer or insurers and such director or directors, as the case may be, to cease and desist from such violation.
If, upon such hearing, the Commissioner of Banking and Insurance finds that there has been a violation of this act he shall issue and cause to be served upon such insurer or insurers and such director or directors, as the case may be, an order reciting the facts found by him, and setting forth the respects in which there has been a violation of this act, and directing such insurer or insurers and such director or directors, as the case may be, to cease and desist from such violation.
Any such cease and desist order of the Commissioner of Banking and Insurance shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:17A-4** Abridgement of rights or remedies {#sec-17-17a-4 omnilex-key=us-nj-statutes--title-17--17:17A-4}
Nothing contained in this section shall be deemed to alter or abridge any rights or remedies which may otherwise be available to any person under law of this State.
## **Chapter 17B** {#struct-chapter-17b}
##### **§ 17:17B-1** Statement of beneficial owner, director or officer; amount of securities; change in ownership {#sec-17-17b-1 omnilex-key=us-nj-statutes--title-17--17:17B-1}
Every person who is directly or indirectly the beneficial owner of more than 10% of any class of any equity security of a domestic stock insurance company, or who is a director or officer of such company, shall file in the office of the commissioner on or before January 31, 1966, or within 10 days after he becomes such beneficial owner, director or officer, a statement, in such form as the commissioner may prescribe, of the amount of all equity securities of such company of which he is the beneficial owner, and within 10 days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file in the office of the commissioner a statement, in such form as the commissioner may prescribe, indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.
##### **§ 17:17B-2** Profits from purchase and sale, etc., of security within period less than 6 months to inure to company; recovery; exemptions {#sec-17-17b-2 omnilex-key=us-nj-statutes--title-17--17:17B-2}
For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to such company, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such company within any period of less than 6 months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the company, irrespective of any intention on the part of such beneficial owner, director or officer in entering into such transaction of holding the security purchased or not repurchasing the security sold for a period exceeding 6 months. Suit to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the company or by the owner of any security of the company in the name and in behalf of the company if the company shall fail or refuse to bring such suit within 60 days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than 2 years after the date such profit was realized. This section shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the commissioner may by rules and regulations exempt as not comprehended within the purpose of this section.
##### **§ 17:17B-3** Unlawful sales of equity securities; defense {#sec-17-17b-3 omnilex-key=us-nj-statutes--title-17--17:17B-3}
It shall be unlawful for any such beneficial owner, director or officer, directly or indirectly, to sell any equity security of such company if the person selling the security or his principal (i) does not own the security sold, or (ii) if owning the security, does not deliver it against such sale within 20 days thereafter, or does not within 5 days after such sale deposit it in the mails or other usual channels of transportation: but no person shall be deemed to have violated this section if he proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.
##### **§ 17:17B-4** Securities held in investment account; transactions made in ordinary course of business; exemption {#sec-17-17b-4 omnilex-key=us-nj-statutes--title-17--17:17B-4}
The provisions of section 2 of this act shall not apply to any purchase and sale, or sale and purchase, and the provisions of section 3 of this act shall not apply to any sale, of an equity security of a domestic stock insurance company not then or theretofore held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market (otherwise than on an exchange as defined in the Securities Exchange Act of 1934) for such security. The commissioner may, by such rules and regulations as he deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.
##### **§ 17:17B-5** Foreign or domestic arbitrage transactions; exemption {#sec-17-17b-5 omnilex-key=us-nj-statutes--title-17--17:17B-5}
The provisions of sections 1, 2, and 3 of this act shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the commissioner may adopt in order to carry out the purposes of this act.
##### **§ 17:17B-6** "Equity security" defined {#sec-17-17b-6 omnilex-key=us-nj-statutes--title-17--17:17B-6}
The term "equity security" when used in this act means any stock or similar security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any other security which the commissioner shall deem to be of similar nature and consider necessary or appropriate, by such rules and regulations as he may prescribe in the public interest or for the protection of investors, to treat as an equity security.
##### **§ 17:17B-7** Exemption of certain equity securities {#sec-17-17b-7 omnilex-key=us-nj-statutes--title-17--17:17B-7}
The provisions of sections 1, 2, and 3 of this act shall not apply to equity securities of a domestic stock insurance company if (a) such securities shall be registered, or shall be required to be registered, pursuant to section 12 of the Securities Exchange Act of 1934, as amended, or if (b) such domestic stock insurance company shall not have any class of its equity securities held of record by 100 or more persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to the provisions of sections 1, 2, and 3 of this act except for the provisions of this subsection (b).
##### **§ 17:17B-8** Rules and regulations {#sec-17-17b-8 omnilex-key=us-nj-statutes--title-17--17:17B-8}
The commissioner shall have the power to make such rules and regulations as may be necessary for the execution of the functions vested in him by sections 1 through 7 of this act, and may for such purpose classify domestic stock insurance companies, securities, and other persons or matters within his jurisdiction. No provision of sections 1, 2 and 3 of this act imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the commissioner, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.
## **Chapter 17C** {#struct-chapter-17c}
##### **§ 17:17C-1** Definitions regarding domestic mutual life insurers. {#sec-17-17c-1 omnilex-key=us-nj-statutes--title-17--17:17C-1}
1. As used in this act:
"Adoption date" means the date as of which the board of directors of the mutual insurer initially approves and adopts the plan of reorganization;
"Closed block" means a block of participating business operated for the exclusive benefit of the policies included therein for policyholder dividend purposes only;
"Effective date" means the date upon which the reorganization of the mutual insurer is effective, as provided in section 9 of this act;
"Eligible policyholder" means a policyholder who owns, or is deemed by the plan of reorganization to own, a policy that is, or that is deemed by the plan of reorganization to be, in force on the adoption date, or a policyholder who is deemed eligible by the plan of reorganization, including as a result of reinstatement in accordance with the terms of the policy or the plan of reorganization, or otherwise;
"Fair and equitable" means that any action undertaken pursuant to this act with respect to a plan of reorganization, provides for full and proper consideration of the aggregate membership interests and corresponding values of eligible policyholders, in no manner discriminates improperly among eligible policyholders and appropriately protects the interests of eligible policyholders before and subsequent to the reorganization;
"Membership interest" means all rights and interests of a policyholder as a member of a mutual insurer arising under the mutual insurer's charter or certificate of incorporation and bylaws, by law or otherwise, which rights include, but are not limited to, the right, if any, to vote and the right, if any, with regard to the surplus of the mutual insurer not apportioned or declared by the board of directors for policyholder dividends;
"Mutual insurance holding company" means a holding company based on a mutual plan which at all times owns, directly or indirectly through one or more intermediate stock holding companies, a majority of the voting securities of a reorganized insurer;
"Mutual insurer" means, in the case of a plan of reorganization under this act, a domestic mutual insurer authorized to write the kind of business defined in N.J.S.17B:17-3 and is reorganizing pursuant to a plan of reorganization;
"Parent corporation" means a stock corporation that is or has been organized for the purpose of acquiring, directly or indirectly, pursuant to the plan of reorganization, all or substantially all of the common shares of the reorganized insurer;
"Person" means an individual, partnership, firm, association, corporation, joint-stock company, limited liability company, limited liability partnership, trust, government or governmental agency, state or political subdivision of a state, board, estate, trustee or fiduciary, or any other legal entity;
"Plan of reorganization" means the plan of reorganization adopted by the mutual insurer in compliance with section 3 of this act;
"Policy" means an individual or group policy of insurance or annuity contract issued, or deemed by the plan of reorganization to have been issued, by the mutual insurer. If a policy is a group policy, the individual certificates or other evidences of interests in the group policy shall not be treated as separate policies; provided, however, that in the case of a policy or contract that was issued to a trust or group established or deemed by the plan of reorganization to have been established by the mutual insurer, the mutual insurer may provide in its plan of reorganization that each certificate or other evidence of interest is deemed to be a policy for the sole purpose of determining the rights, if any, of the holders of those certificates to receive consideration under the plan of reorganization;
"Policyholder" means the owner or deemed owner of a policy, as determined in accordance with the definition of "policyholder" set forth in N.J.S.17B:18-13 or N.J.S.17B:18-23, as applicable, and any additional rules as are set forth in the plan of reorganization;
"Qualified voter" has the meaning set forth in N.J.S.17B:18-13 or N.J.S.17B:18-23, as applicable; and
"Reorganized insurer" means the domestic stock insurer into which a mutual insurer has been reorganized in accordance with this act.
##### **§ 17:17C-2** Reorganization into a domestic stock life insurer. {#sec-17-17c-2 omnilex-key=us-nj-statutes--title-17--17:17C-2}
2. A domestic mutual life insurer authorized to write the kind of business defined in N.J.S.17B:17-3, which life insurer may also be authorized to write other kinds of business under Title 17B of the New Jersey Statutes, may pursuant to the provisions of this act reorganize into a domestic stock life insurer that may be or become a subsidiary of another stock corporation that is or has been organized for the purpose of acquiring, directly or indirectly, all or substantially all of the common stock of the reorganized insurer, provided that the use of a mutual insurance holding company shall not be permitted.
##### **§ 17:17C-3** Reorganization process. {#sec-17-17c-3 omnilex-key=us-nj-statutes--title-17--17:17C-3}
3. The reorganization of a mutual insurer shall be accomplished pursuant to a plan of reorganization that complies with the following requirements:
a. The plan of reorganization shall have been duly adopted by action of not less than three-fourths of the members of the entire board of directors of the mutual insurer.
b. The plan of reorganization shall: (1) specify the manner in which the proposed reorganization shall occur and the reasons for the proposed reorganization; (2) be fair and equitable to the policyholders of the mutual insurer; (3) promote the best interest of the mutual insurer and its policyholders; (4) provide for the enhancement of the operations of the reorganized insurer; (5) not be contrary to law; and (6) not be detrimental to the public.
c. The plan of reorganization shall provide that all membership interests in the mutual insurer shall be extinguished as of the effective date; shall require the distribution of consideration, in a fair and equitable manner, to all eligible policyholders upon extinguishment of their membership interests; shall specify the manner in which the aggregate value of the consideration shall be determined and the method by which the consideration shall be allocated among eligible policyholders; and shall provide for the reasonable dividend expectations of policyholders.
(1) With respect to that consideration, eligible policyholders shall be allocated in the aggregate one hundred per centum (100%) of the common stock of the reorganized insurer or its parent corporation, provided, however, that the commissioner may approve the sale of additional shares of stock of the reorganized insurer or its parent corporation if the mutual insurer demonstrates: (a) a need for additional capital, or (b) that the sale would not significantly dilute the value of the shares distributed to the policyholders.
(2) The method for allocating consideration among eligible policyholders shall be fair and equitable. The method shall provide for each eligible policyholder to receive (a) a fixed component of consideration or a variable component of consideration, or both; or (b) any other component of consideration acceptable to the commissioner. Any component shall reflect, based upon fair and equitable formulas, methods and assumptions, factors such as estimated proportionate contributions of classes or groupings of policies and contracts to the aggregate component of consideration being distributed to eligible policyholders or other factors the commissioner may approve.
(3) The consideration to be distributed to eligible policyholders shall consist of cash, stock of the reorganized insurer or the parent corporation, or if appropriate for tax or other reasons, additional life insurance or annuity benefits, any combination of these forms of consideration, or other forms of consideration acceptable to the commissioner. The form or forms of consideration to be distributed to a class or category of eligible policyholders may differ from the form or forms of consideration to be distributed to another class or category of eligible policyholders. The choice of the form or forms of consideration to be distributed to a class or category of eligible policyholders shall take into account such factors as the type of policy with respect to which the consideration is being distributed, the country of residence or tax status of the eligible policyholders or other appropriate factors; provided, however, that, if the consideration to be distributed to one or more classes or categories of eligible policyholders will be in a form other than common stock of a publicly traded company, the plan of reorganization shall include a provision for determining, in a reasonable manner, the value of the consideration by means of reference to (a) the estimated market value of the reorganized insurer based upon an independent evaluation by a qualified expert; (b) the per share public market value of the registered common stock of the reorganized insurer or its parent corporation; or (c) by another method acceptable to the commissioner.
(4) If the plan of reorganization does not provide for registration and public trading of the common stock of the reorganized insurer or the parent corporation as of the effective date, the plan of reorganization shall require the reorganized insurer or the parent corporation, as applicable, to use good faith efforts, to encourage and assist in the establishment of a market for the common stock of the reorganized insurer or the parent corporation as soon as reasonably possible and in any event not later than two years after the effective date of the reorganization, including obtaining a listing for the stock on a national exchange, facilitating coverage by research analysts, conducting management presentations to potential investors and analysts and securing the commitment of at least one market maker, which may be a specialist firm, to make a market in the common stock.
(5) Within two years after the effective date of the reorganization, the reorganized insurer or its parent corporation, as applicable, shall make available to each eligible policyholder who received and retained shares of stock with minimal aggregate value upon reorganization, a procedure to dispose of those shares of stock at market value without brokerage commissions or similar fees under a plan approved by the commissioner. The plan of reorganization shall include a provision for determining, in a reasonable manner, the market value of the shares by means of reference to (a) the estimated market value of the reorganized insurer based upon an independent evaluation by a qualified expert; (b) the per share public market value of the registered common stock of the reorganized insurer or its parent corporation; or (c) by another method acceptable to the commissioner.
d. (1) The plan of reorganization of a mutual insurer shall provide for the reasonable dividend expectations of policyholders through establishment of a closed block or other method acceptable to the commissioner. The sole purpose of any dividend protection provision shall be to provide for reasonable policyholder dividend expectations, and it is not intended that the provision shall provide in any way for the distribution of consideration to eligible policyholders for the extinguishment of membership interests as set forth in subsection c. of this section. If a closed block is utilized, (a) the closed block shall be operated for the exclusive benefit of policies and contracts included therein, (b) no costs or expenses incurred in connection with the reorganization shall be charged to the closed block, and (c) subject to termination of the closed block pursuant to paragraph (3) of this subsection d., none of the assets, including the revenue therefrom, allocated to the closed block shall revert to the benefit of the stockholders of the reorganized insurer.
(2) Any provision for dividend expectations may be limited to participating individual life insurance policies and participating individual annuity contracts in force or deemed to be in force by the plan of reorganization on the effective date of the plan of reorganization for which the mutual insurer has an experience-based dividend scale due, paid or accrued by action of the board of directors of the mutual insurer in the year in which the plan of reorganization is adopted; provided, however, that (a) policies that would be includible but for the fact that their recent issuance results in no dividends for an initial period, may be included, and (b) policies that are in force as extended term insurance may be included, and (c) other categories of policies and benefits not described in this subparagraph may be included or excluded, subject to the approval of the commissioner.
(3) If a closed block is utilized, the assets allocated therein, together with the revenue from the closed block, shall be reasonably sufficient to support the business in the closed block until the time the last policy in the closed block has terminated, including payment of claims and those expenses and taxes as are specified in the plan of reorganization, and to provide for continuation of dividend scales in effect on the adoption date, if the experience underlying those scales continues, and for appropriate adjustments in the scales if the experience changes. The plan of reorganization shall provide that the assets assigned to a closed block will consist of: (a) a list of designated assets of the mutual insurer's general account or specified segments thereof, which list shall change periodically to reflect the acquisition and disposition of assets, or (b) a designated portion of each and every asset of the mutual insurer's general account or specified segments thereof, which portion shall change periodically to reflect the cash flows of the closed block, or (c) a combination of both. The plan of operation for any closed block that is established shall specify which of the methods of assignment of closed block assets is being used, and shall set forth the methods by which the designations referred to in subparagraphs (a), (b) and (c) of this paragraph are changed during the course of closed block operations. The plan of reorganization shall: require the reorganized insurer to submit to the commissioner periodic reports, in a form acceptable to the commissioner, that account for and describe the operations of the closed block; and as specified in the plan, provide for periodic reviews of, and reports on, the closed block by an independent actuary in accordance with paragraph (4) of this subsection d. The plan of reorganization may provide for conditions under which the reorganized insurer, with the approval of the commissioner, may cease to maintain the closed block.
(4) Both the mutual insurer and the commissioner shall each appoint one or more qualified and independent actuaries for the purpose of providing actuarial certifications with respect to:
(a) The reasonableness and sufficiency of the assets allocated to the closed block, if a closed block is provided; and
(b) The reasonableness and appropriateness of the methodology and underlying assumptions used to allocate consideration among eligible policyholders.
The actuaries shall be members of the American Academy of Actuaries. The certifications provided shall be in a form satisfactory to the commissioner and shall be made in accordance with professional standards and practices generally accepted by the actuarial profession and those other factors as the actuary in his professional judgment believes are reasonable and appropriate at the time the certification is made. The certification shall be accompanied by a memorandum of the actuary, in a form satisfactory to the commissioner, describing the calculations made in support of the certification and the assumptions used in the calculations. The memoranda shall be and remain confidential and shall not be subject to public inspection or copying pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.).
##### **§ 17:17C-4** Application for reorganization approval. {#sec-17-17c-4 omnilex-key=us-nj-statutes--title-17--17:17C-4}
4. a. Upon the affirmative vote of not less than three-fourths of the members of the entire board of directors of the mutual insurer, the mutual insurer shall file with the commissioner an application for approval of, and permission to reorganize pursuant to, a plan of reorganization. The application shall include the following:
(1) The plan of reorganization and exhibits thereto which shall include:
(a) an explanation of the manner and basis upon which the reorganization shall occur;
(b) the method of allocation of the consideration to be distributed to policyholders, including an actuarial certification of the reasonableness and appropriateness of the methodology used to allocate consideration among eligible policyholders; and
(c) the method by which the dividend expectations of policyholders will be preserved including, if the plan utilizes a closed block, the plan of operation of the closed block and an actuarial certification of the reasonableness and sufficiency of the assets allocated to the closed block;
(2) A fairness opinion addressed to the board of directors of the mutual insurer from a qualified, nationally recognized investment banker that the provision of common stock, cash and policy benefits upon the extinguishment of the policyholders' membership interests pursuant to the plan of reorganization is fair to the eligible policyholders, as a group, from a financial point of view;
(3) A business plan of the reorganized insurer including five-year financial projections;
(4) A certification that the plan of reorganization has been duly adopted by action of not less than three-fourths of the members of the entire board of directors of the mutual insurer;
(5) The actuarial memoranda accompanying the certifications of the independent actuary appointed by the mutual insurer as required by paragraph (4) of subsection d. of section 3 of this act;
(6) Certified copies of the proposed charter or certificate of incorporation and bylaws of the reorganized insurer;
(7) The proposed forms of the notice of hearing to policyholders and for publication required by subsection d. of this section and the notice of the meeting of policyholders required by subsection c. of section 5 of this act, and any other notices required by the plan of reorganization;
(8) Any information provided to the board of directors of the mutual insurer in connection with its review and approval of the plan of reorganization, except materials that are protected by attorney-client privilege;
(9) Any other additional information that the mutual insurer believes is necessary; and
(10) Any other additional information that the commissioner in his sole discretion deems necessary.
b. The commissioner in his sole discretion shall determine, within thirty days of submission of the application, whether the application is complete and whether the forms of notice submitted pursuant to paragraph (7) of subsection a. of this section are adequate and may be provided to policyholders.
c. The application and supporting documents shall be public documents except that the business plan, the financial projections, the actuarial memoranda and any other information that the commissioner determines could result in harm to the mutual insurer, harm to the reorganized insurer, or a reduction of values to eligible policyholders, if disclosed, shall be considered confidential. This confidentiality will not extend to information provided by the mutual insurer that the commissioner deems necessary to be provided to policyholders to evaluate the plan of reorganization.
d. Upon determining that the application is complete and the forms of notice are adequate, the commissioner shall designate a date for a public hearing on the plan of reorganization. The public hearing may be held on one or more days, the first commencing within 90 days after the date on which the commissioner determines the application is complete, unless the mutual insurer requests, and the commissioner agrees to, a longer period for the purpose of preparing and distributing the notices required by this subsection and subsection c. of section 5 of this act. The hearing shall be in the nature of a legislative hearing and shall not constitute or be considered, a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The mutual insurer shall provide policyholders with at least 45 days' notice of the hearing, the notice to be in the form, and provided in the manner, that the commissioner approves pursuant to subsection b. of this section. The mutual insurer shall cause notice of the time and place of the public hearing to be published at least two times at intervals of not less than one week, the first publication to be not more than 45 days and the last publication not less than 15 days prior to the public hearing in at least two newspapers of general circulation throughout the United States. The notice of the hearing shall state the purpose thereof and the time and the place where the hearing will occur. The purpose of the hearing shall be to receive comments and information for the purpose of aiding the commissioner in making a decision on the plan of reorganization. Persons wishing to make comments and submit information may submit written statements prior to the public hearing and may appear and be heard at the hearing.
e. The hearing shall be conducted by the commissioner or, at the commissioner's discretion, his designee, who shall report to and advise the commissioner on the matter, and the determination or order issued by the commissioner shall have the same force and effect as if the commissioner had conducted the hearing personally. The commissioner's order or determination shall be issued within 45 days after the closing of the record of the hearing by the commissioner or the hearing officer, as applicable, which record shall not be closed until the time it includes certification of the vote on the plan of reorganization by the mutual insurer's qualified voters as required by section 5 of this act. The commissioner shall issue a written decision detailing the reasons why the mutual insurer's plan of reorganization is approved or disapproved.
f. The commissioner shall approve the application and permit the reorganization pursuant to the plan of reorganization if he finds, following a public hearing, that: (1) the application conforms to the requirements of this section; (2) the plan is fair and equitable to the policyholders of the mutual insurer; (3) the plan promotes the best interest of the mutual insurer and its policyholders; (4) the plan provides for the enhancement of the operations of the reorganized insurer; (5) the plan is not contrary to law; (6) the plan is not detrimental to the public; and (7) after giving effect to the reorganization, the reorganized insurer will have an amount of capital and surplus the commissioner deems to be reasonably necessary for its future solvency.
g. The commissioner may engage the services of advisors and consultants, which may include, but are not limited to, lawyers, actuaries, accountants, investment bankers, compensation and employee benefit plan consultants or any combination thereof, to advise him on any matters related to the reorganization. All reasonable costs related to the development and examination of, and deliberations concerning, a plan of reorganization and other related matters, including those reasonable costs attributable to the use by the commissioner of advisors and consultants, shall be paid by the mutual insurer that makes the filing or initiates the discussions about a plan of reorganization for services prior to the effective date and by the reorganized insurer for services after the effective date.
h. The commissioner's order approving or disapproving a plan of reorganization shall be a final agency decision subject to appeal in accordance with, and within the time periods specified by, the Rules Governing the Courts of the State of New Jersey.
##### **§ 17:17C-5** Approval of reorganization. {#sec-17-17c-5 omnilex-key=us-nj-statutes--title-17--17:17C-5}
5. a. Subject to the provisions of subsection b. of this section, the plan of reorganization shall be approved by a vote of not less than two-thirds of the votes of the mutual insurer's qualified voters voting thereon in person or by attorney or proxy, except in the case of a mutual insurer that holds its elections pursuant to N.J.S. 17B:18-18 to 17B:18-28, inclusive, in which case voting shall be in person or by ballot, at a meeting of policyholders called for that purpose. The meeting of policyholders shall occur after the hearing required pursuant to subsection e. of section 4 of this act. Pursuant to N.J.S. 17B:18-14 or subsection d. of N.J.S. 17B:18-26, as applicable, each qualified voter shall be entitled to cast only one vote, irrespective of the number or value of policies held, unless the mutual insurer's charter or bylaws provide otherwise. The commissioner shall have the power to supervise and direct and prescribe rules governing the procedure for the conduct of voting on the plan of reorganization to the extent, consistent with the provisions of this section, he deems necessary to insure a fair and accurate vote. These powers shall include, but not be limited to, power to examine, supervise and approve: (1) the determination of qualified voters entitled to notice of and to vote on the plan of reorganization; (2) the giving of notice of the policyholders' meeting; (3) the content of the proxy form or ballot; (4) the receipt, custody, safeguarding, verification and tabulation of proxy forms and ballots; and (5) the resolution of any disputes.
b. The number of qualified voters who vote on the plan of reorganization shall equal or exceed, in the aggregate, (1) one million qualified voters, or (2) that lesser number of qualified voters as the commissioner shall approve.
c. All qualified voters shall be given notice of their opportunity to vote on the plan of reorganization, which notice shall be in a form approved by the commissioner and accompanied by a copy of the plan of reorganization or a summary thereof which shall also be in a form approved by the commissioner, and any other explanatory information that the commissioner approves or requires. The notice shall be mailed, or provided by some other method or methods as may be approved by the commissioner, not less than 45 days before the date of the meeting of policyholders to vote on the plan of reorganization. The notice may be combined with the notice of the hearing described in subsection d. of section 4 of this act.
d. The mutual insurer shall use good faith efforts to encourage qualified voters to vote on the plan of reorganization. These efforts shall be specified in the plan of reorganization and may include, but need not be limited to, establishing a toll-free call center, establishing an Internet site, adding messages to routine policy statements, providing written communications to qualified voters, and advertising in national publications.
##### **§ 17:17C-6** Limits on acquisition of beneficial ownership; exceptions. {#sec-17-17c-6 omnilex-key=us-nj-statutes--title-17--17:17C-6}
6. Except as otherwise specifically provided in the plan of reorganization, prior to and for a period of three years following the effective date of the reorganization, no person or persons acting in concert, other than the reorganized insurer or any employee benefit plans or trusts sponsored by the reorganized insurer, shall directly or indirectly offer to acquire or acquire in any manner the beneficial ownership of five percent or more of any class of a voting security of the reorganized insurer or any person that owns or controls a majority or all of the voting securities of the reorganized insurer without the prior approval by the commissioner of an application for acquisition filed by that person with the commissioner. The application for acquisition shall contain the information required by subsection b. of section 2 of P.L.1970, c.22 (C.17:27A-2) and any other information required by the commissioner. The commissioner shall not approve an application for acquisition unless he finds that the requirements of subsection d. of section 2 of P.L. 1970, c. 22 (C.17:27A-2) will be satisfied and, additionally, that: a. the acquisition would not frustrate the plan of reorganization as approved by the policyholders and the commissioner; b. the board of directors of the reorganized insurer or its parent corporation, as applicable, has approved the acquisition or extraordinary circumstances not contemplated in the plan of reorganization have arisen that would warrant their approval of the acquisition; and c. the acquisition would be in the interest of the policyholders of the reorganized insurer. No security that is the subject of any agreement or arrangement regarding acquisition or that is acquired or to be acquired in contravention of this section or of an order of the commissioner may be voted at any shareholders' meeting, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though the securities were not issued and outstanding; provided, however, that no action taken at a meeting shall be invalidated by the voting of those securities unless the action would materially affect control of the reorganized insurer or a person that owns or controls a majority or all of the voting securities of the reorganized insurer or unless the courts of this State have so ordered.
##### **§ 17:17C-7** Financial compensation restricted {#sec-17-17c-7 omnilex-key=us-nj-statutes--title-17--17:17C-7}
7. No director, officer, agent or employee of the mutual insurer shall receive any fee, commission or other valuable consideration, other than his usual regular salary and compensation, whatsoever, that is contingent upon the plan of reorganization becoming approved or effective or is based upon a director, officer, agent or employee aiding, promoting or assisting in the approval or effectuation of the plan of reorganization. Subject to the approval of the commissioner, the mutual insurer may provide in its plan of reorganization for employee benefit and compensation arrangements, including arrangements involving the use of the stock of the reorganized insurer or stock of its parent corporation, which are to become effective simultaneously with the plan of reorganization; provided, however, that no member of the board of directors may be included in any such arrangement that becomes effective at that time.
##### **§ 17:17C-8** Compliance; nonimpairment. {#sec-17-17c-8 omnilex-key=us-nj-statutes--title-17--17:17C-8}
8. If the mutual insurer complies substantially and in good faith with the requirements of this act with respect to any required notice to policyholders, its failure in any case to give the notice to any person or persons entitled thereto shall not impair the validity of the actions and proceedings taken under this act or entitle a person to any injunctive or other relief with respect thereto.
##### **§ 17:17C-9** Effective date of reorganization. {#sec-17-17c-9 omnilex-key=us-nj-statutes--title-17--17:17C-9}
9. The reorganization shall be effective upon the date when the specified requirements within the plan of reorganization are satisfied. On or prior to the effective date of the reorganization, the mutual insurer shall file with the commissioner a certificate stating that: a. all of the conditions set forth in the plan of reorganization, including a final order by the commissioner granting permission to reorganize in accordance with the plan pursuant to subsection f. of section 4 of this act and approval by policyholders pursuant to section 5 of this act, have been satisfied and b. the board of directors of the mutual insurer has not abandoned or amended the plan of reorganization pursuant to section 11 of this act.
##### **§ 17:17C-10** Status of stock insurer after reorganization. {#sec-17-17c-10 omnilex-key=us-nj-statutes--title-17--17:17C-10}
10. Upon the effective date, the mutual insurer shall immediately become a stock insurer, all membership interests shall be extinguished, and the reorganized insurer will act in good faith to convey consideration to policyholders eligible to receive consideration under the plan of reorganization within 45 days, pursuant to the terms of the plan of reorganization. The reorganized insurer shall be a continuation of the original mutual insurer, and the reorganization in no way shall annul, modify or change any of the original mutual insurer's existing suits, rights, contracts or liabilities, except as provided in the plan of reorganization. After reorganization, the reorganized insurer shall exercise all the rights and powers and perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, and shall be vested in all the rights, franchises and interests of the mutual insurer in and to every species of property without any deed or transfer and the reorganized insurer shall succeed to all the obligations and liabilities of the mutual insurer, and retain all rights and contracts existing prior to conversion, except as provided in the plan.
##### **§ 17:17C-11** Reorganization plan amendments. {#sec-17-17c-11 omnilex-key=us-nj-statutes--title-17--17:17C-11}
11. The mutual insurer may, by action of not less than three-fourths of its board of directors, abandon or amend the plan of reorganization at any time before the effective date. No amendment made after the public hearing required by subsection d. of section 4 of this act shall change the plan in a manner which the commissioner determines is materially disadvantageous to any of the policyholders unless a further public hearing is held on the plan as amended.
##### **§ 17:17C-12** Commissioner's rules, regulations. {#sec-17-17c-12 omnilex-key=us-nj-statutes--title-17--17:17C-12}
12. The commissioner may, in his discretion, promulgate rules and regulations to implement this act.
##### **§ 17:17C-13** Directors, officers retained. {#sec-17-17c-13 omnilex-key=us-nj-statutes--title-17--17:17C-13}
13. The directors and officers of the mutual insurer, unless otherwise specified in the plan of reorganization, shall serve as the directors and officers of the reorganized stock insurer until new directors and officers are duly elected pursuant to the articles of incorporation and bylaws of the reorganized stock insurer.
##### **§ 17:17C-14** Notice of intent to demutualize. {#sec-17-17c-14 omnilex-key=us-nj-statutes--title-17--17:17C-14}
14. Within 90 days following the public announcement by a mutual insurer of its intent to demutualize pursuant to this act, the mutual insurer shall provide notice of its intent to demutualize to all former policyholders who are at the time of the notice eligible to reinstate their policies. The notice shall be in a form and distributed in a manner approved by the commissioner.
## **Chapter 18** {#struct-chapter-18}
##### **§ 17:18-1** Powers and duties generally {#sec-17-18-1 omnilex-key=us-nj-statutes--title-17--17:18-1}
Any company organized under chapters 17 to 33 of this title (s. 17:17-1 et seq.), and its stockholders, members and directors, shall have all the powers granted and be subject to all the duties and obligations imposed by Title 14, Corporations, General, except so far as they may be inconsistent with the provisions of this subtitle.
##### **§ 17:18-2** Membership in federal home loan bank {#sec-17-18-2 omnilex-key=us-nj-statutes--title-17--17:18-2}
An insurance company incorporated under the laws of this state may become a member of the federal home loan bank organized in the district in which the insurance company is located under the provisions of the act of congress known as the "federal home loan bank act" , approved July twenty-second, one thousand nine hundred and thirty-two. The insurance company may subscribe for, purchase, hold and surrender from time to time such amounts of the capital stock of the federal home loan bank as may be required under the "federal home loan bank act" or any amendment thereof in order to obtain and continue its membership or as the insurance company may desire to purchase or hold, and become a member of the federal home loan bank and assume all the responsibilities and be entitled to all the benefits of such membership as imposed and conferred by the "federal home loan bank act" .
##### **§ 17:18-3** Dealing in real estate; disposition of unnecessary real estate {#sec-17-18-3 omnilex-key=us-nj-statutes--title-17--17:18-3}
Any insurance company of this State may purchase, hold and convey, such real estate as may be:
(a) Requisite for its accommodation in the transaction of its business;
(b) Conveyed to it in satisfaction of debts previously contracted in the course of its dealings;
(c) Purchased at sales upon judgments or mortgages obtained or made for those debts;
(d) Conveyed to it pursuant to or in connection with any contract of reinsurance effected under section 17:34-13 of this Title; or
(e) Purchased or held as an investment for the production of income as permitted by section 17:24-1 of this Title.
No such company shall purchase, hold or convey real estate in any other case or for any other purpose. All real estate so acquired (except real estate held as an investment for the production of income as permitted by section 17:24-1 of this Title), not necessary for the accommodation of the company in the convenient transaction of its business, shall be sold and disposed of within five years after the company has acquired title thereto, unless it procures a certificate from the commissioner that the interests of the company will suffer materially by a forced sale of the real estate, in which event the time for the sale may be extended to such time as the commissioner directs in the certificate. Nothing herein contained shall prevent any company from improving and conveying its real estate, notwithstanding the lapse of five years without having procured the certificate. Real estate acquired by such company as provided in subsections (b), (c) and (d) of this section shall not be held as an investment for the production of income as provided in subsection (e) of this section unless such company shall have procured the approval of the commissioner.
##### **§ 17:18-4** Purchase of stock of other companies {#sec-17-18-4 omnilex-key=us-nj-statutes--title-17--17:18-4}
Any insurance company, other than a life insurance company, organized under the laws of this state and authorized to transact business, may purchase or acquire, hold, sell or transfer all or a part of the capital stock of any other insurance company, and may pay therefor in cash or its equivalent or in its own capital stock, and may issue its capital stock in payment to the persons from whom the same may be purchased or acquired, or otherwise for the purpose of the purchase or acquisition. The stock so purchased or acquired shall constitute lawful payment for the capital stock issued to purchase or acquire it and any capital stock so issued shall be deemed a part of the capital of the issuing company. The company may exhibit the amount of capital so paid up in its advertisements.
##### **§ 17:18-5** Reinsurance {#sec-17-18-5 omnilex-key=us-nj-statutes--title-17--17:18-5}
Any insurance company of this state may make reinsurance of any risks taken by it, but no life insurance company shall reinsure any of its risks except as provided in section 17:34-13 of this title.
##### **§ 17:18-6** Loan for defraying expenses {#sec-17-18-6 omnilex-key=us-nj-statutes--title-17--17:18-6}
A mutual company organized under chapters 17 to 33 of this title (s. 17:17-1 et seq.), may borrow or assume a liability for the repayment of a sum of money sufficient to defray the reasonable expenses of its organization, or to enable it to comply with any requirement of law or as a guaranty fund upon agreement, which shall first be submitted to and approved by the commissioner, that the loan or advance, with interest at a rate not exceeding six per cent per annum, shall be repaid only out of the surplus, earnings or profits of the corporation with the approval of the commissioner whenever, in his judgment, its financial condition shall warrant. The commissioner's approval shall not be withheld if after the repayment is made the company has and is in possession of a surplus equal to ten per cent or more of its gross annual premiums on policies outstanding and in force. Any such loan or advance shall not form a part of the legal liabilities of the company, but until repaid all statements published or filed with the commissioner by the company shall show the amount thereof then unpaid.
##### **§ 17:18-8** Engaging in other business {#sec-17-18-8 omnilex-key=us-nj-statutes--title-17--17:18-8}
No company formed hereunder shall transact any other business than that specified in its original or amended certificate of incorporation.
##### **§ 17:18-9** Maximum amounts of individual risks {#sec-17-18-9 omnilex-key=us-nj-statutes--title-17--17:18-9}
No insurance company transacting business in this State shall expose itself to any loss on any one risk or hazard in an amount exceeding ten per centum (10%) of its net assets as of December 31 next preceding, except that for the kind of business specified in subsection e. of R.S.17:17-1, the exposure to any loss on any one risk or hazard shall not exceed five per centum (5.0%) of the insurer's net assets as of December 31 next preceding. With respect to the kind of business specified in subsection e. of R.S.17:17-1, the commissioner may revise the limit between five per centum (5.0%) and ten per centum (10.0%) of net assets exposed on any one risk or hazard as deemed necessary based on an assessment of the lines and classifications of business written and on the individual company's financial condition. So much of a risk or hazard as shall be reinsured in a company that satisfies the requirements set forth in P.L.1993, c.243 (C.17:51B-1 et al.) or as to which credit for reinsurance is allowed pursuant to the law of the ceding insurer's state or country of domicile, which law is substantially similar to P.L.1993, c.243 (C.17:51B-1 et al.) shall not be considered part of the risk.
Any mutual fire insurance company operated without purpose of profit and which confines its business principally to sprinklered risks and which pays no commissions or brokerages for the acquisition of its business may expose itself to loss on any one risk or hazard to an amount not exceeding ten per centum (10%) of the sum of its net assets and its gross premium or premium deposits in force. No insurance company transacting business in this State and having net assets of less than $2,000,000 shall issue any policy of insurance on any one risk or hazard for an amount in excess of double the amount to which it can legally expose itself, as above provided, unless the reinsurance contracts have been submitted to and approved by the commissioner.
This section shall not apply to policies of life insurance, marine insurance, including transportation and inland navigation, title or mortgage insurance, or workmen's compensation or employer's liability insurance.
##### **§ 17:18-10** Advertisement of assets to include liabilities {#sec-17-18-10 omnilex-key=us-nj-statutes--title-17--17:18-10}
When an insurance company doing business in this state advertises its assets, it shall, in the same connection and equally conspicuously, advertise its liabilities, the same to be determined in the manner required in making the annual statements to the commissioner. All advertisements purporting to show the capital of the company shall exhibit only the amount of capital actually paid in cash. In the case of a company organized under the laws of a foreign country, its assets shall be considered to be only the amounts deposited with the officials of the several states of the union or held by trustees in the United States for the benefit of the policyholders and creditors of the company in the United States. All policies, renewals, signs, circulars, cards, or other means by which public announcements are made, shall be held to be advertisements within the meaning of this section.
##### **§ 17:18-12** Disability benefits not liable to execution, attachment, garnishment, etc.; rights of creditors {#sec-17-18-12 omnilex-key=us-nj-statutes--title-17--17:18-12}
No money or other benefit paid, provided or allowed to be paid, provided or allowed by any stock or mutual life, health or casualty insurance corporation on account of the disability from injury, or sickness of any insured person under any policy of insurance, whether heretofore or hereafter issued, shall be liable to execution, attachment, garnishment, or other process, or to be seized, taken, appropriated or applied by any legal or equitable process or operation of law, to pay any debt or liability of such insured person whether such debt or liability was incurred before or after the commencement of such disability, but this section shall not affect the assignability of any such disability benefit otherwise assignable, nor shall this section apply to any money income disability benefit in an action to recover for necessaries contracted for after the commencement of the disability covered by the disability clause or contract allowing such money income benefit. Subject to the statute of limitation, the amount of any premiums paid by the insurer for such disability insurance, in fraud of creditors, with interest thereon, shall inure to such creditor's benefit from the proceeds of such insurance, but all payments made in accordance with such disability insurance contract before written notice by or on behalf of some creditors, with specifications of the amount claimed, claiming to recover for certain premiums paid in fraud of creditors, has been served on the insurer, shall discharge the insurer from all liability to such creditor for such payments.
##### **§ 17:18-13** Title insurance companies; reserve of gross fees and premiums; charges against reserve {#sec-17-18-13 omnilex-key=us-nj-statutes--title-17--17:18-13}
Every title insurance company of this State or of another State or foreign country doing business in this State under paragraph "h" of section 17:17-1 of this Title shall set up, accumulate, and maintain a reserve as follows:
a. During the first ten years of its doing business after the effective date of this act, it shall set up, accumulate, and maintain a reserve at the end of each calendar month at least equal to three per centum (3%) of the total gross fees and premiums received or to be received on account of policies issued during the next preceding calendar month for title insurance, examinations or searches of title, and for abstracts of title, written, issued, or performed, as the case may be, after the effective date of this act; and at the end of every such calendar month the amount so required to be accumulated shall be charged as a reserve liability of such company in determining its financial condition.
b. After the expiration of the said first ten years and in lieu of the reserve required by the preceding paragraph "a" , every such company shall, at the end of each calendar month thereafter, set up and accumulate a similar reserve of two per centum (2%) of the total of said gross fees and premiums received or to be received on account of policies issued during the preceding calendar month and during the one hundred nineteen immediately preceding calendar months for title insurance, examinations or searches of title, and for abstracts of title, written, issued, or performed, as the case may be; and at the end of every such calendar month thereafter the amount so required to be accumulated shall be charged as a reserve liability of such company in determining its financial condition.
c. The amount of any loss or claim and the amount of any counsel fees, incurred as a result of any claim, that shall be paid by any such title insurance company on policies of title insurance, examinations of titles, searches of title and abstracts of title may be charged against the reserve accumulated under the provisions of the preceding paragraphs "a" and "b" ; provided, however, that no such charge against the reserve shall be made unless the reserve amounts to more than fifty thousand dollars ($50,000.00); and provided, further, that the amount of the reserve shall not be thereby reduced to a sum less than fifty thousand dollars ($50,000.00).
##### **§ 17:18-14** Title insurance companies; loss reserve {#sec-17-18-14 omnilex-key=us-nj-statutes--title-17--17:18-14}
In addition to the reserves hereinabove required by section six of this act, every such company shall set up and maintain a loss reserve at least equal to the aggregate estimated amounts due or to become due on account of all unpaid losses and claims upon title insurance policies of which the company has received notice.
##### **§ 17:18-15** Allocation of reserve of fees and premiums {#sec-17-18-15 omnilex-key=us-nj-statutes--title-17--17:18-15}
In cases where a title insurance company of this State or of another State or foreign country doing business in this State under paragraph "h" of s. 17:17-1 of this Title issues its title insurance policy upon the examination and certification of title of another such company, the reserve required under section six of this act above shall be allocated between the companies upon the basis of the amount of the total fee and premium retained by each, respectively.
##### **§ 17:18-16** Payment of taxes, charges and fees authorized unless laws imposing them have been held invalid {#sec-17-18-16 omnilex-key=us-nj-statutes--title-17--17:18-16}
The directors or trustees of any corporation organized or existing under any general or special law of this State for the purpose of transacting the business of insurance of any kind or class are authorized to pay, and to appropriate money to pay, such taxes, charges and fees as have been or may be imposed against the property, business, income or franchises of such corporation by the laws of this or any other State, or territory of the United States, or the District of Columbia, in which such corporation is doing business unless, prior to the payment of any such tax, charge or other fee, the law imposing the same shall have been expressly held invalid by the State court having final appellate jurisdiction in the premises or by the Supreme Court of the United States.
##### **§ 17:18-17** Furnishing accounting record of compensation to or on behalf of holder of policy to holder {#sec-17-18-17 omnilex-key=us-nj-statutes--title-17--17:18-17}
The provisions of any other law to the contrary notwithstanding, every insurance company when making compensation to or on behalf of the holder of any insurance policy issued by such company for any loss incurred by or on behalf of such holder pursuant to the terms of such policy, shall upon request furnish such holder a complete accounting record of the transaction resulting in such compensation. Such record shall contain dollar amounts for each specific item in the transaction, including, but not limited to, attorneys fees, court costs, any amount deductible from the insured value of any such loss pursuant to the terms of such policy and the amount of compensation actually received by or on behalf of such holder.
Such record shall be mailed to the policyholder, or furnished him by his agent, at his last known address.
##### **§ 17:18-18** Violations; penalty {#sec-17-18-18 omnilex-key=us-nj-statutes--title-17--17:18-18}
Any insurance company violating any provision of this act shall be liable to a penalty of $200.00 for each violation which shall be collected pursuant to the penalty enforcement law (N.J.S. 2A:58-1 et seq.).
##### **§ 17:18-19** Definitions relative to vehicle protection product warranties. {#sec-17-18-19 omnilex-key=us-nj-statutes--title-17--17:18-19}
1. As used in this act:
"Administrator" means a third party, other than the warrantor, who is designated by the warrantor to be responsible for the administration of vehicle protection product warranties.
"Incidental costs" means losses and expenses that are specified in the vehicle protection product warranty and are incurred by the warranty holder relating to the failure of the vehicle protection product to perform as provided in the warranty. Incidental costs may include, but are not limited to, insurance policy deductibles, rental vehicle charges, the difference between the actual value of the stolen vehicle at the time of theft and the cost of a replacement vehicle, sales taxes, registration fees, transaction fees and mechanical inspection fees.
"Vehicle protection product" means a vehicle protection device, system or service that:
(a) is installed on or applied to a vehicle;
(b) is designed to prevent loss or damage to a vehicle from a specific cause or to facilitate the recovery of the vehicle after it has been stolen; and
(c) includes a written warranty by a warrantor that provides if the vehicle protection product fails to prevent loss or damage to a vehicle from a specific cause or to facilitate the recovery of the vehicle after it has been stolen, the warranty holder shall be paid specified incidental costs by the warrantor as a result of the failure of the vehicle protection product to perform pursuant to the terms of the warranty.
The term does not include a vehicle protection device, system, or service that is installed on or applied to a vehicle by the vehicle manufacturer at the vehicle assembly facility. Vehicle protection products include, but are not limited to, alarm systems, body part marking products, steering locks, window etch products, pedal and ignition locks, fuel and ignition kill switches and electronic, radio and satellite tracking devices.
"Vehicle protection product warrantor" or "warrantor" means a person who is contractually obligated to the warranty holder under the terms of the vehicle protection product warranty. Warrantor does not include a licensed or eligible insurer.
"Warranty reimbursement insurance policy" means a policy of insurance issued to a vehicle protection product warrantor to provide reimbursement to the warrantor under the terms of the insured warrantor's vehicle protection product warranty, and to pay on behalf of the warrantor, in the event of the warrantor's nonperformance, all covered obligations incurred by the warrantor under the terms of the warrantor's vehicle protection product warranty. A licensed or eligible insurer that has filed its policy form with the Department of Banking and Insurance shall issue the warranty reimbursement insurance policy.
##### **§ 17:18-20** Requirements for issuance of vehicle protection product warranty. {#sec-17-18-20 omnilex-key=us-nj-statutes--title-17--17:18-20}
2. A vehicle protection product warranty offered or issued in this State shall:
a. Identify the warrantor, the seller, the warranty holder and the terms of the sale;
b. Conspicuously and in plain English set forth in writing the obligations of the warrantor to the warranty holder, and state that those obligations are guaranteed under a warranty reimbursement insurance policy;
c. Conspicuously state that if the payment due under the terms of the warranty is not provided by the warrantor within sixty days after proof of loss has been filed pursuant to the terms of the warranty by the warranty holder, the warranty holder may file directly with the warranty reimbursement insurance company for reimbursement;
d. Conspicuously state the name and address of the company issuing the warranty reimbursement insurance policy and, if different, the complete address at which a claim may be filed; and
e. Contain a disclosure that reads substantially as follows:
THIS AGREEMENT IS A PRODUCT WARRANTY, NOT INSURANCE, AND IS UNDER THE PURVIEW OF THE DIVISION OF CONSUMER AFFAIRS.
##### **§ 17:18-21** Registration for warrantor required. {#sec-17-18-21 omnilex-key=us-nj-statutes--title-17--17:18-21}
3. a. A person may not operate as a warrantor or represent to the public that the person is a warrantor unless the person is registered with the Director of the Division of Consumer Affairs, in such manner as the director deems appropriate, and:
(1) Maintains and has filed with the director a copy of a warranty reimbursement insurance policy which states that:
(a) The company issuing the warranty reimbursement insurance policy will reimburse or pay on behalf of the vehicle protection product warrantor all incidental costs or will provide the service that the warrantor is legally obligated to perform according to the warrantor's contractual obligations under the vehicle protection product warranty; and
(b) If the payment due under the terms of the warranty is not provided by the warrantor within sixty days after proof of loss has been filed according to the terms of the warranty by the warranty holder, the warranty holder may file for reimbursement directly with the company issuing the warranty reimbursement insurance policy and the insurer shall make reimbursement or provide the service required by the warranty directly to the warranty holder; and
(2) Has filed a copy of the warranties used by the warrantor in this State and a copy of the warranty reimbursement insurance policy with the director.
b. The director shall require warrantors to register annually, and to update their registration, the form of warranty, or the warranty reimbursement insurance policy, within 30 days of any change. The registration form shall contain:
(1) The warrantor's name, and any assumed name under which the warrantor does business in the State;
(2) The warrantor's principal office address and telephone number;
(3) The name, address, and telephone number of all administrators designated by the warrantor to be responsible for the administration of vehicle protection product warranties in this State; and
(4) The name, address, and telephone number of the insurance company providing the warranty reimbursement insurance policy coverage.
c. The information required to be provided in the registration form shall be made available to the public.
d. The director shall impose a fee on each registered warrantor to defray the costs of administering the provisions of P.L.2007, c.166 (C.17:18-19 et al.), in the amount of $1,000 annually. Beginning 12 months after the effective date of P.L.2007, c.166 (C.17:18-19 et al.), and annually thereafter, the director may modify the amount of the fee imposed pursuant to this subsection, which amount shall not exceed $2,000, to reflect the division's actual costs of administration.
##### **§ 17:18-22** Conditions for express warranty. {#sec-17-18-22 omnilex-key=us-nj-statutes--title-17--17:18-22}
5. A vehicle protection product warranty issued by the warrantor of a vehicle protection product does not constitute a contract substantially amounting to insurance or its issuance the business of insurance under Title 17 of the Revised Statutes and is an express warranty, if all of the following conditions are met:
a. The warranty is limited to indemnifying the warranty holder for incidental costs which may be reimbursed under the provisions of the warranty in either a fixed amount specified in the warranty or sales agreement or by the use of a formula itemizing specific incidental costs incurred by the warranty holder;
b. The warranty meets all the requirements set forth in section 2 of P.L.2007, c.166 (C.17:18-20), including, but not limited to, being guaranteed by a warranty reimbursement insurance policy; and
c. The warrantor meets all the requirements set forth in section 3 of P.L.2007, c.166 (C.17:18-21).
##### **§ 17:18-23** Registration not required for nonwarrantor. {#sec-17-18-23 omnilex-key=us-nj-statutes--title-17--17:18-23}
6. An administrator or person who sells or solicits a sale of a vehicle protection product, but who is not a warrantor, shall not be required to register as a warrantor or be licensed under the insurance laws of this State to sell vehicle protection products.
##### **§ 17:18-24** Vehicle protection product not required for sale, financing. {#sec-17-18-24 omnilex-key=us-nj-statutes--title-17--17:18-24}
7. A warrantor or seller of vehicle protection products shall not require, as a condition of sale or financing, a retail purchaser of a motor vehicle to purchase a vehicle protection product that is not installed on the motor vehicle at the time of sale.
##### **§ 17:18-25** Noncompliance prior to effective date. {#sec-17-18-25 omnilex-key=us-nj-statutes--title-17--17:18-25}
8. The failure of a warrantor or other person to comply with P.L.2007, c.166 (C.17:18-19 et al.), or otherwise to administer a vehicle protection product in the manner required by P.L.2007, c.166 (C.17:18-19 et al.), before its effective date is not admissible in any court, administrative, arbitration, or alternative dispute resolution proceeding and may not otherwise be used to prove that the action of any person or the affected vehicle protection product was unlawful or otherwise improper.
##### **§ 17:18-26** Violation, unlawful practice. {#sec-17-18-26 omnilex-key=us-nj-statutes--title-17--17:18-26}
9. A violation of the provisions of P.L.2007, c.166 (C.17:18-19 et al.) shall be an unlawful practice and a violation of P.L.1960, c.39 (C.56:8-1 et seq.).
## **Chapter 19** {#struct-chapter-19}
##### **§ 17:19-1** Insanitary housing conditions; necessity for remedy {#sec-17-19-1 omnilex-key=us-nj-statutes--title-17--17:19-1}
It is hereby declared that congested, insanitary and dangerous housing conditions which exist in portions of the cities of the first class in this state are a menace to the health, safety, morals and welfare of the public; that the correction of these conditions is essential to the general public health and safety; that it is only practicable to accomplish that purpose by the investment of private funds for the acquisition at fair prices of the lands and buildings upon and within which the conditions obtain for the demolition of the insanitary and unsafe buildings and the construction of new housing facilities under public supervision in accordance with proper standards of sanitation and safety and at a cost which will permit rentals within the means of wage-earners of the lowest earning capacity.
##### **§ 17:19-2** Application for approval of project to remedy conditions {#sec-17-19-2 omnilex-key=us-nj-statutes--title-17--17:19-2}
Any insurance company of this state authorized to hold, purchase and convey real estate may present to the governing body of any city of the first class in this state an application for approval of a project for the acquisition of a tract of real estate in the city occupied in whole or in part by insanitary or unsafe structures used as dwellings, for the demolition of the existing structures and for the construction upon the tract of new housing facilities in accordance with proper standards of sanitation and safety, at the expense of the applicant. The application shall set forth a statement of the project presented for approval, to which shall be annexed the following exhibits:
a. A map showing the location of the tract and of the structures thereon, the acquisition of which is deemed by the applicant to be necessary to the project.
b. A plan and specifications prepared by an architect or engineer showing the new housing facilities to be constructed upon the tract pursuant to the project, which may provide stores and offices on the ground floor.
c. An estimate of the cost of the entire project prepared by an architect or engineer.
d. An estimate of the rentals of the new housing facilities necessary to assure a return of five per cent upon the cost of the entire project after payment of all taxes, insurance, costs of operation and maintenance and an annual amount sufficient to amortize the entire cost of construction of the new housing facilities at the end of a period of twenty years from their completion.
At any time prior to the final action of the governing body upon the application, the applicant may in its discretion amend or supplement the application in such manner as it desires to conform to the conditions the governing body may impose upon the granting of its approval.
##### **§ 17:19-3** Application; examination into; approval {#sec-17-19-3 omnilex-key=us-nj-statutes--title-17--17:19-3}
Upon filing the application the governing body shall examine it and any amendments and supplements thereto, and within three months of its filing, or of the last amendment or supplement thereto, by resolution, determine whether the project set forth in the application is in the public interest and necessary for public use. If it determines that the undertaking and completion of the project is in the public interest and necessary for public use, it shall, by resolution, approve the application and authorize and empower the applicant to undertake and carry the project to completion in accordance with the provisions of this article.
##### **§ 17:19-4** Acquiring property; condemnation {#sec-17-19-4 omnilex-key=us-nj-statutes--title-17--17:19-4}
When the application has been approved by the governing body, the applicant may thereupon undertake and proceed to acquire the real estate required for the completion of the project set forth in the application. If the applicant is unable to acquire any property included within and necessary to the completion of the project by agreement with the owner thereof, the applicant may petition the governing body which has approved the application to acquire the property by the exercise of the power of eminent domain. If the governing body determines by resolution that the acquisition of the property described in the petition for the completion of the project in question is in the public interest and necessary for the public use, the governing body shall thereupon proceed to acquire the same by condemnation. A copy of the resolution, duly certified by the clerk of the city, under its seal, shall be conclusive evidence as to the matter therein contained in any proceeding on the part of the governing body to acquire the property or any part thereof therein described. Upon the adoption of the resolution by the governing body the applicant shall be required to enter into an undertaking with the governing body to pay such sums as may be ascertained according to law to be payable to the owner of the property, together with costs of the condemnation proceedings.
Upon paying the owner of the property the sum so ascertained, with the costs, if any, the city shall be seized and possessed in fee simple of all the real estate.
##### **§ 17:19-5** Conveyance of property to applicant {#sec-17-19-5 omnilex-key=us-nj-statutes--title-17--17:19-5}
Upon the acquisition by the city of the property, and payment to the city by the applicant of the sum expended by it, the governing body shall convey the property to the applicant, subject only to the public duties and obligations imposed upon the applicant by this article.
##### **§ 17:19-6** Completion of project {#sec-17-19-6 omnilex-key=us-nj-statutes--title-17--17:19-6}
When the property or any part necessary to the completion of the project has been acquired by condemnation and conveyed to the applicant, the applicant shall thereupon be charged with the public duty of immediately commencing and within a reasonable time completing the project in accordance with the plans and specifications therefor approved by the governing body.
##### **§ 17:19-7** Disposal of property {#sec-17-19-7 omnilex-key=us-nj-statutes--title-17--17:19-7}
No applicant that has acquired any property by the exercise of the power of eminent domain by a city and by subsequent conveyance from the city, as herein provided, shall sell, assign or convey the property except upon notice to and consent by the governing body. Until the expiration of twenty-five years from the date of the acquisition in the manner aforesaid, every purchaser of the property shall take it subject to the same public use and charged with all the duties and obligations imposed upon the property while in the ownership of the applicant. From and after the expiration of twenty-five years the property shall be discharged from the public use and the owner shall be discharged forthwith of the duties and obligations.
##### **§ 17:19-8** Investment in project authorized {#sec-17-19-8 omnilex-key=us-nj-statutes--title-17--17:19-8}
Any insurance company of this state, in addition to other investments allowed by law, may invest its funds, to an aggregate amount not exceeding five per cent of its total admitted assets, in the purchase of real estate in any city of this state for the purpose of constructing thereon apartments, tenements or other dwelling houses, in the manner hereinafter provided.
##### **§ 17:19-9** Application for approval of project; proceedings thereon {#sec-17-19-9 omnilex-key=us-nj-statutes--title-17--17:19-9}
The insurance company, prior to the acquisition of the real estate or within one year after its acquisition, or within such further period as may be permitted and prescribed in writing by the commissioner, shall present to the governing body of the city wherein the real estate is located an application for approval of a project for the improvement of the real estate which has been acquired, for the acquisition of real estate for such purposes and for the construction thereon of new housing facilities in accordance with proper standards of sanitation and safety, at the expense of the company. The application, which may be amended or supplemented, as provided in section 17:19-2 of this title, shall set forth a statement of the project presented for approval and shall have annexed thereto the exhibits stated in said section 17:19-2.
The governing body shall thereupon proceed in the manner provided in section 17:19-3 of this title.
##### **§ 17:19-10** Procedure after approval of application {#sec-17-19-10 omnilex-key=us-nj-statutes--title-17--17:19-10}
When the application has been approved by the governing body, the company may thereupon proceed to improve the real estate already acquired, and to acquire and improve any additional real estate which may be necessary for the completion of the project set forth in the application, and may proceed to construct new housing facilities in accordance therewith.
##### **§ 17:19-11** Maximum rental fixed {#sec-17-19-11 omnilex-key=us-nj-statutes--title-17--17:19-11}
When new housing facilities, as provided in this chapter, have been completed, the governing body shall fix the maximum rental per room that may be charged by the applicant to the tenants of the new housing facilities, upon such a scale that the net return to the insurance company from the rentals so fixed shall equal at least five per cent but not more than six per cent upon the cost of the entire project after payment of all items set forth in paragraph "d" of section 17:19-2 of this title. From time to time the governing body may increase the maximum rental per room so fixed, upon satisfactory evidence presented by the insurance company of such increase in taxes, insurance or costs of operation or maintenance as requires the increased rental to assure a return of at least five per cent upon the cost of the project.
##### **§ 17:19-12** Construction period {#sec-17-19-12 omnilex-key=us-nj-statutes--title-17--17:19-12}
When an insurance company has invested its funds in real estate pursuant to the authority granted by this article, it shall, within five years from the date upon which it has acquired the real estate, sell and dispose of the same unless within that period it has commenced the construction of one or more apartments, tenements, or dwelling houses thereon pursuant to the plans and specifications set forth in the project approved by the board of commissioners or other governing body of the city wherein the real estate is located, in accordance with the provisions of this article. The commissioner may, in his discretion, extend this period of five years for such further period as the circumstances of the particular case seem to him to require.
## **Chapter 20** {#struct-chapter-20}
##### **§ 17:20-1** Definitions {#sec-17-20-1 omnilex-key=us-nj-statutes--title-17--17:20-1}
a. As used in this chapter:
(1) "Bank" means a State or federally chartered bank, savings bank, or savings and loan association which has trust powers and which has its principal office in New Jersey.
(2) "Custodian" means a bank which performs fiduciary functions in the maintenance of deposits.
(3) "Deposit" means those deposits of securities required to be made by insurance companies prior to their authorization to transact business within any jurisdiction.
(4) "Federal Reserve book-entry system" means the computerized system sponsored by the United States Department of the Treasury and certain agencies and instrumentalities of the United States for holding and transferring securities of the United States government and the agencies and instrumentalities, respectively, in Federal Reserve Banks through banks which are members of the Federal Reserve System or which otherwise have access to this computerized system.
(5) "Policyholders" means those persons including subscribers, certificate holders, and others who are named in or covered by a contract of insurance.
(6) "Securities" means and shall only include:
(a) Bills, bonds and notes issued by the United States Treasury;
(b) Debt obligations of the State of New Jersey, its authorities, counties and municipalities; and
(c) Certificates of deposit of a State or federally chartered bank, savings bank, or savings and loan association with its principal office in New Jersey.
b. The commissioner shall appoint one or more custodians which shall be selected on the basis of bids submitted by banks to perform such fiduciary functions as the commissioner deems necessary in the maintenance of deposits.
c. Every company organized under subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), other than a mutual company organized to make insurance solely against loss or damage to property belonging to the insured member, shall deposit with the custodian on behalf of the commissioner, securities with a market value of at least $100,000.00 to be held in physical form or purchased for its account in the Federal Reserve book-entry system. The deposits shall be held for the benefit and security of all the policyholders of the company depositing them. The records of the custodian, through which an insurance company holds securities in the Federal Reserve book-entry system or in physical form, shall at all times show that these securities are held for an insurance company and for which accounts thereof.
d. The Commissioner of Insurance may, from time to time, after the company has commenced business, require it to make further deposits of securities up to the sum of $250,000, as the commissioner may deem necessary to protect the policyholders of the depositing company.
##### **§ 17:20-1.1** Procedure for holding of deposits {#sec-17-20-1.1 omnilex-key=us-nj-statutes--title-17--17:20-1.1}
Whenever the commissioner is required or authorized by a law of this or any other state or country to receive and hold a deposit, he may utilize the procedures for the holding of those deposits which are found in R.S.17:20-1.
##### **§ 17:20-2** Deposits; interest on; substitution of {#sec-17-20-2 omnilex-key=us-nj-statutes--title-17--17:20-2}
The commissioner shall hold the securities deposited as aforesaid, for the benefit and security of all the policyholders of the company depositing them, but shall, so long as the company continues solvent and complies with all the requisites of the laws applicable to it, permit the company to collect the interest or dividends on the securities so deposited, and, from time to time, with his assent, to withdraw any of the securities, on depositing with him other eligible securities, the market value of which shall not cause the value of the total deposit to fall below the amount required by the commissioner.
##### **§ 17:20-3** Delivery of securities on dissolution, liquidation, reorganization or merger; action to obtain delivery; claims of policyholders {#sec-17-20-3 omnilex-key=us-nj-statutes--title-17--17:20-3}
Whenever any insurance company of this State shall voluntarily dissolve, or a receiver or trustee thereof shall be appointed by the Superior Court in any action brought in such court to effect the liquidation or reorganization of such company; or if, pursuant to the provisions of any statute of this State, any statutory officer shall take possession of the business and affairs of such company; or if such company shall have heretofore or shall hereafter become legally merged into or consolidated with another such company, the commissioner shall thereupon deliver to such receiver or trustee, or to the directors or trustees on dissolution, or to such statutory officer, or to the company resulting from such merger or consolidation, the securities deposited with him.
Before the commissioner shall make such delivery, such receiver or trustee, or such directors or trustees on dissolution, or such statutory officer, or such company resulting from such merger or consolidation, shall institute an action in the Superior Court to obtain delivery by the commissioner of such securities to the plaintiff. The court may proceed in the action in a summary manner or otherwise, and process therein may be served upon all persons, other than the commissioner by publishing the same or a notice thereof once in a newspaper published in the county where the company has its principal office. The court may enter judgment directing the commissioner to deliver such securities to the plaintiff. Upon such delivery, the commissioner shall be relieved of all further responsibility or obligation in regard to the securities so deposited, except when such securities are delivered by such commissioner as commissioner to himself in his capacity as the officer designated by statute to take possession of the business and affairs of any such company. Such deposited securities shall not be delivered to the directors or trustees on dissolution until all proceedings in such voluntary dissolution shall have first been approved by the commissioner.
Nothing herein contained shall be construed as in anywise affecting the rights, in such securities, of the policyholders of such company for whose benefit and security such deposit was made, as provided in R.S.17:20-2. Such securities or the proceeds thereof, shall be administered, upon such delivery, as a trust fund for the benefit of such policyholders, and shall not be mingled with other assets of such company, until distribution thereof is made as hereinafter provided.
The Superior Court, in any action brought therein for the delivery of such securities as herein provided, shall have jurisdiction to limit the time within which policyholders shall present and make proof of their respective claims against such company, and may bar all such policyholders from any claim in such securities for failing so to do within the time limited. The court may also prescribe what notice, by publication or otherwise, shall be given to such policyholders of such limitation of time. Nothing contained in subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.) shall be construed as conferring upon the Superior Court general jurisdiction over the business and affairs of such company by reason only of any application made to it pursuant to the provisions of this section. Such claims shall be presented to such receiver or trustee, or to such directors or trustees in dissolution, or to such statutory officer, or to such company resulting from such merger or consolidation, in writing and under oath and shall be passed upon by the same, subject to a summary review by the court as may be prescribed by order of the court. Upon the expiration of the time limited for filing claims, and upon the determination as herein provided, of claims disallowed, such securities or the proceeds thereof shall be distributed pro rata to such policyholders on account of such claims, and the balance thereof shall thereupon be discharged from any trust for the benefit of such policyholders. If the proceeds of such distribution are insufficient to pay such claims in full, nothing herein contained shall be construed as preventing such policyholders from asserting any lawful claim against other assets of such company for the amount of such deficiency.
##### **§ 17:20-3.1** Fees for services of custodian required pursuant to R.S.17:20-1 et seq. {#sec-17-20-3.1 omnilex-key=us-nj-statutes--title-17--17:20-3.1}
The Commissioner of Insurance shall establish, by regulation, the fees to be charged insurance companies for the services of the custodian pursuant to the requirements of R.S.17:20-1 through R.S.17:20-3.
##### **§ 17:20-4** Deposits to do business elsewhere {#sec-17-20-4 omnilex-key=us-nj-statutes--title-17--17:20-4}
The commissioner may receive from any insurance company of this State a deposit of any securities necessary to enable it to transact business in any other State, territory, dependency or Federal District of the United States or in any foreign country under the laws thereof. The securities shall be held by the commissioner as long as the company desires to transact business in the State, territory, dependency, Federal District or foreign country requiring the deposit but the company may draw the dividends or receive the interest on the securities. When the company desires to discontinue its business therein, and the deposit is no longer required by the laws thereof, the commissioner shall return the securities to the company depositing them. Before the commissioner shall return such securities deposited with him as aforesaid, the company shall institute an action and obtain a judgment therefor in the Superior Court substantially similar to that provided in section 17:20-3 of this Title.
## **Chapter 21** {#struct-chapter-21}
##### **§ 17:21-1** Proxy voting permitted at elections {#sec-17-21-1 omnilex-key=us-nj-statutes--title-17--17:21-1}
At any election of directors, managers or other officers of an insurance company of this state, every person entitled to vote at the election may vote in person or by attorney or proxy, but no proxy shall be voted, allowed or received after three years from its date.
##### **§ 17:21-2** Compensation of directors {#sec-17-21-2 omnilex-key=us-nj-statutes--title-17--17:21-2}
The directors of any insurance company of this state, when acting as its officers, and also for each occasion of their attendance at meetings of the board or its committees, may receive such compensation as a majority of the board deems just and reasonable.
##### **§ 17:21-3** Election of directors of benefit companies {#sec-17-21-3 omnilex-key=us-nj-statutes--title-17--17:21-3}
All elections of directors of any stock insurance company of this state incorporated by special charter, whose object is to assist its sick or needy members, or aid in defraying funeral expenses of deceased members and make provision for their families, shall be by the stockholders of the company, and no policyholder or person insured in the company may vote at an election unless he is also a stockholder.
## **Chapter 22** {#struct-chapter-22}
##### **§ 17:22-5.2** Effective date {#sec-17-22-5.2 omnilex-key=us-nj-statutes--title-17--17:22-5.2}
This act shall take effect May first, one thousand nine hundred and forty-two.
##### **§ 17:22-6.2a** Authorization entitling broker to receive insurance premium on behalf of insurer {#sec-17-22-6.2a omnilex-key=us-nj-statutes--title-17--17:22-6.2a}
Any insurer which delivers in this State to any insurance broker a contract of insurance (other than a contract of life insurance, or life, accident or health insurance) pursuant to the application or request of such broker, acting for an insured other than himself, shall be deemed to have authorized such broker to receive on its behalf payment of any premium which is due on such contract at the time of its issuance or delivery or payment of any installment of such premium or any additional premium which becomes due or payable thereafter on such contract, provided such payment is received by such broker within 90 days after the due date of such premium or installment thereof or after the date of delivery of statement by the insurer of such additional premium.
##### **§ 17:22-6.14a** Rates of commission to be set forth in contracts; exceptions; termination of contracts. {#sec-17-22-6.14a omnilex-key=us-nj-statutes--title-17--17:22-6.14a}
1. a. In the event that a policy is canceled by the insurer, either at its own behest or at the behest of the agent or broker of record, the unearned premium, including the unearned commission, shall be returned to the policyholder.
b. In the event that a policy of insurance, issued by the automobile insurance plan established pursuant to P.L.1970, c.215 (C.17:29D-1) or any successor thereto, is canceled by reason of nonpayment of premium to the insurer issuing the policy or nonpayment of an installment payment due pursuant to an insurance premium finance agreement, the broker of record for that policy may retain the full annual commission due thereon and, if a premium finance agreement is not involved, the effective date of cancellation of the policy shall be no earlier than 10 days prior to the last full day for which the premium paid by the insured, net of the broker's full annual commission, would pay for coverage on a pro rata basis in accordance with rules established by the commissioner.
c. Contracts between insurance companies and agents for the appointment of the agent as the representative of the company shall set forth the rate of commission to be paid to the agent for each class of insurance within the scope of such appointment written on all risks or operations in this State, except:
(1) Reinsurance.
(2) Life insurance.
(3) Annuities.
(4) Accident and health insurance.
(5) Title insurance.
(6) Mortgage guaranty insurance.
(7) Hospital service, medical service, health service, or dental service corporations, investment companies, mutual benefit associations, or fraternal beneficiary associations.
Said rates of commission shall continue in force and effect unless changed by mutual written consent or until termination of said contract as hereinafter provided. Failure to achieve such mutual consent shall require that the agent's contract be terminated as hereinbelow provided. The rate of commission being paid on each class of insurance on the date of enactment hereof shall be deemed to be pursuant to the existing contract between agent and company.
d. Termination of any such contract for any reason other than one excluded herein shall become effective after not less than 90 days' notice in writing given by the company to the agent and the Commissioner of Banking and Insurance. No new business or changes in liability on renewal or in force business, except as provided in subsection l. of this section, shall be written by the agent for the company after notice of termination without prior written approval of the company. However, during the term of the agency contract, including the said 90-day period, the company shall not refuse to renew such business from the agent as would be in accordance with said company's current underwriting standards. The company shall, during a period of 12 months from the effective date of such termination, provided the former agent has not been replaced as the broker of record by the insured, and upon request in writing of the terminated agent, renew all contracts of insurance for such agent for said company as may be in accordance with said company's then current underwriting standards and pay to the terminated agent a commission in accordance with the agency contract in effect at the time notice of termination was issued. Said commission can be paid only to the holder of a valid New Jersey insurance producer's license. In the event any risk shall not meet the then current underwriting standards of said company, that company may decline its renewal, provided that the company shall give the terminated agent and the insured not less than 60 days' notice of its intention not to renew said contract of insurance.
e. The agency termination provisions of this act shall not apply to those contracts:
(1) in which the agent is paid on a salary basis without commission or where he agrees to represent exclusively one company or to the termination of an agent's contract for insolvency, abandonment, gross and willful misconduct, or failure to pay over to the company moneys due to the company after his receipt of a written demand therefor, or after revocation of the agent's license by the Commissioner of Banking and Insurance; and in any such case the company shall, upon request of the insured, provided he meets the then current underwriting standards of the company, renew any contract of insurance formerly processed by the terminated agent, through an active agent, or directly pursuant to such rules and regulations as may be promulgated by the Commissioner of Banking and Insurance; or
(2) which are entered into between a qualified insurer and a UEZ agent pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4).
f. The Commissioner of Banking and Insurance, on the written complaint of any person stating that there has been a violation of this act, or when he deems it necessary without a complaint, may inquire and otherwise investigate to determine whether there has been any violation of this act.
g. All existing contracts between agent and company in effect in the State of New Jersey on the effective date of this act are subject to all provisions of this act.
h. The Commissioner of Banking and Insurance may, if he determines that a company is in unsatisfactory financial condition, exclude such company from the provisions of this act.
i. Whenever under this act it is required that the company shall renew a contract of insurance, the renewal shall be for a time period equal to one additional term of the term specified in the original contract, but in no event to be less than one year.
j. The provisions of subsection b. of this section shall not apply to policies written by the New Jersey Automobile Full Insurance Underwriting Association established pursuant to sections 13 through 34 of P.L.1983, c.65 (C.17:30E-1 et seq.).
k. The New Jersey Automobile Full Insurance Underwriting Association established pursuant to sections 13 through 34 of P.L.1983, c.65 (C.17:30E-1 et seq.), shall not be liable to pay any commission required by subsection b. of this section on any policies written by the association prior to January 1, 1986.
l. A company which terminates its contractual relationship with an agent subject to the provisions of subsection d. of this section shall, at the time of the agent's termination, with respect to insurance covering an automobile as defined in subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2), notify each named insured whose policy is serviced by the terminated agent in writing of the following: (1) that the agent's contractual relationship with the company is being terminated and the effective date of that termination; and (2) that the named insured may (a) continue to renew and obtain service through the terminated agent; or (b) renew the policy and obtain service through another agent of the company.
Notwithstanding any provision of this section to the contrary, no insurance company which has terminated its contractual relationship with an agent subject to subsection d. of this section shall, upon the expiration of any automobile insurance policy renewed pursuant to subsection d. of this section which is required to be renewed pursuant to section 3 of P.L.1972, c.70 (C.39:6A-3), refuse to renew, accept additional or replacement vehicles, refuse to provide changes in the limits of liability or refuse to service a policyholder in any other manner which is in accordance with the company's current underwriting standards, upon the written request of the agent or as otherwise provided in this section, provided the agent maintains a valid New Jersey insurance producer's license and has not been replaced as the broker of record by the insured. However, nothing in this section shall be deemed to prevent nonrenewal of an automobile insurance policy pursuant to the provisions of section 26 of P.L.1988, c.119 (C.17:29C-7.1).
The company shall pay a terminated agent who continues to service policies pursuant to the provisions of this subsection a commission in an amount not less than that provided for under the agency contract in effect at the time the notice of termination was issued. A terminated agent who continues to service automobile insurance policies pursuant to this subsection shall be deemed to be an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28), and not an agent of the company, except that the terminated agent shall have the authority to bind coverage for renewals, additional or replacement vehicles, and for changed limits of liability as provided in this subsection to the same extent as an active agent for the company. The company shall provide the terminated agent with a written copy of its current underwriting guidelines during the time the agent continues to service policies pursuant to this subsection.
If a terminated agent who is continuing to service policies pursuant to the provisions of this subsection violates the written underwriting guidelines of the company in such a manner or with such frequency as to substantially affect the company's ability to underwrite or provide coverage, the company may discontinue accepting renewal and service requests from, and paying commissions to, the terminated agent; provided, however, that the company provides the terminated agent with at least 45 days' written notice which shall include a detailed explanation of the reasons for discontinuance. A copy of this notice, along with supporting documentation providing evidence that the terminated agent received proper notice of discontinuance pursuant to this subsection and evidence in support of the company's action, shall be sent by the company to the Division of Enforcement and Consumer Protection in the Department of Banking and Insurance.
The provisions of this subsection shall not apply to any policy issued by the New Jersey Automobile Full Insurance Underwriting Association created pursuant to the provisions of P.L.1983, c.65 (C.17:30E-1 et seq.).
m. A qualified insurer which terminates its contractual relationship with its UEZ agent pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4) shall terminate its relationship in accordance with the following provisions:
(1) The qualified insurer shall give the UEZ agent at least 60 days' written notice of termination. Notice of termination shall be on a form prescribed by the commissioner and shall indicate the date of termination and the reason for the termination. A copy of the notice of termination shall be sent to the commissioner.
(2) Notwithstanding the provisions of this section and section 26 of P.L.1988, c.119 (C.17:29C-7.1), a qualified insurer may refuse to renew the business written through a UEZ agent in an orderly and non-discriminatory manner over the course of at least a three-year period provided that such refusals to renew in each year shall not exceed one-third of a terminated UEZ agent's book of business on the effective date of termination of its relationship with its UEZ agent. A qualified insurer intending to refuse renewal business written by a terminated UEZ agent shall notify the commissioner prior to the date of the UEZ agent's termination.
(3) The terminated UEZ agent who continues to service automobile insurance policies shall continue to receive commissions for any renewal business pursuant to the terms of the contract in force with the qualified insurer at the time of termination, provided that the UEZ agent maintains a valid New Jersey insurance producer's license and has not been replaced as the broker of record by the insured. A terminated UEZ agent who continues to service automobile insurance policies shall be deemed to be an insurance broker and not the agent of the qualified insurer.
n. In any case of a transfer by an insurance company of any kind or kinds of insurance specified in its certificate of authority to another company, pursuant to the provisions of R.S.17:17-10 or section 72 of P.L.1990, c.8 (C.17:33B-30), the policies transferred shall continue to be serviced by the agent of record and the company to which the business is transferred shall offer contracts to the agents of the transferring company which contain terms and conditions concerning the use, control and ownership of policy expirations and payment of commissions that are no less favorable than the terms and conditions of their current contracts. Nothing in this subsection shall prohibit a company from offering contracts to agents of the transferring company that limit the agents' right to produce new business or prohibit subsequent modification of the rate of commission set forth in the agency contract in accordance with subsection c. of this section. This subsection shall not apply if the company seeking to transfer policies pays its agents on a salary basis without commission or if its agents represent the company exclusively.
##### **§ 17:22-6.14a1** Property and casualty insurers; filing of current underwriting guidelines {#sec-17-22-6.14a1 omnilex-key=us-nj-statutes--title-17--17:22-6.14a1}
All property and casualty insurers doing business in New Jersey shall, upon request of the Commissioner of Insurance, file with the Department of Insurance a copy of their current underwriting guidelines, together with any amendments thereto or modification thereof. Such guidelines, amendments or modifications shall not be arbitrary, capricious or unfairly discriminatory.
##### **§ 17:22-6.14a2** Notice of nonrenewal; identification of underwriting standards not met; liability for information to insurer as to reasons for nonrenewal {#sec-17-22-6.14a2 omnilex-key=us-nj-statutes--title-17--17:22-6.14a2}
Where a policy of insurance is not renewed because of failure to meet the then current underwriting standards, the notice of nonrenewal shall identify the underwriting standard and specify in detail the factual basis upon said underwriting standard has not been met.
There shall be no liability on the part of and no cause of action of any nature shall arise against the Commissioner of Insurance or against any insurer, its authorized representative, its agents, its employees, or any firm, person or corporation furnishing to the insurer information as to reasons for nonrenewal, for any statement made by any of them in any written notice of nonrenewal, or in any other communication, oral or written specifying the reasons for nonrenewal, or the providing of information pertaining thereto, or for statements made or evidence submitted at any hearings conducted in connection therewith.
##### **§ 17:22-6.14a3** Rules and regulations by commissioner of insurance {#sec-17-22-6.14a3 omnilex-key=us-nj-statutes--title-17--17:22-6.14a3}
The Commissioner of Insurance is authorized to adopt, promulgate and enforce such rules and regulations as he determines to be necessary to implement this act.
##### **§ 17:22-6.14b** Severability {#sec-17-22-6.14b omnilex-key=us-nj-statutes--title-17--17:22-6.14b}
If any section, subsection, subdivision, paragraph, sentence or clause of this act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this act, and to this end the provisions of this act are declared to be severable.
##### **§ 17:22-6.26** Repeals {#sec-17-22-6.26 omnilex-key=us-nj-statutes--title-17--17:22-6.26}
Sections 17:22-1, 17:22-2, 17:22-3, 17:22-4, 17:22-5, 17:23-3, 17:32-6, and 17:32-11 of the Revised Statutes and section one of "An act concerning the licensing of agents for insurance companies in certain cases, supplementing chapter twenty-two of Title 17, and amending section 17:33-1 of the Revised Statutes" , approved May sixteenth, one thousand nine hundred and forty-one and all acts or parts of acts inconsistent herewith are repealed.
##### **§ 17:22-6.35** Repeal {#sec-17-22-6.35 omnilex-key=us-nj-statutes--title-17--17:22-6.35}
Section 17:36-1 of the Revised Statutes is repealed.
##### **§ 17:22-6.37** Acting for unauthorized companies; prohibition; exceptions {#sec-17-22-6.37 omnilex-key=us-nj-statutes--title-17--17:22-6.37}
No person shall in this State directly or indirectly act as agent for, or otherwise represent or aid on behalf of another, any insurer not then authorized to transact such insurance in this State, in the solicitation, negotiation, procurement or effectuation of insurance or annuity contracts, or renewals thereof, or in the dissemination of information as to coverage or rates, or forwarding of applications, or delivery of policies or contracts, or inspection of risks, or fixing of rates, or investigation or adjustment of claims or losses, or collection or forwarding of premiums, or in any other manner represent or assist such an insurer in the transaction of insurance with respect to subjects of insurance resident, located or to be performed in this State. Except that, the holder of an insurance broker's license shall have authority on behalf of a prospective assured to negotiate and deal with a surplus lines agent to effect any such transaction, collect the insurance premium therefor from the assured, and receive from the said surplus lines agent a share of any commission or brokerage fee earned by the said surplus lines agent in connection therewith.
This section does not apply to:
(a) Matters authorized to be done by the commissioner under the unauthorized insurers process law, P.L.1952, c.330 (C.17:51-1 et seq.);
(b) Surplus lines insurance when written pursuant to the surplus lines law;
(c) Transactions as to which a certificate of authority is not required of an insurer under the insurance laws of the State of New Jersey;
(d) Reinsurance effectuated in accordance with the laws of New Jersey;
(e) Railroad or aviation risks engaged in interstate or international commerce;
(f) Insurances of vessels, crafts or hulls, cargoes, marine builders' risks, marine protection and indemnity or other risks including strikes and war risks commonly insured under ocean or wet marine forms of policy.
No insurance contract entered into in violation of this section shall be deemed to have been rendered invalid thereby.
##### **§ 17:22-6.38** Violation; misdemeanor; penalties {#sec-17-22-6.38 omnilex-key=us-nj-statutes--title-17--17:22-6.38}
Any person who in this State represents or aids an unauthorized insurer in violation of section 3 of this act shall upon conviction thereof be guilty of a misdemeanor.
In addition to the penalty provided for herein such violator shall be liable, personally, jointly and severally with any other person or persons liable therefor, for payment of taxes payable on account of such insurance as if such insurance were independently procured.
##### **§ 17:22-6.39** Actions or proceedings by unauthorized insurers prohibited; exceptions {#sec-17-22-6.39 omnilex-key=us-nj-statutes--title-17--17:22-6.39}
No unauthorized insurer shall institute, file, or maintain, or cause to be instituted, filed, or maintained, any suit, action or proceeding in this State to enforce any right, claim or demand arising out of any insurance transaction in this State except with respect to the following:
(1) Investigation, settlement, or litigation of claims under its policies lawfully written in this State, or liquidation of assets and liabilities of the insurer (other than collection of new premiums), all as resulting from its former authorized operations in this State;
(2) Transactions involving a policy, subsequent to issuance thereof, covering only subjects of insurance not resident, located or expressly to be performed in this State at time of issuance, and lawfully solicited, written, or delivered outside this State; or railroad or aviation risks engaged in interstate or international commerce and insurances of vessels, crafts or hulls, cargoes, marine builders' risks, marine protection and indemnity or other risks including strikes and war risks commonly insured under ocean or wet marine forms of policy;
(3) Transactions pursuant to surplus lines coverages lawfully written under subtitle 3 of this Title;
(4) Reinsurance effectuated in accordance with the laws of New Jersey;
(5) The continuation and servicing of life insurance or disability insurance policies or annuity contracts remaining in force as to residents of this State where the insurer has withdrawn from the State and is not transacting new insurance therein.
##### **§ 17:22-6.40** Short title; application of act {#sec-17-22-6.40 omnilex-key=us-nj-statutes--title-17--17:22-6.40}
Sections 6 through 31 of this act (C. 17:22-6.40 through 17:22-6.65) constitute and may be referred to as "the surplus lines law." This act does not apply to life insurance companies writing life insurance, accident and health insurance and annuities, nor to risks insured under exceptions (e) and (f) of section 3 of this act (C 17:22-6.37), nor to insurance coverages which are independently procured as provided in section 30 (C. 17:22-6.64) of this act.
##### **§ 17:22-6.41** Definitions relative to surplus lines insurers. {#sec-17-22-6.41 omnilex-key=us-nj-statutes--title-17--17:22-6.41}
7. As used in this surplus lines law:
(a) "Surplus lines agent" means an individual licensed as a surplus lines insurance producer with surplus lines authority as provided in P.L.2001, c.210 (C.17:22A-26 et seq.) to handle the placement of insurance coverages on behalf of unauthorized insurers.
(b) "Surplus lines insurer" means an unauthorized insurer in which an insurance coverage is placed or may be placed under this surplus lines law.
(c) To "export" means to place in an unauthorized insurer under this surplus lines law, insurance covering a subject of insurance resident, located, or to be performed in New Jersey.
(d) "Commissioner" means the Commissioner of Banking and Insurance of the State of New Jersey.
(e) "Certificate of insurance" means permanent evidence of insurance on a form approved by the commissioner and issued by a surplus lines agent who has filed evidence of his binding authority with the commissioner on behalf of an alien insurer. When issued other than on behalf of an alien insurer, an initial certificate of insurance will be treated as temporary evidence of insurance, pending the issuance of a policy. "Certificate of insurance" also means evidence of a renewal of that insurance provided: (1) there is no change in the terms or amounts of coverage; (2) the coverage is still eligible for export; and (3) the insured may request the issuance of a new policy.
(f) "Cover note," "binder" or "confirmation of insurance," means temporary evidence of insurance, to be replaced by a policy or certificate of insurance.
(g) "Home state" means,
(1) Except as provided in paragraph (2) of this subsection, the term ''home state'' means, with respect to an insured:
(i) the state in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or
(ii) if 100 percent of the insured risk is located out of the state referred to in subparagraph (i) of this paragraph, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.
(2) If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term ''home state'' means the home state, as determined pursuant to subparagraph (i) of paragraph (1) of this subsection, of the member of the affiliated group that has the largest percentage of premium attributed to it under that insurance contract.
##### **§ 17:22-6.42** Procurement of surplus line coverages; conditions {#sec-17-22-6.42 omnilex-key=us-nj-statutes--title-17--17:22-6.42}
8. If certain insurance coverages of subjects resident, located, or to be performed in this State cannot be procured from authorized insurers, such coverages, hereinafter designated "surplus lines," may be procured from unauthorized insurers, subject to the following conditions:
(a) The insurance must be eligible for export under section 9 of P.L.1960, c.32 (C.17:22-6.43);
(b) The insurer must be an eligible surplus lines insurer under section 11 of P.L.1960, c.32 (C.17:22-6.45);
(c) The insurance must be so placed through a licensed New Jersey surplus lines agent; and
(d) Other applicable provisions of this surplus lines law must be complied with.
(e) No surplus lines agent shall exercise binding authority in this State on behalf of any insurer unless the agent has first filed with the commissioner for informational purposes and not for the purpose of approval or disapproval the written agreement between the agent and the insurer setting forth the terms, conditions and limitations governing the exercise of the binding authority by the agent. A copy of any amendments to the agreement and of any notice of cancellation or termination of the agreement shall be filed by the agent with the commissioner no later than 10 days after adoption thereof.
The agreement filed pursuant to this section shall be considered and treated as a confidential document, and shall not be available for inspection by the public.
The agreement shall include the following items:
(1) A description of the classes of insurance for which the agent holds binding authority;
(2) The geographical limits upon the exercise of binding authority by the agent;
(3) The maximum dollar limitation on the binding authority of the agent for any one risk for each class of insurance written by the agent;
(4) The maximum policy period for which the agent may bind a risk;
(5) If the binding authority is delegable by the agent, a prohibition against the delegation without the prior written approval of the insurer.
If an agent who is qualified in accordance with this section to exercise binding authority on behalf of an insurer delegates the binding authority to any other agent, the agent to whom the authority is delegated shall not exercise the same until a copy of the instrument delegating the binding authority shall first have been filed with the commissioner for informational purposes and not for the purpose of approval or disapproval. The instrument delegating the binding authority shall include an identification of the binding authority agreement between the delegating agent and the insurer.
(f) Forms used by eligible surplus lines insurers pursuant to P.L.1960, c.32 (C.17:22-6.40 et seq.) shall not be subject to the insurance laws and regulations of this State except to the extent that P.L.1960, c.32 (C.17:22-6.40 et seq.) regulates those forms. For purposes of this subsection, "eligible surplus lines insurers" include eligible surplus lines insurers and unauthorized insurers, which pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45), are insuring risks which are eligible for export but insurance coverage thereon, in whole or in part, is not procurable from eligible surplus lines insurers.
##### **§ 17:22-6.43** Eligibility for export of insurance coverage; conditions {#sec-17-22-6.43 omnilex-key=us-nj-statutes--title-17--17:22-6.43}
9. No insurance coverage shall be eligible for export unless it meets all of the following conditions:
(a) The insurance coverage required must not be procurable, after a diligent effort has been made to do so, from among the insurers authorized to transact that kind and class of insurance in this State, and the insurance coverage exported shall be only that coverage not so procurable from authorized insurers, provided, however, that associated commercial general liability and commercial property coverages may be exported along with such unprocurable coverage; and
(b) The premium rate at which the coverage is exported shall not be lower than the lowest rate which has been filed by or on behalf of any authorized insurer, provided, however, that any reduction in coverage or limits as compared to policies filed by authorized insurers may be exported at a commensurate reduction in premium rate.
(c) (Deleted by amendment, P.L.2003, c.179.)
Except, that the commissioner shall by rules and regulations declare eligible for export generally and notwithstanding the provisions of subsections (a)and (b) above, any class or classes of insurance coverage or risk for which he finds, after a hearing, which he shall hold annually or more often, of which notice thereof was given to each insurer authorized to transact such class or classes in this State, that there is no reasonable or adequate market among authorized insurers. The notice of such hearing shall provide interested parties with the opportunity to present relevant information at the hearing for the commissioner's consideration. Any such rules and regulations shall continue in effect during the existence of the conditions upon which predicated, but subject to earlier termination by the commissioner. The commissioner shall notify all surplus lines agents of such termination.
##### **§ 17:22-6.44** Writing of coverages declared eligible for export without regard to rate filings {#sec-17-22-6.44 omnilex-key=us-nj-statutes--title-17--17:22-6.44}
An admitted insurer may write any insurance coverage declared eligible for export by the commissioner under section 9 of this act through any surplus lines agent without regard to rate filings which may otherwise be applicable to such admitted insurers provided that the business is written in compliance with all other applicable provisions of this act. Such insurance so written by an admitted insurer shall be subject to the tax on premiums imposed in chapter 132 of the laws of 1945.
##### **§ 17:22-6.45** Eligibility as surplus lines insurer. {#sec-17-22-6.45 omnilex-key=us-nj-statutes--title-17--17:22-6.45}
11. No surplus lines agent shall place any coverage with any unauthorized insurer which is not then an eligible surplus lines insurer as provided for under this section. No unauthorized insurer shall be or become an eligible surplus lines insurer unless made eligible by the commissioner in accordance with the following conditions:
(a) Eligibility of the insurer must be requested in writing by a licensed surplus lines agent;
(b) The insurer must be currently an authorized insurer in the state or country of its domicile as to the kind or kinds of insurance proposed to be so placed, and must have been such an insurer for not less than one full year preceding; or must be the subsidiary of an admitted insurer or of an already eligible surplus lines insurer that has been so admitted or eligible for a period of not less than one full year preceding or must be a domestic surplus lines insurer as provided by section 2 of P.L.2011, c.39 (C.17:22-6.69b);
(c) Before granting eligibility the requesting surplus lines agent or the insurer shall furnish the commissioner with duly authenticated copies of its current annual financial statement, one in the language and monetary values of the country of the insurer, and the other in the English language and with all monetary values therein expressed in United States dollars, at the current exchange rate shown in the statement, and with such additional information relative to the insurer as the commissioner may require;
(d) The insurer shall establish satisfactory evidence of financial integrity, and:
(1) Have capital and surplus, or its equivalent under the laws of its domiciliary jurisdiction, which is not less than twice the amount of minimum capital and surplus required for like admitted insurers or $15,000,000, whichever is greater; except that unauthorized insurers already eligible under this act shall have at least $10,000,000 by December 31, 1996; at least $12,500,000 by December 31, 1997; and $15,000,000 by December 31, 1998. In addition, an alien insurer shall maintain in the United States, as the sole security requirement to qualify for eligibility in this State, an irrevocable trust fund in a state or federally chartered bank in an amount not less than $2,500,000 for the protection of all of its policyholders in the United States; provided, however, that an alien insurer eligible for surplus lines may be required to deposit securities in New Jersey in an amount deemed appropriate by the commissioner as a condition of maintaining its eligibility status. The trust fund shall consist of cash, securities, letters of credit, or of investments of substantially the same character and quality as those which are eligible investments for the capital and statutory reserves of admitted insurers authorized to write like kinds of insurance in this State. The trust fund shall not be included in any calculation of capital and surplus or its equivalent and shall have an expiration date which at no time shall be less than five years. In lieu of the above capital and surplus requirements, and trust fund amount, any Lloyd's or other similar group of alien insurers, which group includes unincorporated individual insurers shall maintain a trust fund of not less than $50,000,000.00 as security to the full amount thereof for all policyholders and creditors in the United States of each member of the group, and the trust shall likewise comply with the terms and conditions hereinabove set forth. The credit for reinsurance requirements of sections 2 and 3 of P.L.1993, c.243 (C.17:51B-2 and 17:51B-3) shall not apply to an eligible alien surplus lines insurer that appears on the quarterly listing prepared by the International Insurers Department (IID) of the National Association of Insurance Commissioners and that provides the commissioner annually with a copy of such insurer's current Schedule R filing and such other information concerning ceded reinsurance that the International Insurers Department or the commissioner may from time to time require. Any insurance exchange created by the laws of an individual state may be approved by the commissioner as an eligible insurer under the provisions of this section, and shall maintain capital and surplus, or the substantial equivalent thereof, of not less than $35,000,000.00 in the aggregate. For insurance exchanges which maintain funds in an amount acceptable to the commissioner for the protection of all insurance exchange policyholders, each individual syndicate, except those syndicates which have elected and qualify for S corporation status pursuant to subsection (a) of section 1362 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1362, shall maintain minimum capital and surplus, or the substantial equivalent thereof, of not less than $2,000,000.00. Any syndicate which has elected and qualified for S corporation status pursuant to subsection (a) of section 1362 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1362, need not maintain the minimum capital and surplus required under the provisions of this section and the failure of any such syndicate to meet these minimum requirements shall not render the exchange ineligible for approval under this section; except that so long as such syndicate fails to maintain the minimum capital and surplus required under the provisions of this section, such syndicate shall not transact the business of insurance in this State and shall not be approved by the commissioner as an eligible insurer under the provisions of this section. In the event the insurance exchange does not maintain funds in an amount acceptable to the commissioner for the protection of all insurance exchange policyholders, each individual syndicate shall have capital and surplus, or its equivalent under the laws of its domiciliary jurisdiction, which is not less than twice the amount of minimum capital and surplus required for like admitted insurers. No insurance exchange approved as an eligible insurer by the commissioner shall be a member of the New Jersey Surplus Lines Insurance Guaranty Fund created pursuant to P.L.1984, c.101 (C.17:22-6.70 et seq.) nor shall any claim against an exchange be deemed to be a covered claim pursuant to the provision of that act; and
(2) Have caused to be provided to the commissioner a copy of its current annual statement certified by the insurer, which, relative to the period reported upon, is no more than 18 months old, and which is either: (A) filed with and approved by the regulatory authority in the domicile of the unauthorized insurer; or (B) certified by an accounting or auditing firm licensed in the jurisdiction of the insurer's domicile. In the case of an insurance exchange, the statement may be an aggregate combined statement of all underwriting syndicates operating during the period reported upon;
(e) The condition or methods of operation of the insurer must not be such as would render its operation hazardous to the public or its policyholders in this State;
(f) The insurer must be of good reputation as to the providing of service to its policyholders and the payment of losses and claims;
(g) No insurer shall be eligible the management of which is found by the commissioner to be incompetent or untrustworthy, or so lacking in insurance company managerial experience as to make the proposed operation hazardous to the insurance-buying public; or which the commissioner has good reason to believe is affiliated directly or indirectly through ownership, control, reinsurance transactions or other insurance or business relations, with any person or persons whose business operations are or have been detrimental to policyholders, stockholders, investors, creditors or to the public;
(h) No insurer shall be eligible the voting control or ownership of which is held in whole or substantial part by any government or governmental agency, or which is operated for or by any such government or agency. Membership in a mutual insurer, or subscribership in a reciprocal insurer, or ownership of stock of an insurer by the alien property custodian or similar official of the United States, or supervision of an insurer by public insurance supervisory authority shall not be deemed to be an ownership, control, or operation of the insurer for the purposes of this subsection;
(i) The insurer shall constitute, by a duly executed instrument filed with the department, the commissioner and his successor in office its true and lawful attorney, upon whom all original process in any action or legal proceeding against it may be served, and therein agree that any original process against it which may be served upon the commissioner shall be of the same force and validity as if served on the insurer, and that the authority thereof shall continue in force irrevocable so long as any liability of the insurer remains outstanding in this State.
The commissioner shall annually publish a list of all currently eligible surplus lines insurers, and shall mail a copy thereof to each licensed surplus lines agent at his office last of record with the commissioner.
This section shall not be deemed to cast upon the commissioner any duty or responsibility to determine the actual financial condition or claims practices of any unauthorized insurer; and the status of eligibility, if granted by the commissioner, shall indicate only that the insurer appears to be sound financially and to have satisfactory claims practices, and that the commissioner has no credible evidence to the contrary.
Where it appears that any particular insurance risk which is eligible for export, but insurance coverage thereon, in whole or in part, is not procurable from the eligible surplus lines insurers, then the surplus lines agent may file a supplemental affidavit stating such facts and advising the commissioner that such part of the risk as shall be unprocurable, as aforesaid, is being placed with named unauthorized insurers, in the amounts and percentages set forth in the affidavit. Such named unauthorized insurer shall, however, before accepting any risk in this State, deposit with the commissioner United States government bonds in an amount acceptable to the commissioner, which shall be held by said commissioner for the benefit of New Jersey policyholders only and the surplus lines agent shall procure from such unauthorized insurer and file with the commissioner a certified copy of its current annual statement of financial condition. If such deposit is made and the statement reveals, including both capital and surplus, net assets of at least $5,000,000 consisting of at least $1,500,000 liquid assets, then the surplus lines agent may proceed to consummate the contract of insurance. Whenever any insurance risk or any part thereof is placed with an unauthorized insurer, as provided herein, the policy, binder or cover note shall bear conspicuously on its face in boldface type the following notation:
"All or some of the insurers participating in this risk have not been admitted to transact business in the State of New Jersey, nor have they been approved as a surplus lines insurer by the insurance commissioner of this State. The placing of such insurance by a duly licensed surplus lines agent in this State shall not be construed as approval of such insurer by the insurance commissioner of the State of New Jersey. Such insurance is not covered by the New Jersey Property-Liability Insurance Guaranty Association or the New Jersey Surplus Lines Insurance Guaranty Fund." All other provisions of this Title, except the provisions of P.L.1984, c.101 (C.17:22-6.70 et seq.), shall apply to such placement the same as if such risks were placed with an eligible surplus lines insurer.
##### **§ 17:22-6.46** Withdrawal of eligibility; grounds; notice {#sec-17-22-6.46 omnilex-key=us-nj-statutes--title-17--17:22-6.46}
If at any time the commissioner has reason to believe that any unauthorized insurer then on the list of eligible surplus lines insurers is insolvent, or in unsound financial condition, or that it is no longer eligible under the conditions therefor provided in section 11 of this act, he shall withdraw the eligibility of the insurer to insure surplus lines risks in this State.
If the commissioner finds, after a hearing thereon of which notice was given to all licensed surplus lines agents, that an insurer currently eligible as a surplus lines insurer has willfully violated the laws of New Jersey, or does not make reasonably prompt payment of just losses and claims in this State, he may withdraw the eligibility of the insurer to insure surplus lines risks in this State.
The commissioner shall promptly mail notice of all such withdrawals of eligibility to each surplus lines agent at his address last of record with the commissioner.
##### **§ 17:22-6.47** Submission of affidavit, certification to surplus lines agent {#sec-17-22-6.47 omnilex-key=us-nj-statutes--title-17--17:22-6.47}
13. Within 30 business days after the effectuation of any surplus lines insurance the originating broker shall submit to the surplus lines agent an affidavit or certification by the broker, on a form prescribed and furnished by the commissioner, as to efforts made to place the coverage with authorized insurers and the results thereof, except that no such affidavit or certification shall be required for those coverages, risks or classes of insurance declared eligible for export by the commissioner pursuant to section 9 of P.L.1960, c.32 (C.17:22-6.43). The affidavit or certification shall be maintained in the files of the broker and the surplus lines agent and shall be available for inspection by the commissioner for a period of at least five years.
A broker who fails to submit the affidavit or certification to the surplus lines agent within the prescribed time is subject to the penalties provided under section 27 of P.L.1960, c.32 (C.17:22-6.61).
##### **§ 17:22-6.48** Surplus lines examining office {#sec-17-22-6.48 omnilex-key=us-nj-statutes--title-17--17:22-6.48}
The commissioner shall establish and maintain an office and such facilities as may reasonably be necessary to carry out the purposes of this act. This office shall be known as "The Surplus Lines Examining Office."
In the operation of the examining office, the commissioner may employ or obtain necessary personnel and office furniture, fixtures and facilities, and/or may make joint use of personnel, furniture, fixtures and facilities otherwise employed or used in his office.
##### **§ 17:22-6.49** Appropriation {#sec-17-22-6.49 omnilex-key=us-nj-statutes--title-17--17:22-6.49}
There is hereby appropriated to the Department of Banking and Insurance for the fiscal year 1959-60 the sum of $35,000.00 for the purpose of discharging the functions of the Surplus Lines Examining Office and the payment of salaries and expenses incurred in connection therewith.
##### **§ 17:22-6.50** Issuance and delivery of evidence of insurance {#sec-17-22-6.50 omnilex-key=us-nj-statutes--title-17--17:22-6.50}
Upon placing a surplus line coverage, the surplus lines agent shall promptly issue and deliver to the insured evidence of the insurance consisting either of the policy as issued by the insurer or, if such policy is not then available, a certificate of insurance, cover note, or other confirmation of insurance, as provided in this act. Such document shall be executed or countersigned by the surplus lines agent and shall show the description and location of the subject of the insurance, coverage, conditions and term of the insurance, the premium and rate charge and taxes collected from the insured, and the name and address of the insured and insurer. If the direct risk is assumed by more than one insurer, the document shall state the name and address and proportion of the entire direct risk assumed by each insurer.
No surplus lines agent shall issue any such document, or purport to insure or represent that insurance will be or has been granted by any unauthorized insurer unless he has written authority from the insurer for the insurance, or has received confirmation from the insurer in the regular course of business that such insurance has been granted, or an insurance policy or certificate of insurance providing the insurance actually has been issued by the insurer and delivered to the insured.
If after the issuance and delivery of any such document there is any change as to the identity of the insurers, or the proportion of the direct risk assumed by the insurer as stated in the original certificate of insurance, cover note or confirmation of insurance, or in any other material respect as to the insurance coverage evidenced by such a document, the surplus lines agent shall promptly issue and deliver to the insured a substitute certificate of insurance, cover note or confirmation, or endorsement for the original of such document, accurately showing the current status of the coverage and the insurers responsible thereunder. No such change shall result in a coverage or insurance contract which would be in violation of this surplus lines law if originally issued on such basis.
If a policy issued by the insurer is not available upon placement of the insurance and the surplus lines agent has issued and delivered a certificate of insurance on behalf of other than an alien insurer, or a cover note or confirmation, as hereinabove provided, the surplus lines agent shall as soon as reasonably possible, and in no event later than 90 days after placement of such insurance, procure from the insurer its policy evidencing the insurance and deliver the policy to the insured in replacement of the certificate of insurance, cover note, or confirmation theretofore issued.
Any surplus lines agent who issues a false certificate, cover note, binder or confirmation of insurance, or false endorsement therefor, or who fails to notify the insured promptly of any material change with respect to such insurance and deliver as soon as reasonably possible to the insured a substitute certificate of insurance, cover note or confirmation, or endorsement as provided in paragraph 3 commits a crime of the fourth degree.
##### **§ 17:22-6.50a** Certificate of insurance; contents {#sec-17-22-6.50a omnilex-key=us-nj-statutes--title-17--17:22-6.50a}
Every certificate of insurance shall contain or have attached thereto a complete record of all policy insuring agreements, conditions, exclusions, clauses, endorsements or any other material facts that would regularly be included in a surplus lines policy.
##### **§ 17:22-6.52** Statement of surplus lines agent {#sec-17-22-6.52 omnilex-key=us-nj-statutes--title-17--17:22-6.52}
Each surplus lines agent through whom a surplus lines coverage is procured shall write or print on the outside of the policy and on any certificate, cover note, or other confirmation of the insurance his name, address and license number, the name of the New Jersey broker through whom the business originated, and the name, address and code designation, if any, of the foreign or alien broker through whom the coverage was placed. Where such coverage is placed with an eligible surplus lines insurer there shall be stamped or written upon the first page of the policy or the certificate, cover note or confirmation of insurance, the words: "This Insurance is Issued Pursuant to the New Jersey Surplus Lines Law."
##### **§ 17:22-6.53** Validity of contracts procured from unauthorized insurers {#sec-17-22-6.53 omnilex-key=us-nj-statutes--title-17--17:22-6.53}
Insurance contracts procured as "surplus lines" coverages from unauthorized insurers in accordance with this law shall be fully valid and enforceable as to all parties.
##### **§ 17:22-6.54** Liability of insurer {#sec-17-22-6.54 omnilex-key=us-nj-statutes--title-17--17:22-6.54}
If the unauthorized insurer has assumed the risk as to a surplus lines coverage placed under this surplus lines law, and if the premium therefor has been received by the surplus lines agent who placed such insurance, then in all questions thereafter arising under the coverage as between the insurer and the insured the insurer shall be deemed to have received the premium due to it for such coverage; and the insurer shall be liable to the insured as to losses covered by such insurance, and for unearned premiums which may become payable to the insured upon cancellation of such insurance, whether or not in fact the surplus lines agent is indebted to the insurer with respect to such insurance or for any other cause.
Each unauthorized insurer assuming a surplus lines risk under this surplus lines law shall be deemed thereby to have subjected itself to the terms of this section.
##### **§ 17:22-6.55a** Advisory organizations {#sec-17-22-6.55a omnilex-key=us-nj-statutes--title-17--17:22-6.55a}
a. Advisory surplus lines organizations of surplus lines agents may be formed to: (1) facilitate and encourage compliance by its members with the laws of this State and the rules and regulations of the commissioner relative to surplus lines insurance; (2) provide means for the examination, which shall remain confidential, of all surplus lines coverages written by its members to determine whether the coverages comply with the laws and regulations; (3) communicate with organizations of admitted insurers with respect to the proper use of the surplus lines market; and (4) receive and disseminate to its members information relative to surplus lines coverages.
b. Every advisory organization shall file with the commissioner: (1) a copy of its constitution, its articles of agreement or association or its certificate of incorporation, (2) a copy of its bylaws, and the rules and regulations governing its activities, (3) a current list of its members, (4) the name and address of a resident of this State upon whom notices or orders of the commissioner or processes issued at his direction may be served, and (5) an agreement that the commissioner may examine the advisory organization in accordance with the provisions of this section.
c. The commissioner may, whenever he deems it necessary and at least once every three years, make or cause to be made an examination of each advisory organization. The reasonable cost of any examination shall be paid by the advisory organization upon presentation to it by the commissioner of a detailed account of the cost. The officers, managers, agents and employees of the advisory organization may be examined at any time, under oath, and shall exhibit all books, records, accounts, documents or agreements governing its method of operation. The commissioner shall furnish two copies of the examination report to the advisory organization examined and shall notify the organization that it may, within 20 days thereof, request a hearing on the report or on any facts or recommendations therein. If the commissioner finds the advisory organization or any member thereof to be in violation of this section, he may issue an order requiring the discontinuance of the violation, and may impose a penalty not exceeding $1,000.00 for the first offense and not exceeding $2,000.00 for each succeeding offense, to be enforced and collected by the commissioner in the name of the State in a summary proceeding in accordance with "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.).
d. The commissioner may contract with a surplus lines advisory organization, which shall render advice and assistance in carrying out the purposes of the surplus lines law, and whereby the affidavits, reports, certificates or statements required by the surplus lines law may be filed with and maintained by the advisory organization. The services performed by the advisory organization shall be funded by a stamping fee assessed on each surplus lines policyholder whose policy is submitted to the advisory organization, which stamping fee shall be established by the board of governors of the advisory organization from time to time and shall be subject to approval by the commissioner.
e. The advisory organization may submit reports and make recommendations to the commissioner regarding the financial condition of any surplus lines insurer. These reports and recommendations shall not be considered to be public information or subject to any State or federal freedom of information law. There shall be no liability on the part of nor shall any cause of action of any nature be sustained against surplus lines insurers, the advisory organization or its members, agents or employees, the directors, or the commissioner or authorized representatives of the commissioner for statements in any reports or recommendations made by them in good faith under this section.
##### **§ 17:22-6.57** Record of surplus lines contracts procured {#sec-17-22-6.57 omnilex-key=us-nj-statutes--title-17--17:22-6.57}
23. Each surplus lines agent shall keep in his office a full and true record of each surplus lines contract procured by him, including a copy of the daily report, if any, and showing such of the following items as may be applicable:
(a) Amount of the insurance and perils insured against;
(b) Brief general description of property insured and where located;
(c) Gross premium charged;
(d) Return premium paid, if any;
(e) Rate of premium charged upon the several items of property;
(f) Effective date of the contract, and the terms thereof;
(g) Name and post-office address of the insured;
(h) Name and home office address of the insurer;
(i) Amount collected from the insured; and
(j) Other information as may be required by the commissioner.
The record shall at all times be open to examination by the commissioner without notice, and shall be so kept available and open to the commissioner for five years next following expiration or cancellation of the contract.
##### **§ 17:22-6.58** Verified report of surplus lines insurance transacted {#sec-17-22-6.58 omnilex-key=us-nj-statutes--title-17--17:22-6.58}
24. Each surplus lines agent shall within 45 calendar days after the end of each calendar quarter file with the commissioner a verified report in duplicate of all surplus lines insurance transacted by him during such calendar quarter.
The report shall be on forms as prescribed and furnished by the commissioner and shall show:
(a) Gross amount of each kind of insurance transacted;
(b) Aggregate gross premiums charged;
(c) Aggregate of returned premiums and taxes paid to insureds;
(d) Aggregate of net premiums; and
(e) Additional information as required by the commissioner.
##### **§ 17:22-6.59** Premium receipts tax for surplus lines coverage. {#sec-17-22-6.59 omnilex-key=us-nj-statutes--title-17--17:22-6.59}
25. The premiums charged for surplus lines coverages are subject to a premium receipts tax of 5% of all gross premiums less any return premiums charged for such insurance. The surplus lines agent shall collect from the insured, either directly or through the originating broker, the amount of the tax, in addition to the full amount of the gross premium charged by the insurer for the insurance; provided, however, that the tax on any unearned portion of the premium shall be returned to the policyholder by the surplus lines agent. The surplus lines agent is prohibited from absorbing such tax, or, as an inducement for insurance or for any other reason, rebating all or any part of such tax or of his commission.
The surplus lines agent shall forward to the commissioner together with his quarterly report submitted pursuant to section 24 of P.L.1960, c.32 (C.17:22-6.58) a check in the amount of the premium receipts tax due for that period made out to "the State of New Jersey," except that where the policies cover fire insurance on property in any municipality or portion of a township, or fire district in this State, which now has or may hereafter have, a duly incorporated firemen's relief association, 3% of the premium receipts tax covering such insurance shall be paid to the treasurer of the New Jersey State Firemen's Association and the remaining 2% of the premium receipts tax shall be forwarded to the commissioner.
The tax imposed hereunder, if delinquent, shall be subject to the provisions of R.S.54:49-3 and R.S.54:49-4.
The check covering taxes paid under the provisions of this act shall be forwarded by the commissioner to the Director of the Division of Taxation and that portion of the premiums representing fire insurance shall be distributed by him in the amount now or hereafter provided by law as to taxes collected by him from fire insurance companies of other states and foreign countries. The commissioner shall ascertain and report to the Director of the Division of Taxation all facts necessary to enable the director to ascertain, fix and collect the amount of the tax to be paid by each licensee subject thereto under this act.
If a surplus lines policy covers risks or exposures in this State and other states, where this State is the home state, as defined in section 7 of P.L.1960, c.32 (C.17:22-6.41), the tax payable pursuant to this section shall be based on the total United States premium for the applicable policy.
This section does not apply as to insurance of or with respect to insurance of risks of the State Government or its agencies, or of any county or municipality or of any agency thereof.
##### **§ 17:22-6.60** Suit for tax {#sec-17-22-6.60 omnilex-key=us-nj-statutes--title-17--17:22-6.60}
If the tax payable by a surplus lines agent under this surplus lines law is not so paid within the time prescribed, the same shall be recoverable in a suit brought by the commissioner against the surplus lines agent and the surety or sureties on the bond filed by the surplus lines agent in accordance with the requirements of this act.
##### **§ 17:22-6.61** Suspension, revocation, refusal to renew license of surplus lines agents {#sec-17-22-6.61 omnilex-key=us-nj-statutes--title-17--17:22-6.61}
27. The commissioner may suspend, revoke, or refuse to renew the license of a surplus lines agent and all other licenses and permits held by the licensee under this Title, upon any one or more of the following grounds:
(a) (Deleted by amendment, P.L.2001, c.210);
(b) Removal of the accounts and records of his surplus lines business during the period when such accounts and records are required to be maintained under section 23 of P.L.1960, c.32 (C.17:22-6.57);
(c) Closure of the licensee's office for a period of more than 30 consecutive days, unless granted permission by the commissioner upon showing circumstances warranting such closure for a longer period;
(d) Failure to make and file his quarterly reports when due as required by section 24 of P.L.1960, c.32 (C.17:22-6.58);
(e) Failure to pay the tax on surplus lines premiums, as provided for in this surplus lines law;
(f) (Deleted by amendment, P.L.2001, c.210);
(g) Suspension, revocation or refusal to renew any other license issued by the commissioner;
(h) Lack of qualifications as for an original surplus lines agent's license;
(i) Violation of any provision of this surplus lines law;
(j) For any other cause for which a license could be denied, revoked, suspended or renewal refused under section 15 of P.L.2001, c.210 (C.17:22A-40).
In addition to the foregoing penalties set forth in this section, any person, persons or corporation violating any of the provisions of this act shall be liable to a penalty not exceeding $2,500 for the first offense and not exceeding $5,000 for each succeeding offense to be recovered in a summary proceeding as provided in R.S.17:33-2.
##### **§ 17:22-6.62** Revocation for failure to file report or pay taxes; procedure; review {#sec-17-22-6.62 omnilex-key=us-nj-statutes--title-17--17:22-6.62}
If any licensed surplus lines agent fails to file the quarterly report required or pay the taxes as required of him under this surplus lines law, the commissioner shall issue an order directed to the licensee requiring the licensee to file such report and pay such tax or to show cause by a day certain to be named therein why the commissioner should not revoke his license. The notice shall provide a return day not sooner than 30 days subsequent to its issuance and shall be served upon the licensee by registered mail at his business post-office address.
The licensee may, not less than 10 days prior to such return day, file his response in writing with the commissioner showing cause why he has not paid such tax, but the only defenses available to the licensee with respect thereto shall be that the commissioner is requiring the payment of a tax greater than that due from the licensee, and such defense will be available only if the licensee shall have filed return purporting to show the tax payable by the licensee, and shall have tendered the amount of tax computed by the licensee to be due.
If on the return day the licensee has not filed such return and paid the tax and has not filed any such defense and made such tender, the commissioner shall revoke the licenses of the licensee.
If the licensee files such defense to the order and makes such tender within the time required, on the return day the commissioner shall hold a hearing with respect to such matters and if the commissioner determines after such hearing that the licensee has failed to pay the tax required, and the licensee does not within 5 days thereafter pay such tax, the commissioner shall enter his order revoking the licenses of such licensee.
The revocation of a license by the commissioner under this section shall be subject to review in the Superior Court by a proceeding in lieu of prerogative writ.
##### **§ 17:22-6.63** Lawsuits against unauthorized insurer {#sec-17-22-6.63 omnilex-key=us-nj-statutes--title-17--17:22-6.63}
29. An unauthorized insurer which has not been made eligible as a surplus lines insurer by the commissioner in accordance with section 11 of P.L.1960, c.32 (C.17:22-6.45) may be sued upon any cause of action arising in this State under any surplus lines insurance contract issued by it or certificate, cover note or other confirmation of such insurance issued by the surplus lines agent, pursuant to the same procedure as is provided in the Unauthorized Insurers' Process Act, P.L.1952, c.330 (C.17:51-1 et seq.).
Any such policy issued by the insurer, or any certificate of insurance issued by the surplus lines agent, shall contain a provision stating the substance of this section and designating the person to whom the commissioner shall mail process.
This section shall be cumulative to any other methods which may be provided by law for service of process upon the insurer.
##### **§ 17:22-6.64** Report of insurance through unauthorized foreign, alien insurer. {#sec-17-22-6.64 omnilex-key=us-nj-statutes--title-17--17:22-6.64}
30. Every insured who in this State procures or causes to be procured or continues or renews insurance with an unauthorized foreign or alien insurer, or any insured or self-insurer who procures or continues excess loss, catastrophe or other insurance, upon a subject of insurance resident, located or to be performed within this State, other than insurance procured through a surplus lines agent pursuant to the surplus lines law of this State or exempted from tax under section 25 of P.L.1960, c.32 (C.17:22-6.59), shall within 30 days after the date such insurance was so procured, continued, or renewed, file a report of the same with the commissioner in writing and upon forms designated by the commissioner and furnished to such an insured upon request. The report shall show the name and address of the insured or insureds, name and address of the insurer, the subject of the insurance, a general description of the coverage, the amount of premium currently charged therefor, and such additional pertinent information as is reasonably requested by the commissioner.
Any insurance in an unauthorized insurer procured through negotiations or an application, in whole or in part occurring or made within or from within this State, or for which premiums in whole or in part are remitted directly or indirectly from within this State, shall be deemed to be insurance procured, or continued or renewed in this State within the intent of this section.
There is hereby levied upon the obligation, chose in action, or right represented by the premium charged for such insurance, a tax at the rate of 5% of the gross amount of such premium less any return premiums charged for such insurance. Within 30 days after the insurance was so procured, continued or renewed, and coincidentally with the filing with the commissioner of the report provided for in this section, the insured shall pay the amount of the tax to the commissioner, who, after reviewing the above report, shall turn over the amount of the tax to the Director of the Division of Taxation along with a summary of the facts necessary to enable the director to ascertain and fix the proper amount of the tax, except that where the policies cover fire insurance on property in any municipality or portion of a township, or fire district in this State, which now has or may hereafter have, a duly incorporated firemen's relief association, 3% of the premium receipts tax covering such insurance shall be paid to the treasurer of the New Jersey State Firemen's Association and the remaining 2% of the premium receipts tax shall be forwarded to the commissioner.
If the insured fails to withhold from the premium the amount of tax herein levied, the insured shall be liable for the amount thereof and shall pay the same to the commissioner within the time specified in this section.
If a surplus lines policy covers risks or exposures in this State and other states, where this State is the home state, as defined in section 7 of P.L.1960, c.32 (C.17:22-6.41), the tax payable pursuant to this section shall be based on the total United States premium for the applicable policy.
The tax imposed hereunder if delinquent shall be subject to the provisions of R.S.54:49-3 and R.S.54:49-4.
The tax shall be collectible from the insured by civil action brought by the commissioner.
The amount of taxes paid to the Director of the Division of Taxation under the provisions of this section on premiums for fire insurance shall be distributed by him in the manner now or hereafter provided by law as to taxes collected by him from fire insurance companies of other states and foreign countries.
This section does not abrogate or modify, and shall not be construed or deemed to abrogate or modify, any provision of section 3 of P.L.1960, c.32 (C.17:22-6.37), representing or aiding unauthorized insurer prohibited; section 4 of P.L.1960, c.32 (C.17:22-6.38), penalty for representing unauthorized insurer; or section 5 of P.L.1960, c.32 (C.17:22-6.39), suits by unauthorized insurers prohibited; or any other provision of this Title.
This section does not apply as to life or disability insurances.
##### **§ 17:22-6.65** Production of records and information upon order of commissioner {#sec-17-22-6.65 omnilex-key=us-nj-statutes--title-17--17:22-6.65}
Every person by or as to whom insurance is procured or placed in an unauthorized insurer, upon the commissioner's order shall produce for his examination all policies and other documents evidencing the insurance, and shall disclose to the commissioner the amount of gross premiums paid or agreed to be paid for the insurance. In case of a failure of any person to comply with the commissioner's order, the Superior Court, on application of the commissioner, may issue an order requiring the production of the records and information sought by the commissioner. Any person failing to obey the court's order may be punished by the court as for a contempt.
This section does not apply to life insurance or disability insurance.
##### **§ 17:22-6.66** Partial invalidity {#sec-17-22-6.66 omnilex-key=us-nj-statutes--title-17--17:22-6.66}
If any clause, sentence, paragraph, section or part of this act shall be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence, paragraph, section or part thereof directly involved in the controversy in which such judgment shall have been rendered.
##### **§ 17:22-6.67** Effective date {#sec-17-22-6.67 omnilex-key=us-nj-statutes--title-17--17:22-6.67}
This action shall take effect immediately except that sections 1 and 2 shall not take effect until November 1, 1960.
##### **§ 17:22-6.68** Repeal {#sec-17-22-6.68 omnilex-key=us-nj-statutes--title-17--17:22-6.68}
Section 21 of "An act relating to the licensing, regulation and supervision of insurance agents, insurance brokers and insurance solicitors, supplementing chapters 22, 32 and 36 of Title 17 of the Revised Statutes and repealing sections 17:22-1, 17:22-2, 17:22-3, 17:22-4, 17:22-5, 17:23-3, 17:32-6 and 17:32-11 of the Revised Statutes and section 1 of "An act concerning the licensing of agents for insurance companies in certain cases, supplementing chapter 22 of Title 17, and amending section 17:33-1 of the Revised Statutes,' approved May 16, 1941 (P.L.1941, c.118)" approved April 20, 1944 (P.L.1944, c.175) is repealed.
##### **§ 17:22-6.69** Repeal {#sec-17-22-6.69 omnilex-key=us-nj-statutes--title-17--17:22-6.69}
Sections 2, 3, 4, 5, 6 and 7 of "An act to amend and supplement "An act relating to the licensing, regulation and supervision of insurance agents, insurance brokers and insurance solicitors, supplementing chapters 22, 32 and 36 of Title 17 of the Revised Statutes, and repealing sections 17:22-1, 17:22-2, 17:22-3, 17:22-4, 17:22-5, 17:23-3, 17:32-6 and 17:32-11 of the Revised Statutes and section 1 of "An act concerning the licensing of agents for insurance companies in certain cases supplementing chapter 22 of Title 17, and amending section 17:33-1 of the Revised Statutes" approved May 16, 1941 (P.L.1941, c.118)' approved April 20, 1944 (P.L.1944, c.175) and to repeal section 17:36-1 of the Revised Statutes" approved October 28, 1948 (P.L.1948, c.462) are repealed.
##### **§ 17:22-6.69a** Short title. {#sec-17-22-6.69a omnilex-key=us-nj-statutes--title-17--17:22-6.69a}
1. Sections 1, 2 and 3 of this amendatory and supplementary act shall be known and may be cited as the "Reinsurance and Surplus Lines Stimulus and Enhancement Act."
##### **§ 17:22-6.69b** Designation as domestic surplus lines insurer. {#sec-17-22-6.69b omnilex-key=us-nj-statutes--title-17--17:22-6.69b}
2. a. Notwithstanding any other provision of law to the contrary, a domestic insurer possessing policyholder surplus of at least $15,000,000 may, pursuant to a resolution by its board of directors, and upon the written approval of the Commissioner of Banking and Insurance, be designated as a domestic surplus lines insurer. A domestic surplus lines insurer shall be considered an eligible, unauthorized insurer for purposes of writing surplus lines insurance coverage.
b. A domestic surplus lines insurer shall only insure in this State a New Jersey risk procured from a surplus lines agent in accordance with the provisions of "the surplus lines law," P.L.1960, c.32 (C.17:22-6.40 et seq.).
c. A domestic surplus lines insurer shall not issue policies of private passenger automobile insurance, workers' compensation or workers' occupational disease insurance.
d. Insurance written by a domestic surplus lines insurer shall be subject to the tax on premiums provided by section 25 of P.L.1960, c.32 (C.17:22-6.59).
##### **§ 17:22-6.69c** Notice to policyholder. {#sec-17-22-6.69c omnilex-key=us-nj-statutes--title-17--17:22-6.69c}
3. Whenever any insurance risk or any part thereof is placed with a domestic surplus lines insurer, the policy, binder, or cover note shall bear conspicuously on its face in boldface, the following notation:
"Notice to policyholder: This policy is written by a domestic surplus lines insurer, an eligible unauthorized insurer pursuant to section 2 of P.L.2011, c.39 (C.17:22-6.69b), and is not subject to the rate or form filing or approval requirements of the New Jersey Department of Banking and Insurance. This policy may contain conditions, limitations, exclusions and different terms than a policy otherwise issued by a New Jersey authorized or admitted insurer. This policy is not covered by the New Jersey Property-Liability Guaranty Association. This policy may be covered by the New Jersey Surplus Lines Insurance Guaranty Fund, but only to the extent provided pursuant to section 2 of P.L.1984, c.101 (C.17:22-6.71)."
##### **§ 17:22-6.69d** Authority of commissioner to enter into compacts, agreements. {#sec-17-22-6.69d omnilex-key=us-nj-statutes--title-17--17:22-6.69d}
4. a. Notwithstanding the provisions of section 24, 25 or 30 of P.L.1960, c.32 (C.17:22-6.58, C.17:22-6.59 or C.17:22-6.64) or any other law to the contrary, the commissioner is authorized, subject to the provisions of section 6 of P.L.2011, c.119 (C.17:22-6.69f), to enter into, modify and to terminate this State's participation in one or more compacts or agreements that establish procedures for the reporting, payment, collection and allocation, among the other states participating in those compacts or agreements, of the premium taxes for multi-state risks paid to this State as the home state pursuant to section 25 or 30 of P.L.1960, c. 32 (C.17:22-6.59 and C.17:22-6.64) or paid to any other state as home state as defined in section 7 of P.L.1960, c.32 (C.17:22-6.41) on a risk which is resident or located in this State. The compacts or agreements may address any matters necessary to facilitate the reporting, payment, collection and allocation of premium taxes on multi-state risks, including, but not limited to:
(1) A method and formula for that allocation;
(2) Establishment of uniform requirements, forms and procedures that facilitate the reporting, payment, collection and allocation of premium taxes on multi-state risks;
(3) Establishment of a clearinghouse to facilitate the receipt and distribution of premium taxes and transaction data related to multi-state risks; and
(4) The authority to collect and distribute taxes based on a single home state rate as well as the rates of other states.
b. In determining whether to enter into one or more compacts or agreements, the commissioner shall consider:
(1) The efficiencies to be achieved in the reporting, payment, collection and allocation of premium taxes on surplus lines insurance;
(2) The amount of revenue to be generated through participation in any such compacts or agreements. The commissioner may consult with the State Treasurer in making this determination; and
(3) Any other material factor relevant to the reporting, payment, collection and allocation of premium taxes on surplus lines insurance.
##### **§ 17:22-6.69e** Authority of commissioner to modify, terminate compacts, agreements. {#sec-17-22-6.69e omnilex-key=us-nj-statutes--title-17--17:22-6.69e}
5. Notwithstanding any other law to the contrary, the commissioner is authorized, subject to the provisions of section 6 of P.L.2011, c.119 (C.17:22-6.69f), to enter into, modify and to terminate this State's participation in one or more compacts or agreements necessary to implement the federal "Nonadmitted and Reinsurance Reform Act of 2010," Pub.L.111-203 (15 U.S.C. s.8201 et seq.), as authorized by that act, including, but not limited to, the imposition of eligibility requirements or establishment of eligibility criteria for nonadmitted surplus lines insurers.
##### **§ 17:22-6.69f** Authority to nullify commissioner's decision. {#sec-17-22-6.69f omnilex-key=us-nj-statutes--title-17--17:22-6.69f}
6. The commissioner shall submit any decision to enter into or terminate this State's participation in any compacts or agreements pursuant to section 4 or 5 of P.L.2011, c.119 (C.17:22-69d or C.17:22-6.69e) to the Joint Budget Oversight Committee, or its successor. The Joint Budget Oversight Committee, or its successor, shall have the authority to nullify any decision to enter into or terminate participation in a compact or agreement. The committee shall notify the commissioner in writing of any nullification within 30 days of receipt of the commissioner's decision. Should the committee not act within 30 days of receipt of the commissioner's decision, the commissioner's decision shall be deemed approved.
##### **§ 17:22-6.69g** Rules, regulations. {#sec-17-22-6.69g omnilex-key=us-nj-statutes--title-17--17:22-6.69g}
7. The commissioner, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), may adopt such rules and regulations as may be necessary to effectuate the purposes of this act.
##### **§ 17:22-6.70** Short title {#sec-17-22-6.70 omnilex-key=us-nj-statutes--title-17--17:22-6.70}
This act shall be known and may be cited as the "New Jersey Surplus Lines Insurance Guaranty Fund Act."
##### **§ 17:22-6.70a** Findings, declarations relative to surplus lines insurance. {#sec-17-22-6.70a omnilex-key=us-nj-statutes--title-17--17:22-6.70a}
1. The Legislature finds and declares:
a. The "New Jersey Surplus Lines Insurance Guaranty Fund Act," P.L.1984, c.101 (C.17:22-6.70 et seq.), enacted 18 years ago in the face of an imminent threat of declaration of insolvency of Ambassador Insurance Company of Vermont, has provided valuable benefits by covering claims of certain claimants against insolvent property and casualty insurers selling insurance in New Jersey as surplus lines.
b. That act was amended 15 years ago to include, as covered claims, those claims arising from the declared insolvency of Northeastern Fire Insurance Company of Pennsylvania.
c. Claims covered by the New Jersey Surplus Lines Insurance Guaranty Fund included claims by New Jersey residents or claims arising from property permanently located in New Jersey, in an amount up to the lesser of the policy limit or $300,000, subject to policy deductibles, thereby redistributing some of the economic burden of surplus lines insurer failures.
d. The New Jersey Surplus Lines Insurance Guaranty Fund currently contains a balance of approximately $80,000,000 and $40,000,000 is sufficient to satisfy existing covered claims.
e. The Legislature believes that, beyond the payment of existing covered claims, it is good public policy to maintain surplus lines insurance guaranty benefits for certain lines of insurance in the future.
##### **§ 17:22-6.71** Purpose, application of act. {#sec-17-22-6.71 omnilex-key=us-nj-statutes--title-17--17:22-6.71}
2. The purpose of this act is to provide a mechanism for the payment of covered claims under certain insurance policies issued by eligible surplus lines insurers; to minimize excessive delays in the payment of the covered claims against insolvent, eligible, nonadmitted insurers; and to avoid financial loss to claimants or policyholders because of the insolvency of an eligible, nonadmitted insurer.
On and after July 27, 1984 and before June 25, 2002, P.L.1984, c.101 (C.17:22-6.70 et seq.) shall apply to all property and casualty lines of direct insurance authorized under R.S.17:17-1, except workers' compensation insurance, title insurance, surety bonds, credit insurance, mortgage guaranty insurance, municipal bond coverage, fidelity insurance, investment return assurance, and ocean marine insurance. This act shall also not apply to reinsurance of any kind.
On or after June 25, 2002, P.L.1984, c.101 (C.17:22-6.70 et seq.) shall apply only to medical malpractice liability insurance as defined in subsection d. of section 3 of P.L.1975, c.301 (C.17:30D-3) and property insurance covering owner occupied dwellings of less than four dwelling units. On or after June 25, 2002, P.L.1984, c.101 (C.17:22-6.70 et seq.) shall not apply to reinsurance of any kind.
##### **§ 17:22-6.72** Definitions relative to the Surplus Lines Insurance Guaranty Fund. {#sec-17-22-6.72 omnilex-key=us-nj-statutes--title-17--17:22-6.72}
3. Affiliate" means a person who directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer.
"Association" means the New Jersey Property-Liability Insurance Guaranty Association created pursuant to P.L.1974, c.17 (C.17:30A-1 et seq.).
"Commissioner" means the Commissioner of Banking and Insurance.
"Covered claim" means an unpaid claim, including a claim for unearned premiums, which arises out of and is within the coverage, and not in excess of the applicable limits of an insurance policy to which this act applies, and which was issued by a surplus lines insurer which was eligible to transact insurance business in this State at the time the policy was issued and which has been determined to be an insolvent insurer on or after June 1, 1984, but prior to June 25, 2002, if (1) the claimant or policyholder is a resident of this State at the time of the occurrence of the insured event for which a claim has been made, provided that for an entity other than an individual, the residence of the claimant or insured is the state in which its principal place of business was located at the time of the insured event; or (2) the claim is a first party claim for damage to property with a permanent location in this State. A "covered claim" which arises because of an insolvency occurring on or after June 25, 2002 shall be limited to an unpaid claim, including a claim for unearned premiums, which arises out of either medical malpractice liability insurance coverage or property insurance covering owner occupied dwellings of less than four dwelling units within the coverage, and not in excess of the applicable limits, of an insurance policy to which P.L.1984, c.101 (C.17:22-6.70 et seq.) applies, and which was issued by a surplus lines insurer which was eligible to transact insurance business in this State at the time the policy was issued and which has been determined to be an insolvent insurer on or after June 25, 2002, if (1) the claimant or policyholder is a resident of this State at the time of the occurrence of the insured event for which a claim has been made, provided that for an entity other than an individual, the residence of the claimant or insured is the state in which its principal place of business was located at the time of the insured event; or (2) the claim is a first party claim for damage to property with a permanent location in this State.
"Covered claim" shall not include: (1) any amount due any reinsurer, insurance pool or underwriting association, as subrogation recoveries or otherwise, except that a claim for any such amount, asserted against a person insured under a policy issued by a surplus lines insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool, or underwriting association, would be a "covered claim," may be filed directly with the receiver of the insolvent insurer, but in no event may any such claim be asserted in any legal action against the insured of that insolvent insurer; (2) amounts for interest on unliquidated claims; (3) punitive damages unless covered by the policy; (4) counsel fees for prosecuting suits for claims against the fund; (5) assessments or charges for failure by an insolvent insurer to have expeditiously settled claims; (6) counsel fees and other claim expenses incurred prior to the date of insolvency; (7) a claim filed with the fund, liquidator or receiver of an insolvent insurer after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer or, if a final date is not set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer, two years from the date of the order of liquidation, unless the claimant demonstrates unusual hardship and the commissioner approves of treatment of the claim as a "covered claim." "Unusual hardship" shall be defined in regulations promulgated by the commissioner. With respect to insurer insolvencies pending as of the effective date of P.L.2004, c.165 (C.17:22-6.84 et al.), a "covered claim" shall not include a claim filed with the fund, liquidator or receiver of an insolvent insurer: (a) more than one year after the effective date of P.L.1996, c. 156 or (b) the date set by the court for the filing of claims against the liquidator or receiver of the insolvent insurer, whichever date occurs later; and (8) any first party claim by an insured whose net worth exceeds $25 million on December 31 of the year prior to the year in which the insurer becomes an insolvent insurer provided that the insured's net worth on that date shall be deemed to include the aggregate net worth of the insured and all of its affiliates as calculated on a consolidated basis.
"Exhaust" means with respect to other insurance, the application of a credit for the maximum limit under the policy provided, however, in any case where continuous indivisible injury or property damage occurs over a period of years as a result of exposure to injurious conditions, exhaustion shall be deemed to have occurred only after a credit for the maximum limits under all other coverages, primary or excess, if applicable, issued in all other years has been applied. With respect to health insurance and workers' compensation insurance, "exhaust" means the application of a credit for the amount of recovery under the insurance policy. With respect to another insurance guaranty association or its equivalent, "exhaust" means the application of a credit for the maximum statutory limit of recovery from that other guaranty association or its equivalent. The amount of a covered claim payable by the fund shall be reduced by the amount of any applicable credits.
"Fund" means the New Jersey Surplus Lines Insurance Guaranty Fund created pursuant to section 4 of this act.
"Insolvent insurer" means an insurer which was an eligible surplus lines insurer at the time the insurance policy was issued or when the insured event occurred, and against whom an order of liquidation has been entered with a finding of insolvency by a court of competent jurisdiction in this State or the state or place in which the surplus lines insurer is domiciled. "Insolvent insurer" does not include an admitted insurer or any insurance exchange issuing insurance pursuant to section 10 of P.L.1960, c.32 (C.17:22-6.44).
"Member insurer" means an eligible, nonadmitted or surplus lines insurer required to be a member of, and that is subject to, assessments by the fund.
"Net direct written premiums" means direct gross premiums on insurance policies written by a surplus lines insurer to which this act applies, less return premiums thereon and dividends paid or credited to policyholders on that direct business. If a policy issued by a surplus lines insurer covers risks or exposures only partially in this State, the "net direct written premiums" shall be computed, for assessment purposes, on that portion of the premium subject to the premium receipts tax levied in accordance with section 25 of P.L.1960, c.32 (C.17:22-6.59). "Net direct written premiums" do not include premiums on contracts between insurers or reinsurers.
"Person" means any individual, corporation, partnership, association or voluntary organization.
"Surplus lines insurer" means a nonadmitted insurer approved as an eligible, nonadmitted or unauthorized insurer pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45) at the time the policies were issued against which a covered claim may be filed in accordance with this act.
##### **§ 17:22-6.73** Surplus Lines Insurance Guaranty Fund. {#sec-17-22-6.73 omnilex-key=us-nj-statutes--title-17--17:22-6.73}
4. There is created a private, nonprofit, unincorporated, legal entity to be known as the New Jersey Surplus Lines Insurance Guaranty Fund. All surplus lines insurers shall be and remain member insurers of the fund as a condition of their continued eligibility pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45). The fund shall be managed and administered by the New Jersey Property-Liability Insurance Guaranty Association. The association shall exercise all of the powers vested in the fund under this act, and such other powers as may be necessary or appropriate to the fulfilling of its responsibilities under this act. The association shall administer the affairs of the fund in accordance with the "New Jersey Property-Liability Guaranty Association Act," P.L.1974, c.17 (C.17:30A-1 et seq.) and its plan of operation adopted pursuant to section 9 (C.17:30A-9), insofar as the provisions of that act and that plan are not thereof inconsistent with the provisions of this act, and subject to any amendments to the plan as may be necessary or appropriate to effectuate the purposes of this act. After the excess moneys in the fund are transferred to the General Fund pursuant to section 5 of P.L.1984, c.101 (C.17:22-6.74), the association shall be responsible for the run-off and wind-up of all covered claims existing before June 25, 2002. On or after June 25, 2002, the operations and obligations of the fund pursuant to P.L.1984, c.101 (C.17:22-6.70 et seq.), with respect to eligible surplus lines insurers determined to be insolvent after that date, other than eligible surplus lines insurers issuing policies for medical malpractice liability insurance or property insurance covering owner occupied dwellings of less than four dwelling units, shall be terminated. On or after June 25, 2002, the fund shall only provide coverage for eligible surplus lines insurers issuing medical malpractice liability insurance or property insurance covering owner occupied dwellings of less than four dwelling units determined to be insolvent after that date.
In order to assist the association in implementing the provisions of this act, there is created an advisory body to the board of directors of the association to be comprised of two members representing eligible surplus lines insurers and two members representing surplus lines agents, to be appointed by and to serve at the pleasure of the commissioner. The association shall consult the advisory body on any matter relating to the provisions of P.L.1984, c.101 (C.17:22-6.70 et seq.).
##### **§ 17:22-6.74** Powers, duties and obligations of the Surplus Lines Insurance Guaranty Fund. {#sec-17-22-6.74 omnilex-key=us-nj-statutes--title-17--17:22-6.74}
5. a. The fund shall:
(1) Be obligated to the extent of the covered claims against an insolvent insurer incurred prior to or 30 days after the determination of insolvency, or before the policy expiration date, if less than 30 days after that determination, or before the policyholder replaces the policy or causes its cancellation, if he does so within 30 days of the determination. The fund's obligation for covered claims shall not be greater than $300,000 per occurrence, subject to any applicable deductible and self-insured retention contained in the policy. The commissioner may pay a portion of or defer the fund's obligations for covered claims based on the moneys available in the fund. In no event shall the fund be obligated to a policyholder or claimant in excess of the limits of liability of the insolvent insurer stated in the policy from which the claim arises. Any obligation of the fund to defend an insured shall cease upon the fund's payment or tender of an amount equal to the lesser of the fund's covered claim statutory limit or the applicable policy limit;
(2) Be 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;
(3) Assess member insurers in accordance with section 6 of this act in amounts necessary to pay:
(a) Obligations of the fund under paragraph (1) of this subsection,
(b) Expenses of handling covered claims,
(c) Any other expenses incurred in the implementation of the provisions of this act;
(4) Investigate claims brought against the fund; and adjust, compromise, settle, and pay covered claims to the extent of the fund's obligation; and deny all other claims; and may review settlements, releases and judgments to which the insolvent insurer or its policyholders were parties to determine the extent to which the settlements, releases and judgments may be properly contested;
(5) Notify those persons as the commissioner directs under section 8 of this act;
(6) Handle claims through the association's employees or representatives, or through one or more insurers or other persons designated as servicing facilities;
(7) Pay the other expenses of the association in administering the provisions of this act; and
(8) (Deleted by amendment, P.L.2004, c.165.)
(9) (Deleted by amendment, P.L.2017, c.97)
(10) On or before June 30, 2017, transfer $8,000,000 to the General Fund.
b. The fund may:
(1) Sue or be sued;
(2) Negotiate and become a party to those contracts which are necessary to carry out the purpose of this act;
(3) Perform those other acts which are necessary or appropriate to effectuate the purpose of this act;
(4) (Deleted by amendment, P.L.2002, c.30.)
(5) With the approval of the commissioner, borrow and separately account for moneys from any source, including but not limited to the New Jersey Property-Liability Insurance Guaranty Association and the Unsatisfied Claim and Judgment Fund, in such amounts and on such terms as the New Jersey Property-Liability Insurance Guaranty Association may determine are necessary or appropriate to effectuate the purposes of P.L.2003, c.89 (C.17:30A-2.1 et al.) in accordance with the association's plan of operation; and
(6) Make loans, in such amounts and on such terms as the association may determine are necessary or appropriate, to the New Jersey Property-Liability Insurance Guaranty Association in accordance with the provisions of the "New Jersey Property-Liability Insurance Guaranty Association Act," P.L.1974, c.17 (C.17:30A-1 et seq.) and the "Unsatisfied Claim and Judgment Fund Law," P.L.1952, c.174 (C.39:6-61 et seq.).
##### **§ 17:22-6.75** Financial support; surcharges; loans {#sec-17-22-6.75 omnilex-key=us-nj-statutes--title-17--17:22-6.75}
a. In order to provide the monies necessary to meet the fund's obligations and expenses under this act:
(1) Each member insurer, including a surplus lines insurer made eligible on or after the effective date of this act, shall make an initial one time payment of $25,000.00, to be made to the fund within 60 days of the effective date of this act; and
(2) A surcharge on the policy premium, as determined by the commissioner, shall be levied and collected on any surplus lines coverage issued or renewed on or after the effective date of this amendatory act. The surcharge shall be collected by the surplus lines agent at the time of delivery of the cover note, certificate of insurance, policy or other initial confirmation of insurance. No premium receipts tax, commissions or assessments shall be levied or collected on the surcharge. The surplus lines agent shall forward to the fund the amount of the surcharge on a quarterly payment basis. Each member insurer and surplus lines agent shall be notified of the policy surcharge not later than 10 days before it is due. The amount of the surcharge may be, from time to time, adjusted, terminated or reinstituted by the commissioner, as he may deem necessary to meet the current and projected obligations and expenses of the fund, except that in no case shall the surcharge in any year exceed 4% of the policy premium.
b. The fund may, from time to time, borrow monies from the New Jersey Property-Liability Insurance Guaranty Association to pay the fund's obligations and expenses under this act, which are in excess of the monies available to the fund therefor. The aggregate amount owed by the fund to the association shall at no time exceed $10,000,000.00, exclusive of interest charges, except that the commissioner may limit the amount of loans outstanding at any one time to less than $10,000,000.00 upon a finding that the additional monies requested by the fund would reduce the monies available to the association below a level necessary to meet the current and prospective obligations of the association pursuant to paragraph (3) of subsection a. of section 8 of P.L.1974 (C.17:30A-8). Monies borrowed under this subsection shall be paid back to the association in accordance with a payment schedule approved by the commissioner. An interest charge shall be levied on all monies borrowed under this subsection at the current market rate of interest, using an index or indexes to be selected by the commissioner.
c. No policy surcharge shall be levied or collected upon a determination by the commissioner that the fund's unencumbered assets exceed the fund's outstanding and anticipated obligations and other liabilities, including expenses chargeable to the fund, by $10,000,000.00 or more.
##### **§ 17:22-6.76** Suspension of eligibility of member insurer or license of surplus lines agent; interest on unpaid assessment or surcharge; reinstatement {#sec-17-22-6.76 omnilex-key=us-nj-statutes--title-17--17:22-6.76}
The commissioner may, after notice, suspend the eligibility of a member insurer or the license of a surplus lines agent that fails to pay an assessment or policy surcharge under section 6 of this act when due, or any interest accruing thereon, or fails to comply with the applicable provisions of the plan of operations. The commissioner may, after notice and hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), withdraw the eligibility of that insurer or suspend or revoke the surplus lines agent's license.
Interest shall be charged on the amount of the unpaid assessment or surcharge subject to the provisions of this section. The interest charge shall be at the current market rate of interest, using an index or indexes to be selected by the commissioner, and shall be payable at the time the unpaid assessment or policy surcharge is paid to the fund.
Eligibility of a surplus lines insurer or the license of an agent shall not be restored or reissued until all monies owing under this section have been paid to the fund.
##### **§ 17:22-6.77** Declaration of insolvency, actions of commissioner. {#sec-17-22-6.77 omnilex-key=us-nj-statutes--title-17--17:22-6.77}
8. a. An insolvent insurer shall forward to the commissioner and to the association a copy of the declaration of insolvency within three business days of the date of the determination of the insolvency. A surplus lines insurer shall forward to the fund and commissioner a copy of any complaint seeking an order of liquidation with a finding of insolvency against the insurer at the same time that such complaint is filed with a court of competent jurisdiction.
b. The commissioner shall:
(1) Order the termination of all in-force policies of an insolvent insurer within 30 days of the date of determination of the insolvency;
(2) Upon request, provide the fund with a statement of the net direct written premiums of each member insurer; and
(3) Require surplus lines agents or the fund to notify the policyholders of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this act. Notification shall be by publication in newspapers of general circulation as the commissioner shall direct.
##### **§ 17:22-6.78** Assignment of rights by person recovering. {#sec-17-22-6.78 omnilex-key=us-nj-statutes--title-17--17:22-6.78}
9. a. Any person recovering under this act shall be deemed to have assigned his rights under the policy from which the claim arose to the fund to the extent of his recovery from the fund. Every policyholder or claimant seeking the protection of this act shall cooperate with the fund to the same extent as that person would have been required to cooperate with the insolvent insurer. The fund shall have no cause of action against the policyholder of the insolvent insurer for any sums it has paid out, except for those causes of action as the insolvent insurer would have had if the sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with an assessment liability, payments of claims by the fund shall not operate to reduce the liability of policyholders to the receiver, liquidator, or statutory successor for unpaid assessments.
b. The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the fund or its representatives. The court having jurisdiction shall grant the covered claims paid by the fund priority, against the assets of the insolvent insurer, over any claims against the assets of the insolvent insurer by claimants having received any payment from the fund for the covered claims, to the extent of the amount of the payments made by the fund. The expenses of the fund in handling claims shall be accorded the same priority as the liquidator's expenses.
c. The fund shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the fund and estimates of anticipated claims on the fund, which shall preserve the rights of the fund against the assets of the insolvent insurer.
d. The liquidator, receiver, or statutory successor of an insolvent insurer covered by this act shall permit access by the fund or its representative to all of the insolvent insurer's records which would assist the fund in carrying out its functions under this act with regard to covered claims. In addition, the liquidator, receiver or statutory successor shall provide the fund or its representative with copies, or permit copies to be made of the insolvent insurer's records upon request, and at the expense of the fund.
e. The fund shall have the right to recover from the following persons the amount of any covered claim paid to or on behalf of such person pursuant to this act:
(1) An insured whose net worth on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer exceeds $25 million and whose liability obligations to other persons are satisfied in whole or in part by payments made under P.L.1984, c.101 (C.17:22-6.71 et seq.); and
(2) Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under P.L.1984, c.101 (C.17:22-6.71 et seq.).
##### **§ 17:22-6.79** Recovery of covered claims, exhaustion of other sources. {#sec-17-22-6.79 omnilex-key=us-nj-statutes--title-17--17:22-6.79}
10. a. Any person having a covered claim that may be recovered from more than one insurance guaranty association, or its equivalent, shall be required to exhaust first his rights under the statute governing the association of the place of residence of the policyholder 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 jurisdiction in which the property is located. If recovery is denied or deferred by that association, a person may proceed to seek recovery from any other insurance guaranty association from which recovery may be legally sought.
b. Any person having a claim under an insurance policy other than a policy of an insolvent insurer, shall be required to exhaust first his right under that other policy. For purposes of this subsection b., a claim under an insurance policy shall include a claim under any kind of insurance, whether it is a first-party or third-party claim, and shall include without limitation, general liability, accident and health insurance, workers' compensation, health benefits plan coverage, primary and excess coverage, if applicable, and all other private, group or governmental coverages.
##### **§ 17:22-6.80** Examination of insurers in financial condition hazardous to policyholders or public; request to domiciliary jurisdiction for examination and report {#sec-17-22-6.80 omnilex-key=us-nj-statutes--title-17--17:22-6.80}
In the event the commissioner has sufficient basis to believe that the financial condition of a member insurer is hazardous to the policyholders or the public, the commissioner shall request the appropriate regulatory authority of the domiciliary jurisdiction of that member insurer to examine and report back to the commissioner on the financial condition of the member insurer.
##### **§ 17:22-6.81** Examination and regulation of fund; financial report {#sec-17-22-6.81 omnilex-key=us-nj-statutes--title-17--17:22-6.81}
The fund shall be subject to examination and regulation by the commissioner. The association, on behalf of the fund, shall submit, not later than March 31 of each year, a financial report for the preceding calendar year in a form approved by the commissioner.
##### **§ 17:22-6.82** Immunity from liability of persons acting under this law {#sec-17-22-6.82 omnilex-key=us-nj-statutes--title-17--17:22-6.82}
There shall be no liability on the part of, and no cause of action of any nature shall arise against any member insurer, the fund, the association or its board of directors, or agents or employees, or the commissioner or his representatives for any action taken by them in the performance of their powers and duties under this act.
##### **§ 17:22-6.83** Coverage under this act; notice on application and policy or certificate; advertisement {#sec-17-22-6.83 omnilex-key=us-nj-statutes--title-17--17:22-6.83}
A member insurer shall include on the application and on the face of the policy or certificate for insurance subject to this act, a notice stating that the insurer is not an admitted company in New Jersey, but that the policy coverage has the protection, in whole or in part, of the New Jersey Surplus Lines Insurance Guaranty Fund, if the eligible surplus lines insurer becomes bankrupt or insolvent. A member insurer or an agent or broker may advertise that policy coverages offered by a member insurer and subject to the provisions of this act are protected by the New Jersey Surplus Lines Insurance Guaranty Fund, should the surplus lines insurer become bankrupt or insolvent. The commissioner shall determine the contents and form of the notice.
##### **§ 17:22-6.84** Proceedings involving insolvent insurer stayed; conditions. {#sec-17-22-6.84 omnilex-key=us-nj-statutes--title-17--17:22-6.84}
7. All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this State shall, subject to full or partial waiver by the fund in specific cases involving covered claims, be stayed for 120 days, and any additional time thereafter as may be determined by the court, from the date of the order of liquidation or any ancillary proceeding initiated in the State, whichever is later, to permit proper defense by the fund of all pending causes of action. Public notice of the stay shall be by publication in three newspapers of general circulation in this State within 10 days of the order of liquidation. With respect to any covered claims arising from a judgment under any decision, verdict or finding based on the default of the insolvent insurer or its failure to defend an insured, the fund either on its own behalf or on behalf of that insured may apply to have such judgment, order, decision, verdict or finding set aside by the court in which such judgment, order, decision, verdict or finding is entered and shall be permitted to defend against such claim on the merits.
## **Chapter 22A** {#struct-chapter-22a}
##### **§ 17:22A-26** Short title {#sec-17-22a-26 omnilex-key=us-nj-statutes--title-17--17:22A-26}
1. This act shall be known and may be cited as the "New Jersey Insurance Producer Licensing Act of 2001."
##### **§ 17:22A-27** Purpose of act {#sec-17-22a-27 omnilex-key=us-nj-statutes--title-17--17:22A-27}
2. This act governs the qualifications and procedures for the licensing of insurance producers. It simplifies and organizes the statutory law to improve efficiency, permits the use of new technology and reduces costs associated with issuing and renewing insurance producer licenses.
##### **§ 17:22A-28** Definitions relative to licensure of insurance producers {#sec-17-22a-28 omnilex-key=us-nj-statutes--title-17--17:22A-28}
3. As used in this act:
"Business entity" means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
"Commissioner" means the Commissioner of Banking and Insurance.
"Department" means the Department of Banking and Insurance.
"Home state" means the District of Columbia and any state or territory of the United States in which an insurance producer maintains his principal place of residence or principal place of business and is licensed to act as an insurance producer.
"Insurance" means any of the lines of insurance in subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes and includes contracts or policies of life insurance, health insurance, annuities, indemnity, property and casualty, fidelity, surety, guaranty and title insurance.
"Insurance consultant" means a person, who for a commission, brokerage fee, or other consideration, acts or holds himself out to the public or any licensee as offering any advice, counsel, opinion or service with respect to the benefits, advantages or disadvantages under any insurance policy or contract that is or could be issued in this State, but shall not include bank trust officers, attorneys-at-law and certified public accountants who negotiate contracts on behalf of others or provide general financial counsel if no commission or brokerage fee is paid for those services.
"Insurance producer" means a person required to be licensed under the laws of this State to sell, solicit or negotiate insurance.
"Insurer" means a business entity authorized to transact the business of insurance in this State pursuant to subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes.
"License" means a document issued by the commissioner authorizing a person to act as an insurance producer for the lines of authority specified in the document. The license itself does not create any authority, actual, apparent or inherent, in the holder to represent or commit an insurer.
"Limited line credit insurance" includes credit life, credit disability, credit property, credit unemployment, involuntary unemployment, mortgage life, mortgage guaranty, mortgage disability, automobile dealer gap insurance, and any other form of insurance offered in connection with an extension of credit that is limited to partially or wholly extinguishing that credit obligation that the commissioner determines should be designated a form of limited line credit insurance.
"Limited line credit insurance producer" means a person who sells, solicits or negotiates one or more forms of limited line credit insurance coverage to individuals though a master corporate, group or individual contract or policy.
"Limited lines insurance" means those lines of insurance established pursuant to section 14 of this act or any other line of insurance that the commissioner determines is necessary to recognize for the purposes of complying with subsection e. of section 9 of this act.
"Limited lines insurance producer" means a person who is authorized by the commissioner to sell, solicit or negotiate limited lines insurance or to engage in the business of an insurance consultant.
"NAIC" means the National Association of Insurance Commissioners, its affiliates or subsidiaries, or any agency or committee thereof.
"Negotiate" means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract or policy of insurance concerning any of the substantive benefits, terms or conditions of the contract or policy, provided that the person engaged in that act either: sells insurance or obtains insurance from insurers for purchasers.
"Person" means an individual or a business entity.
"Sell" means to exchange a contract or policy of insurance by any means, for money or its equivalent, on behalf of an insurer.
"Solicit" means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular insurer.
"Surplus lines insurance producer" means a person who is authorized to sell, solicit or negotiate contracts or policies of insurance coverage on behalf of unauthorized insurers pursuant to "the surplus lines law," P.L.1960, c.32 (C.17:22-6.40 et seq.); and "surplus lines" shall have the same meaning as generally accorded to it by that act.
"Terminate" means the cancellation of the relationship between an insurance producer and the insurer or the termination of a producer's authority to transact insurance.
"Uniform business entity application" means the current version of the NAIC uniform business entity application for resident and nonresident business entities.
"Uniform application" means the current version of the NAIC uniform application for resident and nonresident insurance producer licensing.
##### **§ 17:22A-29** Licensure required {#sec-17-22a-29 omnilex-key=us-nj-statutes--title-17--17:22A-29}
4. A person shall not sell, solicit or negotiate insurance in this State unless the person is licensed for that line of authority in accordance with this act.
##### **§ 17:22A-30** Construction of act; license not required {#sec-17-22a-30 omnilex-key=us-nj-statutes--title-17--17:22A-30}
5. a. Nothing in this act shall be construed to require an insurer to obtain an insurance producer license. In this section, the term "insurer" does not include an insurer's officers, directors, employees, subsidiaries or affiliates.
b. A license as an insurance producer shall not be required of the following:
(1) An officer, director or employee of an insurer or of an insurance producer, provided that the officer, director or employee does not receive any commission on contracts or policies written or sold to insure risks residing, located or to be performed in this State and:
(a) The officer's, director's or employee's activities are executive, administrative, managerial, clerical or a combination of these, and are only indirectly related to the sale, solicitation or negotiation of insurance; or
(b) The officer's, director's or employee's function relates to underwriting, loss control, inspection or the processing, adjusting, investigating or settling of a claim on a contract or policy of insurance; or
(c) The officer, director or employee is acting in the capacity of a special agency or agency supervisor assisting insurance producers and those activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation or negotiation of insurance;
(2) A person who secures and furnishes information for the purpose of group life insurance, group property and casualty insurance, group annuities, group or blanket accident and health insurance; or for the purpose of enrolling individuals under insurance plans, issuing certificates under insurance plans or otherwise assisting in administering insurance plans; or performs administrative services related to mass marketed property and casualty insurance; where no commission is paid to the person for the service;
(3) An employer or association or its officers, directors, employees, or the trustees of an employee trust plan, to the extent that the employers, officers, employees, directors or trustees are engaged in the administration or operation of a program of employee benefits for the employer's or association's own employees or the employees of its subsidiaries or affiliates, which program involves the use of insurance issued by an insurer, as long as the employers, associations, officers, directors, employees or trustees are not in any manner compensated, directly or indirectly, by the insurer issuing the contracts or policies;
(4) Employees of insurers or organizations employed by insurers who are engaging in the inspection, rating or classification of risks, or in the supervision of the training of insurance producers and who are not individually engaged in the sale, solicitation or negotiation of insurance;
(5) A person whose activities in this State are limited to advertising without the intent to solicit insurance in this State through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of this State, provided that the person does not sell, solicit or negotiate insurance that would insure risks residing, located or to be performed in this State;
(6) A person who is not a resident of this State who sells, solicits or negotiates a contract or policy of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under that contract or policy, so long as that person is otherwise licensed as an insurance producer to sell, solicit or negotiate that insurance in the state in which the insured maintains its principal place of business and the contract or policy of insurance insures risks located in that state; or
(7) A salaried full-time employee who counsels or advises his employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer if the employee does not sell or solicit insurance or receive a commission.
##### **§ 17:22A-31** Written examination, fee. {#sec-17-22a-31 omnilex-key=us-nj-statutes--title-17--17:22A-31}
6. a. A resident individual applying for an insurance producer license shall pass a written examination unless exempt pursuant to section 10 of this act. The examination shall test the knowledge of the individual concerning the lines of authority for which application is made, the duties and responsibilities of an insurance producer and the insurance laws and regulations of this State. Examinations required by this section shall be developed and conducted under rules and regulations prescribed by the commissioner.
b. The commissioner may make arrangements, including contracting with an outside testing service, for administering examinations and collecting the nonrefundable fee set forth in section 19 of this act.
c. Each individual applying for an examination shall remit a nonrefundable fee as prescribed by the commissioner as set forth in section 19 of this act.
d. An individual who fails to appear for the examination as scheduled or fails to pass the examination, may reapply for an examination and shall remit all required fees and forms before being rescheduled for another examination.
e. The commissioner shall ensure that the examination and registration materials for the examination shall be offered in English and Spanish.
f. The commissioner shall make available to approved insurance education providers, instructional materials in Spanish, suitable for use as a course curriculum for preparation for the examination.
##### **§ 17:22A-32** Application, approval. {#sec-17-22a-32 omnilex-key=us-nj-statutes--title-17--17:22A-32}
7. a. An individual applying for a resident insurance producer license shall make application to the commissioner on the uniform application and declare under penalty of refusal, suspension or revocation of the license that the statements made in the application are true, correct and complete to the best of the individual's knowledge and belief. Before approving the application, the commissioner shall find that the individual:
(1) Is at least 18 years of age;
(2) Has not committed any act that is a ground for denial, suspension or revocation set forth in section 15 of this act;
(3) Has completed a prelicensing course of study for the lines of authority for which the individual has applied as prescribed by the commissioner by regulation;
(4) Has paid the fees set forth in section 19 of this act; and
(5) Has successfully passed the examinations for the lines of authority for which the individual has applied.
b. A business entity acting as an insurance producer shall obtain an insurance producer license. Application shall be made using the uniform business entity application. Before approving the application, the commissioner shall find that:
(1) The business entity has paid the fees set forth in section 19 of this act; and
(2) The business entity has designated a licensed insurance producer or producers responsible for the business entity's compliance with the insurance laws, rules and regulations of this State.
c. The commissioner may require any documents reasonably necessary to verify the information contained in an application.
d. Each insurer that sells, solicits or negotiates any form of limited line credit insurance shall provide to each individual whose duties will include selling, soliciting or negotiating limited line credit insurance a program of instruction that is approved by the commissioner.
e. Any applicant for a license pursuant to this section and any officer, director, partner or owner of a controlling interest of a corporation or partnership filing for licensure pursuant to this section shall submit to the commissioner the applicant's name, address, fingerprints and written consent for a criminal history record background check to be performed. The commissioner is hereby authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the commissioner in the event a current holder of a license or prospective applicant, who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed.
##### **§ 17:22A-33** Issuance of resident insurance producer license {#sec-17-22a-33 omnilex-key=us-nj-statutes--title-17--17:22A-33}
8. a. Unless denied licensure pursuant to section 15 of this act, persons who have met the requirements of sections 6 and 7 of this act shall be issued a resident insurance producer license. An insurance producer may receive qualification for a license in one or more of the following lines of authority:
(1) Life-insurance coverage on human lives, including benefits of endowment and annuities, and which may include benefits in the event of death or dismemberment by accident and benefits for disability income;
(2) Accident and health or sickness-insurance coverage for sickness, bodily injury or accidental death, and which may include benefits for disability income;
(3) Property-insurance coverage for the direct or consequential loss or damage to property of every kind;
(4) Casualty-insurance coverage against legal liability, including that for death, injury or disability or damage to real or personal property;
(5) Variable life and variable annuity products-insurance coverage provided under variable life insurance contracts, variable annuities or any other life insurance or annuity product that reflects the investment experience of a separate account;
(6) Credit-limited line credit insurance;
(7) Personal lines - property and casualty insurance coverage sold to individuals and families for primarily noncommercial purposes:
(8) Any other line of insurance permitted under any law or regulation of this State.
b. An insurance producer license shall remain in effect unless revoked or suspended as long as the fee set forth in section 19 of this act is timely paid and in the case of resident individual insurance producers, education requirements are timely satisfied.
c. An individual insurance producer who allows his license to lapse may, within 12 months from the due date of the renewal fee, reinstate the same license without the necessity of passing a written examination. However, a penalty in an amount not to exceed double the unpaid renewal fee shall be required for any renewal fee received after the due date.
d. A licensed insurance producer who is unable to comply with license renewal procedures due to military service or some other extenuating circumstance, such as long-term medical disability, may request a waiver of those procedures. The producer may also request a waiver of any examination requirement or any other fine or sanction imposed for failure to comply with renewal procedures.
e. The license shall contain the licensee's name, address, personal identification number, and the date of issuance, the lines of authority, the expiration date and any other information the commissioner deems necessary.
f. Licensees shall inform the commissioner by any means acceptable to the commissioner of a change of address within 30 days of the change.
##### **§ 17:22A-34** Nonresident insurance producer license {#sec-17-22a-34 omnilex-key=us-nj-statutes--title-17--17:22A-34}
9. a. Unless denied licensure pursuant to section 15 of this act, a nonresident person shall receive a nonresident insurance producer license if:
(1) The person is currently licensed as a resident insurance producer in good standing in his home state;
(2) The person has submitted the proper request for licensure and has paid the fees required by section 19 of this act;
(3) The person has submitted or transmitted to the commissioner the application for licensure that the person submitted to his home state, or in lieu of the same, a completed uniform application; and
(4) The person's home state awards nonresident insurance producer licenses to residents of this State on the same basis.
b. The commissioner may verify the nonresident insurance producer's licensing status through the Producer Database maintained by the NAIC.
c. A nonresident insurance producer who moves from one state to another state or a resident insurance producer who moves from this State to another state shall file a change of address and provide certification from the new resident state within 30 days of the change of legal residence. No fee or license application shall be required.
d. Subject to section 13 of this act, a person licensed as a surplus lines insurance producer in his home state shall receive a nonresident surplus lines insurance producer license pursuant to subsection a. of this section.
e. Subject to section 14 of this act, a person licensed as a limited line credit insurance or other type of limited lines insurance producer in his home state shall receive a nonresident limited lines insurance producer license, pursuant to subsection a. of this section, granting the same scope of authority as granted under the license issued by the producer's home state.
f. Each licensed nonresident insurance producer shall, by application for and issuance of, a license be deemed to have appointed the commissioner as agent to receive service of original legal process in this State in any cause of action or legal proceedings arising within this State out of transactions under the license. Service upon the commissioner shall be of the same force and effect as if served on the nonresident insurance producer. This appointment shall be irrevocable for as long as there can be any cause of action against the nonresident insurance producer arising out of insurance transactions for which a nonresident insurance producer license is required. Duplicate copies of the legal process shall be served upon the commissioner. At the time of service the commissioner shall be paid a fee established pursuant to section 19 of this act payable as costs in the action. Upon receiving service, the commissioner shall send one of the copies by registered or certified mail, return receipt requested, to the named nonresident insurance producer at his last known business or residence address.
g. The commissioner shall be immune from all civil actions resulting from the licensee's failure to receive service of process if the commissioner, pursuant to subsection f. of this section, forwards the service to the last business or residence address filed by the licensee as his address. Immunity under this subsection is in no way intended to diminish or otherwise affect the immunity available to the commissioner pursuant to the "New Jersey Tort Claims Act," N.J.S.59:1-1 et seq.
##### **§ 17:22A-35** Exemptions from prelicensing education, examination {#sec-17-22a-35 omnilex-key=us-nj-statutes--title-17--17:22A-35}
10. a. An individual who applies for an insurance producer license in this State who was previously licensed for the same lines of authority in another state shall not be required to complete any prelicensing education or examination. This exemption is only available if the person is currently licensed in that state or if the application is received within 90 days of the cancellation of the applicant's previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the state's Producer Database records, maintained by the NAIC, indicate that the producer is or was licensed in good standing for the lines of authority requested.
b. A person licensed as an insurance producer in another state who moves to this State shall make application within 90 days of establishing legal residence to become a resident licensee pursuant to section 7 of this act. No prelicensing education or examination shall be required of that person to obtain any lines of authority previously held in the prior state except in cases in which the commissioner determines otherwise by regulation.
##### **§ 17:22A-36** Notification of assumed name {#sec-17-22a-36 omnilex-key=us-nj-statutes--title-17--17:22A-36}
11. An insurance producer doing business under any name other than the producer's legal name shall notify the commissioner prior to using the assumed name.
##### **§ 17:22A-37** Temporary license {#sec-17-22a-37 omnilex-key=us-nj-statutes--title-17--17:22A-37}
12. a. The commissioner may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the commissioner determines that the temporary license is necessary for the servicing of an insurance business in the following cases:
(1) To the surviving spouse or court-appointed personal representative of a licensed insurance producer, upon the death or disability of that producer, to allow adequate time for the sale of the insurance business owned by the producer or for the recovery or return of the producer to the business or to provide for the training and licensing of new personnel to operate the producer's business;
(2) To a member or employee of a business entity licensed as an insurance producer, upon the death or disability of an individual designated in the business entity application or the license as responsible for the business entity's compliance with the insurance laws, rules and regulations of this State;
(3) To the designee of a licensed insurance producer entering active service in the armed forces of the United States of America; or
(4) In any other circumstance in which the commissioner determines that the public interest will best be served by the issuance of a temporary insurance producer license.
b. The commissioner may, by order, limit the authority of any temporary licensee in any way necessary to protect insureds and the public. The commissioner may require the temporary licensee to have a suitable sponsor who is a licensed insurance producer or insurer and who assumes responsibility for all acts of the temporary licensee and may impose other similar requirements designed to protect insureds and the public. The commissioner may by order revoke a temporary license if the interest of insureds or the public are endangered. A temporary license shall not continue after the owner or the personal representative disposes of the insurance producer's business.
##### **§ 17:22A-38** Requirements for license granting surplus lines authority. {#sec-17-22a-38 omnilex-key=us-nj-statutes--title-17--17:22A-38}
13. a. No license granting surplus lines authority shall be issued or renewed unless the applicant holds or will hold property and casualty authorities.
b. No surplus lines producer shall charge any fee to an originating broker in connection with the negotiation or procurement of any contract of surplus lines insurance that shall exceed an amount set forth by the commissioner pursuant to regulation, plus the actual costs incurred for any services performed by a person that is not associated with the surplus lines producer, such as inspection services.
##### **§ 17:22A-39** Insurance marketed through limited lines insurance producers {#sec-17-22a-39 omnilex-key=us-nj-statutes--title-17--17:22A-39}
14. The commissioner shall establish, by rule or regulation, the line or lines of insurance that may be marketed through a limited lines insurance producer.
##### **§ 17:22A-40** Causes for probation, suspension, revocation, refusal to issue or renew. {#sec-17-22a-40 omnilex-key=us-nj-statutes--title-17--17:22A-40}
15. a. The commissioner may place on probation, suspend, revoke or refuse to issue or renew an insurance producer's license or may levy a civil penalty in accordance with subsection c. of section 20 of this act or any combination of actions, for any one or more of the following causes:
(1) Providing incorrect, misleading, incomplete or materially untrue information in the license application;
(2) Violating any insurance laws, or violating any regulation, subpoena or order of the commissioner or of another state's insurance regulator;
(3) Obtaining or attempting to obtain a license through misrepresentation or fraud;
(4) Improperly withholding, misappropriating or converting any monies or properties received in the course of doing insurance business;
(5) Intentionally misrepresenting the terms of an actual or proposed insurance contract, policy or application for insurance;
(6) Having been convicted of a felony or crime of the fourth degree or higher;
(7) Having admitted or been found to have committed any insurance unfair trade practice or fraud;
(8) Using fraudulent, coercive or dishonest practices, or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of insurance business in this State or elsewhere;
(9) Having an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory;
(10) Forging another's name to an application for insurance or to any document related to an insurance transaction;
(11) Improperly using notes or any other reference material to complete an examination for an insurance producer license;
(12) Knowingly accepting insurance business from an unlicensed insurance producer;
(13) Failing to comply with an administrative or court order imposing a child support obligation;
(14) Failing to pay income tax or comply with any administrative or court order directing payment of income tax pursuant to Title 54A of the New Jersey Statutes;
(15) Intentionally withholding material information or making a material misstatement in an application for a license;
(16) Committing any fraudulent act;
(17) Knowingly facilitating or assisting another person in violating any insurance laws;
(18) Failing to notify the commissioner within 30 days of his conviction of any crime, indictment or the filing of any formal criminal charges, or the suspension or revocation of any insurance license or authority by a state, other than this State, or the initiation of formal disciplinary proceedings in a state, other than this State, affecting the producer's insurance license; or failing to obtain the written consent pursuant to sections 1033 and 1034 of Title 18, United States Code (18 U.S.C. ss.1033 and 1034); or failing to supply any documentation that the commissioner may request in connection therewith; or
(19) Failing to notify the commissioner within 30 days of the final disposition of any formal disciplinary proceedings initiated against the insurance producer, or disciplinary action taken against the producer, by the Financial Industry Regulatory Authority (FINRA), any successor organization, or other similar non-governmental regulatory authority with statutory authority to create and enforce industry standards of conduct, or of any other administrative actions or criminal prosecutions, as required by sections 15 and 22 of P.L.2001, c.210 (C.17:22A-40 and 17:22A-47), or failing to supply any documentation the commissioner may request in connection therewith.
b. If the action by the commissioner is to nonrenew or to deny an application for an insurance producer license, the commissioner shall notify the applicant or licensee and advise, in writing, the applicant or licensee of the reason for the denial or nonrenewal of the license. The applicant or licensee may make written demand upon the commissioner for a hearing before the commissioner, or his designee, to determine the reasonableness of the commissioner's action. The hearing shall be held pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
c. The insurance producer license of a business entity may be suspended, revoked or refused if the commissioner finds, after hearing, that an individual licensee's violation was known or should have been known by one or more of the partners, officers or managers acting on behalf of the business entity and the violation was neither reported to the commissioner nor corrective action taken.
d. The commissioner shall retain the authority to enforce the provisions of and impose any penalty or remedy authorized by this act and Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes against any person who is under investigation for or charged with a violation of this act or Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes even if the person's license or registration has been surrendered or has lapsed by operation of law.
##### **§ 17:22A-41** Licensure required for receipt of commission {#sec-17-22a-41 omnilex-key=us-nj-statutes--title-17--17:22A-41}
16. a. An insurer or insurance producer shall not pay a commission, service fee, brokerage or other valuable consideration to a person for selling, soliciting or negotiating insurance in this State if that person is required to be licensed under this act and is not so licensed.
b. A person shall not accept a commission, service fee, brokerage or other valuable consideration for selling, soliciting or negotiating insurance in this State if that person is required to be licensed under this act and is not so licensed.
c. Renewal or other deferred commissions may be paid to a person for selling, soliciting or negotiating insurance in this State if the person was required to be licensed under this act at the time of the sale, solicitation or negotiation and was so licensed at that time.
d. An insurer or insurance producer may pay or assign commissions, service fees, brokerages or other valuable consideration to an insurance agency or to persons who do not sell, solicit or negotiate insurance in this State, unless the payment would violate section 15 of P.L.1944, c.27 (C.17:29A-15), section 14 of P.L.1982, c.114 (C.17:29AA-14), section 4 of P.L.1947, c.379 (C.17:29B-4), section 5 of P.L.1968, c.248 (C.17:46A-5), section 34 or 35 of P.L.1975, c.106 (C.17:46B-34 or 17:46B-35) or N.J.S.17B:30-13 or any other provision of law.
##### **§ 17:22A-41.1** Notification by insurance producer to purchaser of compensation received by producer. {#sec-17-22a-41.1 omnilex-key=us-nj-statutes--title-17--17:22A-41.1}
25. a. An insurance producer licensed pursuant to P.L.2001, c.210 (C.17:22A-26 et al.) who sells, solicits, or negotiates health insurance policies or contracts to residents of this State shall notify the purchaser of the insurance, in writing, of the amount of any commission, service fee, brokerage, or other valuable consideration that the producer will receive as a result of the sale, solicitation or negotiation of the health insurance policy or contract. If the commission, fee, brokerage, or other valuable consideration is based on a percentage of premium, the insurance producer shall include that information in the notification to the purchaser.
b. The commissioner may specify, by regulation, the information that shall be provided by an insurance producer in the notification to a purchaser of health insurance and the procedure for providing the notification.
##### **§ 17:22A-42** Appointment of agents {#sec-17-22a-42 omnilex-key=us-nj-statutes--title-17--17:22A-42}
17. a. Any insurer authorized to transact business in this State may, by written contract, appoint as its agent, a person that holds a valid insurance producer license issued in accordance with the provisions of this act. The contract shall authorize the insurance producer to act as an agent for the appointing insurer for all lines of insurance for which the insurer is authorized in this State and the agent holds authority in this State, unless specifically limited. The contract shall contain the duties, responsibilities and limitations of authority between the agent and the appointing insurer, and the agent shall abide by its terms. While the agent is properly licensed, an agency appointment shall continue in effect until termination in accordance with this act. Both the appointing insurer and the appointed agent shall maintain a copy of the agency contract in their office, and shall make the contract available for inspection by the commissioner upon request. Nothing contained in this subsection shall be construed as granting the commissioner the authority to determine contractual disputes between an appointing insurer and an appointed agent.
b. Upon the cancellation of an agency contract in accordance with section 1 of P.L.1970, c.217 (C.17:22-6.14a), the insurer shall within 15 days file written notice of cancellation with the commissioner. Notice of cancellation shall be on a form prescribed by the commissioner and shall indicate the date of cancellation and the reason therefor. Agency appointment shall not terminate until the notice of cancellation has been filed with the commissioner. The requirements of this subsection shall not affect any notice or filing requirements otherwise established by law.
c. Any insurer appointing an agent pursuant to this section shall file with the commissioner, on a form prescribed by the commissioner, a notice of appointment providing the names and business addresses of its agents, including notice of any limitations on the agent's authority. The filing of a single notice of appointment by each insurer represented by a licensed business entity shall cover all of its licensed producers.
d. The filing of a notice of appointment pursuant to subsection c. of this section shall constitute notice that the named insurance producer has been appointed an agent for any subsidiary or affiliate company of the insurer if certified copies of any resolution duly adopted by the board of directors of each insurer requesting that authority are filed with the commissioner. The resolution shall also designate the primary insurer for which all of the insurer's agents shall be appointed.
##### **§ 17:22A-43** Immunity from civil liability {#sec-17-22a-43 omnilex-key=us-nj-statutes--title-17--17:22A-43}
18. a. (1) In the absence of actual malice, an insurer, the authorized representative of the insurer, an insurance producer, the commissioner, or an organization of which the commissioner is a member and that compiles the information and makes it available to other insurance commissioners or regulatory or law enforcement agencies, shall not be subject to civil liability, and a civil cause of action of any nature shall not arise against these entities or their respective agents or employees, as a result of any statement or information required by or provided pursuant to section 17 of this act or this section or any information relating to any statement that may be requested in writing by the commissioner, from an insurer or insurance producer; or a statement by a terminating insurer or insurance producer to an insurer or insurance producer limited solely and exclusively to whether a termination for cause under subsection b. of section 17 of this act was reported to the commissioner, provided that the propriety of any termination for cause is certified in writing by an officer or authorized representative of the insurer or insurance producer terminating the relationship.
(2) In any action brought against a person that has immunity under paragraph (1) of this subsection for making any statement required by this section or providing any information relating to any statement that may be requested by the commissioner, the party bringing the action shall plead specifically in any allegation that paragraph (1) does not apply because the person making the statement or providing the information did so with actual malice.
(3) Paragraph (1) or (2) of this subsection shall not abrogate or modify any existing statutory or common law privileges or immunities.
b. (1) Any documents, materials or other information in the control or possession of the department furnished by an insurer, insurance producer or an employee or agent thereof acting on behalf of the insurer or insurance producer, or obtained by the commissioner in an investigation pursuant to this section, shall be confidential by law and privileged, shall not be subject to any State or federal freedom of information law, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's duties.
(2) Neither the commissioner, nor any person who received documents, materials or other information while acting under the authority of the commissioner, shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to paragraph (1) of this subsection.
(3) In order to assist in the performance of the commissioner's duties under this act, the commissioner:
(a) May share documents, materials or other information, including the confidential and privileged documents, materials or information subject to paragraph (1) of this subsection, with other state, federal, and international regulatory agencies, with the NAIC, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material or other information pursuant to this section;
(b) May receive documents, materials or information, including otherwise confidential and privileged documents, materials or information, from the NAIC and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information; and
(c) May enter into agreements governing sharing and use of information consistent with this subsection.
(4) No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in paragraph (3) of this subsection.
(5) Nothing in this act shall prohibit the commissioner from releasing final, adjudicated actions including terminations for cause that are open to public inspection pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.) to a database or other clearinghouse service maintained by the NAIC.
c. An insurer, the authorized representative of the insurer, or an insurance producer that fails to report as required under the provisions of this section or that is found by a court of competent jurisdiction to have reported with actual malice may, after notice and hearing, have its license or certificate of authority suspended or revoked and may be fined in accordance with section 20 of this act.
##### **§ 17:22A-44** Fees. {#sec-17-22a-44 omnilex-key=us-nj-statutes--title-17--17:22A-44}
19. a. The commissioner shall, by regulation, set reasonable, necessary and appropriate fees to be charged for licensing insurance producers, filing agency appointments, filing limited insurance producer registrations, filing fictitious, trade or firm names, issuing certification of license status and processing any document required to be submitted pursuant to this act, except that the total annual revenue generated from these fees shall not be less than the total annual revenue generated from equivalent fees for the preceding fiscal year.
b. Applicants may be charged a fee for any licensing examination conducted pursuant to this act in an amount designated or approved by the commissioner.
c. All fees payable to the commissioner pursuant to this section are nonrefundable.
d. The commissioner may, by rule or regulation, provide for the waiving of fees for disabled war veterans of the United States military service.
e. The commissioner shall waive the initial licensing fee imposed by subsection a. of this section for any applicant who is a resident of New Jersey and who is a veteran who has been discharged honorably or under honorable conditions from a branch of the active or reserve component of the Armed Forces of the United States or the National Guard of any state, provided that the applicant has passed the licensing examination and fulfilled any other requirements for licensure. Following the waiver of the initial licensing fee, the licensee shall comply with any fees imposed by subsection a. of this section, except that nothing in this subsection shall prevent the commissioner from waiving any fees pursuant to subsection d. of this section.
##### **§ 17:22A-45** Powers of commissioner {#sec-17-22a-45 omnilex-key=us-nj-statutes--title-17--17:22A-45}
20. a. The commissioner shall have the power to conduct investigations, to administer oaths, to interrogate licensees and others, and to issue subpoenas to any licensee or any other person in connection with any investigation, hearing or other proceeding pursuant to this act, without fee.
b. Subpoenas shall be issued in the name of the commissioner, the deputy commissioner or other employee designated by the commissioner, but no subpoena shall be issued except for good cause. Any person failing or refusing to comply with a subpoena may be ordered by a judge of the Superior Court, on application made by the commissioner or by the person at whose instance the subpoena was issued, to comply with the terms of the subpoena or be punished by the court for contempt. The court may proceed in a summary manner.
c. Any person violating any provision of this act shall be liable to a penalty not exceeding $5,000 for the first offense and not exceeding $10,000 for each subsequent offense to be recovered in a summary proceeding in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). In addition, the commissioner or the court, as the case may be, may order restitution of moneys owed any person and reimbursement of the costs of investigation and prosecution, as appropriate.
d. In any formal proceeding, if the commissioner finds that the interests of the public require that immediate action be taken prior to completion of the hearing, the making of a determination and the entry of a final order, he may enter an appropriate order to be effective pending completion of the hearing and entry of a final order. These orders may be entered on ex parte proofs if the proofs indicate that the commissioner's withholding of any action until completion of a full hearing will be harmful to the public interest. Orders issued pursuant to this section shall be subject to an application to vacate upon 10 days' notice, and a preliminary hearing on the ex parte order shall be held in any event within 20 days after it is entered. In the alternative, or in addition, the commissioner is authorized to institute a proceeding in the Superior Court, to be conducted in a summary manner, for an injunction against specified acts or conduct in aid of the proceedings pending before him, including temporary injunctions and interim restraints.
##### **§ 17:22A-46** Fees, requirements for nonresident insurance producers, reciprocity {#sec-17-22a-46 omnilex-key=us-nj-statutes--title-17--17:22A-46}
21. a. The commissioner shall not assess a greater fee for an insurance producer license or related service to a person not residing in this State based solely on the fact that the person does not reside in this State.
b. The commissioner shall waive any license application requirements for a nonresident insurance producer license applicant with a valid license from his home state, except the requirements imposed by section 9 of this act, if the applicant's home state awards nonresident insurance producer licenses to licensees of this State on the same basis.
c. A nonresident insurance producer's satisfaction of his home state's continuing education requirements for licensed insurance producers shall constitute satisfaction of this State's continuing education requirements if the nonresident producer's home state recognizes the satisfaction of its continuing education requirements imposed upon insurance producers from this State on the same basis.
##### **§ 17:22A-47** Reports to commissioner. {#sec-17-22a-47 omnilex-key=us-nj-statutes--title-17--17:22A-47}
22. a. An insurance producer shall report to the commissioner any administrative action taken against the insurance producer in another jurisdiction or by another governmental agency in this State within 30 days of the final disposition of the matter. This report shall include a copy of the order, consent order or other relevant legal documents.
b. Within 30 days of the initial pretrial hearing date, an insurance producer shall report to the commissioner any criminal prosecution of the producer taken in any jurisdiction. The report shall include a copy of the initial complaint filed, the order resulting from the hearing and any other relevant legal documents.
c. An insurance producer shall report to the commissioner any disciplinary action taken against the insurance producer, or any formal disciplinary proceedings initiated against the producer, by the Financial Industry Regulatory Authority (FINRA), any successor organization, or other similar non-governmental regulatory authority with statutory authority to create and enforce industry standards of conduct, within 30 days of the final disposition of the matter. The report shall include a copy of the order, consent order or other relevant legal documents.
##### **§ 17:22A-47.1** Temporary suspension for failure to report to commissioner; additional penalties. {#sec-17-22a-47.1 omnilex-key=us-nj-statutes--title-17--17:22A-47.1}
3. a. Upon receipt of information that a producer has failed to report to the commissioner any administrative action, criminal prosecution or any disciplinary action taken against the producer, as required by sections 15 and 22 of P.L.2001, c.210 (C.17:22A-40 and 17:22A-47), the commissioner may notify the producer that its authority to sell, solicit or negotiate insurance, or be affiliated in any manner with the sale, solicitation or negotiation of insurance in this State shall be temporarily suspended.
b. In addition to any temporary suspension imposed pursuant to subsection a. of this section, and in addition to any other penalties that may be imposed under subsection c. of section 20 of P.L.2001, c.210 (C.17:22A-45) the commissioner, after notice and an opportunity for a hearing, may impose a penalty against an insurance producer in the amount of up to $10,000 for a first violation, up to $25,000 for a second violation and up to $100,000 for a third or subsequent violation for failure to provide full, accurate and truthful information to the commissioner in accordance with sections 15 and 22 of P.L.2001, c.210 (C.17:22A-40 and 17:22A-47). A civil penalty imposed pursuant to this section shall be collected by the Commissioner of Banking and Insurance in a summary proceeding in the Superior Court in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
c. The commissioner shall continue the temporary suspension imposed pursuant to subsection a. of this section until the commissioner is satisfied that the producer has provided information in accordance with sections 15 and 22 of P.L.2001, c.210 (C.17:22A-40 and 17:22A-47) and in the case of any administrative or disciplinary action, has satisfied all the conditions, judgments or orders related to that action which are required to reinstate the producer's good standing with the agency or authority imposing that action, and has paid all fines imposed pursuant to this section.
##### **§ 17:22A-48** Rules, regulations {#sec-17-22a-48 omnilex-key=us-nj-statutes--title-17--17:22A-48}
26. a. The commissioner may, in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) promulgate rules and regulations necessary to effectuate the purposes of this act.
b. The commissioner may provide for the orderly transition of producer license types and authorities by promulgating rules and regulations that are reasonable, necessary, appropriate and consistent with this act.
##### **§ 17:22A-49** Definitions relative to portable electronics insurance. {#sec-17-22a-49 omnilex-key=us-nj-statutes--title-17--17:22A-49}
As used in this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Consumer" means a person who purchases portable electronics or related services.
"Department" means the Department of Banking and Insurance.
"Enrolled consumer" means a consumer who elects coverage under a portable electronics insurance policy issued to a vendor of portable electronics.
"Location" means any physical location in the State of New Jersey or any website, call center site, or similar location directed to residents of the State of New Jersey.
"Portable electronics" means electronic devices that are portable in nature, and accessories and services related to the use of the devices.
"Portable electronics insurance" means insurance providing coverage for the repair or replacement of portable electronics which may provide coverage for portable electronics against any one or more of the following causes of loss: loss; theft; inoperability due to mechanical failure; malfunction; damage; or other similar causes of loss.
"Portable electronics insurance" shall not include:
(1) A service contract or extended warranty providing coverage limited to the repair, replacement or maintenance of property for the operational or structural failure of property due to a defect in materials, workmanship, accidental damage from handling, power surges or normal wear and tear;
(2) A policy of insurance covering a seller's or a manufacturer's obligations under a warranty; or
(3) A homeowner's, renter's, private passenger automobile, commercial multi-peril, or similar policy of insurance.
"Portable electronics transaction" means:
(1) the sale or lease of portable electronics by a vendor to a consumer; or
(2) the sale of a service related to the use of portable electronics by a vendor to a consumer.
"Supervising entity" means a business entity that is a licensed insurer or insurance producer that is appointed by an insurer to supervise the administration of a portable electronics insurance program.
"Vendor" means a person engaged, directly or indirectly, in the business of portable electronics transactions.
##### **§ 17:22A-50** License required to sell coverage. {#sec-17-22a-50 omnilex-key=us-nj-statutes--title-17--17:22A-50}
2. a. A vendor shall not sell, or offer to sell, coverage under a policy of portable electronics insurance unless licensed as a limited lines insurance producer pursuant to the provisions of the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.) and this act. To hold a limited lines insurance producer license pursuant to this section, a vendor shall meet all the requirements to be a business entity producer pursuant to P.L.2001, c.210 (C.17:22A-26 et seq.), unless a provision of this act conflicts with a provision of P.L.2001, c.210 (C.17:22A-26 et seq.) in which case the provision of this act shall control.
b. Notwithstanding any other provision of law, a limited lines insurance producer license issued to a vendor shall authorize the licensee and its employees or authorized representatives to engage in those activities permitted pursuant to that license and the provisions of this act.
c. An employee or authorized representative of a vendor of portable electronics shall not advertise, represent or otherwise hold himself out as an insurance producer for any purposes other than as a licensed limited lines insurance producer.
##### **§ 17:22A-51** Vendor may offer insurance to consumers. {#sec-17-22a-51 omnilex-key=us-nj-statutes--title-17--17:22A-51}
3. The employees and authorized representatives of a vendor holding a limited lines insurance producer license may sell or offer to sell portable electronics insurance to consumers as permitted by section 2 of this act and shall not be subject to individual licensure as an insurance producer under P.L.2001, c.210 (C.17:22A-26 et seq.) or this act as a result of those activities so long as:
a. The vendor obtains a limited lines license to authorize its employees or authorized representatives to sell or offer portable electronics insurance pursuant to this act; and
b. The insurer issuing the portable electronics insurance either directly supervises or appoints a supervising entity to supervise the administration of the program, including development of a training program for employees and authorized representatives of the vendors. The training required by this subsection:
(1) shall be delivered to employees and authorized representatives of a vendor who are directly engaged in the activity of selling or offering portable electronics insurance;
(2) may be provided in electronic form; however, if conducted in electronic form the supervising entity shall implement a supplemental education program regarding the portable electronics insurance that is conducted and overseen by licensed employees of the supervising entity; and
(3) shall include basic instruction about the portable electronics insurance offered to consumers and the disclosures required under section 6 of this act.
##### **§ 17:22A-52** Application for limited lines insurance producer; renewal, fee. {#sec-17-22a-52 omnilex-key=us-nj-statutes--title-17--17:22A-52}
4. Notwithstanding the provisions of the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.):
a. A sworn application for a limited lines insurance producer license under this act shall be made to and filed with the department on forms prescribed and furnished by the commissioner.
b. The application shall provide:
(1) the name, residence address, and other information required by the commissioner for an employee or officer of the vendor that is designated by the applicant as the person responsible for the vendor's compliance with the requirements of this act. However, if the vendor derives more than 50% of its revenue from the sale of portable electronics insurance, the information required shall be provided for all officers, directors, and shareholders of record having beneficial ownership of 10% or more of any class of securities registered under the federal securities law; and
(2) the location of the applicant's home office.
c. Any vendor engaging in portable electronics insurance transactions on or before the effective date of this act shall apply for a limited lines insurance producer license within 90 days of the application being made available by the commissioner. Any vendor wishing to commence operations after the effective date of this act shall obtain a limited lines insurance producer license prior to offering portable electronics insurance.
d. Limited lines insurance producer licenses issued pursuant to this act shall renew biennially in accordance with regulations promulgated by the commissioner.
e. Each vendor of portable electronics licensed under this act shall pay to the commissioner a fee as prescribed by the commissioner but in no event shall the fee exceed $1,000 for an initial portable electronics insurance limited lines producer license and $500 for each renewal thereof. However, for a vendor that is engaged in portable electronics transactions at 10 or fewer locations in the State, the fee shall not exceed $100 for an initial license and for each renewal thereof.
##### **§ 17:22A-53** Insurance offered on periodic basis; eligibility, underwriting standards. {#sec-17-22a-53 omnilex-key=us-nj-statutes--title-17--17:22A-53}
5. a. Portable electronics insurance may be offered on a month to month or other periodic basis as a group or master commercial inland marine policy issued to a vendor of portable electronics for its enrolled consumers.
b. Eligibility and underwriting standards for consumers electing to enroll in coverage shall be established for each portable electronics insurance program.
##### **§ 17:22A-54** Availability of information to consumers. {#sec-17-22a-54 omnilex-key=us-nj-statutes--title-17--17:22A-54}
6. At every location at which portable electronics insurance is offered to consumers, the limited lines insurance producer licensed to sell that insurance shall make available to prospective consumers brochures or other written materials which:
a. disclose that portable electronics insurance may provide a duplication of coverage already provided by a consumer's homeowner's insurance policy, renter's insurance policy or other source of coverage;
b. state that enrollment by the consumer in a portable electronics insurance program is not required in order to purchase or lease portable electronics or services;
c. summarize the material terms of the insurance coverage, including:
(1) the identity of the insurer;
(2) the identity of the supervising entity;
(3) the amount of any applicable deductible and how it is to be paid;
(4) benefits of the coverage; and
(5) key terms and conditions of coverage, such as whether portable electronics may be repaired or replaced with similar make and model reconditioned or non-original manufacturer parts or equipment;
d. summarize the process for filing a claim, including a description of how to return portable electronics and the maximum fee applicable in the event that the enrolled consumer fails to comply with any equipment return requirements; and
e. state that an enrolled consumer may cancel enrollment for coverage under a portable electronics insurance policy at any time and the person paying the premium shall receive a refund or credit of any applicable unearned premium.
##### **§ 17:22A-55** Billing, collection of charges. {#sec-17-22a-55 omnilex-key=us-nj-statutes--title-17--17:22A-55}
7. a. The charges for portable electronics insurance coverage may be billed and collected by the vendor of portable electronics. Any charge to the enrolled consumer for coverage that is not included in the cost associated with the purchase or lease of portable electronics or related services shall be separately itemized on the enrolled consumer's bill. If the portable electronics insurance coverage is included with the purchase or lease of portable electronics or related services, the vendor shall clearly and conspicuously disclose to the enrolled consumer that the portable electronics insurance coverage is included with the purchase or lease of portable electronics or related services.
b. A vendor that bills and collects charges for portable electronics insurance coverage shall not be required to maintain funds received in a segregated account, provided that the vendor is authorized by the insurer to hold those funds in an alternative manner and remits those amounts to the supervising entity within 60 days of receipt.
c. All funds received by a vendor from an enrolled consumer for the sale of portable electronics insurance shall be considered funds held in trust by the vendor in a fiduciary capacity for the benefit of the insurer. A vendor may receive compensation for billing and collection services.
##### **§ 17:22A-56** Rights, responsibilities of insurers. {#sec-17-22a-56 omnilex-key=us-nj-statutes--title-17--17:22A-56}
8. Notwithstanding any other provision of law:
a. An insurer may terminate or otherwise change the terms and conditions of a policy of portable electronics insurance only upon providing the policyholder and enrolled consumers with at least 30 days' notice.
b. If the insurer changes the terms and conditions, then the insurer shall provide the vendor policyholder with a revised policy or endorsement and each enrolled consumer with a revised certificate, endorsement, updated brochure, or other evidence indicating a change in the terms and conditions has occurred and a summary of material changes.
c. Notwithstanding subsection a. of this section, an insurer may terminate an enrolled consumer's enrollment under a portable electronics insurance policy upon 15 days' notice if the insurer discovers fraud or material misrepresentation in obtaining coverage or in the presentation of a claim thereunder.
d. Notwithstanding subsection a. of this section, an insurer may immediately terminate an enrolled consumer's enrollment under a portable electronics insurance policy:
(1) For nonpayment of premium;
(2) If the enrolled consumer ceases to have an active service with the vendor for one or more portable electronics covered under the policy, if applicable; or
(3) If an enrolled consumer exhausts the aggregate limit of liability, if any, under the terms of the portable electronics insurance policy and the insurer sends notice of termination to the enrolled consumer within 30 calendar days after exhaustion of the limit. However, if notice is not timely sent, enrollment shall continue notwithstanding the aggregate limit of liability, until the insurer sends notice of termination to the enrolled consumer.
e. If a policyholder terminates a portable electronics insurance policy, the policyholder shall provide electronic mail notification or shall mail or deliver written notice to each enrolled consumer advising the enrolled consumer of the termination of the policy and the effective date of termination. The written notice shall be sent by electronic mail, mailed, or delivered to the enrolled consumer at least 30 days prior to the termination.
f. Whenever notice or correspondence with respect to a policy of portable electronics insurance is required pursuant to this section or is otherwise required by law, it shall be in writing and sent within the notice period, if any, specified within the statute or regulation requiring the notice or correspondence. The notice or correspondence shall be sent to the vendor at the vendor's mailing address or electronic mail address specified for that purpose and to its affected enrolled consumers' last known mailing addresses or electronic mail addresses on file with the insurer. The insurer or vendor, as the case may be, shall maintain proof of mailing in a form authorized or accepted by the United States Postal Service or other commercial mail delivery service or, if sent to an electronic mail address, a copy of the electronic mail message.
g. Notice or correspondence required pursuant to this section or otherwise required by law may be sent on behalf of an insurer or vendor, as the case may be, by the supervising entity appointed by the insurer.
h. An insurer shall cease delivering by electronic mail any notice or other document and shall deliver the notice or other document by any other delivery method authorized by law if:
(1) the insurer attempts to deliver by electronic mail a notice or other document and has a reasonable basis to believe that the notice or other document was not received by the enrolled customer or vendor, as applicable; or
(2) the insurer becomes aware that the electronic mail address provided by the enrolled customer or vendor, as applicable, is no longer valid.
##### **§ 17:22A-57** Violations, penalties. {#sec-17-22a-57 omnilex-key=us-nj-statutes--title-17--17:22A-57}
9. If a vendor of portable electronics or its employee or authorized representative violates any provision of this act or any provision of P.L.2001, c.210 (C.17:22A-26 et seq.), the commissioner may do any of the following:
a. Impose fines in accordance with P.L.2001, c.210 (C.17:22A-26 et seq.). However, fines assessed against a vendor licensed under this act shall not exceed $50,000 in the aggregate for multiple violations that involve the same conduct, action, or practice.
b. Impose other penalties that the commissioner deems necessary and reasonable to carry out the purposes of this act, including:
(1) suspending the privilege of transacting portable electronics insurance pursuant to this section at specific business locations where violations have occurred; and
(2) suspending or revoking the ability of individual employees or authorized representatives to act under the license.
## **Chapter 22B** {#struct-chapter-22b}
##### **§ 17:22B-1** Short title {#sec-17-22b-1 omnilex-key=us-nj-statutes--title-17--17:22B-1}
1. This act shall be known and may be cited as the "Public Adjusters' Licensing Act."
##### **§ 17:22B-2** Definitions {#sec-17-22b-2 omnilex-key=us-nj-statutes--title-17--17:22B-2}
2. As used in this act:
"Commissioner" means the Commissioner of Insurance.
"Department" means the Department of Insurance.
"Public adjuster" or "adjuster" means any individual, firm, association or corporation who, or which, for money, commission or any other thing of value, acts or aids in any manner on behalf of an insured in negotiating for, or effecting, the settlement of claims for loss of damage caused by, or resulting from, any accident, incident, or occurrence covered under a property insurance policy, including, but not limited to, a flood, transit, inland marine or ocean marine policy; or who, or which, advertises for, or solicits employment as an adjuster of those claims. The term "public adjuster" shall also include any individual who, for money, commission or any other thing of value, solicits or adjusts those claims on behalf of any public adjuster.
##### **§ 17:22B-3** License required for adjuster {#sec-17-22b-3 omnilex-key=us-nj-statutes--title-17--17:22B-3}
3. a. No individual, firm, association or corporation shall act as an adjuster in this State unless authorized to do so by virtue of a license issued or renewed pursuant to this act.
b. No adjuster shall act on behalf of an insured unless licensed as a public adjuster.
c. The holder of a license under this act may act as an adjuster without any other license.
##### **§ 17:22B-4** Nonapplicability of act {#sec-17-22b-4 omnilex-key=us-nj-statutes--title-17--17:22B-4}
4. a. Nothing contained in this act applicable to public adjusters shall apply to any employee, agent, or other representative of any authorized insurer who acts in that capacity in the adjustment of claims, nor to any licensed insurance producer who is designated by the insurer to act as an adjuster for a client of the producer without any compensation for those services as adjuster. No insurer's representative and no licensed insurance producer shall advertise or publicly solicit the adjustment of claims in a manner likely to mislead the public into believing that he is offering his services as a public adjuster.
b. Nothing contained in this act shall apply to:
(1) any licensed attorney of this State who acts or aids in adjusting insurance claims as an incident to the practice of his profession and who does not advertise himself as a public adjuster;
(2) any licensed insurance producer who acts as an adjuster with respect to any loss involving insurance contracts under which he was the broker of record in placing the insurance, whether or not designated in writing to act for the insured;
(3) any other duly licensed producer who has been designated to act for the insured in writing before a loss occurs; or
(4) an auto body repair facility licensed pursuant to P.L.1983, c.360 (C.39:13-1 et seq.) that acts or aids in adjusting a motor vehicle insurance claim as an incident to the performance of duties for which it is licensed.
##### **§ 17:22B-5** Issuance of license {#sec-17-22b-5 omnilex-key=us-nj-statutes--title-17--17:22B-5}
5. The commissioner may issue a public adjuster's license to any individual, firm, association or corporation, hereinafter designated as the licensee, who, or which, is trustworthy and competent to act as an adjuster in a manner as to safeguard the interests of the people of this State and who, or which, has complied with the prerequisites herein prescribed. A license issued to a corporation may name as sublicensees only the officers and directors of the corporation, and a license issued to a firm or association may name as sublicensees only the individual members of the firm or association. Each sublicensee named in the license issued to a firm, association or corporation shall be qualified to obtain a license as a public adjuster and for each sublicensee a fee shall be paid at the times and at the rate hereinafter specified. Each sublicensee shall be authorized, pursuant to the license, to act as a public adjuster only on behalf of the licensee.
##### **§ 17:22B-6** Application requirements {#sec-17-22b-6 omnilex-key=us-nj-statutes--title-17--17:22B-6}
6. a. Before any license or any renewal thereof shall be issued by the commissioner, there shall be filed in his office a written application therefor. The application shall be in the form prescribed by the commissioner and shall contain information as he may require.
b. Each individual applicant and proposed sublicensee signing an application shall submit to the commissioner, together with the application: (1) his photograph, in duplicate, in passport size; and (2) fingerprints of his two hands taken on standard fingerprint cards by a State or municipal law enforcement agency. No license shall be issued to any person who has ever been convicted of an indictable offense, or of any crime or offense involving fraud or dishonesty; nor shall a licensee under this act employ any person who has ever been convicted of an indictable offense or a crime or offense as aforesaid. The provisions of this act shall not prevent the employment of, or the issuance of a license to, any person who, subsequent to his conviction, shall have made an application for a license under and complied with the provisions of P.L.1968, c.282 (C.2A:168A-1 et seq.). The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the Federal Bureau of Investigation and the Division of State Police in the Department of Law and Public Safety for use in making the determinations required by this subsection.
c. The commissioner may require an applicant for a license to present evidence of a State tax identification number.
d. The commissioner may require an applicant for a license to present evidence, in the form he may prescribe, that the applicant has been employed for a period which he deems reasonable, by an insurer, an independent adjuster or a public adjuster, in the performance of duties which in his opinion would provide the applicant with satisfactory preliminary training for the duties and responsibilities which would devolve upon him as a licensee under this act.
##### **§ 17:22B-7** Written examination {#sec-17-22b-7 omnilex-key=us-nj-statutes--title-17--17:22B-7}
7. a. The commissioner shall require every individual applicant and each sublicensee to take and pass a written examination to his satisfaction, except in the case of a renewal license, in order to determine the competency of the applicant or sublicensee to act as a public adjuster. The commissioner is authorized to enter into contracts with private vendors that are reasonable and necessary in regard to examinations.
b. The commissioner may, in his discretion and on terms he may prescribe, dispense with the examination in the case of any individual applicant or proposed sublicensee who:
(1) holds a license as a public adjuster issued by another state in which the licensing provisions of public adjusters are substantially similar to the provisions of this act and which similarly recognizes and accepts public adjusters licensed in New Jersey; or
(2) previously has operated a public adjusting business in this State.
##### **§ 17:22B-8** License granted without examination, prior experience {#sec-17-22b-8 omnilex-key=us-nj-statutes--title-17--17:22B-8}
8. a. Upon payment of the prescribed fee as provided in this act, a person who has been employed as or acted as a public adjuster as his principal business for a period of five years immediately prior to the effective date of this act, and who has demonstrated his trustworthiness and competence to act as an adjuster to the satisfaction of the commissioner, shall be granted a license without examination.
b. Application for a license without examination pursuant to this section shall be made to the commissioner within 12 months of the effective date of this act and shall be accompanied by a sworn statement:
(1) Describing the experience of the applicant as a public adjuster; and
(2) Containing other information as may be required by the commissioner.
##### **§ 17:22B-9** License fees. {#sec-17-22b-9 omnilex-key=us-nj-statutes--title-17--17:22B-9}
9. For applications made during the first year of operation of this act, there shall be paid to the commissioner by each individual applicant and by each proposed sublicensee a fee of $300 for an initial license term of four years. Thereafter, the commissioner may adjust the amount of the license fee to produce revenues sufficient to support the regulatory obligations imposed on the department by this act. The term of all public adjuster licenses shall be for a period of two years. The commissioner shall refund to the applicant or proposed sublicensee the fee paid if the application is denied.
##### **§ 17:22B-10** License renewal. {#sec-17-22b-10 omnilex-key=us-nj-statutes--title-17--17:22B-10}
10. Every adjuster's license issued pursuant to this act may be renewed for a two-year period upon the filing of an application in conformity with section 6 of this act, which shall include proof of completion of continuing education requirements as established by this section.
a. The commissioner shall require every individual licensed as a public adjuster, and each sublicensee of a licensed adjuster that is a corporation, firm or association, as a condition of biennial license renewal pursuant to this section, to complete not less than 15 hours of continuing education. Each hour of instruction shall be equivalent to one credit.
b. The commissioner shall:
(1) establish standards for the continuing education of public adjusters, including the subject matter and content of courses of study;
(2) approve educational programs offering continuing education credits and the qualification of instructors; and
(3) approve other equivalent educational programs and establish procedures for the issuance of credit upon satisfactory proof of the completion of these programs.
c. The commissioner may, in his discretion, waive requirements for continuing education on an individual basis for reasons of hardship such as illness or disability, retirement of the license, or other good cause.
d. The commissioner may, in his discretion, waive the continuing education requirements set forth in subsection a. of this section for a public adjuster who is a non-resident licensee if the commissioner deems that such licensee has satisfactorily completed continuing education requirements for licensed public adjusters in the state in which he resides that are equivalent to New Jersey continuing education requirements.
##### **§ 17:22B-11** Issuance of supplemental, temporary licenses {#sec-17-22b-11 omnilex-key=us-nj-statutes--title-17--17:22B-11}
11. a. Any firm, association, or corporation licensed as an adjuster under this act may at any time apply to the commissioner for the issuance of a supplemental license authorizing additional officers or directors of the corporation or additional members of the firm or association, as the case may be, to act as sublicensees and, if the requirements of this act are fully complied with as to each of the proposed sublicensees, the commissioner may thereupon issue to the licensee a supplemental license naming the additional persons as sublicensees.
b. (1) A license as a temporary sublicensee may be issued in the discretion of the commissioner for a 90-day period on the occasion of a catastrophic loss occurrence. An applicant for a license as a temporary sublicensee shall be sponsored by and work directly under the supervision of a licensed public adjuster. The temporary sublicensee shall be an agent of the sponsoring public adjuster, who shall bear full responsibility that the temporary sublicensee shall comply with this act and any rules or regulations promulgated hereunder.
(2) Proper application and a fee of $150 shall be required for license as a sublicensee pursuant to this subsection. A license as a temporary sublicensee pursuant to this subsection may be renewed for an additional 90-day period upon payment of an additional $150 fee.
(3) Information regarding adequate competency of the temporary sublicensee as a public adjuster shall be required by the commissioner.
(4) For the purposes of this subsection, "catastrophic loss occurrence" means an occurrence designated by the President of the United States or the Federal Emergency Management Agency, or the Governor of New Jersey or the State Office of Emergency Management in the Division of State Police in the Department of Law and Public Safety, or any other authorized federal, State or local agency, as an emergency or a disaster and includes, but is not limited to, a flood, hurricane, storm or earthquake.
##### **§ 17:22B-12** Bond required for licensure {#sec-17-22b-12 omnilex-key=us-nj-statutes--title-17--17:22B-12}
12. No adjuster's license or renewal license shall be issued to an applicant unless there shall be on file with the commissioner a bond, executed by the applicant and by approved sureties, in the penal sum of $10,000 applicable to the licensee and each of the sublicensees named in the license. The bond shall be approved as to form by the Attorney General and as to sufficiency of security by the commissioner. The bond shall be made to the State of New Jersey for the use and benefit of any person injured by a willful, malicious or wrongful act by an adjuster in connection with the transaction of his or its business as an adjuster.
##### **§ 17:22B-13** Prohibited practices. {#sec-17-22b-13 omnilex-key=us-nj-statutes--title-17--17:22B-13}
13. No individual, firm, association or corporation licensed under P.L.1993, c.66 (C.17:22B-1 et al.) shall:
a. solicit the adjustment of a loss or damage occurring in this State from an insured, whether by personal interview, by telephone, or by any other method, between the hours of 6:00 p.m. and 8:00 a.m. during the 24 hours after the loss has occurred;
b. enter into any contract, oral or written, with an insured to negotiate or settle claims for loss or damage occurring in this State between the hours of 6:00 p.m. and 8:00 a.m. during the 24 hours after the loss has occurred;
c. have any right to compensation from any insured for or on account of services rendered to an insured as a public adjuster unless the right to compensation is based upon a written contract, signed by the party to be charged and by the adjuster and the contract:
(1) states the license number of the public adjuster signing the contract as well as the license number of the company or firm, if the contract is in the name of a public adjusting company or firm;
(2) specifies or clearly defines the services to be rendered, the amount or extent of the compensation, and the insured's right to cancel the contract within three business days or terminate the contract after that time on a form and with such language as the commissioner may prescribe; and
(3) meets the minimum standards and requirements of section 2 of P.L.2025, c.84 (C.17:22B-13.1);
d. induce cancellation of a duly executed written contract between an insured and a public adjuster;
e. make any misrepresentation of facts or advise any person on questions of law in connection with the transaction of business as an adjuster; or
f. receive, accept, or hold any moneys towards the settlement of a claim for loss or damage on behalf of an insured unless the public adjuster deposits the moneys in an escrow account in a banking institution or savings and loan association in this State insured by an agency of the federal government. Any funds held in escrow together with interest accumulated thereon shall be the property of the insured until disbursement thereof pursuant to a written contract, signed by the insured and by the adjuster, as specified above and in section 2 of P.L.2025, c.84 (C.17:22B-13.1). In the event of the insolvency or bankruptcy of a public adjuster, the claim of an insured for any settlement moneys received, accepted or held by the adjuster shall constitute a statutory trust.
##### **§ 17:22B-13.1** Public adjusters, written contract, right to cancel, terminate, notice. {#sec-17-22b-13.1 omnilex-key=us-nj-statutes--title-17--17:22B-13.1}
2. a. A public adjuster shall not, directly or indirectly, act within this State as a public adjuster without having first entered into a contract, in writing, and executed in duplicate by the public adjuster and the insured. One original contract shall be kept on file by the public adjuster, available at all times for inspection, without notice, by the commissioner, and one original contract shall be given to the insured. A particular form of contract is not required, but the following statements and provisions shall be included in the contract, including a separate notice of right to cancel or terminate as required pursuant to subsection b. of this section:
(1) Title of Public Adjuster Contract;
(2) The name, business name, license number, telephone number, email address, and physical address of the public adjuster, as well as the same information for the company or firm, if the contract is in the name of a business entity;
(3) The name and address of the insured;
(4) A description of the loss and its location, if applicable;
(5) The name of the insurer and the policy number, if known;
(6) The full consideration the public adjuster is to receive for services under the contract;
(7) A description of the services to be provided to the insured;
(8) Signatures of the public adjuster and the insured;
(9) The date and time the contract was signed by the public adjuster and the date and time the contract was signed by the insured; and
(10) In addition to the foregoing, the following statements shall be included in the contract:
(a) "A public adjuster is hereby retained by the above-named insured to advise and assist in the adjustment of a property damage insurance claim, which services may include evaluation, documentation, presentation, and negotiation of the insurance claim arising from the loss described herein."
(b) "Any services provided by the public adjuster shall be accounted for with the specific nature of the work performed supported by a record of that work."
(c) "The insured may cancel this contract before midnight of the third business day after signing the contract without further obligation by completing the attached notice of right to cancel. After that time if the contract is terminated by the insured, the insured remains obligated to pay from any insurance proceeds recovered, either prior to or after the date of termination, a fee for the reasonable value of services provided by the public adjuster based upon the nature of services performed supported by a record of that work."
b. The following notice of right to cancel or terminate, as applicable, is required with regard to defining the right to cancel or terminate, unless the Commissioner of Banking and Insurance requires additional information by regulation, bulletin, or posting on the department's Internet website, consistent with P.L.2025, c.84 (C.17:22B-13.1 et al.):
"NOTICE OF RIGHT TO CANCEL OR TERMINATE
Date of Contract: _____ / _____ / ____
Name of Insured/s:________________________________
You may cancel this contract, without further penalty or obligation, prior to midnight of the third business day after the above date. After that time, you may terminate this contract at any time. If you exercise your right to cancel this contract prior to midnight on the third business day, you will remain liable for reasonable expenses and necessary emergency out-of-pocket expenses or services the public adjuster incurred on your behalf that were necessary to protect your investment between signing of the contract and cancellation if the expenses or services were approved by you. If your public adjuster seeks reimbursement from you for such out-of-pocket expenses or services, your public adjuster shall provide you with an itemized statement of those expenses.
If you cancel, any money or anything of value given by you to the public adjuster under the contract will be returned within 10 business days following the receipt by the public adjuster of your cancellation notice, and any security interest arising out of the contract will be canceled.
If you terminate this contract after midnight on the third business day, you are obligated to pay from any insurance proceeds recovered, either prior to or after the date of termination, a fee for the reasonable value of services provided by the public adjuster based upon the nature of the services performed by the public adjuster supported by a record of that work. If your public adjuster seeks such payment from you for the reasonable value of such services, your public adjuster shall provide you with an itemized statement of those services and the record of such work.
To cancel this contract, mail, fax, email, or personally deliver a signed and dated copy of this notice, or any other written notice, indicating your intent to cancel and date of cancellation, to the address of public adjuster shown at the top of the public adjuster contract, no later than midnight of ______ / ______ / ______. To terminate this contract after that time, mail, fax, email, or personally deliver a signed and dated copy of this notice, or any other written notice, indicating your intent to terminate and the date of termination.
I HEREBY CANCEL /TERMINATE THIS CONTRACT
Insured:__________________________________________
Insured:__________________________________________
Adjuster:_________________________________________
Please Print Name Date: _____ / _____ / _____"
c. If a public adjuster is to receive as compensation a percentage of the total amount paid by the insurer to resolve the insured's claim for property damage to the insured's primary or secondary dwelling, the contract between a public adjuster and an insured may not contain a contract term that would:
(1) allow the public adjuster to collect the public adjuster's entire compensation from the first payment issued by the insurer if the insurer will pay the total amount to resolve the insured's claim in two or more payments;
(2) require the insured to authorize an insurer to issue a check only in the name of the public adjuster; and
(3) preclude the public adjuster or the insured from pursuing civil remedies.
##### **§ 17:22B-14** Refusal to issue or renew license, revocation; conditions {#sec-17-22b-14 omnilex-key=us-nj-statutes--title-17--17:22B-14}
14. a. The commissioner may refuse to issue or renew a license, or suspend or revoke any adjuster's license if, after notice and opportunity for a hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), the commissioner determines that the licensee, or any sublicensee named in the license:
(1) Has violated any provision of the insurance law, including any rules promulgated by the commissioner, or has violated any law in the course of his, or its, dealings as an adjuster;
(2) Has withheld material information or made a material misstatement in the application for the license;
(3) Has committed a fraudulent or dishonest act;
(4) Has demonstrated his, or its, incompetency, lack of integrity, bad faith, dishonesty, financial irresponsibility or untrustworthiness to act as an adjuster; or
(5) Has aided, abetted or assisted another person in violating any insurance law of this State.
b. Any person aggrieved may file with the commissioner a verified complaint setting forth facts showing sufficient grounds for the suspension or revocation of any adjuster's license. Upon the filing of the complaint, the commissioner shall determine whether the license shall be suspended or revoked.
##### **§ 17:22B-15** One-year waiting period after revocation {#sec-17-22b-15 omnilex-key=us-nj-statutes--title-17--17:22B-15}
15. No individual, firm, association or corporation whose license has been so revoked, and no firm or association of which the individual is a member, and no corporation of which the individual is an officer or director, shall be entitled to any license or renewal license, or to be named as sublicensee in any license or renewal license under this act, for a period of one year after the revocation, or if the revocation is judicially reviewed, for one year after the final determination of the judicial proceeding affirming the action of the commissioner in revoking the license. If any license held by a firm, association or corporation is so revoked, no member of the firm or association and no officer or director of the corporation shall be entitled to a license or to be named as sublicensee in a license for the same period of time unless the commissioner finds that the member or officer or director, as the case may be, was not personally at fault in the matter on account of which the license was revoked.
##### **§ 17:22B-16** Notice to applicant of rejection, suspension or revocation {#sec-17-22b-16 omnilex-key=us-nj-statutes--title-17--17:22B-16}
16. If an application for a license under this act is rejected, or if any license is suspended or revoked by the commissioner, he shall forthwith give notice to the applicant, or to the licensee or sublicensee, as the case may be.
##### **§ 17:22B-17** Violations; civil penalties {#sec-17-22b-17 omnilex-key=us-nj-statutes--title-17--17:22B-17}
17. Any person violating any provision of this act shall, in addition to any other sanctions provided by law, be liable to a civil penalty of not more than $2,500 for the first offense and not more than $5,000 for the second and each subsequent offense. For the purposes of this section, each transaction or statutory violation shall constitute a separate offense. In lieu of an administrative proceeding or in an action in the Superior Court, the commissioner may bring an action for the collection or enforcement of civil penalties for the violation of any provision of this act or any regulation promulgated pursuant hereto. The action may be brought in a summary manner, pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq. Process in the action may be by summons or warrant and in the event that the defendant in the action fails to answer the action, the court shall, upon finding an unlawful act or practice to have been committed by the defendant, issue a warrant for the defendant's arrest in order to bring the person before the court to satisfy the civil penalties imposed. In any action commenced pursuant to this section, the court may order restored to any person in interest any moneys or property acquired by means of an unlawful act or practice. Any action alleging the unlicensed practice of public adjuster shall be brought pursuant to this section in the Superior Court. In any action brought pursuant to this act, the commissioner or the court may order the payment of costs for the use of the State.
##### **§ 17:22B-18** Additional fees {#sec-17-22b-18 omnilex-key=us-nj-statutes--title-17--17:22B-18}
18. a. The commissioner shall set reasonable, necessary and appropriate fees, other than licensure fees under section 9 of this act, to effectuate the purposes of this act.
b. Applicants may be charged a fee for any licensing examination conducted pursuant to this act in an amount designated or approved by the commissioner.
c. All fees payable to the commissioner pursuant to this section are nonrefundable.
d. The commissioner may provide for the waiving of any fees for disabled war veterans of the United States military service.
##### **§ 17:22B-19** Licenses remain property of State {#sec-17-22b-19 omnilex-key=us-nj-statutes--title-17--17:22B-19}
19. a. All licenses shall at all times be the property of the State of New Jersey and upon any suspension, revocation, refusal to renew, expiration or other termination shall no longer be in force and effect. Upon any suspension, revocation or other termination of a license, the licensee or other person having possession or custody of the license shall immediately deliver it to the commissioner by personal delivery or by registered or certified mail.
b. If a license is lost, stolen or destroyed, the commissioner may accept in lieu of the return of the license the affidavit of the licensee or other person or persons responsible for the license, stating the facts of that loss, theft or destruction.
##### **§ 17:22B-20** Rules, regulations {#sec-17-22b-20 omnilex-key=us-nj-statutes--title-17--17:22B-20}
20. The commissioner may promulgate any rules and regulations as may be necessary to effectuate the purposes of this act pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
## **Chapter 22C** {#struct-chapter-22c}
##### **§ 17:22C-1** Definitions {#sec-17-22c-1 omnilex-key=us-nj-statutes--title-17--17:22C-1}
1. For the purposes of this act:
"Commissioner" means the Commissioner of Insurance.
"Insurer" means:
a. Any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), or Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.);
b. Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
c. Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
d. Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et al.); and
e. Any dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.).
"Managing general agent" means any person, firm, association or corporation who binds ceding reinsurance contracts on behalf of an insurer or manages all or part of the insurance business of an insurer, including the management of a separate division, department or underwriting office, and acts as an agent for that insurer whether known as a managing general agent, manager or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross written premium equal to or more than 5% of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following: (1) adjusts or pays claims in excess of an amount determined by the commissioner; or (2) negotiates reinsurance on behalf of the insurer.
Notwithstanding the above, the following persons shall not be considered as managing general agents for the purposes of this act:
(1) An employee of the insurer;
(2) A United States manager of the United States branch of an alien insurer;
(3) An underwriting manager which, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to P.L.1970, c.22 (C.17:27A-1 et seq.), and whose compensation is not solely based on the volume of premiums written;
(4) An attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or inter-insurance exchange under powers of attorney.
"Sub-managing general agent" means any person, firm, association or corporation with which a managing general agent contracts or which a managing general agent appoints to perform all or substantially all of the duties and responsibilities of the managing general agent.
"Underwrite" means the authority to accept or reject risk on behalf of the insurer.
##### **§ 17:22C-2** Licensing for domestic risks as insurance producer required {#sec-17-22c-2 omnilex-key=us-nj-statutes--title-17--17:22C-2}
2. No person, firm, association or corporation shall act in the capacity of a managing general agent with respect to risks located in this State for an insurer licensed in this State unless such person is licensed as an insurance producer in this State.
##### **§ 17:22C-3** Licensing for foreign risks {#sec-17-22c-3 omnilex-key=us-nj-statutes--title-17--17:22C-3}
3. No person, firm, association or corporation shall act in the capacity of a managing general agent representing an insurer domiciled in this State with respect to risks located outside of this State unless such person is licensed as a producer in this State.
##### **§ 17:22C-4** Bond required {#sec-17-22c-4 omnilex-key=us-nj-statutes--title-17--17:22C-4}
4. The commissioner may require a bond in an amount acceptable to him for the protection of the insurer.
##### **§ 17:22C-5** Errors, omissions policy {#sec-17-22c-5 omnilex-key=us-nj-statutes--title-17--17:22C-5}
5. The commissioner may require the managing general agent to maintain an errors and omissions policy in a form and amount acceptable to the commissioner.
##### **§ 17:22C-6** Contract requirements for managing general agents {#sec-17-22c-6 omnilex-key=us-nj-statutes--title-17--17:22C-6}
6. No person, firm, association, or corporation acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and, if both parties share responsibility for a particular function, specifies the division of such responsibilities, and which contains the following minimum provisions:
a. The insurer may terminate the contract upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination. The insurer shall, within 15 days of any termination of the contract, file written notice of the termination with the commissioner. Notice of termination shall be on a form established by the commissioner and shall indicate the date of termination and the reason therefor. Agency appointment shall not terminate until notice of termination has been received by the commissioner.
b. The managing general agent shall render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.
c. All funds collected for the account of an insurer shall be held by the managing general agent in a trust account which shall conform with the requirements established by the commissioner for the management of funds by insurance producers licensed in this State. The account shall be used for all payments on behalf of the insurer. The managing general agent shall retain no more than three months' estimated claims payments and allocated loss adjustment expenses.
d. Separate records of business written by the managing general agent shall be maintained. The insurer shall have access and the right to copy all accounts and records related to this business in a form usable by the insurer and the commissioner shall have access to all books, bank accounts and records of the managing general agent in a form usable to the commissioner.
e. The contract shall not be assigned in whole or part by the managing general agent.
f. Appropriate underwriting guidelines including:
(1) The maximum annual premium volume;
(2) The basis of the rates to be charged;
(3) The types of risks which may be written;
(4) Maximum limits of liability;
(5) Applicable exclusions;
(6) Territorial limitations;
(7) Policy cancellation provisions; and
(8) The maximum policy period.
The insurer shall have the right to cancel or non-renew any policy of insurance subject to the applicable laws and regulations of this State governing the cancellation and nonrenewal of insurance policies.
g. If the contract permits the managing general agent to settle claims on behalf of the insurer the managing general agent shall comply with the requirements governing the settlement of claims set forth in subsections (9) and (10) of section 4 of P.L.1947, c.379 (C.17:29B-4), or sections 1 and 2 of P.L.1975, c.101 (C.17B:30-13.1 and 17B:30-13.2), as applicable, and any regulations promulgated by the commissioner thereunder. In addition:
(1) All claims shall be reported to the company in a timely manner.
(2) A copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known that the claim:
(a) Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the insurer, whichever is less;
(b) Involves a coverage dispute;
(c) May exceed the managing general agent's claims settlement authority;
(d) Is open for more than six months; or
(e) Is closed by payment of an amount set by the commissioner or an amount set by the insurer, whichever is less.
(3) All claim files shall be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer such files shall become the sole property of the insurer or its estate, and the managing general agent shall have reasonable access to and the right to copy the files on a timely basis.
(4) Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.
h. If electronic claims files are in existence, the contract shall address the timely transmission of the data.
i. If the contract provides for a sharing of interim profits by the managing general agent and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments or in any other manner, interim profits shall not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business, or such other periods of time as determined by the commissioner, and not until the profits have been certified pursuant to section 7 of this act.
j. The managing general agent shall not:
(1) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules;
(2) Commit the insurer to participate in insurance or reinsurance syndicates;
(3) Appoint any insurance producer without assuring that the producer is lawfully licensed to transact the type of insurance for which he is appointed;
(4) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one percent of the insurer's policyholders' surplus as of December 31 of the last completed calendar year;
(5) Collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report shall be promptly forwarded to the insurer;
(6) Permit its subproducer to serve on its board of directors;
(7) Jointly employ an individual, who is employed with the insurer; or
(8) Appoint a sub-managing general agent.
##### **§ 17:22C-7** Audit; loss reserve opinion, on-site procedural audit {#sec-17-22c-7 omnilex-key=us-nj-statutes--title-17--17:22C-7}
7. a. The insurer shall conduct and have on file an independent audit in a form acceptable to the commissioner of each managing general agent with which it has done business.
b. If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. Such loss reserve opinion shall be in the format of and otherwise satisfy all requirements established by the commissioner for loss reserve opinions required to be submitted by licensed insurers in this State.
c. The insurer shall at least biannually conduct an on-site procedural audit of the underwriting and claims processing operations of the managing general agent.
d. The managing general agent may negotiate reinsurance contracts or participation in insurance or reinsurance syndicates on behalf of the insurer. However, binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent.
e. Within 30 days of entering into, or within 15 days of termination of, a contract with a managing general agent, the insurer shall provide written notification of that appointment or termination to the commissioner. Notices of appointment of a managing general agent shall include a statement of duties which the managing general agent is expected to perform on behalf of the insurer, the lines of insurance for which the managing general agent is to be authorized to act, and any other information the commissioner may request.
f. An insurer shall review each quarter its books and records to determine if any insurance producer has become a managing general agent as defined in section 1 of this act. If the insurer determines that an insurance producer has become a managing general agent, the insurer shall promptly notify the insurance producer and the commissioner of such determination and the insurer and insurance producer shall fully comply with the provisions of this act within 30 days.
g. An insurer shall not appoint to its board of directors an officer, director, employee or controlling shareholder of its managing general agents. This subsection shall not apply to relationships governed by P.L.1970, c.22 (C.17:27A-1 et seq.) or, if applicable, any laws governing business transacted by producer-controlled property and casualty insurers in this State.
##### **§ 17:22C-8** Acts of managing general agent considered acts of insurer {#sec-17-22c-8 omnilex-key=us-nj-statutes--title-17--17:22C-8}
8. The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer.
##### **§ 17:22C-9** Violations; penalties; summary proceedings {#sec-17-22c-9 omnilex-key=us-nj-statutes--title-17--17:22C-9}
9. a. If the commissioner finds after notice and opportunity for a hearing that any person has violated any provision of this act, the commissioner may refuse to issue or renew the insurance producer's license, or may revoke or suspend the insurance producer's license.
b. In addition, or as an alternative to any other penalty, the commissioner may:
(1) Impose a fine of up to $5,000 for the first violation, and not exceeding $10,000 for each subsequent violation, and in appropriate circumstances order restitution of moneys owed to any person and reimbursement of the costs of investigation and prosecution;
(2) Order the managing general agent to reimburse the insurer, the rehabilitator or liquidator of the insurer for any losses incurred by the insurer caused by a violation of this act committed by the managing general agent.
c. If the commissioner finds that the interests of the public require that immediate action be taken prior to completion of the hearing, the making of a determination and the entry of a final order, he may enter an appropriate order to be effective pending completion of the hearing and entry of a final order. These orders may be entered on ex parte proofs if the proofs indicate that the commissioner's withholding of any action until completion of a full hearing will be harmful to the public interest. Orders issued pursuant to this subsection shall be subject to an application to vacate upon 10 days' notice, and a preliminary hearing on the ex parte order shall be held in any event within 20 days after it is entered. In the alternative, or in addition, the commissioner is authorized to institute a proceeding in the Superior Court, to be conducted in a summary manner, for an injunction against specified acts or conduct in aid of the proceedings pending before him, including temporary injunctions and interim restraints.
d. Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for by the laws of this State.
e. Nothing contained in this act is intended to or shall in any manner limit or restrict the rights of policyholders, claimants and auditors.
##### **§ 17:22C-10** Rules, regulations {#sec-17-22c-10 omnilex-key=us-nj-statutes--title-17--17:22C-10}
10. The commissioner may promulgate rules and regulations as are necessary to effectuate the purposes of this act.
## **Chapter 22D** {#struct-chapter-22d}
##### **§ 17:22D-1** Definitions {#sec-17-22d-1 omnilex-key=us-nj-statutes--title-17--17:22D-1}
1. For purposes of this act:
"Accredited state" means a state in which the insurance department or other regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the National Association of Insurance Commissioners.
"Captive insurer" means an insurance company owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, insurance organizations owned by the insureds whose exclusive purpose is to insure risks to member organizations or group members and their affiliates.
"Commissioner" means the Commissioner of Insurance.
"Control" or "controlled" has the same meaning as defined in section 1 of P.L.1970, c.22 (C.17:27A-1).
"Controlled insurer" means a licensed insurer which is controlled, directly or indirectly, by a producer.
"Controlling producer" means a producer who, directly or indirectly, controls an insurer.
"Licensed insurer" or "insurer" means any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes.
"Producer" means any person engaged in the business of an insurance agent, insurance broker or insurance consultant as defined in section 2 of P.L.1987, c.293 (C.17:22A-2).
##### **§ 17:22D-2** Application of act {#sec-17-22d-2 omnilex-key=us-nj-statutes--title-17--17:22D-2}
2. a. This act shall apply to licensed insurers which are domiciled in this State or domiciled in a state that is not an accredited state having in effect a substantially similar law.
b. The provisions of P.L.1970, c.22 (C.17:27A-1 et seq.), to the extent they are not superseded by this act, shall continue to apply to all parties within holding company systems subject to this act. This act shall not apply to captive insurers.
##### **§ 17:22D-3** Application of provisions of section; controlled business, regulated {#sec-17-22d-3 omnilex-key=us-nj-statutes--title-17--17:22D-3}
3. a. The provisions of this section shall apply if, in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling producer is equal to or greater than five percent of the admitted assets of the controlled insurer, as reported in the controlled insurer's quarterly statement filed as of September 30 of the prior year.
b. Notwithstanding subsection a. of this section to the contrary, the provisions of this section shall not apply if the controlling producer:
(1) Places insurance only with the controlled insurer, or only with the controlled insurer and a member or members of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate or subsidiary and receives no compensation based upon the amount of premiums written in connection with such insurance;
(2) Accepts insurance placements only from non-affiliated subproducers, and not directly from insureds; and
(3) The controlled insurer, except for insurance business written through a residual market plan such as a plan established pursuant to P.L.1970, c.215 (C.17:29D-1) or a plan established pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.), accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer, or a producer that is a subsidiary of the controlled insurer.
c. A controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a controlled insurer unless there is a written contract between the controlling producer and the controlled insurer specifying the responsibilities of each party, which contract has been approved by the board of directors of the controlled insurer and contains the following minimum provisions:
(1) The controlled insurer may terminate the contract for cause upon written notice to the controlling producer. The controlled insurer shall suspend the authority of the controlling producer to write business during the pendency of any dispute regarding the cause for termination;
(2) The controlling producer shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the controlling producer;
(3) The controlling producer shall remit all funds due under the terms of the contract to the controlled insurer no less often than monthly. The due date shall be fixed so that premiums or installments thereof collected shall be remitted no later than 90 days after the effective date of any policy placed with the controlled insurer under this contract;
(4) All funds collected for the controlled insurer's account shall be held by the controlling producer in a fiduciary capacity in one or more appropriately identified bank accounts in banks that are members of the Federal Reserve System, in accordance with the laws of this State governing the statutory deposits of insurers doing business in this State. Funds of a controlling producer not required to be licensed in this State shall be maintained in compliance with the requirements of the controlling producer's domiciliary jurisdiction;
(5) The controlling producer shall maintain separately identifiable records of business written for the controlled insurer;
(6) The contract shall not be assigned in whole or in part by the controlling producer;
(7) The controlled insurer shall provide the controlling producer with its underwriting standards, rules and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to these standards, rules, procedures, rates and conditions which shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer;
(8) The rates and terms of the controlling producer's commissions, charges or other fees and the purposes for those charges or fees. The rates of commissions, charges and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers. For purposes of this paragraph and paragraph (7) of this subsection, comparable business includes, but is not limited to: the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits, and similar quality of business;
(9) If the contract provides that the controlling producer, on insurance business placed with the controlled insurer, is to be compensated contingent upon the controlled insurer's profits on that business, then such compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified pursuant to subsection e. of this section;
(10) There shall be a limit on the controlling producer's writings in relation to the controlled insurer's surplus and total writings. The controlled insurer may establish a different limit for each line or sub-line of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer if the limit is reached. The controlling producer shall not place business with the controlled insurer if it had been notified by the controlled insurer that the limit has been reached; and
(11) The controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer, except that the controlling producer may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules.
d. Every board of directors of a controlled insurer shall establish an audit committee composed of independent directors. The audit committee shall meet annually with management, the controlled insurer's independent certified public accountants, and an independent casualty actuary who shall be qualified, pursuant to the requirements established by the commissioner for loss reserve opinions required to be submitted by licensed property and casualty insurers in this State, to review the adequacy of the insurer's loss reserves.
e. In addition to any other required loss reserve certification, the controlled insurer shall annually, on April 1 of each year, file with the commissioner an opinion of an independent casualty actuary reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end, which shall include losses incurred but not yet reported, on business placed by the controlling producer. The loss reserve opinion shall satisfy all requirements established by the commissioner for loss reserve opinions required to be submitted by licensed property and casualty insurers in this State.
f. The controlled insurer shall annually report to the commissioner on April 1 of each year the amount of commissions paid to the controlling producer, the percentage this amount represents of the net premiums written, and comparable amounts and percentages paid to noncontrolling producers for placements of the same kinds of insurance.
##### **§ 17:22D-4** Written notice of relationship between controlling producer, controlled insurer; exception {#sec-17-22d-4 omnilex-key=us-nj-statutes--title-17--17:22D-4}
4. The controlling producer, prior to the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the controlling producer and the controlled insurer, except that, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in his records a signed commitment from the subproducer that the subproducer is aware of the relationship between the controlled insurer and the controlling producer and that the subproducer has or will notify the insured.
##### **§ 17:22D-5** Noncompliance; penalties {#sec-17-22d-5 omnilex-key=us-nj-statutes--title-17--17:22D-5}
5. a. (1) Upon a finding that the controlling producer or any other person has not complied with this act, or any regulation or order promulgated hereunder, the commissioner, after notice and opportunity to be heard, may order the controlling producer to cease placing business with the controlled insurer.
(2) Upon a finding that the controlled insurer or any policyholder thereof has suffered any loss or damage as the result of any noncompliance with the provisions of this act, the commissioner may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder or other appropriate relief.
b. If an order for rehabilitation or liquidation of the controlled insurer has been entered pursuant to the laws of this State governing the rehabilitation and liquidation of insurers, and the receiver appointed under that order believes that the controlling producer or any other person has not complied with this act, or any regulation or order promulgated hereunder, and the controlled insurer suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the controlled insurer.
c. Upon a finding, after notice and opportunity for a hearing, that any person has violated any provision of this act, the commissioner may refuse to issue or renew the producer's license, or may revoke or suspend the producer's license.
d. In addition, or as an alternative to any other penalty, the commissioner may impose a fine of up to $5,000.00 for the first violation, and not exceeding $10,000.00 for each subsequent violation, and in appropriate circumstances order restitution of moneys owed to any person and reimbursement of the costs of investigation and prosecution.
e. Upon a finding that the interests of the public require that immediate action be taken prior to completion of the hearing, the making of a determination and the entry of a final order, the commissioner may enter an appropriate order to be effective pending completion of the hearing and entry of a final order. These orders may be entered on ex parte proofs if the proofs indicate that the commissioner's withholding of any action until completion of a full hearing will be harmful to the public interest. Orders issued pursuant to this section shall be subject to an application to vacate upon 10 days' notice, and a preliminary hearing on the ex parte order shall be held in any event within 20 days after it is entered. In the alternative, or in addition, the commissioner may institute a proceeding in the Superior Court, to be conducted in a summary manner, for an injunction against specified acts or conduct in aid of the proceedings pending before him, including temporary injunctions and interim restraints.
f. Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for by the laws of this State.
g. Nothing contained in this section is intended to or shall in any manner alter or affect the rights of policyholders, claimants, creditors or other third parties.
##### **§ 17:22D-6** Rules, regulations {#sec-17-22d-6 omnilex-key=us-nj-statutes--title-17--17:22D-6}
6. The commissioner may, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate rules and regulations as are necessary to effectuate the purposes of this act.
## **Chapter 22E** {#struct-chapter-22e}
##### **§ 17:22E-1** Definitions {#sec-17-22e-1 omnilex-key=us-nj-statutes--title-17--17:22E-1}
1. As used in this act:
"Commissioner" means the Commissioner of Insurance.
"Controlling person" means a person which directly or indirectly has the power to direct, or cause to be directed, the management, control or activities of the reinsurance intermediary.
"Insurer" means:
(1) A corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes;
(2) A medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
(3) A hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
(4) A health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et al.); and
(5) A dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.).
"Producer" means a person engaged in the business of an insurance agent, insurance broker or insurance consultant pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.).
"Reinsurance intermediary" means a reinsurance intermediary-broker or a reinsurance intermediary-manager.
"Reinsurance intermediary-broker" means a person, other than an officer or employee of the ceding insurer, which solicits, negotiates or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of that insurer.
"Reinsurance intermediary-manager" means a person which has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department or underwriting office, and acts as an agent for that reinsurer whether known as a reinsurance intermediary-manager, manager or other similar term, except that the following persons shall not be considered a reinsurance intermediary-manager, with respect to that reinsurer, for the purposes of this act:
(1) An employee of the reinsurer;
(2) A United States manager of a United States branch of an alien reinsurer;
(3) An underwriting manager which, pursuant to contract, manages all or part of the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to P.L.1970, c.22 (C.17:27A-1 et seq.), and whose compensation is not solely based on the volume of premiums written;
(4) The manager of a group, association, pool or organization of insurers which engage in joint underwriting or joint reinsurance and who are subject to examination by the insurance commissioner or other similar regulatory officer of the state in which the manager's principal business office is located;
(5) A licensed attorney-at-law who negotiates contracts or provides general financial counsel provided no commission or brokerage fee is provided.
"Reinsurer" means any person which engages in the activity of insuring part or all of an insurance risk from an originating or ceding insurer.
"To be in violation" means that a reinsurance intermediary, or the insurer or reinsurer for which the reinsurance intermediary was acting, failed to substantially comply with the provisions of this act.
"Qualified United States financial institution" means an institution that:
(1) Is organized, or in the case of a branch or agency office of a foreign banking organization in the United States, licensed, under the laws of the United States or any state thereof;
(2) Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies; and
(3) Has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
##### **§ 17:22E-2** Licensing of intermediary-broker, intermediary-manager {#sec-17-22e-2 omnilex-key=us-nj-statutes--title-17--17:22E-2}
2. a. No person shall act as a reinsurance intermediary-broker or reinsurance intermediary-manager in this State unless licensed as a producer in this State.
b. No insurer or reinsurer shall continue to utilize the services of a reinsurance intermediary on and after the effective date of this act unless utilization is in compliance with this act.
##### **§ 17:22E-3** Requirements for intermediary-manager {#sec-17-22e-3 omnilex-key=us-nj-statutes--title-17--17:22E-3}
3. The commissioner may require a reinsurance intermediary-manager to:
a. File a bond in an amount and from an insurer acceptable to the commissioner for the protection of the reinsurer; and
b. Maintain an errors and omissions policy in an amount acceptable to the commissioner.
##### **§ 17:22E-4** Authorization to act as reinsurance intermediary {#sec-17-22e-4 omnilex-key=us-nj-statutes--title-17--17:22E-4}
4. a. The commissioner shall authorize a person to act as a reinsurance intermediary if that person has complied with the requirements of this act. Such authorization to a firm or association shall authorize all the members of the firm or association and any designated employees to act as reinsurance intermediaries under the authorization, and all those persons shall be named in the application and any supplements thereto. An authorization to a corporation shall authorize all of the officers, and any designated employees and directors thereof, to act as reinsurance intermediaries on behalf of the corporation, and all those persons shall be named in the application and any supplements thereto.
b. If the applicant seeking authorization to act as a reinsurance intermediary is a nonresident, the applicant, as a condition precedent to receiving or holding such authorization, shall designate the commissioner as agent for service of process; and also shall furnish the commissioner with the name and address of a resident of this State upon whom notices or orders of the commissioner or process affecting such nonresident reinsurance intermediary may be served. The person shall within 30 days notify the commissioner in writing of every change in its designated agent for service of process, and such change shall not become effective until acknowledged by the commissioner.
##### **§ 17:22E-5** Refusal of authorization {#sec-17-22e-5 omnilex-key=us-nj-statutes--title-17--17:22E-5}
5. The commissioner may refuse to authorize a person to act as a reinsurance intermediary if, in his judgment, the person, anyone named on the application, or any member, principal, officer or director of the applicant, is not trustworthy, or that any controlling person of the applicant is not trustworthy to act as a reinsurance intermediary, or that any of these persons have given cause for revocation or suspension of that authorization, or have failed to comply with any prerequisite for that authorization. Upon written request therefor, the commissioner shall furnish a summary of the basis for refusal of such authorization, which document shall be privileged and not subject to P.L.1963, c.73 (C.47:1A-1 et seq.).
##### **§ 17:22E-6** Written contract required for transactions between reinsurance intermediary-broker, insurer {#sec-17-22e-6 omnilex-key=us-nj-statutes--title-17--17:22E-6}
6. Transactions between a reinsurance intermediary-broker and the insurer it represents in that capacity shall only be entered into pursuant to a written contract, specifying the responsibilities of each party. The contract shall, at a minimum, provide that:
a. The insurer may terminate the reinsurance intermediary-broker's authority at any time;
b. The reinsurance intermediary-broker shall render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the reinsurance intermediary-broker, and remit all funds due to the insurer within 30 days of receipt;
c. All funds collected for the insurer's account shall be held by the reinsurance intermediary-broker in a fiduciary capacity in a qualified United States financial institution;
d. The reinsurance intermediary-broker shall comply with sections 7 and 8 of this act;
e. The reinsurance intermediary-broker shall comply with the written standards established by the insurer for the cession or retrocession of all risks; and
f. The reinsurance intermediary-broker shall disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.
##### **§ 17:22E-7** Records of transactions {#sec-17-22e-7 omnilex-key=us-nj-statutes--title-17--17:22E-7}
7. For at least 10 years after the expiration of each contract of reinsurance transacted by the reinsurance intermediary-broker, the reinsurance intermediary-broker shall keep a complete record for each transaction showing:
a. The type of contract, limits, underwriting restrictions, classes or risks and territory;
b. Period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation;
c. Reporting and settlement requirements of balances;
d. Rate used to compute the reinsurance premium;
e. Names and addresses of assuming reinsurers;
f. Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-broker;
g. Related correspondence and memoranda;
h. Proof of placement;
i. Details regarding retrocessions handled by the reinsurance intermediary-broker, including the identity of retrocessionaires and percentage of each contract assumed or ceded;
j. Financial records, including, but not limited to, premium and loss accounts; and
k. When the reinsurance intermediary-broker procures a reinsurance contract on behalf of a ceding licensed insurer:
(1) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or
(2) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the assuming reinsurer has delegated binding authority to the representative.
##### **§ 17:22E-8** Access to intermediary-broker records by insurer {#sec-17-22e-8 omnilex-key=us-nj-statutes--title-17--17:22E-8}
8. The insurer shall have access and the right to copy and audit all accounts and records maintained by the reinsurance intermediary-broker related to its business in a form usable by the insurer.
##### **§ 17:22E-9** Authorization as reinsurance intermediary-broker required {#sec-17-22e-9 omnilex-key=us-nj-statutes--title-17--17:22E-9}
9. An insurer shall not engage the services of any person to act as a reinsurance intermediary-broker on its behalf unless that person is authorized pursuant to section 4 of this act.
##### **§ 17:22E-10** Employment restrictions {#sec-17-22e-10 omnilex-key=us-nj-statutes--title-17--17:22E-10}
10. An insurer shall not employ an individual who is employed by a reinsurance intermediary-broker with which it transacts business, unless the reinsurance intermediary-broker is under common control with the insurer and subject to P.L.1970, c.22 (C.17:27A-1 et seq.).
##### **§ 17:22E-11** Annual statement of financial condition to insurer {#sec-17-22e-11 omnilex-key=us-nj-statutes--title-17--17:22E-11}
11. A reinsurance intermediary-broker shall annually send a copy of statements of its financial condition to each insurer with which it transacts business.
##### **§ 17:22E-12** Written contract required for transactions between reinsurance intermediary-manager and reinsurer {#sec-17-22e-12 omnilex-key=us-nj-statutes--title-17--17:22E-12}
12. Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that capacity shall only be entered into pursuant to a written contract, specifying the responsibilities of each party, which shall be approved by the reinsurer's board of directors. At least 30 days before the reinsurer assumes or cedes business through a reinsurance intermediary-manager, a true copy of the approved contract shall be filed with the commissioner for approval. The contract shall, at a minimum, provide that:
a. The reinsurer may immediately terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of any dispute regarding the cause for termination;
b. The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the reinsurance intermediary-manager, and remit all funds due under the contract to the reinsurer on not less than a monthly basis;
c. All funds collected for the reinsurer's account shall be held by the reinsurance intermediary-manager in a fiduciary capacity in a qualified United States financial institution. The reinsurance intermediary-manager shall not retain more than three months' estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents;
d. For at least 10 years after the expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing:
(1) The type of contract, limits, underwriting restrictions, classes or risks and territory;
(2) Period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks;
(3) Reporting and settlement requirements of balances;
(4) Rate used to compute the reinsurance premium;
(5) Names and addresses of reinsurers;
(6) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager;
(7) Related correspondence and memoranda;
(8) Proof of placement;
(9) Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by section 17 of this act, including the identity of retrocessionaires and percentage of each contract assumed or ceded;
(10) Financial records, including, but not limited to, premium and loss accounts; and
(11) When the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer:
(a) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or
(b) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that such reinsurer has delegated binding authority to the representative;
e. The reinsurer shall have access and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to its business in a form usable by the reinsurer;
f. The contract shall not be assigned in whole or in part by the reinsurance intermediary-manager;
g. The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection or cession of all risks;
h. The rates, terms and purposes of commissions, charges and other fees which the reinsurance intermediary-manager may levy against the reinsurer shall be set forth;
i. If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer:
(1) All claims shall be reported to the reinsurer in a timely manner;
(2) A copy of the claim file shall be sent to the reinsurer at its request or as soon as it becomes known that the claim:
(a) Has the potential to exceed the lesser of an amount determined by the commissioner or the limit set by the reinsurer;
(b) Involves a coverage dispute;
(c) May exceed the reinsurance intermediary-manager's claims settlement authority;
(d) Is open for more than six months; or
(e) Is closed by payment of the lesser of an amount set by the commissioner or an amount set by the reinsurer;
(3) All claims files shall be the joint property of the reinsurer and reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer, the claims files shall become the sole property of the reinsurer or its estate, except that the reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis;
(4) Any settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer's written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of the dispute regarding the cause of termination;
j. If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, those interim profits shall not be paid until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business, or a later period set by the commissioner for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to section 16 of this act;
k. The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified public accountant;
l. The reinsurer shall at least biannually conduct a procedural audit of the underwriting and claims processing operations of the reinsurance intermediary-manager;
m. The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer pursuant to a contract;
n. Within the scope of its actual or apparent authority, the acts of the reinsurance intermediary-manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting; and
o. Any addendum to the contract shall be approved by the reinsurer's board of directors and shall be filed with the commissioner within 30 days of approval by the board of directors for the commissioner's approval. No addendum to the contract shall take effect until approved by the commissioner.
##### **§ 17:22E-13** Prohibitions for reinsurance intermediary-manager {#sec-17-22e-13 omnilex-key=us-nj-statutes--title-17--17:22E-13}
13. The reinsurance intermediary-manager shall not:
a. Cede retrocessions on behalf of the reinsurer, except that the reinsurance intermediary-manager may cede facultative retrocessions pursuant to obligatory faculative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for such retrocessions. The guidelines shall include a list of reinsurers with which such automatic agreements are in effect, and for each such reinsurer, the coverages and amounts or percentages that may be reinsured, and commission schedules;
b. Commit the reinsurer to participate in reinsurance syndicates;
c. Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he is appointed;
d. Without prior approval of the reinsurer, pay, or commit the reinsurer to pay, a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or one percent of the reinsurer's policyholders' surplus as of December 31 of the last complete calendar year;
e. Collect any payment from a retrocessionaire, or commit the reinsurer to any claim settlement with a retrocessionaire, without prior approval of the reinsurer. If prior approval is given, a report shall be promptly forwarded to the reinsurer;
f. Jointly employ an individual who is employed by the reinsurer unless the reinsurance intermediary-manager is under common control with the reinsurer subject to P.L.1970, c.22 (C.17:27A-1 et seq.); and
g. Appoint a sub-reinsurance intermediary-manager.
##### **§ 17:22E-14** Authorization as reinsurance intermediary-manager required {#sec-17-22e-14 omnilex-key=us-nj-statutes--title-17--17:22E-14}
14. A reinsurer shall not engage the services of any person to act as a reinsurance intermediary-manager on its behalf unless such person is authorized pursuant to section 4 of this act.
##### **§ 17:22E-15** Annual statement of financial condition to reinsurer {#sec-17-22e-15 omnilex-key=us-nj-statutes--title-17--17:22E-15}
15. A reinsurance intermediary-manager shall annually send a copy of statements of its financial condition to each reinsurer with which it transacts business. Such statements shall be prepared by an independent certified public accountant in a form acceptable to the commissioner.
##### **§ 17:22E-16** Adequacy of loss reserves {#sec-17-22e-16 omnilex-key=us-nj-statutes--title-17--17:22E-16}
16. If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually, or more frequently at the commissioner's discretion, obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. The loss reserve opinion shall be in the format and otherwise satisfy all requirements established by the commissioner for loss reserve opinions required to be submitted by licensed insurers in this State. This opinion shall be in addition to any other loss reserve certification required in this State.
##### **§ 17:22E-17** Binding authority for retrocessional contracts, reinsurance syndicates {#sec-17-22e-17 omnilex-key=us-nj-statutes--title-17--17:22E-17}
17. Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer who shall not be affiliated with the reinsurance intermediary-manager.
##### **§ 17:22E-18** Written notice of contract termination {#sec-17-22e-18 omnilex-key=us-nj-statutes--title-17--17:22E-18}
18. Within 15 days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of that termination to the commissioner. Notice of termination shall be on a form prescribed by the commissioner and shall indicate the date of termination and the reason therefor. Agency appointment shall not terminate until notice of termination has been received by the commissioner.
##### **§ 17:22E-19** Restrictions on appointment of board of directors {#sec-17-22e-19 omnilex-key=us-nj-statutes--title-17--17:22E-19}
19. A reinsurer shall not appoint to its board of directors any officer, director, employee, controlling shareholder or subproducer of its reinsurance intermediary-manager. This section shall not apply to relationships governed by P.L.1970, c.22 (C.17:27A-1 et seq.) or, if applicable, any laws governing business transacted by producer-controlled property and casualty insurers in this State.
##### **§ 17:22E-20** Examination of reinsurance intermediary {#sec-17-22e-20 omnilex-key=us-nj-statutes--title-17--17:22E-20}
20. A reinsurance intermediary shall be subject to examination by the commissioner. The commissioner shall have access to all books, bank accounts and records of the reinsurance intermediary in a form usable by the commissioner. A reinsurance intermediary-manager may be examined as if it were the reinsurer.
##### **§ 17:22E-21** Violations; penalties {#sec-17-22e-21 omnilex-key=us-nj-statutes--title-17--17:22E-21}
21. a. If the commissioner finds, after notice and opportunity for a hearing, that a reinsurance intermediary, insurer or reinsurer is in violation of any provision of this act, the commissioner may refuse to issue or renew its license, or may revoke or suspend its license.
b. In addition or as an alternative to any other penalty, the commissioner may:
(1) Impose a penalty of not more than $5,000 for a first violation, and not more than $10,000 for each subsequent violation, and in appropriate circumstances order restitution of moneys owed to any person and reimbursement of the costs of investigation and prosecution;
(2) If a violation was committed by the reinsurance intermediary, order the restitution to the insurer, reinsurer or rehabilitator or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer attributable to such violation.
c. If the commissioner finds that the interests of the public require that immediate action be taken prior to completion of the hearing, the making of a determination and the entry of a final order, he may enter an appropriate order to be effective pending completion of the hearing and entry of a final order. These orders may be entered on ex parte proofs if the proofs indicate that the commissioner's withholding of any action until completion of a full hearing will be harmful to the public interest. Orders issued pursuant to this subsection shall be subject to an application to vacate upon 10 days' notice, and a preliminary hearing on the ex parte order shall be held in any event within 20 days after it is entered. In the alternative, or in addition, the commissioner is authorized to institute a proceeding in the Superior Court, to be conducted in a summary manner, for an injunction against specified acts or conduct in aid of the proceedings pending before him, including temporary injunctions and interim restraints.
d. Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided by the laws of this State.
##### **§ 17:22E-22** Rights not restricted, limited {#sec-17-22e-22 omnilex-key=us-nj-statutes--title-17--17:22E-22}
22. Nothing contained in this act is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, creditors or other third parties or confer any rights to such persons.
##### **§ 17:22E-23** Rules, regulations {#sec-17-22e-23 omnilex-key=us-nj-statutes--title-17--17:22E-23}
23. The commissioner may promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), as may be necessary to effectuate the purposes of this act.
## **Chapter 23** {#struct-chapter-23}
##### **§ 17:23-1** Statements; format; preparation {#sec-17-23-1 omnilex-key=us-nj-statutes--title-17--17:23-1}
Every insurance company transacting business in this State shall annually, on or before March 1, file in the department a statement, subscribed and sworn to by its president and secretary, or, in their absence, be two of its principal officers, showing its financial condition at the close of business on December 31 of the year last preceding, and its business for that year in the format dopted by the National Association of Insurance Commissioners and in use at the time the statement is due. The annual statement shall be prepared in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners, and all applicable provisions of law. Additionally, every insurance company shall file quarterly statements in the format adopted by the National Association of Insurance Commissioners covering the periods ending on March 31, June 30, and September 30, which shall be filed within 45 days after each such date. Quarterly statements shall be confidential and shall not be subject to public inspection or copying pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.). All statements shall be submitted in the form and contain any additional matter the commissioner prescribes. The commissioner may also address any inquiries to the company of its officers in relation to its condition of affairs, or any matter connected with its transactions, and the officers of the company shall promptly reply in writing to all the inquiries. The commissioner may, for good cause, extend the time within which the statement or any part thereof may be filed. The annual and quarterly statements of a company of a foreign country shall embrace only its business and condition in the United States, and shall be subscribed and sworn to by its resident manager or principal representative in charge of its American business.
If an insurance company domiciled in this State makes a request in writing no more than 60 days prior to December 1, the commissioner shall, annually, in the month of December furnish to that company one or more blanks in the form of the statement adopted by the National Association of Insurance Commissioners and in use at the time furnished. The commissioner shall have power to make from time to time such modifications and additions in such form and the matters contained therein as he may deem desirable or necessary to ascertain the condition and affairs of the company.
##### **§ 17:23-2** Penalty for not filing annual statement {#sec-17-23-2 omnilex-key=us-nj-statutes--title-17--17:23-2}
A company neglecting to make and file its annual statement in the form and within the time provided by section 17:23-1 of this Title shall forfeit one hundred dollars ($100.00) for each day's neglect, to be recovered in a civil action; and upon notice by the commissioner to such effect its authority to do new business in this State shall cease while the default continues.
##### **§ 17:23-8** Short title {#sec-17-23-8 omnilex-key=us-nj-statutes--title-17--17:23-8}
This act shall be known and may be cited as the "Motor Vehicle Theft and Motor Vehicle Insurance Fraud Reporting--Immunity Act."
##### **§ 17:23-9** Definitions {#sec-17-23-9 omnilex-key=us-nj-statutes--title-17--17:23-9}
As used in this act:
a. "Authorized governmental agency" means the Department of Insurance, any law enforcement agency, or any agency or instrumentality of the State, county or municipality or of the Federal Government which is charged with the responsibility of investigating motor vehicle theft or motor vehicle insurance fraud.
b. "Information deemed important" means information requested by an authorized governmental agency.
c. "Insurer" means any insurance company writing insurance for motor vehicles or otherwise liable for any loss due to motor vehicle theft or motor vehicle insurance fraud in this State.
d. "Relevant" means having a tendency to make the existence of any fact that is of consequence to any investigation or determination of an issue more probable or less probable than it would be without the information.
##### **§ 17:23-10** Release of information by insurer to governmental agency {#sec-17-23-10 omnilex-key=us-nj-statutes--title-17--17:23-10}
Upon written request by an authorized governmental agency, an insurer or its authorized agent shall release to the requesting authorized governmental agency relevant information deemed important to the authorized governmental agency which the insurer may possess relating to a motor vehicle theft or motor vehicle insurance fraud. Relevant information may include, but is not limited to:
a. Insurance policy information relevant to the motor vehicle theft or motor vehicle insurance fraud under investigation, including any application for the policy;
b. Policy premium payment records which are available;
c. History of previous claims made by the insured;
d. Information relating to the investigation of the motor vehicle theft or motor vehicle insurance fraud, including statements of any person, proofs of loss and notice of loss.
##### **§ 17:23-11** Knowledge of theft or insurance fraud; notification to governmental agency {#sec-17-23-11 omnilex-key=us-nj-statutes--title-17--17:23-11}
a. When an insurer knows or has reason to know the identity of a person whom it has reason to believe committed a criminal or fraudulent act relating to a motor vehicle theft or motor vehicle insurance claim or has knowledge of such a criminal or fraudulent act which is reasonably believed not to have been reported to an authorized governmental agency, the insurer or its authorized agent shall notify an authorized governmental agency of such knowledge or reasonable belief and provide any additional information in accordance with section 3.
b. When an insurer provides an authorized governmental agency with notice pursuant to this section, it shall be deemed sufficient notice to all authorized governmental agencies for the purpose of this act.
c. Nothing in this section shall abrogate or impair the rights or powers created under section 3.
##### **§ 17:23-12** Release of information between governmental agencies {#sec-17-23-12 omnilex-key=us-nj-statutes--title-17--17:23-12}
An authorized governmental agency provided with information pursuant to section 3 or 4 of this act may release or provide that information to any other authorized governmental agency.
##### **§ 17:23-13** Request by insurer for information from governmental agency; civil actions {#sec-17-23-13 omnilex-key=us-nj-statutes--title-17--17:23-13}
An insurer providing information to an authorized governmental agency pursuant to section 3 or 4 of this act shall, with respect to a civil action, have the right to request relevant information from the authorized governmental agency, and receive within a reasonable time, not to exceed 30 days, the information requested, provided that the information is not otherwise privileged by law.
##### **§ 17:23-14** Privileged nature of furnished information {#sec-17-23-14 omnilex-key=us-nj-statutes--title-17--17:23-14}
Information furnished pursuant to this act shall be privileged and not a part of any public record. Except as may be required by law other than P.L.1963, c. 73 (C. 47:1A-1 et seq.), an authorized governmental agency or insurer or its authorized agent, which receives any information furnished pursuant to this act, shall not release that information to public inspection. The information shall not be subject to subpena duces tecum in a civil or criminal proceeding unless, after reasonable notice to the insurer or its authorized agent and the authorized governmental agency which has an interest in the information and a hearing, the court determines that the public interest and an ongoing investigation by the authorized governmental agency, insurer or its authorized agent will not be jeopardized by obedience to the subpena.
##### **§ 17:23-15** Civil liability {#sec-17-23-15 omnilex-key=us-nj-statutes--title-17--17:23-15}
No insurer or its authorized agent, authorized governmental agency or their respective employees shall be subject to any civil liability in a cause of action of any kind for releasing or receiving any information pursuant to sections 3, 4, 5, 6 or 7 of this act. Nothing herein abrogates or lessens the common and statutory law privileges and immunities of an insurer or its authorized agent or an authorized governmental agency or any of their respective employees.
##### **§ 17:23-16** Alcohol related claims; statistics {#sec-17-23-16 omnilex-key=us-nj-statutes--title-17--17:23-16}
a. Insurers authorized to do business in this State, who issue policies covering liquor law liability for insureds in this State, shall maintain separately statistics on their New Jersey loss experience due to alcohol related claims with respect to those policies for three years.
b. These statistics shall segregate the loss experience for those insureds which have an alcohol breath analyzer machine on their premises from those insureds who do not.
##### **§ 17:23-17** Report {#sec-17-23-17 omnilex-key=us-nj-statutes--title-17--17:23-17}
Annually, on or before the anniversary of the effective date of this act, the insurers to which section 1 applies shall report that statistical information to the Commissioner of Insurance in the manner which the commissioner may prescribe.
##### **§ 17:23-18** Examination of reports; report; recommendations {#sec-17-23-18 omnilex-key=us-nj-statutes--title-17--17:23-18}
a. The Commissioner of Insurance shall examine the reports required by this act and determine whether the loss experience due to alcohol related claims indicates that liquor law liability coverage is appropriate for rating into subclasses based on the presence and use or absence of alcohol breath analyzer machines on insureds' premises.
b. The commissioner shall issue a report on the examination and determination made in subsection a. of this section and make appropriate recommendations to the Governor and the Legislature within 180 days following the third anniversary of the effective date of this act.
##### **§ 17:23-19** National Automobile Theft Bureau {#sec-17-23-19 omnilex-key=us-nj-statutes--title-17--17:23-19}
a. Any insurer transacting automobile insurance in this State shall:
(1) report the theft or salvage of a motor vehicle to the National Automobile Theft Bureau (hereinafter referred to as the NATB) in accordance with the constitution and operating procedures of the NATB; and
(2) reimburse the NATB for the costs of the performance of its duties under its constitution and operating procedures in a manner to be determined by the governing board of the NATB.
b. The National Automobile Theft Bureau shall:
(1) receive a report of the theft or salvage of a motor vehicle made by an insurer under subsection a. of this section and shall include that information in the central index file which it maintains; and
(2) cooperate with an insurer who submits a report and with a law enforcement agency which is conducting an investigation and release information when appropriate and necessary which it has received on a claim or an investigation.
c. Any information provided to the NATB pursuant to this section shall be confidential and shall not be subject to public inspection. Such information shall not be subject to subpoena or subpoena duces tecum unless, after a notice and hearing, a court determines that an ongoing investigation would not be jeopardized by compliance with a subpoena or subpoena duces tecum.
d. An insurer, a law enforcement agency, or the NATB, or their agents or employees, shall not be subject to civil liability in a cause of action of any kind for conducting an investigation or providing or receiving any information which is required to be reported under subsection a. of this section.
##### **§ 17:23-20** Purpose of act {#sec-17-23-20 omnilex-key=us-nj-statutes--title-17--17:23-20}
1. The purpose of this act is to provide an effective and efficient system for examining the activities, operations, financial condition and affairs of all persons transacting the business of insurance in this State and all persons otherwise subject to the jurisdiction of the commissioner. The provisions of this act are intended to enable the commissioner to adopt a flexible system of examinations which directs resources as may be deemed appropriate and necessary for the administration of the insurance and insurance related laws of this State.
##### **§ 17:23-21** Definitions {#sec-17-23-21 omnilex-key=us-nj-statutes--title-17--17:23-21}
2. As used in this act:
"Commissioner" means the Commissioner of Insurance.
"Company" means any insurer or other person engaging in or proposing or attempting to engage in any transaction or kind of insurance or surety business and any person or group of persons who may otherwise be subject to the administrative, regulatory or taxing authority of the commissioner.
"Department" means the Department of Insurance.
"Examiner" means any individual or firm authorized by the commissioner to conduct an examination under this act.
"Insurer" means any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), or Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.).
"Person" means any individual, aggregation of individuals, trust, association, partnership or corporation, or any affiliate thereof.
##### **§ 17:23-22** Examination by commissioner {#sec-17-23-22 omnilex-key=us-nj-statutes--title-17--17:23-22}
3. a. The commissioner or any of his examiners may conduct an examination of the assets and liabilities, method of conducting business and all other affairs of any company as often as the commissioner in his sole discretion deems appropriate but shall at a minimum, conduct an examination of every insurer licensed in this State not less frequently than once every five years. In scheduling and determining the nature, scope and frequency of the examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants and other criteria as set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners and in effect when the commissioner exercises discretion under this section.
b. For purposes of completing an examination of any company under this act, the commissioner may examine or investigate any person, or the business of any person, insofar as such examination or investigation is, in the sole discretion of the commissioner, necessary or material to the examination of the company.
c. In lieu of an examination under this act of any foreign or alien insurer licensed in this State, the commissioner may accept an examination report on the company as prepared by the insurance department or other regulatory agency for the company's state of domicile or port-of-entry state until January 1, 1994. Thereafter, such reports may only be accepted if:
(1) the insurance department or other regulatory agency was at the time of the examination accredited under the National Association of Insurance Commissioners' Financial Regulation Standards and Accreditation Program; or
(2) the examination is performed under the supervision of an accredited insurance department or other regulatory agency or with the participation of one or more examiners who are employed by such an accredited state insurance department or other regulatory agency and who, after a review of the examination workpapers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their insurance department or other regulatory agency.
d. The reasonable expenses of any examination and any proceedings conducted under this act shall be fixed and determined by the commissioner, and he shall collect them from the company examined, which shall pay them on a presentation of an account of the expenses on such form as determined by the commissioner. If any company, after the examination, is adjudged insolvent by a court of competent jurisdiction, the expense of the examination, if unpaid, shall be ordered out of the assets of the company.
##### **§ 17:23-23** Examination procedures, regulations {#sec-17-23-23 omnilex-key=us-nj-statutes--title-17--17:23-23}
4. a. Upon determining that an examination should be conducted, the commissioner or the commissioner's designee shall issue an examination warrant appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners. The commissioner may also employ such other guidelines or procedures as the commissioner may deem appropriate.
b. Every company or person from whom information is sought, including its officers, directors and agents, shall provide, to the examiners appointed under subsection a. of this section, timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents and any or all computer or other recordings relating to the property, assets, business and affairs of the company being examined. The officers, directors, employees and agents of the company or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The commissioner may, after notice and opportunity for a hearing, suspend, revoke or refuse to renew any license or authority held by the company to engage in an insurance or other business subject to the commissioner's jurisdiction, if the company, by its officers, directors, employees or agents, refuses to submit to examination or to comply with any reasonable request of the examiners.
c. The commissioner or any of his examiners shall have the power to issue subpoenas, to administer oaths and to examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court.
d. When making an examination under this act, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the cost of which shall be borne by the company which is the subject of the examination.
e. Nothing contained in this act shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this State. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.
f. Nothing contained in this act shall be construed to limit the commissioner's authority to use any final or preliminary examination report, any examiner or company workpapers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action which the commissioner may, in his sole discretion, deem appropriate.
##### **§ 17:23-24** Examination reports {#sec-17-23-24 omnilex-key=us-nj-statutes--title-17--17:23-24}
5. a. All examination reports shall be comprised of only facts appearing upon the books, records, or other documents of the company, its officers, directors, employees or agents or other persons examined, or as ascertained from the testimony of its officers, directors, employees, agents or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonable warranted from the facts.
b. No later than 60 days following completion of the examination, the examiner in charge shall file with the department a verified written report of examination under oath. Upon receipt of the verified report, the department shall transmit a copy of the report to the company examined, together with a notice which shall afford the company examined a reasonable opportunity of not more than 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report.
c. Within 30 days of the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals, and any relevant portions of the examiner's workpapers and either:
(1) Adopt the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure such violation; or
(2) Reject the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation or information, and refiling pursuant to subsection a. of this section; or
(3) Call for an investigatory hearing with no less than 20 days' notice to the company for purposes of obtaining additional documentation, data, information and testimony.
d. (1) All determinations made pursuant to paragraph (1) of subsection c. of this section shall be accompanied by findings and conclusions resulting from the commissioner's consideration and review of the examination report, relevant examiner workpapers and any written submissions or rebuttals. Any such determination shall be served upon the company, together with a copy of the adopted examination report. Within 30 days of the issuance of the adopted report, the company shall file affidavits executed by each of its directors stating under oath that they have received a copy of the adopted report and related orders.
(2) Any hearing conducted under paragraph (3) of subsection c. of this section by the commissioner or an authorized representative of the commissioner, shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies or disputed issues apparent upon the face of the filed examination report or raised by or as a result of the commissioner's review of relevant workpapers or by the written submission or rebuttal of the company. Within 20 days of the conclusion of any such hearing, the commissioner shall make a determination pursuant to paragraph (1) of subsection c. of this section.
(a) The hearing shall proceed expeditiously with discovery by the company limited to the examiner's workpapers which tend to substantiate any assertions set forth in any written submission or rebuttal. The commissioner or his representative may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation whether under the control of the department, the company or other persons. Nothing contained in this section shall require the department to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency.
(b) The hearing shall proceed with the commissioner or his representative posing questions to the persons subpoenaed. Thereafter the company and the department may present testimony relevant to the investigation. Cross-examination shall be conducted only by the commissioner or his representative. The company and the department shall be permitted to make closing statements and may be represented by counsel of their choice.
e. (1) Upon the adoption of the examination report under paragraph (1) of subsection c. of this section, the commissioner may continue to hold the content of the examination report as private and confidential information for a period of 90 days except to the extent provided in subsection b. of this section
(2) Nothing contained in this act shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance department or other regulatory authority of this or any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as such agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this act.
(3) In the event the commissioner determines that regulatory action is appropriate as a result of any examination, he may initiate any proceedings or actions as provided by law.
f. All working papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this act shall be given confidential treatment and are not subject to subpoena and may not be made public by the commissioner or any other person, except to the extent provided in subsection e. of this section. Access may also be granted to the National Association of Insurance Commissioners. Such parties shall agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained.
##### **§ 17:23-25** Conflicts of interest for examiner {#sec-17-23-25 omnilex-key=us-nj-statutes--title-17--17:23-25}
6. No examiner shall be appointed by the commissioner if such examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this act. This section shall not be construed to automatically preclude an examiner from being:
a. A policyholder or claimant under an insurance policy;
b. A grantor of a mortgage or similar instrument on the examiner's residence to a regulated entity if done under customary terms and in the ordinary course of business;
c. An investment owner in shares of regulated diversified investment companies; or
d. A settlor or beneficiary of a "blind trust" into which any otherwise impermissible holdings have been placed. Notwithstanding the requirements of this section to the contrary, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though said persons may from time to time be similarly employed or retained by persons subject to examination under this act.
##### **§ 17:23-26** Immunity from liability; awards {#sec-17-23-26 omnilex-key=us-nj-statutes--title-17--17:23-26}
7. a. No cause of action shall arise nor shall any liability be imposed against the commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this act.
b. No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under this act, if such act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.
c. This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection a. of this section.
d. A person identified in subsection a. of this section shall be entitled to an award of attorney's fees and costs if he is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this act and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.
##### **§ 17:23-27** Purpose of sections C.17:23-27 through C.17:23-37. {#sec-17-23-27 omnilex-key=us-nj-statutes--title-17--17:23-27}
46. a. The purpose of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) is to provide the requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA) and provide guidance and instructions for filing an ORSA Summary Report with the Commissioner of Banking and Insurance.
b. The requirements of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) shall apply to all insurers domiciled in this State unless exempt pursuant to section 51 of P.L.2014, c.81 (C.17:23-32).
c. The Legislature finds and declares that the ORSA Summary Report shall contain confidential and sensitive information related to an insurer or insurance group's identification of risks material and relevant to the insurer or insurance group filing the report. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public. It is the intent of this Legislature that, notwithstanding any other law to the contrary, the ORSA Summary Report shall be a confidential document filed with the commissioner, that the ORSA Summary Report shall be shared only as stated herein and to assist the commissioner in the performance of his or her duties, and that in no event shall the ORSA Summary Report be subject to public disclosure.
##### **§ 17:23-28** Definitions. {#sec-17-23-28 omnilex-key=us-nj-statutes--title-17--17:23-28}
47. For the purposes of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37):
"Commissioner" means the Commissioner of Banking and Insurance.
"Insurance group" for the purpose of conducting an ORSA, means those insurers and affiliates included within an insurance holding company system as defined in P.L.1970, c.22 (C.17:27A-1 et seq.).
"Insurer" shall have the same meaning as set forth in section 2 of P.L.1993, c.236 (C.17:23-21), except that it shall not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
"Own Risk and Solvency Assessment" or "ORSA" means a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group's current business plan, and the sufficiency of capital resources to support those risks.
"ORSA Guidance Manual" means the current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the National Association of Insurance Commissioners (NAIC) and as amended from time to time. A change in the ORSA Guidance Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC.
"ORSA Summary Report" means a confidential high-level summary of an insurer or insurance group's ORSA.
##### **§ 17:23-29** Maintenance of risk management framework. {#sec-17-23-29 omnilex-key=us-nj-statutes--title-17--17:23-29}
48. An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.
##### **§ 17:23-30** ORSA conducted, process. {#sec-17-23-30 omnilex-key=us-nj-statutes--title-17--17:23-30}
49. Except as provided in section 51 of P.L.2014, c.81 (C.17:23-32), an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual. The ORSA shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.
##### **§ 17:23-31** Submission of ORSA Summary Report. {#sec-17-23-31 omnilex-key=us-nj-statutes--title-17--17:23-31}
50. a. Upon the commissioner's request, and no more than once each year, an insurer shall submit to the commissioner an ORSA Summary Report or any combination of reports that together contain the information described in the ORSA Guidance Manual applicable to the insurer or the insurance group of which it is a member. Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report or reports required by this subsection if the commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.
b. The report or reports shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process attesting to the best of the individual's belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA Summary Report and that a copy of the report has been provided to the insurer's board of directors or the appropriate committee thereof.
c. An insurer may comply with subsection a. of this section by providing the most recent and substantially similar report or reports provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the ORSA Guidance Manual. Any such report in a language other than English must be accompanied by a translation of that report into the English language.
##### **§ 17:23-32** Exemptions. {#sec-17-23-32 omnilex-key=us-nj-statutes--title-17--17:23-32}
51. a. An insurer shall be exempt from the requirements of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37), if:
(1) The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, less than $500,000,000; and
(2) The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, less than $1,000,000,000.
b. If an insurer qualifies for exemption pursuant to paragraph (1) of subsection a. of this section, but the insurance group of which the insurer is a member does not qualify for exemption pursuant to paragraph (2) of subsection a. of this section, then the ORSA Summary Report that may be required pursuant to section 50 of P.L.2014, c.81 (C.17:23-31), shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one ORSA Summary Report for any combination of insurers so long as any combination of reports includes every insurer within the insurance group.
c. If an insurer does not qualify for exemption pursuant to paragraph (1) of subsection a. of this section, but the insurance group of which it is a member qualifies for exemption pursuant to paragraph (2) of subsection a. of this section, then the only ORSA Summary Report that may be required pursuant to section 50 of P.L.2014, c.81 (C.17:23-31) shall be the report applicable to that insurer.
d. An insurer that does not qualify for exemption pursuant to subsection a. of this section may apply to the commissioner for a waiver from the requirements of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) based upon unique circumstances. In deciding whether to grant the insurer's request for waiver, the commissioner may consider the type and volume of business written, ownership and organizational structure, and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer's request for a waiver.
e. Notwithstanding the exemptions stated in this section:
(1) The commissioner may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA Summary Report based on unique circumstances including, but not limited to, the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests.
(2) The commissioner may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA Summary Report if:
(a) the insurer has risk-based capital for a company action level event as set forth in applicable regulations of this State governing risk-based capital;
(b) meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in applicable regulations of this State defining standards and commissioner's authority over companies deemed to be in hazardous financial condition; or
(c) otherwise exhibits qualities of a troubled insurer as determined by the commissioner.
f. If an insurer that qualifies for an exemption pursuant to subsection a. of this section subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer's most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year in which the threshold is exceeded to comply with the requirements of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37).
##### **§ 17:23-33** Preparation, review of ORSA Summary Report. {#sec-17-23-33 omnilex-key=us-nj-statutes--title-17--17:23-33}
52. a. The ORSA Summary Report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection b. of this section. Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.
b. The review of the ORSA Summary Report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multi-state or global insurers and insurance groups.
##### **§ 17:23-34** Documents, materials deemed proprietary and containing trade secrets. {#sec-17-23-34 omnilex-key=us-nj-statutes--title-17--17:23-34}
53. a. Documents, materials or other information, including the ORSA Summary Report, in the possession of or control of the Department of Banking and Insurance that are obtained by, created by or disclosed to the commissioner or any other person pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37), shall be recognized by this State as being proprietary and to contain trade secrets. All such documents, materials or other information shall be confidential by law and privileged, shall not be subject to P.L.1963, c.71 (C.47:1A-1 et seq.), shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials or other information public without the prior written consent of the insurer.
b. Neither the commissioner nor any person who received documents, materials or other ORSA-related information, through examination or otherwise, while acting under the authority of the commissioner or with whom such documents, materials or other information are shared pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection a. of this section.
c. In order to assist in the performance of the commissioner's regulatory duties, the commissioner:
(1) May, upon request, share documents, materials or other ORSA-related information, including the confidential and privileged documents, materials or information subject to subsection a. of this section, including proprietary and trade secret documents and materials with other state, federal and international financial regulatory agencies, including members of any supervisory college as defined in section 7 of P.L.2014, c.81 (C.17:27A-5.1), with the National Association of Insurance Commissioners (NAIC) and with any third-party consultants designated by the commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality; and
(2) May receive documents, materials or other ORSA-related information, including otherwise confidential and privileged documents, materials or information, including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in section 7 of P.L.2014, c.81 (C.17:27A-5.1), and from the NAIC, and shall maintain as confidential or privileged any documents, materials or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information.
(3) Shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37), consistent with this subsection c. that shall:
(a) Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37), including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality;
(b) Specify that ownership of information shared with the NAIC or a third-party consultant pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) remains with the commissioner, and the NAIC's or a third-party consultant's use of the information is subject to the direction of the commissioner;
(c) Prohibit the NAIC or third-party consultant from storing the information shared pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) in a permanent database after the underlying analysis is completed;
(d) Require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production;
(e) Require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37); and
(f) In the case of an agreement involving a third-party consultant, provide for the insurer's written consent.
d. The sharing of information and documents by the commissioner pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution and enforcement of the provisions of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37).
e. No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the commissioner pursuant to this section or as a result of sharing as authorized in sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37).
f. Documents, materials or other information in the possession or control of the NAIC or a third-party consultants pursuant to sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) shall be confidential by law and privileged, shall not be subject to P.L.1963, c.71 (C.47:1A-1 et seq.), shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
##### **§ 17:23-35** Failure to file ORSA Summary Report; penalty. {#sec-17-23-35 omnilex-key=us-nj-statutes--title-17--17:23-35}
54. Any insurer failing, without just cause, to timely file the ORSA Summary Report as required in sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) shall be required, after notice and opportunity for a hearing, to pay a penalty of up to $5,000 for each day's delay, to be recovered by the commissioner and the penalty so recovered shall be paid into the General Fund of this State.
##### **§ 17:23-36** Severability. {#sec-17-23-36 omnilex-key=us-nj-statutes--title-17--17:23-36}
55. If any provision of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37), or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) which can be given effect without the invalid provision or application, and to that end the provisions of sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through C.17:23-37) are severable.
##### **§ 17:23-37** First filing of ORSA Summary Report in 2015. {#sec-17-23-37 omnilex-key=us-nj-statutes--title-17--17:23-37}
56. The first filing of the ORSA Summary Report shall be in 2015 pursuant to section 50 of P.L.2014, c.81 (C.17:23-31).
##### **§ 17:23-38** Purpose of act. {#sec-17-23-38 omnilex-key=us-nj-statutes--title-17--17:23-38}
1. The purpose of this act is to:
a. Provide the Commissioner of Banking and Insurance a summary of an insurer's or insurance group's corporate governance structure, policies and practices to permit the commissioner to gain and maintain an understanding of the insurer's corporate governance framework.
b. Outline the requirements for completing a corporate governance annual disclosure with the commissioner.
c. Provide for the confidential treatment of the Corporate Governance Annual Disclosure and related information that will contain confidential and sensitive information related to an insurer's or insurance group's internal operations and proprietary and trade secret information which, if made public, could potentially cause the insurer or insurance group competitive harm or disadvantage.
##### **§ 17:23-39** Construction of act. {#sec-17-23-39 omnilex-key=us-nj-statutes--title-17--17:23-39}
2. Nothing in this act shall be construed to prescribe or impose corporate governance standards and internal procedures beyond that which is required under applicable State corporate law. Notwithstanding the foregoing, nothing in this act shall be construed to limit the commissioner's authority, or the rights or obligations of third parties, under applicable law, including, but not limited to, the authority under P.L.1993, c.236 (C.17:23-20 et seq.), section 5 of P.L.1970, c.22 (C.17:27A-5), and sections 7 and 8 of P.L.2014, c.81 (C.17:27A-5.1 and C.17:27A-5.2).
##### **§ 17:23-40** Applicability of act. {#sec-17-23-40 omnilex-key=us-nj-statutes--title-17--17:23-40}
3. The requirements of this act shall apply to all insurers domiciled in this State, including licensed organized delivery systems and reciprocal insurance exchanges.
##### **§ 17:23-41** Definitions relative to the corporate governance of insurers. {#sec-17-23-41 omnilex-key=us-nj-statutes--title-17--17:23-41}
4. As used in this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Corporate governance annual disclosure" or "disclosure" means a confidential report filed by the insurer or insurance group made in accordance with the requirements of this act.
"Department" means the Department of Banking and Insurance.
"Insurance group" means those insurers and affiliates included within an insurance holding company system as defined in section 1 of P.L.1970, c.22 (C.17:27A-1).
"Insurer" shall have the same meaning as set forth in section 1 of P.L.1970, c.22 (C.17:27A-1), and shall include any insurer or entity subject to rehabilitation or liquidation pursuant to P.L.1975, c.113 (C.17:30C-1 et seq.) and P.L.1992, c.65 (C.17B:32-31 et seq.), including licensed organized delivery systems and reciprocal insurance exchanges.
"NAIC" means the National Association of Insurance Commissioners.
"ORSA Summary Report" means the report filed in accordance with sections 46 through 56 of P.L.2014, c.81 (C.17:23-27 through 37).
##### **§ 17:23-42** Corporate governance annual disclosure. {#sec-17-23-42 omnilex-key=us-nj-statutes--title-17--17:23-42}
5. a. An insurer, or the insurance group of which the insurer is a member, shall, no later than June 1 of each calendar year, submit to the commissioner a corporate governance annual disclosure that contains the information described in subsection b. of section 6 of this act. Notwithstanding any request from the commissioner made pursuant to subsection c. of this section, if the insurer is a member of an insurance group, the insurer shall submit the report required by this section to the commissioner of the lead state, or group-wide supervisor as defined by section 8 of P.L.2014, c.81 (C.17:27A-5.2), if applicable, for the insurance group, in accordance with the laws of that state, as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the NAIC.
b. The disclosure shall include a signature of the insurer or insurance group's chief executive officer or corporate secretary attesting to the best of that individual's belief and knowledge that the insurer has implemented the corporate governance practices and that a copy of the disclosure has been provided to the insurer's board of directors or the appropriate committee thereof.
c. An insurer not required to submit a disclosure under this section shall do so upon the commissioner's request.
d. For purposes of completing the disclosure, the insurer or insurance group may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, depending upon how the insurer or insurance group has structured its system of corporate governance. The insurer or insurance group is encouraged to make the disclosures at the level at which the insurer's or insurance group's risk appetite is determined, or at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors are coordinated and exercised, or the level at which legal liability for failure of general corporate governance duties would be placed. If the insurer or insurance group determines the level of reporting based on these criteria, it shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in level of reporting.
e. The review of the disclosure and any additional requests for information shall be made through the lead state, or group-wide supervisor as defined by section 8 of P.L.2014, c.81 (C.17:27A-5.2), if applicable, as determined by the procedures within the most recent Financial Analysis Handbook adopted by the NAIC.
f. Insurers providing information substantially similar to the information required by this act in other documents provided to the commissioner, including proxy statements filed in conjunction with registration statements filed pursuant to section 3 of P.L.1970, c.22 (C.17:27A-3), known as "Form B filings," or other state or federal filings provided to this department shall not be required to duplicate that information in the disclosure, but shall only be required to cross reference the document in which the information is included.
##### **§ 17:23-43** Discretion over responses. {#sec-17-23-43 omnilex-key=us-nj-statutes--title-17--17:23-43}
6. a. The insurer or insurance group shall have discretion over the responses to the disclosure inquiries, provided the disclosure shall contain the material information necessary to permit the commissioner to gain an understanding of the insurer's or group's corporate governance structure, policies, and practices. The commissioner may request additional information that the commissioner deems material and necessary to provide the commissioner with a clear understanding of the corporate governance policies, the reporting or information system or controls implementing those policies.
b. Notwithstanding subsection a. of this section, the disclosure shall be prepared consistent with rules promulgated by the commissioner. Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.
##### **§ 17:23-44** Documents, materials, other information deemed proprietary and containing trade secrets. {#sec-17-23-44 omnilex-key=us-nj-statutes--title-17--17:23-44}
7. a. Documents, materials or other information including the disclosure, in the possession or control of the department that are obtained by, created by or disclosed to the commissioner or any other person under this act, shall be recognized by this State as being proprietary and to contain trade secrets. All such documents, materials or other information shall be confidential by law and privileged, shall not be subject to disclosure by the commissioner pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.), shall not be subject to subpoena, and shall not be subject to discovery from the commissioner or admissible in evidence in any private civil action. However, the commissioner shall be authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials or other information public without the prior written consent of the insurer. Nothing in this section shall be construed to require written consent of the insurer before the commissioner may share or receive confidential documents, materials or other disclosure-related information pursuant to subsection c. of this section to assist in the performance of the commissioner's regular duties.
b. Neither the commissioner nor any person who received documents, materials or other disclosure-related information, through examination or otherwise, while acting under the authority of the commissioner, or with whom those documents, materials or other information are shared pursuant to this act shall be subject to subpoena, permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection a. of this section.
c. In order to assist in the performance of the commissioner's regulatory duties, the commissioner may:
(1) upon request, share documents, materials or other disclosure-related information including the confidential and privileged documents, materials or information subject to subsection a. of this section, including proprietary and trade secret documents and materials. with other state, federal and international financial regulatory agencies, including members of any supervisory college as provided in section 7 of P.L.2014, c.81 (C.17:27A-5.1), with the NAIC, and with third party consultants pursuant to section 8 of this act, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the disclosure-related documents, material or other information and has verified in writing the legal authority to maintain confidentiality; and
(2) receive documents, materials or other disclosure-related information, including otherwise confidential and privileged documents, materials or information, including proprietary and trade-secret information or documents, from regulatory officials of other state, federal and international financial regulatory agencies, including members of any supervisory college as provided in section 7 of P.L.2014, c.81 (C.17:27A-5.1), and from the NAIC, and shall maintain as confidential or privileged any documents, materials or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information.
d. The sharing of information and documents by the commissioner pursuant to this act shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution and enforcement of the provisions of this act.
e. No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials or other disclosure-related information shall occur as a result of disclosure of disclosure-related information or documents to the commissioner under this section or as a result of sharing as authorized in this act.
##### **§ 17:23-45** Third-party consultants. {#sec-17-23-45 omnilex-key=us-nj-statutes--title-17--17:23-45}
8. a. The commissioner may retain, at the insurer's expense, third-party consultants, including attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the disclosure and related information or the insurer's compliance with this act.
b. Any persons retained under subsection a. of this section shall be under the direction and control of the commissioner and shall act in a purely advisory capacity.
c. The NAIC and third-party consultants shall be subject to the same confidentiality standards and requirements as the commissioner.
d. As part of the retention process, a third-party consultant shall verify to the commissioner, with notice to the insurer, that it is free of a conflict of interest and that it has internal procedures in place to monitor compliance with a conflict and to comply with the confidentiality standards and requirements of this act.
e. A written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to this act shall contain the following provisions and expressly require the written consent of the insurer prior to making public information provided under this act:
(1) Specific procedures and protocols for maintaining the confidentiality and security of disclosure-related information shared with the NAIC or a third-party consultant pursuant to this act;
(2) Procedures and protocols for sharing by the NAIC only with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the disclosure-related documents, materials or other information and has verified in writing the legal authority to maintain confidentiality;
(3) A provision specifying that ownership of the disclosure-related information shared with the NAIC or a third-party consultant remains with the department and the NAIC's or third-party consultant's use of the information is subject to the direction of the commissioner;
(4) A provision that prohibits the NAIC or a third-party consultant from storing the information shared pursuant to this act in a permanent database after the underlying analysis is completed;
(5) A provision requiring the NAIC or third-party consultant to provide prompt notice to the commissioner and to the insurer or insurance group regarding any subpoena, request for disclosure, or request for production of the insurer's disclosure-related information; and
(6) A requirement that the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this act.
##### **§ 17:23-46** Penalty for delay in filing disclosure. {#sec-17-23-46 omnilex-key=us-nj-statutes--title-17--17:23-46}
9. Any insurer failing, without just cause, to timely file the disclosure as required in this act shall be required, after notice and hearing, to pay a penalty of up to $5,000 for each day's delay, to be recovered by the commissioner.
##### **§ 17:23-47** Regulations. {#sec-17-23-47 omnilex-key=us-nj-statutes--title-17--17:23-47}
10. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and issue such orders as shall be necessary to carry out the provisions of this act.
##### **§ 17:23-48** Severability. {#sec-17-23-48 omnilex-key=us-nj-statutes--title-17--17:23-48}
11. If any provision of this act, other than section 7, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of this act which can be given effect without the invalid provision or application, and to that end the provisions of this act, with the exception of section 7, are severable.
##### **§ 17:23-49** Effective date. {#sec-17-23-49 omnilex-key=us-nj-statutes--title-17--17:23-49}
12. The requirements of this act shall become effective immediately upon enactment. The first filing of the disclosure shall be in 2020.
## **Chapter 23A** {#struct-chapter-23a}
##### **§ 17:23A-1** Insurers, persons covered by act {#sec-17-23a-1 omnilex-key=us-nj-statutes--title-17--17:23A-1}
The obligations imposed by this act shall apply to those insurance institutions, agents or insurance-support organizations which, on or after the effective date of this act:
(1) In the case of life, health or disability insurance:
(a) Collect, receive, or maintain information in connection with insurance transactions which pertains to natural persons who are residents of this State, or
(b) Engage in insurance transactions with applicants, individuals or policyholders who are residents of this State, and
(2) In the case of property or casualty insurance:
(a) Collect, receive or maintain information in connection with insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in this State, or
(b) Engage in insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in this State.
b. The rights granted by this act shall extend to:
(1) In the case of life, health or disability insurance, the following persons who are residents of this State:
(a) Natural persons who are the subject of information collected, received or maintained in connection with insurance transactions, and
(b) Applicants, individuals or policyholders who engage in or seek to engage in insurance transactions, and
(2) In the case of property or casualty insurance, the following persons:
(a) Natural persons who are the subject of information collected, received or maintained in connection with insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in this State, and
(b) Applicants, individuals or policyholders who engage in or seek to engage in insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in this State.
c. For purposes of this section, a person shall be considered a resident of this State if the person's last known mailing address, as shown in the records of the insurance institution, agent or insurance-support organization, is located in this State.
d. Notwithstanding subsections a. and b. above, this act shall not apply to information collected from the public records of a governmental authority and maintained by an insurance institution or its representatives for the purpose of insuring the title to real property located in this State.
##### **§ 17:23A-2** Definitions {#sec-17-23a-2 omnilex-key=us-nj-statutes--title-17--17:23A-2}
Definitions. As used in this act:
a. "Adverse underwriting decision" means:
(1) Any of the following actions with respect to insurance transactions involving insurance coverage which is individually underwritten for an individual:
(a) A declination of insurance coverage,
(b) A termination of insurance coverage,
(c) Failure of an agent to apply for insurance coverage with a specific insurance institution which the agent represents and which is requested by an applicant,
(d) In the case of a property or casualty insurance coverage:
(i Placement by an insurance institution or agent of a risk with a residual market mechanism or an unauthorized insurer, or
(ii) The charging of a higher rate on the basis of information which differs from that which the applicant or policyholder furnished,
(e) In the case of a life, health or disability insurance coverage, an offer to insure at a higher rate than the insurance institution's table of premium rates applicable to the age and class of risk of each person to be covered under that coverage and to the type and amount of insurance provided.
(2) Notwithstanding paragraph (1) above, the following actions, if permitted by law, shall not be considered adverse underwriting decisions but the insurance institution or agent responsible for their occurrence shall nevertheless provide the applicant or policyholder with the specific reason or reasons for their occurrence:
(a) The termination of an individual policy form on a class or Statewide basis,
(b) A declination of insurance coverage solely because such coverage is not available on a class or Statewide basis, or
(c) The rescission of a policy.
b. "Affiliate" or "affiliated" means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with another person.
c. "Agent" means any person defined in chapter 22 of Title 17 of the Revised Statutes, chapter 22 of Title 17B of the New Jersey Statutes and in R.S. 17:35-23.
d. "Applicant" means a person who seeks to contract for insurance coverage other than a person seeking group insurance that is not individually underwritten.
e. "Commissioner" means the Commissioner of Insurance.
f. "Consumer report" means any written, oral or other communication of information bearing on a natural person's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or expected to be used in connection with an insurance transaction.
g. "Consumer reporting agency" means any person who:
(1) Regularly engages, in whole or in part, in the practice of assembling or preparing consumer reports, for a monetary fee, and
(2) Obtains information primarily from sources other than insurance institutions, and (3) Furnishes consumer reports to other persons.
h. "Control," including the terms "controlled by" or "under common control with," means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract of goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.
i. "Declination of insurance coverage" means a denial, in whole or in part, by an insurance institution or agent of requested insurance coverage.
j. "Individual" means any natural person who:
(1) In the case of property or casualty insurance, is a past, present or proposed named insured or certificateholder;
(2) In the case of life, health or disability insurance, is a past, present or proposed principal insured or certificateholder;
(3) Is a past, present or proposed policyowner;
(4) Is a past or present applicant; or
(5) Is a past or present claimant; or
(6) Derived, derives or is proposed to derive insurance coverage under an insurance policy or certificate subject to this act.
k. "Institutional source" means any person or governmental entity that provides information about an individual to an agent, insurance institution or insurance support organization, other than:
(1) An agent,
(2) The individual who is the subject of the information, or
(3) A natural person acting in a personal capacity rather than in a business or professional capacity.
l. "Insurance institution" means any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance, including health maintenance organizations, medical service corporations, hospital service corporations, dental service corporations, automobile insurance plans and the New Jersey Automobile Full Insurance Underwriting Association as defined in section 2 of P.L. 1973, c. 337 (C. 26:2J-2), section 1 of P.L. 1940, c. 74 (C. 17:48A-1), section 1 of P.L. 1960, c. 1 (C. 17:48B-1), section 2 of P.L. 1968, c. 305 (C. 17:48C-2), P.L. 1970, c. 215 (C. 17:29D-1 et seq.) and P.L. 1983, c. 65 (C. 17:29A-33 et al.), respectively. "Insurance institution" shall not include agents or insurance-support organizations.
m. "Insurance-support organization" means:
(1) Any person who regularly engages, in whole or in part, in the practice of assembling or collecting information about natural persons for the primary purpose of providing the information to an insurance institution or agent for insurance transactions, including
(a) The furnishing of consumer reports or investigative consumer reports to an insurance institution or agent for use in connection with an insurance transaction, or
(b) The collection of personal information from insurance institutions, agents or other insurance-support organizations for the purpose of detecting or preventing fraud, material misrepresentation or material nondisclosure in connection with insurance underwriting or insurance claim activity. (2) Notwithstanding paragraph (1) of this subsection, the following persons shall not be considered "insurance-support organizations" for the purposes of this act: agents, government institutions, insurance institutions, medical-care institutions, medical professionals and rating organizations as defined in section 1 of P.L. 1944, c. 27 (C. 17:29A-1).
n. "Insurance transaction" means any transaction involving insurance primarily for personal, family or household needs rather than business or professional needs which entails:
(1) The determination of an individual's eligibility for an insurance coverage, benefit or payment, or
(2) The servicing of an insurance application, policy, contract or certificate.
o. "Investigative consumer report" means a consumer report or portion thereof in which information about a natural person's character, general reputation, personal characteristics or mode of living is obtained through personal interviews with the person's neighbors, friends, associates, acquaintances or others who may have knowledge concerning those items of information.
p. "Medical-care institution" means a facility or institution that is licensed to provide health care services to natural persons, including but not limited to hospitals, skilled nursing facilities, nursing facilities, home-health agencies, medical clinics, rehabilitation agencies, public health agencies or health maintenance organizations.
q. "Medical professional" means any person providing health care services to natural persons, including but not limited to a physician, podiatrist, dentist, nurse, optometrist, chiropractor, physical therapist, occupational therapist, pharmacist, psychologist, dietitian, psychiatric social worker or speech therapist.
r. "Medical-record information" means personal information which:
(1) Relates to an individual's physical or mental condition, medical history or medical treatment, and
(2) Is obtained from a medical professional or medical-care institution, from the individual, or from the individual's spouse, parent or legal guardian.
s. "Person" means any natural person, corporation, association, partnership or other legal entity.
t. "Personal information" means any individually identifiable information gathered in connection with an insurance transaction from which judgments can be made about an individual's character, habits, avocations, finances, occupation, general reputation, credit, health or any other personal characteristics. "Personal information" includes an individual's name and address and medical-record information but does not include privileged information.
u. "Policyholder" means any person who:
(1) In the case of individual property or casualty insurance, is a present named insured;
(2) In the case of individual life, health or disability insurance, is a present policyowner; or
(3) In the case of group insurance which is individually underwritten, is a present group certificateholder.
v. "Pretext interview" means an interview whereby a person, in an attempt to obtain information about a natural person, performs one or more of the following acts:
(1) Pretends to be someone he is not,
(2) Pretends to represent a person he is not in fact representing, (3) Misrepresents the true purpose of the interview, or
(4) Refuses to identify himself upon request.
w. "Privileged information" means any individually identifiable information that:
(1) Relates to a claim for insurance benefits or a civil or criminal proceeding involving an individual, and
(2) Is collected in connection with or in reasonable anticipation of a claim for insurance benefits or civil or criminal proceeding involving an individual; except that information otherwise meeting the requirements of this subsection shall nevertheless be considered personal information under this act if it is disclosed in violation of section 13 of this act.
x. "Residual market mechanism" means any insurance pooling mechanism, joint underwriting association, or reinsurance facility created pursuant to law or regulation which provides insurance coverage for any risk that is not insurable in the voluntary market.
y. "Termination of insurance coverage" or "termination of an insurance policy" means either a cancellation or nonrenewal of an insurance policy, in whole or in part, for any reason other than the failure to pay a premium as required by the policy.
z. "Unauthorized insurer" means an insurance institution that has not been granted a certificate of authority by the commissioner to transact the business of insurance in this State.
##### **§ 17:23A-3** Pretext interviews {#sec-17-23a-3 omnilex-key=us-nj-statutes--title-17--17:23A-3}
Pretext interviews. No insurance institution, agent or insurance-support organization shall use or authorize the use of pretext interviews to obtain information in connection with an insurance transaction; except that a pretext interview may be undertaken to obtain information from a person or institution that does not have a generally or statutorily recognized privileged relationship with the person about whom the information relates for the purpose of investigating a claim where, based upon specific information available for review by the commissioner, there is a reasonable basis for suspecting criminal activity, fraud, material misrepresentation or material nondisclosure in connection with the claim.
##### **§ 17:23A-4** Notice of insurance information practices {#sec-17-23a-4 omnilex-key=us-nj-statutes--title-17--17:23A-4}
Notice of insurance information practices. a. An insurance institution or agent shall provide a notice of information practices to all applicants or policyholders in connection with insurance transactions as follows:
(1) In the case of an application for insurance:
(a) At the time of the delivery of the insurance policy or certificate when personal information is collected only from the applicant or from public records, or
(b) At the time the collection of personal information is initiated when personal information is collected from a source other than the applicant or public records;
(2) In the case of a policy renewal, the policy renewal date, except that no notice shall be required in connection with a policy renewal if:
(a) Personal information is collected only from the policyholder or from public records, or
(b) A notice meeting the requirements of this section has been given within the previous 24 months; or
(3) In the case of a policy reinstatement or change in insurance benefits, at the time a request for a policy reinstatement or change in insurance benefits is received by the insurance institution, except that no notice shall be required if personal information is collected only from the policyholder or from public records.
b. The notice shall be in writing and shall state:
(1) Whether personal information may be collected from persons other than the individual or individuals proposed for coverage;
(2) The types of personal information that may be collected and the types of sources and investigative techniques that may be used to collect that information;
(3) The types of disclosure identified in subsections b., c., d., e., f., i., k., l. and n. of section 13 of this act and the circumstances under which the disclosure may be made without prior authorization; provided, however, only those circumstances need be described which occur with such frequency as to indicate a general business practice;
(4) A description of the rights established under sections 8 and 9 of this act and the manner in which these rights may be exercised; and
(5) That information obtained from a report prepared by an insurance-support organization may be retained by the insurance-support organization and disclosed to other persons.
c. In lieu of the notice prescribed in subsection b., the insurance institution or agent may provide an abbreviated notice informing the applicant or policyholder that:
(1) Personal information may be collected from persons other than the individual or individuals proposed for coverage,
(2) The information as well as other personal or privileged information subsequently collected by the insurance institution or agent may in certain circumstances be disclosed to third parties without authorization,
(3) A right of access and correction exists with respect to all personal information collected, and
(4) The notice prescribed in subsection b. of this section shall be furnished to the applicant or policyholder upon request.
d. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf.
##### **§ 17:23A-5** Marketing and research surveys {#sec-17-23a-5 omnilex-key=us-nj-statutes--title-17--17:23A-5}
Marketing and research surveys. An insurance institution or agent shall clearly specify those questions designed to obtain information solely for marketing or research purposes from an individual in connection with an insurance transaction.
##### **§ 17:23A-6** Content of disclosure authorization forms {#sec-17-23a-6 omnilex-key=us-nj-statutes--title-17--17:23A-6}
Content of disclosure authorization forms. Notwithstanding any other provision of law in this State, no insurance institution, agent or insurance-support organization shall utilize as its disclosure authorization form in connection with insurance transactions a form or statement which authorizes the disclosure of personal or privileged information about an individual to the insurance institution, agent or insurance-support organization unless the form or statement:
a. Is written in plain language;
b. Is dated;
c. Specifies the types of persons authorized to disclose information about the individual;
d. Specifies the nature of the information authorized to be disclosed;
e. Names the insurance institution or agent and identifies by generic reference representatives of the insurance institution to whom the individual is authorizing information to be disclosed;
f. Specifies the purposes for which the information is collected;
g. Specifies the length of time the authorization shall remain valid, which shall be no longer than:
(1) In the case of authorizations signed for the purpose of collecting information in connection with an application for an insurance policy, a policy reinstatement or a request for change in policy benefits,
(a) 30 months from the date the authorization is signed if the application or request involves life, health or disability insurance, or
(b) One year from the date the authorization is signed if the application or request involves property or casualty insurance;
(2) In the case of authorizations signed for the purpose of collecting information in connection with a claim for benefits under an insurance policy,
(a) The term of coverage of the policy if the claim is for a health insurance benefit, or
(b) The duration of the claim if the claim is not for a health insurance benefit; and
h. Advises the individual or a person authorized to act on behalf of the individual that the individual or the individual's authorized representative is entitled to receive a copy of the authorization form.
##### **§ 17:23A-7** Investigative consumer reports {#sec-17-23a-7 omnilex-key=us-nj-statutes--title-17--17:23A-7}
Investigative consumer reports. a. No insurance institution, agent or insurance-support organization may prepare or request an investigative consumer report about an individual in connection with an insurance transaction involving an application for insurance, a policy renewal, a policy reinstatement or a change in insurance benefits unless the insurance institution or agent informs the individual:
(1) That he may request to be interviewed in connection with the preparation of the investigative consumer report, and
(2) That upon a request pursuant to section 8, he is entitled to receive a copy of the investigative consumer report.
b. If any investigative consumer report is to be prepared by an insurance institution or agent, the insurance institution or agent shall institute reasonable procedures to conduct a personal interview requested by an individual.
c. If any investigative consumer report is to be prepared by an insurance-support organization, the insurance institution or agent desiring the report shall inform the insurance-support organization whether a personal interview has been requested by the individuaL. The insurance-support organization shall institute reasonable procedures to conduct the interviews, if requested.
##### **§ 17:23A-8** Access to recorded personal information {#sec-17-23a-8 omnilex-key=us-nj-statutes--title-17--17:23A-8}
Access to recorded personal information. a. If any individual, after proper identification, submits a written request to an insurance institution, agent or insurance-support organization for access to recorded personal information about the individual which is reasonably described by the individual and reasonably locatable and retrievable by the insurance institution, agent or insurance-support organization, the insurance institution, agent or insurance-support organization shall within 30 business days from the date the request is received:
(1) Inform the individual of the nature and substance of the recorded personal information in writing;
(2) Permit the individual to see and copy, in person, the recorded personal information pertaining to him or to obtain a copy of the recorded personal information by mail, whichever the individual prefers, unless the recorded personal information is in coded form, in which case an accurate translation in plain language shall be provided in writing;
(3) Disclose to the individual the identity, if recorded, of those persons to whom the insurance institution, agent or insurance-support organization has disclosed the personal information within two years prior to the request, and if the identity is not recorded, the names of those insurance institutions, agents, insurance-support organizations or other persons to whom such information is normally disclosed; and
(4) Provide the individual with a summary of the proceedings by which he may request correction, amendment or deletion of recorded personal information.
b. Any personal information provided pursuant to subsection a. above shall identify the source of the information if the source is an institutional source.
c. Medical record information supplied by a medical-care institution or medical professional and requested under subsection a., together with the identity of the medical professional or medical-care institution which provided the information, shall be supplied either directly to the individual or to a medical professional designated by the individual and licensed to provide medical care with respect to the condition to which the information relates, whichever the insurance institution, agent or insurance-support organization prefers. If it elects to disclose the information to a medical professional designated by the individual, the insurance institution, agent or insurance-support organization shall notify the individual, at the time of the disclosure, that it has provided the information to the medical professional.
d. Except for personal information provided under section 10, an insurance institution, agent or insurance-support organization may charge a reasonable fee to cover the costs incurred in providing a copy of recorded personal information to individuals.
e. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf. With respect to the copying and disclosure of recorded personal information pursuant to a request under subsection a., an insurance institution, agent or insurance-support organization may make arrangements with an insurance-support organization or a consumer reporting agency to copy and disclose recorded personal information on its behalf. f. The rights granted to individuals in this section shall extend to all natural persons to the extent information about them is collected and maintained by an insurance institution, agent or insurance-support organization in connection with an insurance transaction. The rights granted to all natural persons by this section shall not extend to information about them that relates to and is collected in connection with or in reasonable anticipation of a claim or civil or criminal proceeding involving them.
g. For the purposes of this section, the term "insurance-support organization" does not include a consumer reporting agency.
##### **§ 17:23A-9** Correction, amendment or deletion of recorded personal information {#sec-17-23a-9 omnilex-key=us-nj-statutes--title-17--17:23A-9}
Correction, amendment or deletion of recorded personal information. a. Within 30 business days from the date of receipt of a written request from an individual to correct, amend or delete any recorded personal information about the individual within its possession, an insurance institution, agent or insurance-support organization shall either:
(1) Correct, amend or delete the portion of the recorded personal information in dispute; or
(2) Notify the individual of:
(a) Its refusal to make the correction, amendment or deletion,
(b) The reasons for the refusal, and
(c) The individual's right to file a statement as provided in subsection c.
b. If the insurance institution, agent, or insurance-support organization corrects, amends or deletes recorded personal information in accordance with paragraph (1) of subsection a. above, the insurance institution, agent or insurance-support organization shall so notify the individual in writing and furnish the correction, amendment or fact of deletion to:
(1) Any person specifically designated by the individual who may have, within the preceding two years, received the recorded personal information;
(2) Any insurance-support organization whose primary source of personal information is insurance institutions if the insurance-support organization has systematically received the recorded personal information from the insurance institution within the preceding seven years; except that the correction, amendment or fact of deletion need not be furnished if the insurance-support organization no longer maintains recorded personal information about the individual; and
(3) Any insurance-support organization that furnished the personal information that has been corrected, amended or deleted.
c. Whenever an individual disagrees with an insurance institution's, agent's or insurance-support organization's refusal to correct, amend or delete recorded personal information, the individual shall be permitted to file with the insurance institution, agent or insurance-support organization:
(1) A concise statement setting forth what the individual thinks is the correct, relevant or fair information, and
(2) A concise statement of the reasons why the individual disagrees with the insurance institution's, agent's or insurance-support organization's refusal to correct, amend or delete recorded personal information.
d. In the event an individual files either statement as described in subsection c. above, the insurance institution, agent or support organization shall:
(1) File the statement with the disputed personal information and provide a means by which anyone reviewing the disputed personal information will be made aware of the individual's statement and have access to it, and
(2) In any subsequent disclosure by the insurance institution, agent or support organization of the recorded personal information that is the subject of disagreement, clearly identify the matter or matters in dispute and provide the individual's statement along with the recorded personal information being disclosed, and (3) Furnish the statement to the persons and in the manner specified in subsection b. above.
e. The rights granted to individuals in this section shall extend to all natural persons to the extent information about them is collected and maintained by an insurance institution, agent or insurance-support organization in connection with an insurance transaction. The rights granted to all natural persons by this section shall not extend to information about them that relates to and is collected in connection with or in reasonable anticipation of a claim or civil or criminal proceeding involving them.
f. For the purposes of this section, the term "insurance-support organization" does not include a consumer reporting agency.
##### **§ 17:23A-10** Reasons for adverse underwriting decisions {#sec-17-23a-10 omnilex-key=us-nj-statutes--title-17--17:23A-10}
Reasons for adverse underwriting decisions. a. In the event of an adverse underwriting decision the insurance institution or agent responsible for the decision shall:
(1) Either provide the applicant, policyholder or individual proposed for coverage with the specific reason or reasons for the adverse underwriting decision in writing or advise the person that upon written request he may receive the specific reason or reasons in writing, and
(2) Provide the applicant, policyholder or individual proposed for coverage with a summary of the rights established under subsection b. of this section and sections 8 and 9 of this act.
b. Upon receipt of a written request within 90 business days from the date of the mailing of notice or other communication of an adverse underwriting decision to an applicant, policyholder or individual proposed for coverage, the insurance institution or agent shall furnish to the person within 21 business days from the date of receipt of the written request:
(1) The specific reason or reasons for the adverse underwriting decision, in writing, if that information was not initially furnished in writing pursuant to paragraph (1) of subsection a.;
(2) The specific items of personal and privileged information that support those reasons, except that:
(a) The insurance institution or agent shall not be required to furnish specific items of privileged information if it has a reasonable suspicion, based upon specific information available for review by the commissioner, that the applicant, policyholder or individual proposed for coverage has engaged in criminal activity, fraud, material misrepresentation or material nondisclosure in connection with insurance transactions or claims, and
(b) Specific items of medical-record information supplied by a medical-care institution or medical professional shall be disclosed either directly to the individual about whom the information relates or to a medical professional designated by the individual and licensed to provide medical care with respect to the condition to which the information relates, whichever the insurance institution or agent prefers; and
(3) The names and addresses of the institutional sources that supplied the specific items of information pursuant to paragraph (2) of subsection b., except that the identity of any medical professional or medical-care institution shall be disclosed either directly to the individual or to the designated medical professional, whichever the insurance institution or agent prefers.
c. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf.
d. When an adverse underwriting decision results solely from an oral request or inquiry, the explanation of reasons and summary of rights required by subsection a. may be given orally.
##### **§ 17:23A-11** Information concerning previous adverse underwriting decisions {#sec-17-23a-11 omnilex-key=us-nj-statutes--title-17--17:23A-11}
Information concerning previous adverse underwriting decisions. No insurance institution, agent or insurance-support organization may seek information in connection with an insurance transaction concerning:
a. Any previous adverse underwriting decision experienced by an individual, or
b. Any previous insurance coverage obtained by an individual through a residual market mechanism, unless the inquiry also requests the reasons for any previous adverse underwriting decision or the reasons why insurance coverage was previously obtained through a residual market mechanism.
##### **§ 17:23A-12** Previous adverse underwriting decisions {#sec-17-23a-12 omnilex-key=us-nj-statutes--title-17--17:23A-12}
Previous adverse underwriting decisions. No insurance institution or agent may base an adverse underwriting decision in whole or in part:
a. On the fact of a previous adverse underwriting decision or on the fact that an individual previously obtained insurance coverage through a residual market mechanism; except that an insurance institution or agent may base an adverse underwriting decision on further information obtained from an insurance institution or agent responsible for a previous adverse underwriting decision;
b. On personal information received from an insurance-support organization whose primary source of information is insurance institutions; except that an insurance institution or agent may base an adverse underwriting decision on further personal information obtained as the result of information received from the insurance-support organization.
##### **§ 17:23A-13** Disclosure limitations and conditions {#sec-17-23a-13 omnilex-key=us-nj-statutes--title-17--17:23A-13}
Disclosure limitations and conditions. An insurance institution, agent or insurance-support organization shall not disclose any personal or privileged information about an individual collected or received in connection with an insurance transaction unless the disclosure is:
a. With the written authorization of the individual, provided:
(1) If the authorization is submitted by another insurance institution, agent or insurance-support organization, the authorization meets the requirements of section 6 of this act, or
(2) If the authorization is submitted by a person other than an insurance institution, agent or insurance-support organization, the authorization is:
(a) Dated,
(b) Signed by the individual, and
(c) Obtained one year or less prior to the date a disclosure is sought pursuant to this subsection;
b. To a person other than an insurance institution, agent or insurance-support organization, provided the disclosure is reasonably necessary:
(1) To enable the person to perform a business, professional or insurance function for the disclosing insurance institution, agent or insurance-support organization, and the person agrees not to disclose the information further without the individual's written authorization unless the further disclosure:
(a) Would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization, or
(b) Is reasonably necessary for the person to perform its function for the disclosing insurance institution, agent or insurance-support organization; or
(2) To enable the person to provide information to the disclosing insurance institution, agent or insurance-support organization for the purpose of:
(a) Determining an individual's eligibility for an insurance benefit or payment, or
(b) Detecting or preventing criminal activity, fraud, material misrepresentation or material nondisclosure in connection with an insurance transaction;
c. To an insurance institution, agent, insurance-support organization or self-insurer, if the information disclosed is limited to that which is reasonably necessary:
(1) To detect or prevent criminal activity, fraud, material misrepresentation or material nondisclosure in connection with insurance transactions, or
(2) For either the disclosing or receiving insurance institution, agent or insurance-support organization to perform its functions in connection with an insurance transaction involving the individual;
d. To a medical-care institution or medical professional for the purpose of:
(1) Verifying insurance coverage or benefits;
(2) Informing an individual of a medical problem of which the individual may not be aware; or
(3) Conducting an operations or services audit, provided only that information is disclosed as is reasonably necessary to accomplish the foregoing purposes; or
e. To an insurance regulatory authority; or
f. To a law enforcement or other governmental authority: (1) To protect the interests of the insurance institution, agent or insurance-support organization in preventing or prosecuting the perpetration of fraud upon it, or
(2) If the insurance institution, agent or insurance-support organization reasonably believes that illegal activities have been conducted by the individual;
g. Otherwise permitted or required by law;
h. In response to a facially valid administrative or judicial order, including a search warrant or subpena;
i. Made for the purpose of conducting actuarial or research studies, provided:
(1) No individual may be identified in any actuarial or research report,
(2) Materials allowing the individual to be identified are returned or destroyed as soon as they are no longer needed, and
(3) The actuarial or research organization agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization;
j. To a party or a representative of a party to a proposed or consummated sale, transfer, merger or consolidation of all or part of the business of the insurance institution, agent or insurance-support organization, except that:
(1) Prior to the consummation of the sale, transfer, merger or consolidation only such information is disclosed as is reasonably necessary to enable the recipient to make business decisions about the purchase, transfer, merger or consolidation, and
(2) The recipient agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization;
k. To a person whose only use of such information will be in connection with the marketing of a product or service, if:
(1) No medical-record information, privileged information, or personal information relating to an individual's character, personal habits, mode of living or general reputation is disclosed, and no classification derived from that information is disclosed,
(2) The individual has been given an opportunity to indicate that he does not want personal information disclosed for marketing purposes and has given no indication that he does not want the information disclosed, and
(3) The person receiving the information agrees not to use it except in connection with the marketing of a product or service;
l. To an affiliate whose only use of the information will be in connection with an audit of the insurance institution or agent or the marketing of an insurance product or service, if the affiliate agrees not to disclose the information for any other purpose or to unaffiliated persons;
m. By a consumer reporting agency, if the disclosure is to a person other than an insurance institution or agent;
n. To a group policyholder for the purpose of reporting claims experience or conducting an audit of the insurance institution's or agent's operations or services, if the information disclosed is reasonably necessary for the recipient to conduct the review or audit;
o. To a professional peer review organization for the purpose of reviewing the services or conduct of a medical-care institution or medical professional; p. To a governmental authority for the purpose of determining the individual's eligibility for health benefits for which the governmental authority may be liable;
q. To a certificateholder or policyholder for the purpose of providing information regarding the status of an insurance transaction; or
r. To a lienholder, mortgagee, assignee, lessor or other person shown on the records of an insurance institution or agent as having a legal or beneficial interest in a policy of insurance, provided:
(1) No medical-record information is disclosed unless the disclosure would otherwise be permitted by this section of this act; and
(2) The information disclosed is limited to that reasonably necessary to permit the person to protect its interests in the policy.
##### **§ 17:23A-13.1** Notification of test results by insurer to applicants; "reportable communicable disease" defined. {#sec-17-23a-13.1 omnilex-key=us-nj-statutes--title-17--17:23A-13.1}
1. An insurer who requires an applicant for insurance to submit to medical testing as a condition of issuing, extending or renewing the insurance shall obtain the applicant's written consent for the test. If in the course of the testing the insurer determines that the applicant has a reportable communicable disease, the insurer shall promptly notify the applicant of the determination and recommend that the applicant contact a physician or other medical professional regarding the significance of the test result. The insurer shall also promptly provide the Department of Health and a physician or other medical professional designated by the applicant with a copy of the results of the test. The provisions of this act shall not be construed to require a physician or other medical professional who receives a copy of the test result to initiate contact with the applicant regarding the test result.
The insurer shall provide the notification required pursuant to this section regardless of whether the existence of the disease will result in an adverse underwriting decision for the applicant.
For the purposes of this act, "reportable communicable disease" means those diseases required to be reported to the Department of Health pursuant to N.J.A.C.8:57-1.3 through 8:57-1.6 and N.J.A.C.8:57-2.2 and 8:57-2.3.
##### **§ 17:23A-13.2** Regulations. {#sec-17-23a-13.2 omnilex-key=us-nj-statutes--title-17--17:23A-13.2}
2. The Commissioner of Banking and Insurance, in consultation with the Commissioner of Health, shall adopt regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) which establish procedures that insurers shall use to notify applicants of test results pursuant to this act.
##### **§ 17:23A-13.3** Disclosure of information relative to victim of domestic violence prohibited; exceptions. {#sec-17-23a-13.3 omnilex-key=us-nj-statutes--title-17--17:23A-13.3}
3. An insurer or insurance producer shall not disclose any personal or privileged information collected or received in connection with an insurance transaction regarding an individual's status as a victim of domestic violence or a domestic violence-related condition as defined in section 1 of P.L.2003, c.41 (C.17:29B-16), or the individual's status as an employer of a victim of domestic violence, unless the disclosure is:
a. To the individual or another person with the written authorization of the individual;
b. To a licensed physician or health care provider for the direct provision of health care services with the written authorization of the individual;
c. Ordered by a court of competent jurisdiction;
d. Necessary to perform a valid business purpose, including the transfer of personal or privileged information that cannot be reasonably segregated without undue hardship, provided that the recipient of the information has executed a written agreement with the insurer or insurance producer and the disclosure is for the benefit of the individual. The disclosure shall only be made to the following:
(1) A reinsurer who seeks to reinsure a policy covering the individual and cannot write or satisfy the reinsurer's obligations under a reinsurance agreement without the disclosure;
(2) A party to a proposed or consummated sale, transfer, merger or consolidation of all or part of the business of an insurer or insurance producer;
(3) A medical or claims professional contracting with the insurer or insurance producer, when necessary, to process an application, perform the insurer or insurance producer's duties under a policy, or protect the safety or privacy of the individual; or
(4) A person, other than the insurer or insurance producer, to enable the person to transact business with the disclosing insurer or insurance producer, if the business cannot be transacted without the individual's address and telephone number, and the person agrees not to disclose the information further without the individual's written authorization;
e. To an attorney for the purpose of representing the insurer or insurance producer in a judicial matter, provided that the insurer or insurance producer informs the attorney of its obligations under this section and requests the attorney to exercise due diligence in preventing the disclosure of the information, unless disclosure is reasonably necessary to enable the attorney to effectively represent the insurer or insurance producer;
f. To a policyholder or assignee, in the course of delivering an insurance policy, if the policy contains information about the individual's status as a victim of domestic violence or domestic violence-related condition or an employer of a victim of domestic violence;
g. To any other entity as ordered by the commissioner; or
h. Otherwise required by law.
As used in this section, "individual" shall have the same meaning as defined in section 2 of P.L.1985, c.179 (C.17:23A-2).
##### **§ 17:23A-14** Power of commissioner {#sec-17-23a-14 omnilex-key=us-nj-statutes--title-17--17:23A-14}
Power of commissioner. a. The commissioner shall have power to examine and investigate into the affairs of every insurance institution or agent doing business in this State to determine whether the insurance institution or agent has been or is engaged in any conduct in violation of this act.
b. The commissioner shall have the power to examine and investigate into the affairs of every insurance-support organization acting on behalf of an insurance institution or agent which either transacts business in this State or transacts business outside this State that has an effect on a person residing in this State in order to determine whether the insurance-support organization has been or is engaged in any conduct in violation of this act.
##### **§ 17:23A-15** Hearings, witnesses, appearances, production of books and service of process {#sec-17-23a-15 omnilex-key=us-nj-statutes--title-17--17:23A-15}
Hearings, witnesses, appearances, production of books and service of process. a. Whenever the commissioner has reason to believe that an insurance institution, agent or insurance-support organization has been or is engaged in conduct in this State which violates this act, or if the commissioner believes that an insurance-support organization has been or is engaged in conduct outside this State which has an effect on a person residing in this State and which violates this act, the commissioner shall issue and serve upon the insurance institution, agent or insurance-support organization a statement of charges and notice of hearing to be held at a time and place fixed in the notice. The date for the hearing shall be not less than 30 days after the date of service.
b. At the time and place fixed for the hearing the insurance institution, agent or insurance-support organization charged shall have an opportunity to answer the charges against it and present evidence on its behalf. Upon good cause shown, the commissioner shall permit any adversely affected person to intervene, appear and be heard at the hearing by counsel or in person.
c. At any hearing conducted pursuant to this section the commissioner may administer oaths, examine and cross-examine witnesses and receive oral and documentary evidence. The commissioner shall have the power to subpena witnesses, compel their attendance and require the production of books, papers, records, correspondence and other documents which are relevant to the hearing. A stenographic record of the hearing shall be made upon the request of any party or at the discretion of the commissioner. If no stenographic record is made and if judicial review is sought, the commissioner shall prepare a statement of the evidence for use on review. Hearings conducted under this section shall be governed by the same rules of evidence and procedure applicable to administrative proceedings conducted pursuant to the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.).
d. Statements of charges, notices, orders and other process of the commissioner under this act may be served by anyone duly authorized to act on behalf of the commissioner. Service of process may be completed in the manner provided by law for service of process in civil actions or by registered mail. A copy of the statement of charges, notice, order or other process shall be provided to the person or persons whose rights under this act have been allegedly violated. A verified return setting forth the manner of service, or return postcard receipt in the case of registered mail, shall be sufficient proof of service.
##### **§ 17:23A-16** Service of process--insurance-support organizations {#sec-17-23a-16 omnilex-key=us-nj-statutes--title-17--17:23A-16}
Service of process--insurance-support organizations. For the purpose of this act, an insurance-support organization transacting business outside this State which has an effect on a person residing in this State shall be deemed to have appointed the commissioner to accept service of process on its behalf, if the commissioner causes a copy of such service to be mailed forthwith by registered mail to the insurance-support organization at its last known principal place of business. The return postcard receipt for the mailing shall be sufficient proof that the same was properly mailed by the commissioner.
##### **§ 17:23A-17** Cease and desist orders and reports {#sec-17-23a-17 omnilex-key=us-nj-statutes--title-17--17:23A-17}
Cease and desist orders and reports. a. If, after a hearing pursuant to section 15, the commissioner determines that the insurance institution, agent or insurance-support organization charged has engaged in conduct or practices in violation of this act, the commissioner shall reduce his findings to writing and shall issue and cause to be served upon the insurance institution, agent or insurance-support organization a copy of the findings and an order requiring the insurance institution, agent or insurance-support organization to cease and desist from the conduct or practices constituting a violation of this act.
b. If, after a hearing pursuant to section 15, the commissioner determines that the insurance institution, agent or insurance-support organization charged has not engaged in conduct or practices in violation of this act, the commissioner shall prepare a written report which sets forth findings of fact and conclusions of law. The report shall be served upon the insurance institution, agent or insurance-support organization charged and upon the persons, if any, whose rights under this act were allegedly violated.
c. Until the expiration of the time allowed under section 19 of this act for filing a petition for review or until the petition is actually filed, whichever occurs first, the commissioner may modify or set aside any order or report issued under this section. After the expiration of the time allowed under section 19 of this act for filing a petition for review, if no petition has been duly filed, the commissioner may, after notice and opportunity for hearing, alter, modify or set aside, in whole or in part, any order or report issued under this section whenever conditions of fact or law warrant such action or if the public interest so requires.
##### **§ 17:23A-18** Penalties {#sec-17-23a-18 omnilex-key=us-nj-statutes--title-17--17:23A-18}
Penalties. a. In any case where a hearing pursuant to section 15 results in the finding of a knowing violation of this act, the commissioner may, in addition to the issuance of a cease and desist order as prescribed in section 17, order payment of a monetary penalty of not more than $500.00 for each violation but not to exceed $10,000.00 in the aggregate for multiple violations.
b. Any person who violates a cease and desist order of the commissioner under section 17 of this act may, after notice and hearing and upon order of the commissioner, be subject to one or more of the following penalties, at the discretion of the commissioner:
(1) A monetary fine of not more than $10,000.00 for each violation, or
(2) A monetary fine of not more than $50,000.00 if the commissioner finds that violations have occurred with such frequency as to constitute a general business practice, or
(3) Suspension or revocation of any insurance institution's or agent's license.
##### **§ 17:23A-19** Judicial review of orders and reports {#sec-17-23a-19 omnilex-key=us-nj-statutes--title-17--17:23A-19}
Judicial review of orders and reports. a. Any person subject to an order of the commissioner under section 17 or section 18 or any person whose rights under this act were allegedly violated may obtain a review of any order or report of the commissioner by filing in the Superior Court, Appellate Division, within 45 days from the date of the service of the order or report, a written petition requesting that the order or report of the commissioner be set aside. A copy of the petition shall be simultaneously served upon the commissioner, who shall forthwith certify and file in the court a transcript of the entire record of the proceeding giving rise to the order or report which is the subject of the petition. Upon the filing of the petition and the transcript, the Superior Court, Appellate Division, shall have jurisdiction to make and enter a decree modifying, affirming or reversing any order or report of the commissioner, in whole or in part. The findings of the commissioner as to the facts supporting any order or report, if supported by clear and convincing evidence, shall be conclusive.
b. To the extent an order or report of the commissioner is affirmed, the court shall issue its own order commanding obedience to the terms of the order or report of the commissioner. If any party affected by an order or report of the commissioner shall apply to the court for leave to produce additional evidence and shall show to the satisfaction of the court that the additional evidence is material and that there are reasonable grounds for the failure to produce this evidence in prior proceedings, the court may order the additional evidence to be taken before the commissioner in a manner and upon those terms and conditions as the court may deem proper. The commissioner may modify his findings of fact or make new findings by reason of the additional evidence so taken and shall file modified or new findings along with any recommendation, if any, for the modification or revocation of a previous order or report. If supported by clear and convincing evidence, the modified or new findings shall be conclusive as to the matters contained therein.
c. An order or report issued by the commissioner under section 17 or 18 shall become final:
(1) Upon the expiration of the time allowed for the filing of a petition for review, if no such petition has been duly filed; except that the commissioner may modify or set aside an order or report to the extent provided in subsection c. of section 17; or
(2) Upon a final decision of the Superior Court, Appellate Division, if the court directs that the order or report of the commissioner be affirmed or the petition for review is dismissed.
d. No order or report of the commissioner under this act or order of a court to enforce the same shall in any way relieve or absolve any person affected by the order or report from any liability under any law of this State.
##### **§ 17:23A-20** Individual remedies {#sec-17-23a-20 omnilex-key=us-nj-statutes--title-17--17:23A-20}
Individual remedies. a. If any insurance institution, agent or insurance-support organization fails to comply with section 8, 9 or 10 of this act with respect to the rights granted under those sections, any person whose rights are violated may apply to the Superior Court of this State, or any other court of competent jurisdiction, for appropriate equitable relief.
b. An insurance institution, agent or insurance-support organization which discloses information in violation of section 13 of this act shall be liable for damages sustained by the individual about whom the information relates; except that no individual shall be entitled to a monetary award which exceeds the actual damages sustained by the individual as a result of a violation of section 13 of this act.
c. In any action brought pursuant to this section, the court may award the costs of the action and reasonable attorney's fees to the prevailing party.
d. An action under this section shall be brought within two years from the date the alleged violation is or should have been discovered.
e. Except as specifically provided in this section, there shall be no remedy or recovery available to individuals, in law or in equity, for occurrences constituting a violation of any provision of this act.
##### **§ 17:23A-21** Immunity {#sec-17-23a-21 omnilex-key=us-nj-statutes--title-17--17:23A-21}
Immunity. No cause of action in the nature of defamation, invasion of privacy or negligence shall arise against any person for disclosing personal or privileged information in accordance with this act, nor shall such a cause of action arise against any person for furnishing personal or privileged information to an insurance institution, agent or insurance-support organization; except this section shall provide no immunity for disclosing or furnishing false information with malice or willful intent to injure any person.
##### **§ 17:23A-22** Obtaining information under false pretenses {#sec-17-23a-22 omnilex-key=us-nj-statutes--title-17--17:23A-22}
Obtaining information under false pretenses. Any person who knowingly and willfully obtains information about an individual from an insurance institution, agent or insurance-support organization under false pretenses is guilty of a crime of the fourth degree.
## **Chapter 23B** {#struct-chapter-23b}
##### **§ 17:23B-1** Definitions {#sec-17-23b-1 omnilex-key=us-nj-statutes--title-17--17:23B-1}
1. For purposes of this act:
"Commissioner" means the Commissioner of Insurance.
"Department" means the Department of Insurance.
"Insurer" means:
a. A corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), or Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.);
b. Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
c. Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
d. Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et al.); and
e. Any dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.).
"NAIC" means the National Association of Insurance Commissioners.
##### **§ 17:23B-2** Filing of information with NAIC {#sec-17-23b-2 omnilex-key=us-nj-statutes--title-17--17:23B-2}
2. a. Every insurer authorized to do business in this State shall annually, on or before March 1 of each year, file with the NAIC a copy of its annual statement of financial condition, along with such additional filings, as prescribed by the commissioner pursuant to law for the preceding year. The information filed with the NAIC shall be in the same form and detail as that required by the commissioner and shall include the signed jurat page and the actuarial certification. Any amendments and addendums to the annual statement of financial condition and any other financial information subsequently filed with the commissioner, including, but not limited to, quarterly financial statements, shall also be filed with the NAIC at the time this information is filed with the commissioner.
b. Foreign insurers that are domiciled in a state which has a law substantially similar to subsection a. of this section shall be deemed in compliance with this section.
c. The commissioner may require other entities which are required to file financial information with the commissioner to file such information with the NAIC.
##### **§ 17:23B-3** Immunity from civil liability {#sec-17-23b-3 omnilex-key=us-nj-statutes--title-17--17:23B-3}
3. Members of the NAIC, their duly authorized committees, subcommittees, and task forces, their delegates, NAIC employees, and all others charged with the responsibility of collecting, reviewing, analyzing and disseminating the information developed from the filing of the annual statement of financial condition shall be acting as agents of the commissioner under the authority of this act, and in the absence of actual malice, shall not be subject to civil liability for libel, slander or any other cause of action by virtue of their collection, review, and analysis or dissemination of the data and information collected from the filings required hereunder. Nothing herein shall abrogate or lessen the common and statutory law privileges and immunities of an authorized governmental agency or any of its respective employees.
##### **§ 17:23B-4** Confidentiality {#sec-17-23b-4 omnilex-key=us-nj-statutes--title-17--17:23B-4}
4. All financial analysis ratios and examination synopses concerning insurers that are submitted to the department by the NAIC Insurance Regulatory Information System are confidential and may not be disclosed by the department.
##### **§ 17:23B-5** Violations; penalties {#sec-17-23b-5 omnilex-key=us-nj-statutes--title-17--17:23B-5}
5. a. The commissioner may suspend, revoke or refuse to renew the certificate of authority of any insurer or other entity that fails to file information with the NAIC as required by this act when due or within any extension of time which the commissioner, for good cause, may have granted.
b. In addition, or as an alternative to any other penalty, the commissioner may impose a fine of up to $5,000 for the first violation of any provision of this act, and up to $10,000 for each subsequent violation. Each day of delay in filing information as required by this act shall constitute a separate violation.
## **Chapter 23C** {#struct-chapter-23c}
##### **§ 17:23C-1** Findings, declarations relative to compliance review of insurance carriers {#sec-17-23c-1 omnilex-key=us-nj-statutes--title-17--17:23C-1}
1. a. The Legislature finds and declares that it is in the public interest for insurance carriers in this State to conduct voluntary internal reviews and audits of their operations, practices and procedures for the purpose of discovering and correcting any operations, practices or procedures which do not comply with applicable law or regulation or which do not comply with recognized industry standards or with the insurance carrier's own standards and for the purpose of preventing continuing and more serious violations. However, if studies and reports beyond those legally required are available to third parties other than regulators and potentially can result in the insurance carrier's liability to such third parties, the insurance carrier may be discouraged from making these additional efforts and from sharing these results with regulators. A legal structure that promotes self-policing programs can achieve improved compliance effectively at less cost to the State and to the insurance carriers. Voluntary compliance review, when properly conducted and implemented, results not only in improved compliance with law, but in the adoption of procedures and policies by the insurance carriers that exceed minimum legal requirements, and that save money by benefiting customers, lowering costs and reducing potential liabilities.
b. The Legislature therefore determines that it is the public policy of the State to encourage insurance carriers to undertake voluntary compliance reviews and corrective action programs by protecting the results of voluntary compliance reviews from third parties other than regulators. Voluntary compliance reviews shall be privileged and shall not be considered public records or public documents subject to inspection or examination under any statutory or common-law right to know request. This privilege is intended to apply only to protect reports created for the express purpose of testing and monitoring compliance, which otherwise might not be undertaken because they are not legally required. Information required to be maintained pursuant to any federal or State law or regulation will not become privileged just because it is utilized or incorporated in a voluntary compliance review report.
##### **§ 17:23C-2** Definitions relative to compliance reviews of insurance carriers {#sec-17-23c-2 omnilex-key=us-nj-statutes--title-17--17:23C-2}
2. As used in this act:
"Department" means the Department of Banking and Insurance.
"Enforcement action" means a criminal investigation or prosecution, or an administrative proceeding, civil action or order by a governmental unit, agency or authority which is intended to ensure the safe and sound operation of an insurance carrier.
"Insurance carrier" means:
(1) Any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), or Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.);
(2) Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
(3) Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
(4) Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.);
(5) Any dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.);
(6) Any dental plan organization operating pursuant to P.L.1979, c.478 (C.17:48D-1 et seq.);
(7) Any insurance plan operating pursuant to P.L.1970, c.215 (C.17:29D-1 et seq.);
(8) The New Jersey Insurance Underwriting Association operating pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.);
(9) Any risk retention group or purchasing group operating pursuant to the "Liability Risk Retention Act of 1986," 15 U.S.C. ss. 3901 et seq.;
(10) Any health maintenance organization operating pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.); and
(11) Any joint insurance fund operating pursuant to P.L.1983, c.108 (C.18A:18B-1 et seq.), P.L.1983, c.372 (C.40A:10-36 et seq.), P.L.1985, c.204 (C.18A:64A-25.33 et seq.) or P.L.1987, c.431 (C.17:49A-1 et seq.).
"Timely discloses" or "timely disclosure" means the voluntary disclosure of the findings of a voluntary compliance review to the department within 90 days of the completion of a voluntary compliance review report or the delivery of or access to a voluntary compliance review report within 20 days of a request by the department.
"Voluntary compliance review" means review, project, testing program, assessment, audit or evaluation instituted by an insurance carrier to collect information or prepare analyses, not required by statute, regulation, bulletin or order and which would otherwise not be collected, maintained or prepared, for the purposes of identifying and correcting problems of compliance with applicable laws and regulations.
"Voluntary compliance review report" means any document or documents prepared or assembled by any person or group of persons, committee or entity conducting a voluntary compliance review, including without limitation, supporting information and documents such as notes, records of observations, findings, conclusions, drafts, memoranda, drawings, photographs, electronic or computerized mail, audio or video recordings or transcriptions or depictions of any type, stored computer data, including floppy or other disks, hard drives, printer memory, software or other data compilations from which information can be obtained, charts, graphs and surveys, provided, however, that the documents and supporting information are developed for the purpose of and in the course of a voluntary compliance review.
##### **§ 17:23C-3** Voluntary compliance review report privileged {#sec-17-23c-3 omnilex-key=us-nj-statutes--title-17--17:23C-3}
3. A voluntary compliance review report shall be privileged and neither it nor its existence shall be discoverable or admissible as evidence in any legal action or administrative proceeding of any nature involving the insurance carrier, except as provided in section 5 of this act.
##### **§ 17:23C-4** Privilege regarding preparation of report {#sec-17-23c-4 omnilex-key=us-nj-statutes--title-17--17:23C-4}
4. Persons involved in the preparation of a voluntary compliance review report shall not be required to give answers to any questions or provide testimony regarding the existence, contents or conclusions of any voluntary compliance review report, except as provided in section 5 of this act.
##### **§ 17:23C-5** Limited disclosure, circumstances {#sec-17-23c-5 omnilex-key=us-nj-statutes--title-17--17:23C-5}
5. a. The provisions of sections 3 and 4 of this act shall not apply if:
(1) an enforcement action is taken, that enforcement action is contested, and an administrative law judge or a court of competent jurisdiction determines that a voluntary compliance review report is relevant to that enforcement action; provided however, that disclosure of a voluntary compliance review report shall be made under seal, with no disclosure beyond the department, the administrative law judge or court of competent jurisdiction, and resulting in no waiver of the privilege to any other individuals or entities seeking disclosure; or
(2) there is a statutory requirement that the violation identified or discovered as a result of the voluntary compliance review be reported; provided however, that a court may order disclosure only in accordance with the terms of this act.
b. The disclosure authorized under paragraphs (1) and (2) of subsection a. of this section shall apply only to those sections and portions of the voluntary compliance review report that pertain to the specific violation which is the subject of the enforcement action. All other sections and portions of the voluntary compliance review report shall remain privileged.
c. If there is a dispute concerning the sections or portions of the voluntary compliance review report subject to disclosure, an administrative law judge or a court of competent jurisdiction, upon petition of either party, shall conduct an in camera review of those sections or portions subject to dispute.
##### **§ 17:23C-6** Reports placed under seal at conclusion of enforcement action {#sec-17-23c-6 omnilex-key=us-nj-statutes--title-17--17:23C-6}
6. At the conclusion of an enforcement action in which a court or administrative law judge determines that an insurance carrier has committed no statutory or regulatory violation, all voluntary compliance review reports contained within the case file of the proceeding shall be placed under seal and the department shall treat that material as confidential, as if no enforcement action had been taken.
##### **§ 17:23C-7** Materials not considered privileged {#sec-17-23c-7 omnilex-key=us-nj-statutes--title-17--17:23C-7}
7. The following materials described in this section shall not become privileged pursuant to the provisions of sections 3 and 4 of this act because they are utilized or incorporated in a voluntary compliance review report:
(1) documents, communications, data, reports or other information required to be collected, developed, maintained, reported or made available to a regulatory agency pursuant to any federal or State law, regulation, permit, bulletin or order or in the normal processing of customer transactions;
(2) information obtained by observation, sampling, examining, auditing or monitoring by any regulatory agency;
(3) information obtained from a source independent of the voluntary compliance review; and
(4) information exchanged by and among the department and other appropriate regulators pursuant to an agreement between or among the regulatory agencies; provided, however, that notwithstanding this permitted exchange of information by the regulatory agencies, sections 3 and 4 of this act shall continue to apply with respect to a person who is not a regulatory agency.
##### **§ 17:23C-8** Inadmissibility of privileged information {#sec-17-23c-8 omnilex-key=us-nj-statutes--title-17--17:23C-8}
8. No person shall use any information privileged pursuant to this act to discover any other information and any information so discovered shall be inadmissible in any action or proceeding. If an administrative law judge or a court of competent jurisdiction determines that any information is not privileged, it shall, by the entry of appropriate protective orders, ensure that information is disclosed only to the extent required for the proper conduct of the subject action or proceeding.
##### **§ 17:23C-9** Privileges unaffected {#sec-17-23c-9 omnilex-key=us-nj-statutes--title-17--17:23C-9}
9. Nothing in this act shall limit, waive or abrogate the scope or nature of any statutory or common law privilege, including, without limitation, the work product doctrine and the attorney-client privilege.
##### **§ 17:23C-10** Circumvention prohibited {#sec-17-23c-10 omnilex-key=us-nj-statutes--title-17--17:23C-10}
10. No regulatory agency shall adopt a rule for the purpose of circumventing the privilege established in this act by requiring disclosure of a voluntary compliance review report.
##### **§ 17:23C-11** Continuing privilege of disclosed information {#sec-17-23c-11 omnilex-key=us-nj-statutes--title-17--17:23C-11}
11. a. If an insurance carrier timely discloses information it obtained from a voluntary compliance review to the department or to another appropriate regulatory agency, that information and the voluntary compliance review which resulted in the information shall remain subject to sections 3 and 4 of this act, except that the agency receiving the information may use it with respect to an enforcement action.
b. The regulatory agency, in deciding on the appropriate penalty or sanction, if any, for a violation shall consider the timely disclosure as a mitigating factor if the violation is disclosed and the insurance carrier responsible for the violation demonstrates, and the regulator determines, that the violation is not the result of knowing, purposeful, reckless or criminally negligent conduct, that reasonable corrective action has been or is being taken to rectify and eliminate any detected violation and that the insurance carrier has made or is making a good-faith effort to prevent similar violations.
##### **§ 17:23C-12** Construction of act relative to third party access {#sec-17-23c-12 omnilex-key=us-nj-statutes--title-17--17:23C-12}
12. Nothing in this act shall be construed to permit any third party access to any voluntary compliance review report subject to the provisions of this act. For the purpose of this section, "third party" means a person other than a federal, State or local governmental agency; however, those agencies shall only be provided access to voluntary compliance review reports if they agree in writing to be bound by the terms of this act.
##### **§ 17:23C-13** Production of documents not a waiver of privilege; penalty {#sec-17-23c-13 omnilex-key=us-nj-statutes--title-17--17:23C-13}
13. a. The department may require production of any document from an insurance carrier through timely disclosure or pursuant to compulsion of law, for its review. This production shall not constitute a waiver of the privilege established by this act.
b. The privilege provided by this act shall not be waived if the department or an employee of the department discloses a document provided to the department to a third-party. For the purpose of this section, "third party" means a person other than a federal, State or local governmental agency; however, those agencies shall only be provided access to voluntary compliance reports if they agree in writing to be bound by the terms of this act.
c. Any person who is found to have intentionally or recklessly disclosed any document to a third party in violation of this act shall be guilty of a crime of the third degree.
## **Chapter 24** {#struct-chapter-24}
##### **§ 17:24-1** Investments by insurance companies generally. {#sec-17-24-1 omnilex-key=us-nj-statutes--title-17--17:24-1}
Any insurance company of this State for the purpose of investing its capital, surplus and other funds, or any part thereof, may:
a. Purchase or hold as collateral security or otherwise and sell and transfer any bonds or public stock issued, created or guaranteed by the United States, or any territory or insular possession thereof, or the Commonwealth of Puerto Rico, or by this State, or by any of the other states of the United States or the District of Columbia, or by Canada or any of the provinces thereof, or by any of the incorporated cities, counties, parishes, townships or other municipal corporations situated in any of the places hereinabove mentioned; or bonds authorized to be issued by any commission appointed by the Supreme Court of this State as the said court was constituted prior to September 15, 1948.
b. Purchase or hold real estate for business or residential purposes, other than as provided for in R.S.17:19-8 to 17:19-12, inclusive, as an investment for the production of income, and improve or otherwise develop such real estate; provided, that if the commissioner shall determine, after due hearing upon notice to any such insurance company, that the interests of such insurance company's policyholders require that any specified real estate so purchased or held be disposed of, then such insurance company shall dispose of such real estate within such reasonable time as the commissioner shall direct; and provided further, the aggregate amount of such investments for the production of income, but excluding real estate held as provided for in R.S.17:19-8 to 17:19-12, inclusive, shall not exceed 5% of the total admitted assets of such insurance company as of December 31 next preceding. The term "real estate for business or residential purposes" as used in this subsection b. shall include any real property used or operated as a part of or in connection with a business or a residential development, and shall also include a leasehold of such real estate having an unexpired term of not less than 20 years, inclusive of the term or terms which may be provided by any enforceable option or options of extension or of renewal. Income produced by investment in any such leasehold shall be applied by such insurance company in a manner calculated to amortize the amount invested for acquisition and improvement thereof within a period not exceeding 8/10 of such unexpired term of the leasehold following such acquisition or improvement, or within a period of 40 years thereafter, whichever is less.
c. Invest in bonds or notes secured by mortgages or trust deeds on unencumbered fee simple or leasehold real estate, which shall include areas above the surface of the ground but not contiguous thereto, or any interest therein, located within the United States, any territory or insular possession thereof, the Commonwealth of Puerto Rico, or Canada, worth at least 1/3 more than the sum so invested. No loan may be made on leasehold real estate unless the terms of such loan provide for amortization payments to be made by the borrower on the principal thereof in amounts sufficient to completely amortize the loan within a period not exceeding 9/10 of the term of the leasehold, inclusive of the term or terms which may be provided by any enforceable option or options of extension or of renewal, which is unexpired at the time the loan is made. For the purpose of this subsection c., fee simple or leasehold real estate or any interest therein shall not be deemed to be encumbered within the meaning of this subsection c. by reason of the existence of taxes or assessments that are not delinquent, easements, profits or licenses, nor by reason of building restrictions or other restrictive covenants, nor when such real estate or interest therein is subject to lease in whole or in part whereby rents or profits are reserved to the owner; provided, that the security created by the mortgage or trust deed on such real estate or interest therein securing such bond or note is a first lien upon such real estate or interest therein. No insurance company shall, pursuant to this subsection c., invest in or loan upon the security of any one property more than $30,000 or more than 2% of its total admitted assets, whichever is the greater. The total investments of any insurance company made pursuant to this subsection c. shall not exceed 40% of its total admitted assets.
d. Invest in bonds or notes evidencing loans to veterans if the full amount of any such loan is guaranteed by the government of the United States or by the Administrator of Veterans' Affairs pursuant to the "Servicemen's Readjustment Act of 1944," Pub.L.78-346 (38 U.S.C. s.3701 et seq.), as heretofore or hereafter amended; and in the case of loans so guaranteed for less than the full amount thereof, the maximum amount which may be loaned or invested by any such insurance company pursuant to the provisions of any law of this State shall be increased by the amount so guaranteed.
e. Lend on or purchase mortgage or collateral trust bonds of railroad companies organized under the laws of said states, or the District of Columbia, or the Commonwealth of Puerto Rico, or Canada or any province thereof, or operated wholly or partly therein; or equipment trust certificates or obligations which are adequately secured or other adequately secured instruments evidencing an interest in transportation or municipal sanitation equipment wholly or in part within the United States or any territory or insular possession thereof, the Commonwealth of Puerto Rico or Canada and a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such equipment; or certificates of receivers of any corporation where such purchase is necessary to protect an investment in the securities of such corporation theretofore made under authority of chapters 17 to 33, inclusive, of this Title; or the bonds or other evidences of indebtedness of public utility companies organized under the laws of Canada or any province thereof; or the capital stock, bonds, securities or evidences of indebtedness created by any corporation of the United States or of any state, or of the District of Columbia, or of the Commonwealth of Puerto Rico or of Canada or of any province thereof; provided, that no purchase of any bond or evidence of indebtedness which is in default as to interest shall be made by such company unless such purchase is necessary to protect an investment theretofore made under authority of chapters 17 to 33, inclusive, of this Title, in the securities of the corporation which issued, assumed or guaranteed such bond or evidence of indebtedness in default; provided further, that no purchase of the stock of any corporation of a class on which dividends have not been paid during each of the past five years preceding the time of purchase shall be made unless the stock so purchased shall represent a majority in control of all the stock then outstanding, or the corporation shall have earned during the period of such five years an aggregate sum available for dividends upon such stock which would have been sufficient, after all fixed charges and obligations, to pay dividends upon all shares of such class of stock outstanding during such period averaging 4% per annum computed upon the par value of such stock, or in the case of stock having no par value, upon the stated capital in respect thereof; and provided further, that in the case of the stock of a corporation resulting from or formed by merger, consolidation, acquisition or otherwise, less than five years preceding the time of purchase, each consecutive year next preceding the effective date of such merger, consolidation, acquisition or other action during which dividends or other distributions of profits shall have been paid by any one or more of its constituent or predecessor institutions shall be deemed a year during which dividends have been paid on such class of stock and the earnings of such constituent or predecessor institutions available for dividends during each of such years may be included as earnings of the existing corporation whose stock is to be purchased for each such years, and in the case of the stock of a corporation resulting from or formed by merger or consolidation less than five years preceding such purchase, each consecutive year next preceding the effective date of such merger or consolidation during which dividends shall have been paid by any one or more of its constituent corporations on any or all classes of its or their stock in an aggregate amount sufficient to have paid dividends on that class of stock of the existing corporation whose stock is to be purchased, had such corporation then been in existence, shall be deemed a year during which dividends have been paid on such class of stock; provided, however, that nothing herein contained shall prohibit the purchase of stock of any class which is preferred, as to dividends, over any class the purchase of which is not prohibited by this section; and provided further, that no purchase of its own stock shall be made by any insurance company except for the purpose of the retirement of such stock or except as specifically permitted by any law of this State applicable by its terms only to insurance companies. Unless the stock so purchased shall represent a majority in control of all the stock then outstanding, the cost of stock investment pursuant to this section may not exceed more than 25% of the total admitted assets of such insurance company as of December 31 next preceding with no more than 5% in any one stock. Notwithstanding any other provision of R.S.17:24-1 et seq., the cost basis of all stock investment shall be used for the purpose of determining the asset value against which such percentage limitations are to be applied.
The aggregate amount invested at cost, including but not limited to common stock, preferred stock and debt obligations, in one or more subsidiaries shall not exceed the lesser of 10% of such insurance company's assets or 50% of such insurance company's surplus as regards policyholders as of December 31 next preceding. In calculating the amount of such investments, investments in domestic or foreign insurance subsidiaries shall be excluded.
f. Invest in bonds or notes evidencing loans if the full amount of any such loan is insured by the government of the United States, or by the Administrator of the Farmers' Home Administration pursuant to the " Bankhead-Jones Farm Tenant Act," Pub.L.75-210 (7 U.S.C. s.1000 et seq.), as heretofore or hereafter amended.
g. Invest in securities, properties and other investments in foreign countries, in addition to those specified in R.S.17:24-10, which are substantially of the same character as prescribed for authorized investments for funds of the insurance company under the preceding subsections of this section, to an amount valued at cost, not exceeding in the aggregate at any one time 20% of the total admitted assets of the insurance company as of December 31 next preceding; provided, however, that the amount invested pursuant to this subsection in authorized investments, other than qualified foreign investments, shall not exceed in the aggregate, at any one time, 5% of such admitted assets; and provided further that the amount invested in authorized investments in any one foreign country pursuant to this subsection shall not exceed in the aggregate, at any one time, 10% of such admitted assets. For the purposes of this subsection, Canada shall not be deemed to be a foreign country.
The term "qualified foreign investment" as used in this subsection shall include any investment in a foreign country where:
(1) the issuer or obligor is:
(a) a jurisdiction which is rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency;
(b) any political subdivision or other governmental unit of any such jurisdiction, or any agency or instrumentality of any such jurisdiction, political subdivision or other governmental unit; or
(c) an institution that is organized under the laws of any such jurisdiction, or, in the case of investments which are substantially of the same character as prescribed for investments under subsections b. and c. of this section, the real property is located in any such jurisdiction; and
(2) if the investment is denominated in any currency other than United States dollars, the investment is effectively hedged, substantially in its entirety, against the United States dollar pursuant to contracts or agreements which are:
(a) issued by or traded on a securities exchange or board of trade regulated under the laws of the United States or Canada or a province thereof;
(b) entered into with a United States banking institution which has assets in excess of $5 billion and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency, or with a broker-dealer registered with the Securities and Exchange Commission which has net capital in excess of $250 million; or
(c) entered into with any other banking institution which has assets in excess of $5 billion and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency and which is organized under the laws of a jurisdiction which is rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency.
Any investment qualified pursuant to paragraph (2) of the preceding definition of "qualified foreign investment" shall remain so qualified only at such time or times that the hedging requirements of paragraph (2) are met.
h. Except as provided in section 3 of P.L.2007, c.252 (C.17:24-1.2), make loans or investments not qualifying or permitted under any subsection of this section to an amount, not including the amount of investments otherwise expressly authorized by law, not exceeding in the aggregate at any one time the greater of 5% of the total admitted assets or 50% of the excess of total admitted assets over the sum of liabilities plus capital and surplus required to transact business, but in any event not to exceed 10% of the total admitted assets of such insurance company as of December 31 next preceding.
##### **§ 17:24-1.1** Written plan for acquiring, holding investments, investment practices. {#sec-17-24-1.1 omnilex-key=us-nj-statutes--title-17--17:24-1.1}
2. a. An insurer's board of directors shall adopt a written plan for acquiring and holding investments and for engaging in investment practices that specifies guidelines as to the quality, maturity, and diversification of investments and other specifications including investment strategies intended to assure that the investments and investment practices are appropriate for the business conducted by the insurer, its liquidity needs, and its capital and surplus. The board shall review and assess the insurer's technical investment and administrative capabilities and expertise before adopting a written plan concerning an investment strategy or investment practice.
b. Investments acquired and held under R.S.17:24-1 et seq. shall be acquired and held under the supervision and direction of the board of directors of the insurer. The board of directors shall evidence by formal resolution, at least annually, that it has determined whether all investments have been made in accordance with delegations, standards, limitations and investment objectives prescribed by the board or a committee of the board charged with the responsibility to direct its investments.
c. On no less than a quarterly basis, and more often if deemed appropriate, an insurer's board of directors or committee of the board of directors shall:
(1) Receive and review a summary report on the insurer's investment portfolio, its investment activities and investment practices engaged in under delegated authority, in order to determine whether the investment activity of the insurer is consistent with its written plan; and
(2) Review and revise, as appropriate, the written plan.
d. In discharging its duties under this section, the board of directors shall require that records of any authorizations or approvals, other documentation as the board may require and reports of any action taken under authority delegated under the plan referred to in subsection a. of this section shall be made available on a regular basis to the board of directors.
e. If an insurer does not have a board of directors, all references to the board of directors in R.S.17:24-1 et seq. shall be deemed to be references to the governing body of the insurer having authority equivalent to that of a board of directors.
##### **§ 17:24-1.2** Actions prohibited by insurer without prior approval; exceptions. {#sec-17-24-1.2 omnilex-key=us-nj-statutes--title-17--17:24-1.2}
3. a. (1) Except as provided in subsection b. of this section, an insurer shall not, without the prior written approval of the commissioner, directly or indirectly:
(a) make a loan to, or other investment in, an officer or director of the insurer or a person in which the officer or director has any direct or indirect financial interest;
(b) make a guarantee for the benefit of, or in favor of, an officer or director of the insurer or a person in which the officer or director has any direct or indirect financial interest; or
(c) enter into an agreement for the purchase or sale of property from or to an officer or director of the insurer or a person in which the officer or director has any direct or indirect financial interest.
(2) For purposes of this section, an officer or director shall not be deemed to have a financial interest by reason of an interest that is held directly or indirectly through the ownership of equity interests representing less than 5% of all outstanding equity interests issued by a person that is a party to the transaction, or solely by reason of that individual's position as a director or officer of a person that is a party to the transaction.
(3) Nothing in this subsection shall permit an investment that is otherwise prohibited by law.
(4) This subsection shall not apply to a transaction between an insurer and any of its subsidiaries or affiliates entered into in compliance with section 4 of P.L.1970, c.22 (C.17:27A-4) other than a transaction between an insurer and its officer or director.
b. An insurer may make, without the prior written approval of the commissioner:
(1) Advances to officers or directors for expenses reasonably expected to be incurred in the ordinary course of the insurer's business or guarantees associated with credit or debit cards issued or credit extended for the purpose of financing these expenses;
(2) Loans secured by the principal residence of an existing or new officer of the insurer made in connection with the officer's relocation at the insurer's request, so long as the terms and conditions otherwise are the same as those generally available from unaffiliated third parties;
(3) Secured loans to an existing or new officer of the insurer made in connection with the officer's relocation at the insurer's request, if the loans:
(a) do not have a term exceeding two years;
(b) are required to finance mortgage loans outstanding at the same time on the prior and new residences of the officer;
(c) do not exceed an amount equal to the equity of the officer in the prior residence; and
(d) are required to be fully repaid within two years, or upon the sale of the prior residence whichever first occurs; and
(4) Loans and advances to officers or directors made in compliance with State or federal law specifically related to the loans and advances by a regulated non-insurance subsidiary or affiliate of the insurer in the ordinary course of business and on terms no more favorable than those available to other customers of the entity.
##### **§ 17:24-3** Accepting or acquiring corporate stock or other securities or property {#sec-17-24-3 omnilex-key=us-nj-statutes--title-17--17:24-3}
Nothing contained in this chapter shall be construed to prohibit an insurance company from accepting or acquiring corporate stock or evidences of indebtedness or other securities or property (1) pursuant to a plan of reorganization approved or made effective by order of a court having jurisdiction over the property of a debtor, (2) pursuant to a voluntary plan or agreement of reorganization approved in writing by the commissioner, (3) as payment on account of an existing indebtedness, (4) as realization of collateral for a loan in default, or (5) through the exercise of rights of conversion, warrants or rights to purchase stock, or preemptive rights to subscribe to stock, contained in or attached to a previously existing investment of such company. If any such stock, securities or property so received shall be of a kind or in an amount not otherwise allowable as an investment by this chapter, they shall be disposed of within 5 years from the time of their acquisition, unless the commissioner shall, for good cause shown, allow further time for the disposal thereof and then within the time so allowed.
##### **§ 17:24-5** Valuation of bonds {#sec-17-24-5 omnilex-key=us-nj-statutes--title-17--17:24-5}
All bonds or other evidences of debt held by an insurance corporation authorized to do business in this state may, if amply secured and not in default as to principal or interest, be valued as follows:
If purchased at par, at the par value; if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield meantime the effective rate of interest at which the purchase was made, but the purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase, and the commissioner shall have full discretion in determining the method of calculating values according to the foregoing rule, and the values found by him in accordance therewith shall be final and binding, and any such corporation may return the bonds or other evidences of debt at their market value or their book value, but in no event at an aggregate value in excess of the aggregate of the values calculated according to the foregoing rule.
This section shall not be construed to apply to any insurance corporation authorized to do business in this state which shall not elect to value its bonds and other evidences of debt by amortization as herein provided.
##### **§ 17:24-5.1** Valuation of securities held by insurance company; violations; penalties {#sec-17-24-5.1 omnilex-key=us-nj-statutes--title-17--17:24-5.1}
4. Except as otherwise required by the commissioner, securities held by an insurance company transacting business in this State in accordance with the provisions of Title 17 of the Revised Statutes shall be valued in accordance with the published valuation standards of the Securities Valuation Office of the National Association of Insurance Commissioners. Every insurance company licensed to transact business in this State shall comply with the filing and valuation requirements of the Securities Valuation Office of the National Association of Insurance Commissioners or requirements established by the commissioner, as applicable, with respect to the valuation of securities. Any insurance company that fails to comply with the provisions of this section shall be subject to a penalty of not less than $1,000 nor more than $5,000 for a first violation, and not less than $2,000 nor more than $10,000 for each subsequent violation.
##### **§ 17:24-6** Marine insurance companies; additional investments {#sec-17-24-6 omnilex-key=us-nj-statutes--title-17--17:24-6}
Any company organized for the purpose of marine insurance may also lend its funds on bottomry and respondentia bonds and change and reinvest the same.
##### **§ 17:24-7** Title insurance companies; dealing in real estate mortgages; issuing obligations {#sec-17-24-7 omnilex-key=us-nj-statutes--title-17--17:24-7}
A company organized under chapters seventeen to thirty-three of this Title (s. 17:17-1 et seq.), to transact the business authorized by paragraph "h" of section 17:17-1 of this Title, may also, with its capital and surplus, take, buy, sell and deal in first mortgages on real estate, and, also may act as agent for investors in and the holders of mortgages and interests therein, in the purchase, sale, and servicing thereof; provided, that no contract of insurance or guaranty or other obligation to pay money be incurred in connection with such managing or servicing beyond the obligation of accounting for funds received.
Companies incorporated and authorized to conduct the business of insuring titles under charters issued prior to the enactment of this amendment shall enjoy all of the powers given by this act as amended and all of the powers they enjoy under their existing certificates of incorporation; provided, however, that they shall not be permitted to write any new contracts guaranteeing payment of principal and interest of bonds and mortgages, or shares or parts of mortgages or mortgage participation certificates, or shares or parts of bonds secured by mortgage, or bonds secured by trust mortgage, or participation certificates or coupon bonds entitling the holder to a proportionate share in a series or number of mortgages and bonds, or extensions or renewals thereof, or other obligations directly or indirectly secured by bonds and mortgages, except such contracts of guaranty as may be issued or made by way of extensions, substitutions, refunding issues of bonds or participations, or otherwise in performing existing contracts of that character.
##### **§ 17:24-8** Additional investment permitted title insurance companies {#sec-17-24-8 omnilex-key=us-nj-statutes--title-17--17:24-8}
Any insurance company of this state, engaged in the business of insuring title to real estate, may also invest its capital or surplus, or both, in shares or parts of mortgages and any mortgage participation certificates which entitle the holder to a proportionate share in a mortgage or number of mortgages or extensions or renewals thereof, which are a first lien on improved real estate in this state, and the amount of which mortgages shall not at the time of the making of the loan exceed sixty per cent of the estimated worth of the real estate covered by the respective mortgages at a rate of interest not less than three per cent nor greater than six per cent per annum. No share or part of the mortgages so held shall be subordinated to any prior interest therein. Mortgages in parts of which any of the capital or surplus, or both, may be invested, together with any guarantees of payment, insurance policies, and other instruments and evidences of title relating thereto, shall be held for the benefit of the insurance company and of any other persons interested in the mortgages by a bank, trust company or title guaranty corporation organized under the laws of this state, or jointly by such a corporation and an individual who is a citizen and bona fide resident of this state. A certificate stating that the corporation, or the corporation and the individual jointly, as the case may be, holds the instruments for the benefit of the insurance company and of any other persons who may be interested in the mortgage, among whom the corporation or the individual jointly holding the instruments may be included, shall be executed by the corporation and delivered to each person who becomes interested in the mortgage. Every corporation, or corporation and individual jointly, issuing any such certificate, shall keep a record in proper books of account of all certificates issued.
Any investments made by any such title insurance company, prior to March twenty-sixth, one thousand nine hundred and twenty-eight, shall be considered as legal assets forming part of the capital and surplus of the insurance company.
##### **§ 17:24-9** Investment of surplus in stock of certain companies {#sec-17-24-9 omnilex-key=us-nj-statutes--title-17--17:24-9}
Any company, other than a life insurance company, organized and authorized to transact business under chapters 17 to 33 of this title (s. 17:17-1 et seq.), may also invest not exceeding twenty-five per cent of its surplus in the common stock of any nondividend-paying insurance company or companies organized in and authorized to transact business in this state.
##### **§ 17:24-10** Investments in foreign securities {#sec-17-24-10 omnilex-key=us-nj-statutes--title-17--17:24-10}
Any insurance company of this State lawfully doing business in any foreign country may also invest its funds, to an amount not exceeding the value of its outstanding policies of insurance issued or delivered in the foreign country, in securities issued by any governing body or agency or any corporation of the foreign country or in obligations secured upon property therein, otherwise of the same character as that prescribed for authorized investments for the funds of the company under the laws of this State; provided, that any loan secured by first mortgage on unencumbered real estate in the Dominion of Canada, authorized and placed under any act of that Dominion by virtue of which it assumes liability for all or a substantial portion of any loss resulting from the liquidation of such investment after the foreclosure of the mortgage securing the same, or by virtue of which it guarantees the payment of such loan, shall be construed as being of such character. Any investment hereby authorized shall be subject to all other limitations imposed by the laws of this State.
##### **§ 17:24-11** Bond and mortgage; sale or assignment of part with guaranty of payment; subordinate interests {#sec-17-24-11 omnilex-key=us-nj-statutes--title-17--17:24-11}
If a company incorporated under this subtitle has, prior to April eighteenth, one thousand nine hundred and thirty-two, under any provision thereof, purchased, obtained or invested in bonds secured by mortgages which are first liens upon the properties described in the mortgages and the company has sold or assigned with a guaranty of payment of principal and interest or shall, after April eighteenth, one thousand nine hundred and thirty-two, sell or assign with such guaranty a primary part or portion of any of such bonds and mortgages to a purchaser thereof, retaining the balance of the bond and mortgage itself behind and subordinate to the lien of the purchaser, the company may continue to hold such interest in the bonds and mortgages and thereafter acquire any other interest in the bonds and mortgages. In each case any such interest shall be considered a proper authorized and legal investment under the terms of this subtitle.
Nothing herein contained shall be construed to authorize the retention of subordinate interests in bonds and mortgages hereafter purchased, obtained or invested in.
##### **§ 17:24-12** Holding of securities within State; exceptions {#sec-17-24-12 omnilex-key=us-nj-statutes--title-17--17:24-12}
All securities of domestic insurers shall be held for safekeeping within the geographical limits of this State, except:
a. Securities deposited with public officials of other states, the District of Columbia, the United States Government, any territory or possession thereof, the Commonwealth of Puerto Rico, and foreign countries, to the extent required by the laws of the jurisdiction as a condition for authority to transact business;
b. Securities required as collateral for loans or as security for the performance of contracts;
c. Mortgages and evidences of indebtedness secured thereby, which are held for safekeeping in one or more offices operated by and under the direct control of an officer of the company;
d. Stock and other securities representing stock or convertible into stock, and options, warrants, or rights to acquire stock;
e. Debt securities with a maturity of less than one year;
f. Securities issued or guaranteed by the United States or any department or agency or instrumentality thereof; and
g. As long as there are held for safekeeping within the geographical limits of this State securities having a value of not less than $50,000,000.00, any other debt securities which are publicly traded.
This section shall not limit or prohibit: (1) the deposit of securities under agreements as provided in R.S.17:24-3, or (2) the transmission of securities outside the State for the purpose of securing or recording title to the securities or to property, or for the purpose of the sale, exchange or alteration of the provisions of the securities, or for the collection of any payment due thereon, or (3) the holding of securities in the names of nominees authorized by the board of directors of the insurer, or by a committee of the board which is charged with the duty of supervising investments, or (4) the lending of securities to any corporation or business partnership upon adequate collateral security, or (5) the holding outside of the State, in The Depository Trust Company or any other depository institution approved by the Commissioner of Insurance, of securities which comprise all or part of a custodial account for which the fiduciary is a qualified bank pursuant to section 28 of P.L.1948, c.67 (C.17:9A-28) or is an association authorized to exercise fiduciary powers pursuant to subsection (19) of section 48 of P.L.1963, c.144 (C.17:12B-48).
##### **§ 17:24-13** Purpose of act; expenses of committee in investigation, analyses, and valuation of securities {#sec-17-24-13 omnilex-key=us-nj-statutes--title-17--17:24-13}
The purpose of this act is to provide a means of making funds not in excess of two hundred and fifty thousand dollars ($250,000.00) in any one year available to the Committee on Valuation of Securities of the National Association of Insurance Commissioners to defray the expenses of such committee in the investigation, analyses and valuation of securities and the determination of the amortizability of bonds, owned by insurance companies, for the purpose of furnishing to the several States on a uniform basis information needed in the supervision of insurance companies licensed to transact business in the several States. The Commissioner of Banking and Insurance is hereby authorized to disburse in the manner hereinafter provided, in co-operation with supervisory officials of other States, funds obtained through assessments for such purpose under this act.
##### **§ 17:24-14** Budget estimate {#sec-17-24-14 omnilex-key=us-nj-statutes--title-17--17:24-14}
The Commissioner of Banking and Insurance shall periodically obtain from such Committee on Valuation of Securities a verified budget estimate of the receipts and of the expenses to be incurred by the committee for a stated period, not exceeding one year, with appropriate explanations of the estimates therein contained.
##### **§ 17:24-16** Audit of receipts and disbursements; statement of assets and liabilities {#sec-17-24-16 omnilex-key=us-nj-statutes--title-17--17:24-16}
The commissioner shall require annually and at such other times as he may deem it necessary or advisable a duly certified audit of receipts and disbursements and statement of assets and liabilities, showing the details of the financial operations of the Committee on Valuation of Securities.
##### **§ 17:24-25** Partial repeal {#sec-17-24-25 omnilex-key=us-nj-statutes--title-17--17:24-25}
a. The following sections of the Revised Statutes, insofar as they apply to life insurance companies are repealed:
Sections 17:2-1, 17:2-2, 17:2-4 to 17:2-8, 17:19-1 to 17:19-12, 17:24-1, 17:24-3, 17:24-5, 17:24-10 to 17:24-12.
b. The following acts insofar as they apply to life insurance companies are repealed:
P.L.1938, chapter 222, P.L.1945, chapter 257, and P.L.1947, chapter 308.
##### **§ 17:24-26** Repeal {#sec-17-24-26 omnilex-key=us-nj-statutes--title-17--17:24-26}
Section 17:24-2 of the Revised Statutes and P.L.1964, chapter 138 are repealed.
##### **§ 17:24-28** Definitions relative to investment pools. {#sec-17-24-28 omnilex-key=us-nj-statutes--title-17--17:24-28}
1. As used in this act:
"Business entity" means a corporation, limited liability company, limited liability partnership, association, partnership, joint stock company, joint venture, mutual fund trust, or other legal form of organization, whether organized for-profit or not-for-profit.
"Class one money market mutual fund" means a money market mutual fund that at all times qualifies for investment using the bond class one reserve factor under the published valuation standards of the Securities Valuation Office of the National Association of Insurance Commissioners.
"Commissioner" means the Commissioner of Banking and Insurance.
"Government money market mutual fund" means a money market mutual fund that at all times:
(1) Invests only in obligations issued, guaranteed or insured by the federal government of the United States or collateralized and repurchase agreements composed of these obligations; and
(2) Qualifies for investment without a reserve under the published valuation standards of the Securities Valuation Office of the National Association of Insurance Commissioners.
"Money market mutual fund" means a mutual fund that meets the conditions of 17 C.F.R.s.270.2a-7, under the federal "Investment Company Act of 1940," 15 U.S.C.s.80a-1 et seq.
"Obligation" means a bond, note, debenture, trust certificate including an equipment certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, credit tenant loan, loan secured by financing net leases and other evidence of indebtedness for the payment of money (or participations, certificates or other evidences of an interest in any of the foregoing), whether constituting a general obligation of the issuer or payable only out of certain revenues or certain funds pledged or otherwise dedicated for payment.
"Qualified bank" means a national bank, state bank or trust company that at all times is no less than adequately capitalized as determined by the standards adopted by the United States banking regulators and that is either regulated by state banking laws or is a member of the Federal Reserve System.
"Repurchase transaction" means a transaction in which an insurer purchases securities from a business entity that is obligated to repurchase the purchased securities or equivalent securities from the insurer at a specified price, either within a specified period of time or upon demand.
"Reverse repurchase transaction" means a transaction in which an insurer sells securities to a business entity and is obligated to repurchase the sold securities or equivalent securities from the business entity at a specified price, either within a specified period of time or upon demand.
"Securities lending transaction" means a transaction in which securities are loaned by an insurer to a business entity that is obligated to return the loaned securities or equivalent securities to the insurer, either within a specified period of time or upon demand.
"SVO" means the Securities Valuation Office of the National Association of Insurance Commissioners.
##### **§ 17:24-29** Permitted investments, qualifications. {#sec-17-24-29 omnilex-key=us-nj-statutes--title-17--17:24-29}
2. An insurer may invest in investment pools that:
a. Invest only in:
(1) Obligations that are rated "1" or "2" by the SVO or have an equivalent of an SVO "1" or "2" rating by a nationally recognized statistical rating organization recognized by the SVO and have:
(a) A remaining maturity of 397 days or less or a put that entitles the holder to receive the principal amount of the obligation, which put may be exercised through maturity at specified intervals, not exceeding 397 days; or
(b) A remaining maturity of three years or less and a floating interest rate that resets no less frequently than quarterly on the basis of a current short-term index (federal funds, prime rate, treasury bills, London InterBank Offered Rate (LIBOR) or commercial paper) and is subject to no maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes;
(2) Government money market mutual funds or class one money market mutual funds; or
(3) Securities lending, repurchase and reverse repurchase transactions on investments in which an insurer is permitted to invest pursuant to the provisions of R.S.17:24-1; or
b. Invest only in investments which an insurer may acquire under subsection a. of this section if the insurer's proportionate interest in the amount invested in these investments does not exceed the applicable limits of section 4 of this act.
##### **§ 17:24-30** Qualified investment pools. {#sec-17-24-30 omnilex-key=us-nj-statutes--title-17--17:24-30}
3. For an investment in an investment pool to be qualified under this act, the investment pool shall not:
a. Acquire securities issued, assumed, guaranteed or insured by the insurer or an affiliate of the insurer;
b. Borrow or incur any indebtedness for borrowed money, except for securities lending and reverse repurchase transactions that meet the requirements of this act; or
c. Permit the aggregate value of securities then loaned or sold to, purchased from or invested in any one business entity under this act to exceed ten percent of the total assets of the investment pool.
##### **§ 17:24-31** Limits on permitted investments. {#sec-17-24-31 omnilex-key=us-nj-statutes--title-17--17:24-31}
4. Notwithstanding the provisions of R.S.17:24-1 to the contrary, an insurer may invest in an investment pool, however, an insurer shall not acquire an investment in an investment pool under this act if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer:
a. n any one investment pool would exceed ten percent of its admitted assets; or
b. In all investment pools, investing in investments permitted under section 2 of this act, would exceed thirty-five percent of its admitted assets.
##### **§ 17:24-32** Requirements of manager of investment pool. {#sec-17-24-32 omnilex-key=us-nj-statutes--title-17--17:24-32}
5. For an investment in an investment pool to be qualified under this act, the manager of the investment pool shall:
a. Be organized under the laws of the United States or a state and designated as the pool manager in a pooling agreement;
b. Be the insurer, an affiliated insurer or a business entity affiliated with the insurer, a qualified bank, a business entity registered under the federal "Investment Advisors Act of 1940," 15 U.S.C.s.80A-1 et seq., or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact, or in the case of a United States branch of an alien insurer, its United States manager or affiliated or subsidiaries of its United States manager;
c. Compile and maintain detailed accounting records setting forth:
(1) The cash receipts and disbursements reflecting each participant's proportionate investment in the investment pool;
(2) A complete description of all underlying assets of the investment pool (including amount, interest rate, maturity date (if any) and other appropriate designations); and
(3) Other records which, on a daily basis, allow third parties to verify each participant's investment in the investment pool; and
d. Maintain the assets of the investment pool in one or more accounts, in the name of or on behalf of the investment pool, under a custody agreement with a qualified bank. The custody agreement shall:
(1) State and recognize the claims and rights of each participant;
(2) Acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool;
(3) Contain an agreement that the underlying assets of the investment pool shall not be commingled with the general assets of the custodian qualified bank or any other person ; and
(4) Conform with guidelines established by the National Association of Insurance Commissioners and regulations governing custodial or safeguard agreements promulgated by the commissioner.
##### **§ 17:24-33** Written pooling agreement, terms. {#sec-17-24-33 omnilex-key=us-nj-statutes--title-17--17:24-33}
6. The pooling agreement for each investment pool shall be in writing and shall provide that:
a. An insurer and its affiliated insurers or, in the case of an investment pool investing solely in investments permitted under section 2 of this act, the insurer and its subsidiaries, affiliates or any pension or profit sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, shall, at all times, hold one hundred percent of the interests in the investments pool;
b. The underlying assets of the investment pool shall not be commingled with the general assets of the pool manager or any other person;
c. In proportion to the aggregate amount of each pool participant's interest in the investment pool:
(1) Each participant owns an undivided interest in the underlying assets of the investment pool; and
(2) The underlying assets of the investment pool are held solely for the benefit of each participant;
d. A participant, or in the event of the participant's insolvency, bankruptcy or receivership, its trustee, receiver or other successor-in-interest, may withdraw all or any portion of its investment from the pool under the terms of the pooling agreement;
e. Withdrawals may be made on demand without penalty or other assessment on any business day, but settlement of funds shall occur within a reasonable and customary period thereafter not to exceed five business days. Distributions under this paragraph shall be calculated in each case net of all then applicable fees and expenses of the investment pool. The pooling agreement shall provide that the pool manager shall distribute to a participant, at the discretion of the pool manager:
(1) In cash, the then fair market value of the participant's pro rata share of each underlying asset of the investment pool;
(2) In kind, a pro rata share of each underlying asset; or
(3) In a combination of cash and in kind distributions, a pro rata share in each underlying asset;
f. The pool manager shall make the records of the investment pool available for inspection by the commissioner, and an audit of the pool accounting records shall be conducted at least annually by an independent certified public accountant; and
g. Valuation of the assets of the investment pool shall be in conformance with valuation standards established by the National Association of Insurance Commissioners and regulations promulgated by the commissioner.
##### **§ 17:24-34** Investment pool, organized as business entity. {#sec-17-24-34 omnilex-key=us-nj-statutes--title-17--17:24-34}
7. An investment pool established pursuant to the provisions of this act shall be a business entity and shall be a subsidiary organized to engage exclusively in the acquisition, ownership or management of investments, provided that the subsidiary is wholly-owned by two or more insurers domiciled in the United States, who are members of the same holding company system.
##### **§ 17:24-35** Authority of commissioner. {#sec-17-24-35 omnilex-key=us-nj-statutes--title-17--17:24-35}
8. The commissioner shall have the authority to:
a. Review any investment pool agreement and disapprove that agreement if it does not comply with the provisions of this act;
b. Review the operation of any investment pool and order compliance with this act; and
c. Disallow, as an admitted asset, any investment not in compliance with the provisions of this act.
##### **§ 17:24-36** Inapplicability of C.17:27A-4 as to transaction standards. {#sec-17-24-36 omnilex-key=us-nj-statutes--title-17--17:24-36}
9. The provisions of section 4 of P.L.1970, c.22 (C.17:27A-4) shall not apply to transactions between the pool and its participants, provided, however, that the investment activities of the pool and transactions between an insurer investment pool and its participants shall be reported annually in the registration statement required pursuant to section 3 of P.L.1970, c.22 (C.17:27A-3).
## **Chapter 25** {#struct-chapter-25}
##### **§ 17:25-1** Classes of stock {#sec-17-25-1 omnilex-key=us-nj-statutes--title-17--17:25-1}
No stock company formed under chapters 17 to 33 of this title (s. 17:17-1 et seq.) shall create more than one class of stock except, however, that preferred or nonvoting stock, or both, may be issued if the amount of the stock so issued shall not at any time exceed the amount of common or voting stock, or both, then issued and outstanding, but preferred stock may be issued without limitation when such preferred stock is to be purchased or loaned upon by any corporation, association or agency created by or organized under any law of the United States of America.
##### **§ 17:25-2** Stipulations in stock subscriptions {#sec-17-25-2 omnilex-key=us-nj-statutes--title-17--17:25-2}
Every subscription to the capital stock of a stock company shall contain the stipulation that no sum shall be used for commission, promotion or organization expenses in excess of a per cent of the amount paid upon the stock subscriptions, to be named in the stipulation, not exceeding fifteen per cent. Every subscription for stock and every application for insurance in the company made prior to the granting to the company by the commissioner of the certificate of authority shall contain the stipulation that the money advanced by the applicant shall be returned to him without any deduction if the company fails to complete its organization or procure the certificate or issue the policy applied for in the application.
##### **§ 17:25-3** Declaration of dividends by companies specially incorporated {#sec-17-25-3 omnilex-key=us-nj-statutes--title-17--17:25-3}
Any insurance company organized under a special law may declare dividends out of its surplus earnings at such times and at such per cent of its capital stock as a majority of the directors determines. No dividend shall be made when the capital stock is impaired or when the making of the dividend would have the effect of impairing the capital stock, anything in the law creating the company, or its amendments or supplements, to the contrary notwithstanding.
##### **§ 17:25-4** Retirement of unclaimed scrip {#sec-17-25-4 omnilex-key=us-nj-statutes--title-17--17:25-4}
When a company incorporated as a mutual insurance company has issued scrip or certificates of contribution to its capital, but is unable to ascertain the name or residence of the present owner thereof to whom to pay the interest or dividends thereon, and the interest or dividends have accumulated for six years or more and are being held for the benefit of the owner, the company may retire the scrip or certificates as hereinafter provided.
##### **§ 17:25-5** Affidavit filed; certificate of diligent inquiry {#sec-17-25-5 omnilex-key=us-nj-statutes--title-17--17:25-5}
The company shall file with the commissioner an affidavit by its president, secretary or treasurer, describing the unclaimed scrip or certificates as to the number of shares thereof, the amount contributed to the capital of the company as evidenced thereby, the length of time, not less than six years, during which interest or dividends have been declared or become due and payable thereon but have not been called for, the amount of the accumulations, together with a statement of the inquiry made for the name and address of the present owner thereof. The commissioner upon receipt of the affidavit, and any additional or supplemental affidavits which he may in his discretion require, and upon being satisfied that diligent inquiry has been made for the name and address of the present owner of the unclaimed scrip and interest or dividends thereon, shall issue a statement to the company certifying that in his judgment the company has made diligent inquiry for the name and residence of the owner.
##### **§ 17:25-6** Amount paid into state treasury; scrip deemed retired {#sec-17-25-6 omnilex-key=us-nj-statutes--title-17--17:25-6}
Upon filing with the state treasurer the statement from the commissioner, the company may pay into the treasury of this state the amount of contribution to the capital of the company evidenced by the scrip or certificates, with all interest or dividends thereon declared to be due and payable and held by the company for the benefit of each owner, and interest at the rate of six per cent per annum on the amount so contributed from the last date of any declaration of interest or dividend thereon to the date of the payment into the state treasury. The state treasurer shall receive the money and hold it for the benefit of the unknown owner. Thereupon the scrip or certificates shall be deemed to be retired and all rights of the owner thereof against the company shall be transferred to the money in the hands of the state treasurer, and no action based upon the contributions to the capital of the company or upon the scrip shall thereafter be maintained by the holder or owner thereof against the company.
##### **§ 17:25-7** Escheat of deposit after twenty years {#sec-17-25-7 omnilex-key=us-nj-statutes--title-17--17:25-7}
If, within twenty years after the deposit, no claim or demand is made by the owner of the scrip or certificates, the money so deposited for the benefit of the owner shall thereupon escheat to the state of New Jersey.
## **Chapter 26** {#struct-chapter-26}
##### **§ 17:26-1** Change of name, extension of corporate existence or amendment of charter or certificate of incorporation; procedure {#sec-17-26-1 omnilex-key=us-nj-statutes--title-17--17:26-1}
Any insurance company of this State, whether incorporated under the provisions of this chapter or under the provisions of any special act, may change its name, extend its corporate existence, either before or after the expiration of the period limited for its duration or amend its charter or certificate of incorporation as follows:
The board of directors shall pass a resolution declaring that the amendment, change or alteration is advisable and calling a meeting of the stockholders or members to take action thereon. The meeting shall be held upon the notice the by-laws provide, or, in the absence of such provision, upon ten days' notice in writing given personally or by mail to each stockholder or member. If two-thirds in interest of the stockholders, or, in the case of a mutual company, two-thirds of the members, vote in favor of the amendment, change or alteration, a certificate thereof shall be signed by the president or a vice-president and secretary under the corporate seal and be acknowledged or proved as in the case of deeds of real estate. The certificate shall be submitted to the Attorney-General for his approval, as provided for certificates of incorporation. When so approved, it shall be filed in the department, whereupon the charter or certificate of incorporation shall be deemed to be amended accordingly. The certificate to be made and filed pursuant to this section shall contain only such provisions as it would be lawful and proper to insert in an original certificate of incorporation made at the time of making the amendment, change or alteration, and no change shall be made in the charter or certificate of incorporation of any insurance company whereby the rights, remedies or security of existing creditors shall be in any manner impaired.
In all cases where the charter of a company may have expired by limitation of the period set forth in its certificate of incorporation or in the special act creating it, an affidavit of the presiding officer and secretary of the company that it is at the time either actually engaged in, or has provided for, the conduct of the business for which it was incorporated shall be filed in the office of the Department of Banking and Insurance. Such affidavit shall be filed any time within one year from the date of expiration of the period limited for its duration.
The certificate to be made and filed pursuant to the provisions of this act, or a copy thereof, duly certified by the Commissioner of Banking and Insurance, shall be evidence in all courts and places.
When a certificate extending the charter or period of corporate existence of any insurance company has been filed as provided in this section, the charter or period of corporate existence of said insurance company shall be extended as therein provided from the date of the expiration of its said charter or period of corporate existence, and all acts done by such insurance company after the expiration of its said charter or period of corporate existence shall be validated upon the filing of such certificate extending the same.
##### **§ 17:26-1.1** Mutual companies; amendment of charter or certificate of incorporation {#sec-17-26-1.1 omnilex-key=us-nj-statutes--title-17--17:26-1.1}
Any mutual insurance corporation heretofore or hereafter incorporated under any general or special law of this State may change its name, extend its corporate existence or amend its charter or certificate of incorporation; provided, such amendment, change or alteration, shall not be inconsistent with the Constitution and laws of this State, in the manner provided by section 17:26-1 of the Revised Statutes, or, if it so elects, in the following manner:
(a) The board of directors shall by a vote of not less than 2/3 of its number adopt the proposed amendment, change or alteration and thereupon a certificate of such adoption setting forth such amendment, change or alteration shall be made and signed by the president or a vice-president of the corporation and by the secretary or an assistant secretary under the corporate seal and shall be acknowledged or proved as in the case of deeds of real estate and shall be submitted to and examined by the Attorney-General and if found by him to be in accordance with the provisions of this act and not inconsistent with the Constitution and laws of this State, he shall indorse thereon or annex thereto his certificate approving the same and when so approved it shall be filed in the Department of Banking and Insurance, where it shall be open to the inspection of any policyholder of the corporation.
(b) The Commissioner of Banking and Insurance shall, upon the filing of such certificate so approved, cause a certified copy thereof to be delivered to the president of the corporation who shall then call a special meeting of the policyholders of the corporation to be held at the principal office of the corporation in this State at a time to be fixed by the board of directors of the corporation, not less than 3 months and not more than 6 months from the date of the filing of such certificate in the Department of Banking and Insurance, for the purpose of considering and of ratifying or rejecting such amendment, change or alteration. Notice of such special meeting and of the purpose thereof shall be given to the policyholders by publication in such manner and form and for such length of time as the Superior Court, upon application of the corporation, shall direct. Such notice shall include the substance of the proposed amendment, change or alteration in such form as the court shall direct.
(c) At such special meeting each policyholder who is 21 years of age or more and whose policy has been in force for at least 1 year may cast 1 vote in person or by proxy for or against the adoption of such amendment, change or alteration. No other measure shall be brought before such special meeting. The president, or, in his absence, a vice-president of the corporation shall preside at the meeting and the secretary, or, in his absence, an assistant secretary of the corporation shall keep minutes thereof. Voting shall be by ballot and tellers to receive and count the votes and to determine the validity thereof shall be elected by a head vote of policyholders and their proxies present at the meeting. Each ballot shall contain the words "For adoption of (amendment, change or alteration, as the case may be)" and "Against adoption of (amendment, change or alteration, as the case may be)" and shall be signed by the policyholder or proxy casting the same. A majority of the votes cast at the meeting in person or by proxy shall be necessary to ratify such amendment, change or alteration. A certificate setting forth the action of the policyholders at such special meeting, sworn to by the presiding officer and the secretary thereof, shall be filed in the Department of Banking and Insurance. If such certificate shall be to the effect that the policyholders voted in favor of adoption, the charter or certificate of incorporation shall be deemed to be amended, changed or altered accordingly.
(d) Any amendment, change or alteration adopted pursuant to this act may, in the discretion of the board of directors, be in the form of an amended charter or certificate of incorporation setting forth fully and completely all the terms and conditions of the charter or certificate of incorporation under which the corporation shall thereafter transact business.
(e) The certificate, or a copy thereof, duly certified by the Commissioner of Banking and Insurance, shall be evidence in all courts and places.
##### **§ 17:26-2** Increase or decrease of capital stock {#sec-17-26-2 omnilex-key=us-nj-statutes--title-17--17:26-2}
Any stock insurance company of this state may increase its capital stock or decrease it to an amount not less than the minimum required by chapters 17 to 33 of this title (s. 17:17-1 et seq.), by proceeding in the manner and subject to the conditions of section 17:26-1 of this title.
The whole of the increased capital shall be paid and may be invested, and an examination thereof shall be made in the manner provided by section 17:17-8 of this title for the original capital stock. Thereupon the increase shall be deemed a part of the capital of the company, subject to all the provisions of this subtitle applicable thereto. When any company increases its capital stock by more than fifty thousand dollars, an examination thereof shall be made whenever and as often as fifty thousand dollars or more of the increase is paid in, as is provided in said section 17:17-8 for the original capital stock. Thereupon the increase of fifty thousand dollars or more shall be deemed a part of the capital of the company, subject to all the provisions of this subtitle applicable thereto.
##### **§ 17:26-3** Adoption of amended charter {#sec-17-26-3 omnilex-key=us-nj-statutes--title-17--17:26-3}
When any stock or mutual insurance company of this state has adopted an amendment to its charter, as hereinbefore provided, the stockholders or members of the company, at the time of adopting the amendment, may adopt and ratify in its entirety an amended charter to the end that the amended charter shall fully and completely set forth all the terms and conditions of the charter under which the company shall thereafter transact business. The amended charter shall contain only those provisions which an original certificate of incorporation may lawfully contain, and the rights, remedies or security of existing creditors shall not be impaired by the adoption of the amended charter. The amended charter shall be executed, acknowledged, approved and filed in the manner hereinbefore provided for amendments of charters.
##### **§ 17:26-4** Issuing stock certificates {#sec-17-26-4 omnilex-key=us-nj-statutes--title-17--17:26-4}
When it appears to the satisfaction of the commissioner, as the result of examination as provided for by chapters 17 to 33 of this title (s. 17:17-1 et seq.), that any mutual insurance company of this state shall have a net surplus, after providing for reinsurance, and all claims for losses and other actual liabilities, of not less than the amount represented by outstanding scrip issued by said company, the commissioner shall, upon the request of such company, issue a certificate of the amount of such net surplus, and the company, upon vote therefor of a majority of all the directors thereof, may create a capital stock for any portion of the amount of such scrip in exchange for said scrip, and may issue certificates of such stock, but the amount of capital so created and the surplus thereafter remaining shall not be less than the amount of capital and surplus required by the provisions of sections 17:17-6, 17:17-7 and 17:34-8 of this title, as a condition for the commencement of business, to be paid, in cash, to a stock insurance company organized to transact the same kind or kinds of insurance.
##### **§ 17:26-5** Stock nonassessable {#sec-17-26-5 omnilex-key=us-nj-statutes--title-17--17:26-5}
Such capital stock shall be divided into shares of such amount as the board of directors may determine, and the holders of such stock shall be nonassessable, and shall have the same rights and powers in respect to such company as pertain to stockholders in corporations organized under Title 14, Corporations, General, but not inconsistent with the powers conferred on the directors of such company by its charter or certificate of incorporation. The company may issue policies that are not mutual, participating or assessable and may, by by-laws, determine the relative voting powers of stockholders and holders of mutual policies and provide that no policyholders, other than holders of mutual policies, shall be members of such company, or entitled to vote at its meetings.
##### **§ 17:26-6** Mutual company becoming stock company {#sec-17-26-6 omnilex-key=us-nj-statutes--title-17--17:26-6}
Any mutual insurance company of this state may, with the consent of all its members, after giving notice once in each week for six weeks in a newspaper of this state published in the county where the principal office of the company is located, change to a joint stock company, by proceeding in accordance with, and conforming its charter to, the provisions of this subtitle.
## **Chapter 27** {#struct-chapter-27}
##### **§ 17:27-1** Merger of two or more stock corporations; agreement of merger; approval by Commissioner {#sec-17-27-1 omnilex-key=us-nj-statutes--title-17--17:27-1}
Any two or more stock insurance corporations of this State, carrying on the kinds of insurance which may lawfully be carried on by one company organized under chapters seventeen to thirty-three of this Title (Sec. 17:17-1 et seq.), may merge as follows:
They may merge or consolidate into one corporation under the name of one or more of such corporations or such other name as may be approved by the Commissioner of Banking and Insurance. Such corporations may enter into and make an agreement of such merger or consolidation under their respective corporate seals, prescribing its terms and conditions, the amount of its capital and the number of shares into which such capital is to be divided. The agreement shall contain the charter under which the business is to be conducted, which may conform to the provisions of either one or more of the charters of the merging or consolidating corporations or to the provisions of the laws of this State governing corporations transacting the kinds of insurance specified in such charter, and which shall be the charter of the corporation resulting from the merger without further amendment. Every such proposed agreement shall before the execution thereof be presented to the Commissioner of Banking and Insurance for his approval as to form, and such agreement shall, after the execution thereof, have the approval of the Commissioner of Banking and Insurance thereto indorsed thereon.
##### **§ 17:27-2** Approval by directors and stockholders; notice of meetings {#sec-17-27-2 omnilex-key=us-nj-statutes--title-17--17:27-2}
The agreement must be assented to by vote of the majority of the number of directors of each corporation and must be approved by the votes of stockholders owning at least two-thirds of the stock of each corporation voted in person or by proxy at a meeting called separately for that purpose, upon notice stating the time, place and object of the meeting, served at least thirty days previously upon each stockholder personally or mailed to him at his last known address and also published at least once a week for four weeks successively in some newspaper printed in the county where such corporation has its principal office, and there shall be endorsed upon the agreement a certificate of the secretaries of the respective corporations under the seals thereof to the effect that the same has been assented to by such votes of the directors and approved by such votes of the stockholders.
##### **§ 17:27-3** Merger of domestic and foreign corporations {#sec-17-27-3 omnilex-key=us-nj-statutes--title-17--17:27-3}
Any one or more insurance corporation or corporations organized under the laws of this State is or are hereby authorized to merge or consolidate in the manner hereinabove provided with a corporation or corporations organized under the laws of another State, or States, or territory or territories, of the United States, duly admitted to this State and authorized to transact therein the same kinds of insurance as transacted by such corporation, or corporations, organized under the laws of this State, if such merger or consolidation is authorized by the laws, or approved by the insurance supervising officials, of the State, or States, or territory, or territories, in which such foreign corporation, or corporations, is, or are, incorporated. Such domestic corporation or corporations shall comply with all of the requirements specified in the two preceding sections as to the terms and conditions of the merger or consolidation agreement and the steps to be taken and acts to be performed for the adoption, execution and approval thereof. Such foreign corporation or corporations shall comply with all of the requirements of the laws or the requirements of the supervising insurance official of the State or States, or territory or territories, under which it is, or they are, incorporated regulating the terms and conditions of such merger or consolidation agreement and the steps to be taken and acts to be performed for the execution, adoption, and approval thereof. If the domicile of the corporation formed by or resulting from such merger or consolidation between a domestic corporation or corporations, and a foreign corporation or corporations, shall by the agreement be fixed or located in a State other than this State, such merger or consolidation shall not take effect unless said agreement, shall contain a provision appointing the Commissioner of Banking and Insurance of this State to be the true and lawful attorney of such corporation in and for this State, upon whom all lawful process in any action or proceeding against the corporations involved in such merger or consolidation may be served with the same force and effect as if the corporation formed by such merger or consolidation was a domestic corporation, but such appointment of the Commissioner of Banking and Insurance of this State as such attorney to receive process shall not be deemed, in anywise, to authorize the corporation formed by or resulting from such merger or consolidation to transact business within this State unless such corporation shall otherwise comply with the law of this State as respects its admission to transact business in this State.
##### **§ 17:27-4** Filing agreement of merger or consolidation; exchange of stock {#sec-17-27-4 omnilex-key=us-nj-statutes--title-17--17:27-4}
Upon filing such agreement of merger or consolidation with such certificate of the secretaries and approval of the Commissioner of Banking and Insurance endorsed thereon, in the office of the Commissioner of Banking and Insurance and the duplicate or certified copy thereof in the office of the clerk of the county or counties where the office or offices of the domestic contracting corporation or corporations is, or are, located, such agreement may be carried into effect as provided therein. The corporation so formed by or resulting from such merger or consolidation may require the return of the original certificates of stock held by each stockholder in each of the corporations involved in such merger or consolidation, and issue in lieu thereof new certificates for such number of shares of its own stock as such stockholders may be entitled to receive.
##### **§ 17:27-5** Rights, franchises and interests transferred on merger; obligations and liabilities; rights of creditors and pending actions unaffected; taxation {#sec-17-27-5 omnilex-key=us-nj-statutes--title-17--17:27-5}
Upon such merger or consolidation, all the rights, franchises, and interests of the corporations so merging or consolidating in and to every species of property and things in action belonging to them, or either of them, shall be deemed to be transferred to and vest in the corporation resulting from such merger or consolidation, without any other deed or transfer, and the merged or consolidated corporation shall hold and enjoy the same to the same extent as if the merging or consolidating corporations, or either of them, had continued to retain their titles and transact business. The merged or consolidated corporation shall succeed to all the obligations and liabilities of the merging or consolidating corporations, or either of them, and shall be held liable to pay and discharge all such debts and liabilities in the same manner as though they had been incurred or contracted by it. The stockholders of the merging or consolidating corporations shall continue subject to all the liabilities, claims and demands, existing against them, or either of them, before such merger or consolidation took place. Any action or proceeding pending at the time of the consummation of the merger or consolidation in which either or all of the merging or consolidating corporations may be a party, shall not abate or discontinue by reason of the merger or consolidation, but the same may be prosecuted to final judgment in the same manner as if the merger or consolidation had not taken place; or the merged or consolidated corporation may be substituted in place of any corporation involved in such merger or consolidation by order of the court in which the action or proceeding may be pending. So far as they may be applicable, the provisions of this section shall apply to all corporations heretofore merged or consolidated. If the domicile of the corporation formed by or resulting from such merger or consolidation between a domestic corporation or corporations and a foreign corporation or corporations shall by the agreement be fixed or located in this State, such resulting domestic corporation shall thereafter, in addition to all other taxes now or hereafter required to be paid by domestic insurance companies, pay a tax in the same amount and manner as required of foreign insurance companies by sections 17:32-7, 54:17-1 to 3, and 54:18-1 to 7.
##### **§ 17:27-5A** Partial invalidity {#sec-17-27-5a omnilex-key=us-nj-statutes--title-17--17:27-5A}
In case, for any reason, any section, part of section, clause or provision of this act shall be questioned in any court, and determined to be unconstitutional or invalid, then in that event all the provisions of the entire sections 17:27-3, 4 and 5, shall likewise become invalid and inoperative and of no force and effect, it being the intention that this act shall be effective in its entirety only and not otherwise.
##### **§ 17:27-5.1** Merger of 2 or more mutual insurance corporations {#sec-17-27-5.1 omnilex-key=us-nj-statutes--title-17--17:27-5.1}
Any 2 or more mutual insurance corporations of this State, other than mutual life insurance corporations, carrying on the kinds of insurance which may lawfully be carried on by 1 company organized under chapters 17 to 33 of this Title (section 17:17-1 et seq.), may merge as follows:
They may merge or consolidate into 1 corporation under the name of 1 or more of such corporations or such other name as may be approved by the Commissioner of Banking and Insurance. Such corporations may enter into and make an agreement of such merger or consolidation under their respective corporate seals and prescribing its terms and conditions. The agreement shall contain the charter under which the business is to be conducted, which may conform to the provisions of either 1 or more of the charters of the merging or consolidating corporations or to the provisions of the laws of this State governing corporations transacting the kinds of insurance specified in such charter, and which shall be the charter of the corporation resulting from the merger without further amendment. Every such proposed agreement shall before the execution thereof be presented to the Commissioner of Banking and Insurance for his tentative approval.
##### **§ 17:27-5.2** Approval of agreement {#sec-17-27-5.2 omnilex-key=us-nj-statutes--title-17--17:27-5.2}
The agreement must be assented to by vote of 2/3 of the number of directors of each corporation and must be approved by the members of each corporation by a majority of the votes cast in person or by proxy at a general or special meeting, upon notice stating the time, place and object of the meeting, served at least 30 days previously upon each member personally or mailed to him at his last known address and also published at least once a week for 4 weeks successively in some newspaper printed in the county where such corporation has its principal office, and there shall be indorsed upon the agreement a certificate of the secretaries of the respective corporations under the seals thereof to the effect that the same has been assented to by such votes of the directors and approved by such votes of the members.
##### **§ 17:27-5.3** Filing of agreement; approval by commissioner; review {#sec-17-27-5.3 omnilex-key=us-nj-statutes--title-17--17:27-5.3}
Every such agreement of merger or consolidation with such certificate of the secretaries and the tentative approval of the Commissioner of Banking and Insurance indorsed thereon shall be filed in the office of the Commissioner of Banking and Insurance and at the expiration of 30 days thereafter the commissioner shall indorse his final approval thereon unless within said 30 days, 5% or more of the member policyholders shall file with the commissioner objections to such agreement, in which case the commissioner shall call a hearing thereon and shall cause not less than 10 days' notice thereof to be given to such objectors and to each corporation to the agreement. Within 30 days after the conclusion of such hearing, the commissioner shall indorse such agreement with his approval or disapproval. If the commissioner shall disapprove the agreement, he shall forthwith file a memorandum in the department stating the reasons for his disapproval, and shall mail a copy of the memorandum to each of the corporations which is a party to the agreement. The commissioner shall withhold his approval only if he shall find that the agreement is contrary to law, or unreasonable or inequitable to the objectors. The commissioner's disapproval of such agreement shall be subject to review, hearing and relief in the Superior Court.
A duplicate or certified copy of any agreement which has been indorsed with the approval of the commissioner shall be filed in the office of the clerk of the county or counties where the office or offices of the domestic contracting corporation or corporations is, or are, located and thereupon such agreement may be carried into effect as provided therein.
##### **§ 17:27-5.4** Transfer of all rights, franchises and interests to resulting corporation; obligations and liabilities; actions not to abate {#sec-17-27-5.4 omnilex-key=us-nj-statutes--title-17--17:27-5.4}
Upon such merger or consolidation, all the rights, franchises, and interests of the corporations so merging or consolidating in and to every species of property and things in action belonging to them, or either of them, shall be deemed to be transferred to and vest in the corporation resulting from such merger or consolidation, without any other deed or transfer, and the merged or consolidated corporation shall hold and enjoy the same to the same extent as if the merging or consolidating corporations, or either of them, had continued to retain their titles and transact business. The merged or consolidated corporation shall succeed to all the obligations and liabilities of the merging or consolidating corporations, or either of them, and shall be held liable to pay and discharge all such debts and liabilities in the same manner as though they had been incurred or contracted by it. The members of the merging or consolidating corporations shall continue subject to all the liabilities, claims and demands, existing against such corporations, or either of them, before such merger or consolidation took place. Any action or proceeding pending at the time of the consummation of the merger or consolidation in which either or all of the merging or consolidating corporations may be a party, shall not abate or discontinue by reason of the merger or consolidation, but the same may be prosecuted to final judgment in the same manner as if the merger or consolidation had not taken place; or the merged or consolidated corporation may be substituted in place of any corporation involved in such merger or consolidation by order of the court in which the action or proceeding may be pending.
## **Chapter 27A** {#struct-chapter-27a}
##### **§ 17:27A-1** Definitions. {#sec-17-27a-1 omnilex-key=us-nj-statutes--title-17--17:27A-1}
1. Definitions.
As used in P.L.1970, c.22 (C.17:27A-1 et seq.), the following terms shall have the respective meanings hereinafter set forth, unless the context shall otherwise require:
a. An "affiliate" of, or person "affiliated" with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
b. The term "commissioner" shall mean the Commissioner of Banking and Insurance or the commissioner's deputies.
c. The term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, the holding of proxies, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting securities of any other person, or holds or controls sufficient proxies to elect 10% or more of the board of directors of the other person, provided that no such presumption of control shall of itself relieve any person so presumed to have control from any requirement of P.L.1970, c.22 (C.17:27A-1 et seq.). This presumption may be rebutted by a showing made in the manner provided by subsection j. of section 3 of P.L.1970, c.22 (C.17:27A-3) that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and an opportunity to be heard, that a person directly or indirectly, alone or pursuant to an oral or a written agreement, arrangement or understanding with one or more other persons, exercises influence over the management or policies of an insurer that it is necessary or appropriate for the protection of policyholders of the insurer or in the public interest that the person or persons be deemed to control the company. The commissioner shall make specific findings of fact to support the determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
d. An "insurance holding company system" consists of two or more affiliated persons, one or more of which is an insurer. A mutual holding company system resulting from a mutualization and reorganization of a health service corporation pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5), shall be an insurance holding company system pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.).
e. The term "insurer" means any person or persons, corporation, partnership or company authorized by the laws of this State to transact the business of insurance or to operate a health maintenance organization in this State, except that it shall not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
f. A "person" is an individual, a corporation, a limited liability company, partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert.
g. (Deleted by amendment, P.L.1993, c.241).
h. A "subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries.
i. The term "voting security" shall include any security convertible into or evidencing a right to acquire a voting security.
j. "Acquisition" means any agreement, arrangement or activity, the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes but is not limited to the acquisition of voting securities, and assets, and bulk reinsurance and mergers.
k. "Health maintenance organization" means any person operating under a certificate of authority issued pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).
l. "Enterprise risk" means any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including, but not limited to, anything that would cause the insurer's Risk-Based Capital to fall into company action level as set forth in administrative rules adopted by the commissioner which reflect the standards set forth in the Risk-Based Capital For Insurers Model Act adopted by the National Association of Insurance Commissioners or would cause the insurer to be in hazardous financial condition as defined in administrative rules adopted by the commissioner which reflect the standards set forth in the Model Regulation adopted by the National Association of Insurance Commissioners to define standards and the commissioner's authority over companies deemed to be in a hazardous financial condition.
m. "Group Capital Calculation instructions" means the Group Capital Calculation instructions as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures.
n. "NAIC" means the National Association of Insurance Commissioners.
o. "NAIC Liquidity Stress Test Framework" means the separate NAIC publication, which includes a history of the NAIC's development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions and reporting templates for a specific data year, the scope criteria, instructions and reporting template being as adopted by the NAIC and as amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.
p. "Scope criteria" means the designated exposure bases along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC Liquidity Stress Test Framework for that data year.
q. The term "own", "owned," or "owning" by a person means shares:
(1) with respect to which a person has title or to which a person's nominee, custodian, or other agent has title and which such nominee, custodian, or other agent is holding on behalf of the person; or
(2) with respect to which a person:
(a) has purchased or has entered into an unconditional contract, binding on both parties, to purchase the shares, but has not yet received the shares;
(b) owns a security convertible into or exchangeable for the shares and has tendered the security for conversion or exchange;
(c) has an option to purchase or acquire, or rights or warrants to subscribe to, the shares and has exercised such option, rights, or warrants; or
(d) holds a securities futures contract to purchase the shares and has received notice that the position will be physically settled and is irrevocably bound to receive the underlying shares.
To the extent that any affiliates of the stockholder or beneficial owner are acting in concert with the stockholder or beneficial owner, the determination of shares owned by a person may include the effect of aggregating the shares owned by such person's affiliate or affiliates. Whether shares constitute shares owned by a person shall be decided by the commissioner in the commissioner's reasonable determination.
Section 1 of P.L.1970, c. 22, s,1; amended 1993, c.241, s.1; 2001, c.2, s.2; 2012, c.17, s.30; 2014, c.81, s.1; 2020, c.145, s.18; 2021, c.366, s.1; 2021, c.485, s.1.
##### **§ 17:27A-2** Acquisition of control of or merger with domestic insurer. {#sec-17-27a-2 omnilex-key=us-nj-statutes--title-17--17:27A-2}
2. Acquisition of control of or merger with domestic insurer.
a. (1) Filing requirements. No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer, or solicit or seek to acquire or acquire proxies of a domestic insurer, if, after the consummation thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of such insurer, and no person shall enter into an agreement, arrangement or understanding to merge with or otherwise to acquire control of a domestic insurer unless, at the time any form of initial offer, request, or invitation is made or any such agreement, arrangement or understanding is entered into, or prior to the acquisition of such securities or the solicitation or acquisition of such proxies if no offer, agreement, arrangement or understanding is involved, such person has filed with the commissioner and has sent to such insurer, a statement containing the information required by this section and such offer, request, invitation, agreement, arrangement, understanding, acquisition or solicitation has been approved by the commissioner in the manner hereinafter prescribed.
For purposes of this subsection, a domestic insurer shall include any other person controlling a domestic insurer.
(2) For purposes of this subsection, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The commissioner shall by regulation determine those instances in which the party seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the commissioner, in his or her discretion, determines that confidential treatment will interfere with enforcement of this subsection a. If the statement referred to in paragraph (1) of this subsection a. is otherwise filed, this paragraph (2) regarding notice of divestiture or acquisition shall not apply.
(3) With respect to a transaction subject to this subsection a., the acquiring person shall also file a pre-acquisition notification with the commissioner, which shall contain the information set forth in section 7 of P.L.1993, c.241 (C.17:27A-4.1). A failure to file the notification may be subject to penalties specified in paragraph (3) of subsection e. of section 7 of P.L.1993, c.241 (C.17:27A-4.1).
b. Content of statement. The statement to be filed with the commissioner hereunder shall be made under oath or affirmation and shall contain the following:
(1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection a. is to be effected (hereinafter called "acquiring party"), and
(i) If such person is an individual, his principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years;
(ii) If such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subparagraph (i) of this paragraph.
(2) The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose (including any pledge of the insurer's stock, or the stock of any of its subsidiaries or controlling affiliates), and the identity of persons furnishing such consideration, provided, however, that where a source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests.
(3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.
(4) Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.
(5) The number of shares of any security referred to in subsection a. which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection a., and a statement as to the method by which the fairness of the proposal was arrived at.
(6) The amount of each class of any security referred to in subsection a. which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.
(7) (i) A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection a. in which any acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into;
(ii) The name and address of any person that is owned, directly or indirectly, of record or beneficially, by each acquiring party and that is also a beneficial owner of shares of the company that is the subject of the merger or other acquisition of control referred to in subsection a. of this section; any affiliate of the acquiring party or such beneficial owner referred to in this subparagraph; and any associated person;
(iii) A detailed description of every agreement, arrangement, and understanding between the acquiring party and all associated persons in connection with the merger or other acquisition of control; and
(iv) A detailed description of each proxy, contract, arrangement, understanding, or relationship pursuant to which the acquiring party or any associated persons, or both, have a right to vote, or cause or direct the vote of, any security referred to in subsection a. of this section.
As used in this subparagraph, "associated person" means any person acting in concert, directly or indirectly, pursuant to any agreement, arrangement, or understanding, whether written or oral, with the acquiring party or such beneficial owner referred to in this subparagraph, or any of their respective affiliates, in connection with the merger, consolidation, or other acquisition of control.
(8) A description of the purchase of any security referred to in subsection a. during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid therefor.
(9) A description of any recommendations to purchase any security referred to in subsection a. made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party.
(10) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection a., and (if distributed) of additional soliciting material relating thereto.
(11) The terms of any agreement, contract or understanding made or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection a. for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.
(12) An agreement by the person required to file the statement referred to in subsection a. of this section that it will provide the annual enterprise risk report, specified in paragraph (1) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), so long as control exists.
(13) An acknowledgement by the person required to file the statement referred to in subsection a. of this section that the person and all subsidiaries within its control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer.
(14) Such additional information as the commissioner may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.
If the person required to file the statement referred to in subsection a. is a partnership, limited partnership, syndicate or other group, the commissioner may require that the information called for by paragraphs (1) through (14) shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection a. is a corporation, the commissioner may require that the information called for by paragraphs (1) through (14) shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of such corporation.
If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the commissioner and sent to such insurer within two business days after the person learns of such change.
c. Alternative filing materials. If any offer, request, invitation, agreement or acquisition referred to in subsection a. is proposed to be made by means of a registration statement under the Securities Act of 1933, 48 Stat. 74 (15 U.S.C. s.77a et seq.), or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, 48 Stat. 881 (15 U.S.C. s.78a et seq.), or under a State law requiring similar registration or disclosure, the person required to file the statement referred to in subsection a. may utilize such documents in furnishing the information called for by that statement.
d. Approval by commissioner; hearings.
(1) The commissioner shall approve any merger or other acquisition of control referred to in subsection a. unless, after a public departmental hearing thereon, he finds that:
(i) After the change of control the domestic insurer referred to in subsection a. would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;
(ii) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this State or tend to create a monopoly therein. In applying the competitive standard of this subparagraph:
(a) The informational requirements of paragraph (1) of subsection c. and paragraph (2) of subsection d. of section 7 of P.L.1993, c.241 (C.17:27A-4.1) shall apply;
(b) The merger or other acquisition shall not be disapproved if the commissioner finds that any of the situations meeting the criteria provided by paragraph (3) of subsection d. of section 7 of P.L.1993, c.241 (C.17:27A-4.1) exist; and
(c) The commissioner may condition approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time;
(iii) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders;
(iv) The financial condition of any acquiring party is such that (a) the acquiring party has not been financially solvent on a generally accepted accounting principles basis, or if an insurer, on a statutory accounting basis, for the most recent three fiscal years immediately prior to the date of the proposed acquisition (or for the whole of such lesser period as such acquiring party and any predecessors thereof shall have been in existence); (b) the acquiring party has not generated net before-tax profits from its normal business operations for the latest two fiscal years immediately prior to the date of acquisition (or for the whole of such lesser period as such acquiring party and any predecessors thereof shall have been in existence); or (c) the acquisition debt of the acquiring party exceeds 50% of the purchase price of the insurer;
(v) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest;
(vi) The competence, experience and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or
(vii) The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.
(2) The public hearing referred to in paragraph (1) shall be held within 60 days after the statement required by subsection a. is filed and at least 20 days' notice thereof shall be given by the commissioner to the person filing the statement and the insurer. Not less than seven days' notice of such public hearing shall be given by the person filing the statement to such other persons as may be designated by the commissioner. The hearing shall, at the commissioner's discretion, be conducted by the commissioner or his designee who shall report to the commissioner and advise him on the nature of the matter delegated. The commissioner shall make a determination or issue an order, based upon that advice and report, as he shall, in his discretion, determine, and that determination or order shall have the same force and effect as if the commissioner had conducted that hearing personally. The commissioner shall make a determination within 45 business days after the conclusion of such hearing. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interest may be affected thereby shall have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the Superior Court of this State. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearings.
(3) If the proposed acquisition of control requires the approval of more than one commissioner, the public hearing referred to in paragraph (2) may be held on a consolidated basis upon request of the person filing the statement referred to in subsection a. of this section. That person shall file the statement referred to in subsection a. of this section with the National Association of Insurance Commissioners within five days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing, and shall provide notice to the applicant of the decision to opt out within 10 days of the receipt of the statement referred to in subsection a. of this section. A hearing conducted on a consolidated basis shall be public, if not conducted on the documents filed in accordance with the applicable state's procedures for such hearings, and shall be held within the United States in accordance with the rules and procedures of the state hosting the consolidated hearing before the commissioners of the states in which the insurers are domiciled. The commissioners shall hear and receive evidence. A commissioner may attend the hearing, in person or by telecommunication.
(4) The commissioner may retain, at the acquiring person's expense, any attorneys, actuaries, accountants and other persons as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.
e. (Deleted by amendment, P.L.1993, c.241.)
f. Exemptions. The provisions of this section shall not apply to:
(1) Any transaction which is subject to the provisions of R.S.17:27-1 et seq. or N.J.S.17B:18-60 et seq., concerning the merger or consolidation of two or more insurers; and
(2) Any offer, request, invitation, agreement or acquisition which the commissioner by order shall exempt therefrom as (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or (b) as otherwise not comprehended within the purposes of this section.
g. Violations. The following shall be violations of this section:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsection a. or b.; or
(2) Subject to subsection f., the effectuation of, or any attempt to effectuate, an acquisition of control of, divestiture of, or merger with, a domestic insurer unless the commissioner has given his approval thereto.
h. Jurisdiction; consent to service of process.
The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the commissioner under this section, and over all actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the commissioner to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to such person at his last known address.
i. The purpose of this section is to enable the commissioner to review any acquisition of control of a domestic insurer or of any other person controlling a domestic insurer in order to determine whether or not the acquisition of control would be adverse to the public interest or protection of the existing and future policyholders of the company or is being sought by persons who would utilize the control adversely to the public interest or protection of policyholders, and to enable the commissioner to make the findings required pursuant to paragraph (1) of subsection d. of this section.
##### **§ 17:27A-3** Registration of insurers. {#sec-17-27a-3 omnilex-key=us-nj-statutes--title-17--17:27A-3}
3. Registration of insurers.
a. Registration. Every insurer which is authorized to do business in this State and which is a member of an insurance holding company system shall register with the commissioner, except a foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in: this section; paragraph (1) of subsection a. and subsections b. and c. of section 4 of P.L.1970, c.22 (C.17:27A-4); and either paragraph (2) of subsection a. of section 4 of P.L.1970, c.22 (C.17:27A-4) or a substantially similar provision which requires that each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions, including change of or additions to ownership, within 15 days after the end of each month in which it learns of each such change or addition. Any insurer which is subject to registration under this section shall register within 60 days after the effective date of P.L.1993, c.241 or 15 days after it becomes subject to registration, whichever is later, and annually thereafter by April 1 of each year for the previous calendar year, unless the commissioner for good cause shown extends the time for registration, and then within such extended time. The commissioner may require any authorized insurer which is a member of an insurance holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by such insurance company with the insurance regulatory authority of domiciliary jurisdiction.
b. Information and form required. Every insurer subject to registration shall file a registration statement and a summary of the registration statement with the commissioner on a form provided by the commissioner, which shall contain current information about:
(1) The capital structure, general financial condition, ownership and management of the insurer and any person controlling the insurer;
(2) The identity and relationship of every member of the insurance holding company system;
(3) The following agreements in force, relationships subsisting, and transactions currently outstanding or which have occurred during the last calendar year between such insurer and its affiliates:
(a) Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;
(b) Purchases, sales, or exchanges of assets;
(c) Transactions not in the ordinary course of business;
(d) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer's assets to liability, other than insurance contracts entered into in the ordinary course of the insurer's business;
(e) All management agreements, service contracts and all cost-sharing arrangements;
(f) Reinsurance agreements;
(g) Dividends and other distributions to shareholders, including the declarations and authorizations thereof; and
(h) Consolidated tax allocation agreements;
(4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system;
(5) Financial statements of or within an insurance holding company system, including all affiliates, if requested by the commissioner. Financial statements shall include, but are not limited to, annual audited financial statements filed with the U.S. Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, 15 U.S.C. s.77a et seq., or the Securities Exchange Act of 1934, 15 U.S.C. s.78a et seq. An insurer required to file financial statements pursuant to this paragraph may satisfy the request by providing the commissioner with the most recently filed parent corporation financial statements that have been filed with the SEC;
(6) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the commissioner;
(7) Statements that the insurer's board of directors is responsible for and oversees corporate governance and internal controls and that the insurer's officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures; and
(8) Any other information required by the commissioner by rule or regulation.
All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
c. Materiality. No information need be disclosed on the registration statement filed pursuant to subsection b. of this section if such information is not material for the purposes of this section. Unless the commissioner by rule, regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees or other contingent obligations involving 1/2 of 1% or less of an insurer's admitted assets as of December 31 next preceding shall not be deemed material for purposes of this section. The definition of materiality provided in this subsection shall not apply for purposes of the Group Capital Calculation or the NAIC Liquidity Stress Test Framework.
d. Amendments to registration statements. Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the commissioner within 15 days after the end of the month in which it learns of each such change or addition.
e. Information of insurers. Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, if that information is reasonably necessary to enable the insurer to comply with the provisions of P.L.1970, c.22 (C.17:27A-1 et seq.).
f. Termination of registration. The commissioner shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system.
g. Consolidated filing. The commissioner may require or allow two or more affiliated insurers subject to registration hereunder to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements.
h. Alternative registration. The commissioner may allow an insurer which is authorized to do business in this State and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection a. and to file all information and material required to be filed under this section.
i. Exemptions. The provisions of this section shall not apply to any insurer, information or transaction if and to the extent that the commissioner by rule, regulation, or order shall exempt the same from the provisions of this section.
j. Disclaimer. Any person may file with the commissioner a disclaimer of affiliation with any authorized insurer or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. A disclaimer of affiliation shall be deemed to have been granted unless the commissioner, within 30 days following receipt of a complete disclaimer, notifies the filing party in writing that the disclaimer is disallowed. In the event of disallowance, the disclaiming party may request a hearing. The disclaiming party shall be relieved of its duty to register under this section if approval of the disclaimer has been granted by the commissioner, or if the disclaimer is deemed to have been approved.
k. Enterprise risk filings.
(1) The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall, to the best of the ultimate controlling person's knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners.
(2) Group Capital Calculation. Except as provided below, the ultimate controlling person of an insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC Group Capital Calculation Instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the commissioner in accordance with the procedures within the Financial Analysis Handbook adopted by the NAIC. Insurance holding company systems described below are exempt from filing the group capital calculation:
(a) An insurance holding company system that has only one insurer within its holding company structure, that only writes business and is only licensed in its domestic state, and assumes no business from any other insurer;
(b) An insurance holding company system that is required to perform a group capital calculation specified by the United States Federal Reserve Board. The lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing;
(c) An insurance holding company system whose non-U.S. group-wide supervisor is located within a reciprocal jurisdiction as described in subsection e. of section 2 of P.L.1993, c.243 (C.17:51B-2) that recognizes the U.S. state regulatory approach to group supervision and group capital;
(d) An insurance holding company system:
(i) That provides information to the lead state that meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook, and
(ii) Whose non-U.S. group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified by the commissioner in regulation, the group capital calculation as the world-wide group capital assessment for U.S. insurance groups who operate in that jurisdiction;
(e) Notwithstanding the provisions of subparagraphs (c) and (d) of paragraph (2) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system where, after any necessary consultation with other supervisors or officials, it is deemed appropriate by the lead state commissioner for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace.
(f) Notwithstanding the exemptions from filing the group capital calculation stated in subparagraphs (a) through (d) of paragraph (2) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), the lead state commissioner has the discretion to exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified by the commissioner in regulation.
(g) If the lead state commissioner determines that an insurance holding company system no longer meets one or more of the requirements for an exemption from filing the group capital calculation under this section, the insurance holding company system shall file the group capital calculation at the next annual filing date unless given an extension by the lead state commissioner based on reasonable grounds shown.
(3) Liquidity Stress Test. The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC Liquidity Stress Test Framework shall file the results of a specific year's Liquidity Stress Test. The filing shall be made to the lead state insurance commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners:
(a) The NAIC Liquidity Stress Test Framework includes Scope Criteria applicable to a specific data year. These Scope Criteria are reviewed at least annually by the Financial Stability Task Force or its successor. Any change to the NAIC Liquidity Stress Test Framework or to the data year for which the Scope Criteria are to be measured shall be effective on January 1 of the year following the calendar year when the changes are adopted. Insurers meeting at least one threshold of the Scope Criteria are considered scoped into the NAIC Liquidity Stress Test Framework for the specified data year unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the Framework for that data year. Similarly, insurers that do not trigger at least one threshold of the Scope Criteria are considered scoped out of the NAIC Liquidity Stress Test Framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should be scoped into the Framework for that data year.
Regulators wish to avoid having insurers scoped in and out of the NAIC Liquidity Stress Test Framework on a frequent basis. The lead state insurance commissioner, in consultation with the Financial Stability Task Force or its successor, shall assess this concern as part of the determination for an insurer.
(b) The performance of, and filing of the results from, a specific year's Liquidity Stress Test shall comply with the NAIC Liquidity Stress Test Framework's instructions and reporting templates for that year and any lead state insurance commissioner determinations, in consultation with the Financial Stability Task Force or its successor, provided within the Framework.
l. Violations. The failure to file a registration statement or any amendment thereto or enterprise risk filing required by this section within the time specified for such filing shall be a violation of this section.
##### **§ 17:27A-4** Standards. {#sec-17-27a-4 omnilex-key=us-nj-statutes--title-17--17:27A-4}
4. Standards.
a. Transactions within an insurance holding company system.
(1) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards:
(a) The terms shall be fair and reasonable;
(b) Agreements for cost sharing services and management shall include such provisions as required by rules and regulations adopted by the commissioner;
(c) Charges or fees for services performed shall be reasonable;
(d) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;
(e) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and
(f) The insurer's surplus as regards policyholders following any transaction with affiliates or dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.
(2) The following transactions, set forth in subparagraphs (a) through (g) of this paragraph (2) involving a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this section, which are subject to any materiality standards contained in subparagraphs (a) through (g) of this paragraph (2) may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into that transaction at least 30 days prior thereto, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within that 30-day period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the commissioner for determination of the type of filing required.
(a) Sales, purchases, exchanges, loans or extensions of credit, guarantees or other contingent obligations, investments, or loans collateralized by the stock of a subsidiary or affiliate, provided such transactions equal or exceed: (i) with respect to insurers other than life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders, as of December 31 next preceding; (ii) with respect to life insurers, 3% of the insurer's admitted assets, as of December 31 next preceding;
(b) Loans or extensions of credit to any person who is not an affiliate, in which the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making those loans or extensions of credit, provided those transactions are equal to or exceed: (i) with respect to insurers other than life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders, as of December 31 next preceding; (ii) with respect to life insurers, 3% of the insurer's admitted assets, as of December 31 next preceding;
(c) Reinsurance agreements or modifications thereto, including:
(i) All reinsurance pooling agreements; and
(ii) Agreements in which the reinsurance premium or a change in the insurer's liabilities, or the projected reinsurance premium or a change in the insurer's liabilities in any of the next three years, equals or exceeds 5% of the insurer's surplus as regards policyholders, as of December 31 next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a non-affiliate if an agreement or understanding exists between the insurer and non-affiliate that any portion of those assets will be transferred to one or more affiliates of the insurer;
(d) All management agreements, service contracts, tax allocation agreements, and all cost-sharing arrangements;
(e) Guarantees when made by a domestic insurer; provided, however, that a guarantee which is quantifiable as to amount shall not be subject to the notice requirements of this paragraph unless it exceeds the lesser of one-half of one percent (.5%) of the insurer's admitted assets or ten percent (10%) of surplus as regards policyholders as of the 31st day of December next preceding. Further, all guarantees which are not quantifiable as to amount shall be subject to the notice requirements of this paragraph;
(f) Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount which, together with its present holdings in such investments, exceeds two and one-half percent (2.5%) of the insurer's surplus to policyholders. Direct or indirect acquisitions in insurance affiliates that are subject to section 2 of P.L.1970, c.22 (C.17:27A-2), shall be exempt from this requirement; and
(g) Any material transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the insurer's policyholders. Nothing herein contained shall be deemed to authorize or permit any transactions which, in the case of an insurer which is not a member of the same insurance holding company system, would be otherwise contrary to law.
(3) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would otherwise occur. If the commissioner determines that such separate transactions were entered into over any 12-month period for that purpose, he may exercise his authority under section 8 of P.L.1993, c.241 (C.17:27A-9.1).
(4) The commissioner, in reviewing transactions pursuant to paragraph (2) of this subsection, shall consider whether the transactions comply with the standards set forth in paragraph (1) of this subsection and whether they may adversely affect the interests of policyholders.
(5) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in that corporation by the insurance holding company system exceeds 10% of that corporation's voting securities.
(6) The commissioner may by regulation specify certain types of transactions that need not be submitted for review under this subsection if he determines that those transactions would not have a significant impact on the financial condition or methods of operation of the insurer.
b. Adequacy of surplus. For purposes of this chapter, in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:
(1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;
(2) The extent to which the insurer's business is diversified among the several lines of insurance;
(3) The number and size of risks insured in each line of business;
(4) The extent of the geographical dispersion of the insurer's insured risks;
(5) The nature and extent of the insurer's reinsurance program;
(6) The quality, diversification, and liquidity of the insurer's investment portfolio;
(7) The recent past and projected future trend in the size of the insurer's surplus as regards policyholders;
(8) The surplus as regards policyholders maintained by other comparable insurers in respect of the factors enumerated in this subsection;
(9) The adequacy of the insurer's reserves;
(10) The quality and liquidity of investments in affiliates. The commissioner may discount any such investments or treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment such investment so warrants; and
(11) The quality of the insurer's earnings and the extent to which the reported earnings include extraordinary items.
c. Dividends and other distributions.
(1) A domestic insurer subject to registration under section 3 of P.L.1970, c.22 (C.17:27A-3) shall report to the commissioner any dividend or distribution to its shareholders within five business days following declaration and at least 30 days, after receipt of that report by the commissioner, prior to payment. For good cause shown, the commissioner may reduce the notification period prior to payment to a period of not less than 10 days. The commissioner shall limit or disallow the payment of any dividend or distribution if he determines that the insurer's surplus as regards policyholders is not reasonable in relation to its outstanding liabilities and adequate to its financial needs pursuant to subsection b. of this section or if the insurer is otherwise found to be in a hazardous financial condition.
(2) (a) No domestic insurer subject to registration under section 3 shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until (i) 30 days after the commissioner has received notice of the declaration thereof and has not within such period disapproved such payment, or (ii) the commissioner shall have approved such payment within such 30-day period.
(b) For purposes of this paragraph, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the greater of (i) 10% of such insurer's surplus as regards policyholders as of December 31 next preceding, or (ii) the net gain from operations of such insurer, if such insurer is a life insurer, or the net income, if such insurer is not a life insurer, not including realized capital gains, for the 12-month period ending December 31 next preceding, but shall not include pro rata distributions of any class of the insurer's own securities.
(c) Notwithstanding any other provision of law, a domestic insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner's approval thereof, and such a declaration shall confer no rights upon shareholders until (i) 30 days after the commissioner has received notice of the declaration thereof and has not within such period disapproved such payment, or (ii) the commissioner shall have approved such payment within such 30-day period.
(3) Except for extraordinary dividends or distributions paid pursuant to paragraph (2) of this subsection, all dividends or distributions to shareholders shall be declared or paid by insurers subject to registration under section 3 of P.L.1970, c.22 (C.17:27A-3) from only earned surplus. For purposes of this paragraph, "earned surplus" means unassigned funds (surplus), as reported on the insurer's annual statement as of December 31 next preceding, less unrealized capital gains and revaluation of assets.
d. Management of domestic insurers subject to registration.
(1) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with P.L.1970, c.22 (C.17:27A-1 et seq.).
(2) Nothing herein shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property or services with one or more other persons under arrangements meeting the standards of paragraph (1) of subsection a. of this section.
(3) Not less than one-third of the directors of a domestic insurer, and not less than one-third of the members of each committee of the board of directors of any domestic insurer, shall be persons who are not officers or employees of that insurer or of any entity controlling, controlled by, or under common control with, that insurer and who are not beneficial owners of a controlling interest in the voting securities of that insurer or any such entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof.
(4) The board of directors of a domestic insurer shall establish one or more committees comprised solely of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with, the insurer and who are not beneficial owners of a controlling interest in the voting securities of the insurer or any such entity. The committee shall be responsible for recommending the selection of independent certified public accountants, reviewing the insurer's financial condition, the scope and results of the independent audit and any internal audit, nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer and recommending to the board of directors the selection and compensation, including bonuses or other special payments, of the principal officers.
(5) The provisions of paragraphs (3) and (4) of this subsection d. shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, is an entity having a board of directors and committees thereof that substantially meet the requirements of those paragraphs.
(6) An insurer may make application to the commissioner for a waiver from the requirements of this subsection, if the insurer's annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, is less than $300,000,000. An insurer may also make application to the commissioner for a waiver from the requirements of this subsection based upon unique circumstances. The commissioner may consider various factors including, but not limited to, the type of business entity, volume of business written, availability of qualified board members, or the ownership or organizational structure of the entity.
##### **§ 17:27A-4.1** Definitions, regulations concerning acquisitions. {#sec-17-27a-4.1 omnilex-key=us-nj-statutes--title-17--17:27A-4.1}
7. a. As used in this section only:
"Acquisition" means any agreement, arrangement or activity, the consummation of which results in a person acquiring, directly or indirectly, the control of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, bulk reinsurance and mergers.
An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an insurer which is an acquirer or is acquired, or is the result of a merger.
b. (1) Except as provided in paragraph (2) of this subsection, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this State.
(2) This section shall not apply to the following:
(a) (Deleted by amendment, P.L.2014, c.81)
(b) A purchase of securities solely for investment purposes, so long as those securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control as defined in subsection c. of section 1 of P.L.1970, c.22 (C.17:27A-1), it is not solely for investment purposes unless the commissioner or other appropriate official of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary commissioner or official to the commissioner of this State;
(c) The acquisition of already affiliated persons;
(d) An acquisition if, as an immediate result of the acquisition, the combined market share of the involved insurers would not exceed five percent of the total market, there would be no increase in the market, or
(i) the combined market share of the involved affiliated insurers would not exceed twelve percent of the total market, and
(ii) the market share increases by no more than two percent of the total market.
For the purpose of this subparagraph (d), "market" means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State;
(e) An acquisition for which a pre-acquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business;
(f) An acquisition of an insurer whose domiciliary commissioner or other appropriate official affirmatively finds that: the insurer is in failing condition; there is a lack of feasible alternatives to improving that condition; the public benefits of improving that insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary commissioner or official to the commissioner of this State.
(g) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition notification is filed with the commissioner in accordance with paragraph (1) of subsection c. of this section 30 days prior to the proposed effective date of the acquisition. Such pre-acquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other paragraph of this subsection.
c. An acquisition covered by subsection b. of this section shall be subject to an order pursuant to subsection e. of this section unless the acquiring person files a pre-acquisition notification and the waiting period has expired. The acquired person may file a pre-acquisition notification. The commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in section 6 of P.L.1970, c.22 (C.17:27A-6).
(1) The pre-acquisition notification shall be in such form and contain such information as prescribed by the commissioner relating to those markets which, under subparagraph (2)(d) of subsection b. of this section, cause the acquisition not to be exempted from the provisions of this section. The commissioner may require such additional material and information as he deems necessary. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State, accompanied by a summary of the education and experience of that person indicating his ability to render an informed opinion.
(2) The waiting period required shall begin on the date of receipt by the commissioner of pre-acquisition notification and shall end on the earlier of the 30th day after the date of that notification, or termination of the waiting period by the commissioner. Prior to the end of the waiting period, the commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after receipt of that additional information by the commissioner or termination of the waiting period by the commissioner.
d. (1) The commissioner may enter an order under paragraph (1) of subsection e. with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance of this State or, to tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection c.
(2) In determining whether a proposed acquisition would violate the competitive standard of paragraph (1) of this subsection, the commissioner shall consider the following:
(a) Any acquisition covered under subsection b. involving two or more insurers competing in the same market shall be prima facie evidence of violation of the competitive standard if the market is highly concentrated and the involved insurers possess the following shares of the market:
Insurer A Insurer B
4% 4% or more
10% 2% or more
15% 1% or more
or, if the market is not highly concentrated and the involved insurers possess the following shares of the market:
Insurer A Insurer B
5% 5% or more
10% 4% or more
Insurer A Insurer B
15% 3% or more
19% 1% or more
For the purposes of this subparagraph (a), the insurer with the largest share of the market shall be deemed to be Insurer A. A highly concentrated market is one in which the share of the four largest insurers is seventy-five percent or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table shall be prima facie evidence of violation of the competitive standards in paragraph (1) of this subsection.
(b) There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time, extending from any base year five to ten years prior to the acquisition, up to the time of the acquisition. Any acquisition or merger covered under subsection b. involving two or more insurers competing in the same market shall be prima facie evidence of a violation of the competitive standard in paragraph (1) of this subsection if:
(i) there is a significant trend toward increased concentration in the market;
(ii) one of the insurers involved is one of the insurers in a grouping of such large insurers showing the requisite increase in the market share; and
(iii) another involved insurer's market is two percent or more.
(c) Even though an acquisition is not prima facie violative of the competitive standard under subparagraphs (a) and (b) of this paragraph (2), the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under those subparagraphs, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subparagraph (c) include, but are not limited to, the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.
(d) For the purposes of this paragraph (2):
The term "insurer" includes any company or group of companies under common management, ownership or control;
The term "market" means the relevant product and geographical markets as determined by the commissioner. In determining the relevant product and geographical markets, the commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this State, and the relevant geographical market is assumed to be this State.
The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.
(3) An order may not be entered under paragraph (1) of subsection e. if:
(a) The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from those economies exceed the public benefits which would arise from not lessening competition; or
(b) The acquisition will substantially increase the availability of insurance, and the public benefits of that increase exceed the public benefits which would arise from not lessening competition.
e. (1) (a) If an acquisition violates the standards of this section, the commissioner may enter an order:
(i) requiring an involved insurer to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation; or
(ii) denying the application of an acquired or acquiring insurer for a license to do business in this State.
(b) Such an order shall not be entered unless:
(i) there is a hearing,
(ii) notice of that hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing; and
(iii) the hearing is concluded and the order is issued no later than 60 days after the end of the waiting period. Every order shall be accompanied by a written decision of the commissioner setting forth his findings of fact and conclusions of law.
(c) An order entered under this subsection shall not become final earlier than 30 days after it is issued, during which time the involved insurer may submit a plan to remedy the anti-competitive impact of the acquisition within a reasonable time. Based upon such plan or other information, the commissioner shall specify the conditions, if any, under which, and the time period during which, the aspects of the acquisition causing a violation of the standards of this section may be remedied and the order vacated or modified.
(d) An order pursuant to this subsection shall not apply if the acquisition is not consummated.
(2) Any person who violates a cease and desist order of the commissioner under paragraph (1) while such order is in effect, may after notice and hearing, be subject to a penalty of up to $10,000 for each day of violation, or suspension or revocation of that person's license, or both.
(3) Any insurer or other person who fails to make any filing required by this section shall be required to pay a penalty of up to $5,000 per violation.
f. Subsections b. and c. of section 8 of P.L.1970, c.22 (C.17:27A-8) and section 10 of P.L.1970, c.22 (C.17:27A-10) shall not apply to acquisitions covered under this section.
g. This section shall not limit the commissioner's authority to refuse to renew or revoke the certificate of authority of an insurer admitted to transact business in this State pursuant to R.S.17:32-1 et seq., or N.J.S.17B:23-1 et seq.
##### **§ 17:27A-5** Examination. {#sec-17-27a-5 omnilex-key=us-nj-statutes--title-17--17:27A-5}
5. Examination.
a. Power of commissioner. In addition to the powers which the commissioner has under other sections of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes relating to the examination of insurers, the commissioner shall have the power to examine any insurer registered under section 3 of P.L.1970, c.22 (C.17:27A-3) and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party, or by any entity or combination of entities within the insurance holding company system, or by the insurance holding company system on a consolidated basis.
The commissioner shall also have the power to order any insurer registered under section 3 to produce such records, books, or other information papers in the possession of the insurer or its affiliates as shall be necessary to ascertain the financial condition of the insurer or to determine compliance with P.L.1970, c.22 (C.17:27A-1 et seq.). In the event such insurer fails to comply with such order, the commissioner shall have the power to examine such affiliates to obtain such information.
In addition, to determine compliance with this section, the commissioner may order any insurer registered under section 3 of P.L.1970, c.22 (C.17:27A-3) to produce information not in the possession of the insurer if the insurer can obtain access to that information pursuant to contractual relationships, statutory obligations, or other method. In the event the insurer cannot obtain the information requested by the commissioner, the insurer shall provide to the commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of the information. Whenever it appears to the commissioner that the detailed explanation is without merit, the commissioner may require the insurer, after notice and opportunity for a hearing, to pay a penalty of up to $5,000 for each day's delay, or may suspend or revoke the insurer's certificate of authority.
b. (Deleted by amendment, P.L.1993, c.241.)
c. Use of consultants. The commissioner may retain at the registered insurer's expense such attorneys, actuaries, accountants and other persons as shall be necessary to assist in the conduct of the examination under subsection a. above. Any persons so retained shall be under the direction and control of the commissioner and shall act in a purely advisory capacity.
d. Expenses. The reasonable expenses of the examination pursuant to subsection a. above shall be fixed and determined by the commissioner, and he shall collect them from the insurer examined, which shall pay them on presentation of an accounting of the expenses.
e. Compelling production. In the event the insurer fails to comply with an order issued pursuant to this section, the commissioner shall have the power to examine the affiliates to obtain the information. The commissioner shall also have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the State. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in the Superior Court of New Jersey, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses, and their testimony, shall be itemized and charged against, and be paid by, the company being examined.
##### **§ 17:27A-5.1** Power of commissioner; expenses; supervisory college. {#sec-17-27a-5.1 omnilex-key=us-nj-statutes--title-17--17:27A-5.1}
7. a. Power of commissioner. With respect to any insurer registered under section 3 of P.L.1970, c.22 (C.17:27A-3), and in accordance with subsection c. of this section, the commissioner shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with P.L.2014, c.81 (C.17:27A-5.1 et al.). The powers of the commissioner with respect to supervisory colleges include, but are not limited to, the following:
(1) Initiating the establishment of a supervisory college;
(2) Clarifying the membership and participation of other supervisors in the supervisory college;
(3) Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor;
(4) Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and
(5) Establishing a crisis management plan.
b. Expenses. Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner's participation in a supervisory college in accordance with subsection c. of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the commissioner may establish a regular assessment to the insurer for the payment of these expenses.
c. Supervisory college. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management and governance processes, and as part of the examination of individual insurers in accordance with section 5 of P.L.1970, c.22 (C.17:27A-5), the commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal and international regulatory agencies. The commissioner may enter into agreements in accordance with subsection c. of section 6 of P.L.1970, c.22, (C.17:27A-6) providing the basis for cooperation between the commissioner and the other regulatory agencies, and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction.
##### **§ 17:27A-5.2** Group-wide supervision for international insurance groups. {#sec-17-27a-5.2 omnilex-key=us-nj-statutes--title-17--17:27A-5.2}
8. Group-wide supervision for international insurance groups.
a. As used in this section, the following terms shall have the respective meanings hereinafter set forth, unless the context clearly indicates otherwise:
"Group-wide supervisor" means the chief insurance regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is from the jurisdiction determined or acknowledged by the commissioner under this section to have sufficient significant contacts with the international insurance group.
"International insurance group" means an insurance group operating internationally that includes an insurer registered under section 3 of P.L.1970, c.22 (C.17:27A-3).
b. The commissioner is authorized to act as the group-wide supervisor for any international insurance group if the international insurance group's ultimate controlling person is domiciled in this State. The commissioner may otherwise acknowledge another jurisdiction as the group-wide supervisor pursuant to the factors set forth in subsections c. and f. of this section whenever the international insurance group:
(1) Does not have substantial insurance operations in the United States;
(2) Has substantial insurance operations in the United States, but not in this State; or
(3) Has substantial insurance operations in the United States and this State, but the commissioner has determined that another jurisdiction is the appropriate group-wide supervisor.
c. In cooperation with other supervisors, the commissioner may determine that the commissioner is the appropriate group-wide supervisor for an international insurance group with substantial operations concentrated in this State or with substantial insurance operations conducted by subsidiary insurance companies domiciled in this State, where the ultimate controlling person is domiciled outside of this State, or the commissioner may acknowledge that another chief insurance regulatory official is the appropriate group-wide supervisor for the international insurance group. The commissioner shall consider the following factors and the relative scale of each when making a determination or acknowledgment under this subsection:
(1) The location where the international insurance group is based or the place of domicile of the ultimate controlling person of the international insurance group;
(2) The locations of the international insurance group's executive offices;
(3) The locations of origin of the insurance business of the international insurance group;
(4) The locations of the assets and liabilities of the international insurance group;
(5) The locations of the business operations and activities of the international insurance group; and
(6) If another chief insurance regulatory official is seeking to act as the lead group-wide supervisor whether that jurisdiction:
(a) provides the commissioner with reasonably reciprocal recognition and cooperation; and
(b) is accredited by the National Association of Insurance Commissioners (NAIC) or has substantially similar laws when compared to the insurance laws of this State, especially with regard to the provision of group-wide supervision, enterprise risk analysis and cooperation with other chief insurance regulatory officials.
However, when another chief insurance regulatory official is currently acting as the lead group-wide supervisor of an international insurance group and is acknowledged as such in the National Association of Insurance Commissioners (NAIC) Lead State Summary Report, the commissioner shall defer to that lead group-wide supervisor designation unless the commissioner determines that there has been a significant material change in the international insurance group that:
(i) results in the group's insurers domiciled in this State holding the majority of the group's assets or liabilities;
(ii) materially alters the operations or ownership of the group's insurers domiciled in this State; or
(iii) makes this State the jurisdiction with the group's largest premium volume or insured exposures.
In the event of a dispute as to the proper jurisdiction to act as lead group-wide supervisor, a determination by the commissioner not to defer to the current lead group-wide supervisor shall be made only after notice and a hearing, and such determination shall be accompanied by specific findings of fact and conclusions of law.
d. Pursuant to section 5 of P.L.1970, c.22 (C.17:27A-5), the commissioner is authorized to collect from any insurer registered pursuant to section 3 of P.L.1970, c.22 (C.17:27A-3) all information necessary to determine whether the commissioner may act as the group-wide supervisor or if the commissioner may acknowledge another insurance regulatory official to act as the group-wide supervisor. Prior to issuing a determination that an international insurance group is subject to group-wide supervision by the commissioner, the commissioner shall notify the insurer registered pursuant to section 3 of P.L.1970, c.22 (C.17:27A-3) and the ultimate controlling person within the international insurance group. The international insurance group shall have not less than 30 days to provide the commissioner with additional information pertinent to the pending determination. The commissioner shall publish on the Department of Banking and Insurance website the identity of international insurance groups that the commissioner has determined are subject to its group-wide supervision.
e. If the commissioner is the group-wide supervisor for an international insurance group, the commissioner is authorized to engage in conducting and coordinating any of the following group-wide supervision activities:
(1) Assess the enterprise risks within the international insurance group, pursuant to section 5 of P.L.1970, c.22 (C.17:27A-5), to ensure that:
(a) The material financial condition and liquidity risks to the members of the international insurance group which are engaged in the business of insurance are identified by management.
(b) Reasonable and effective mitigation measures are in place.
(2) Request, from any member of an international insurance group subject to the commissioner's supervision, information necessary and appropriate to assess enterprise risk, including, but not limited to, information about the members of the international insurance group regarding:
(a) Governance, risk assessment and management.
(b) Capital adequacy.
(c) Material intercompany transactions.
(3) Compel development and implementation of reasonable measures designed to assure that the international insurance group is able to timely recognize and mitigate material risks to members that are engaged in the business of insurance.
(4) Communicate with other insurance regulatory officials for members within the international insurance group and share relevant information subject to the confidentiality provisions of section 6 of P.L.1970, c.22 (C.17:27A-6), through supervisory colleges as set forth in section 7 of P.L.2014, c.81 (C.17:27A-5.1) or otherwise.
(5) Enter into agreements with or obtain documentation from any insurer registered under section 3 of P.L.1970, c.22 (C.17:27A-3), any member of the international insurance group and any other chief insurance regulatory officials for members, providing the basis for or otherwise clarifying the commissioner's role as group supervisor, including provisions for resolving disputes with other relevant supervisory authorities. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not incorporated in this State is doing business in this State or is otherwise subject to jurisdiction in this State.
(6) Other group-wide supervisory activities as considered appropriate by the commissioner.
f. If the commissioner acknowledges that a regulatory official from a jurisdiction which is not accredited by the National Association of Insurance Commissioners (NAIC) is the group-wide supervisor, the commissioner is authorized to reasonably cooperate, through supervisory colleges or otherwise, with group supervision undertaken by the group-wide supervisor, provided that:
(1) The commissioner's cooperation is in compliance with the insurance laws of this State.
(2) The regulator also recognizes and cooperates with the commissioner's activities as a group-wide supervisor for other international insurance groups where applicable. Whenever such recognition and cooperation is not reasonably reciprocal, the commissioner is authorized to refuse recognition and cooperation.
g. The commissioner is authorized to enter into agreements with or obtain documentation from any insurer registered under section 3 of P.L.1970, c.22 (C.17:27A-3), any affiliate of the insurer and other regulatory officials for members of the insurance group, which provide the basis for or otherwise clarify a regulatory official's role as group supervisor.
h. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary for the administration of this section. In determining whether to promulgate a regulation, the commissioner shall give appropriate consideration to model laws, model regulations and definitions or guidelines pertaining to group-wide supervision, if any, promulgated by the NAIC or other recognized insurance regulatory bodies or associations.
i. A registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner's participation in the administration of this section, including the engagement of attorneys, actuaries and any other professionals and all reasonable travel expenses.
##### **§ 17:27A-6** Confidential treatment. {#sec-17-27a-6 omnilex-key=us-nj-statutes--title-17--17:27A-6}
6. Confidential treatment.
a. Documents, materials or other information in the possession or control of the department that are obtained by or disclosed to the commissioner or any other person in the course of an examination or investigation made pursuant to section 5 of P.L.1970, c.22 (C.17:27A-5) and all information reported pursuant to paragraphs (12) and (13) of subsection b. of section 2 of P.L.1970, c.22 (C.17:27A-2), section 3 and section 4 of P.L.1970, c.22 (C.17:27A-3 and 17:27A-4) are recognized by this State as being proprietary and to contain trade secrets, and shall be confidential by law and privileged, shall not be subject to P.L.1963, c.73 (C.47:1A-1 et seq.), shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make the documents, materials or other information public without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interest of policyholders, shareholders or the public will be served by the publication thereof, in which event the commissioner may publish all or any part in such manner as may be deemed appropriate.
(1) For purposes of the information reported and provided to the Department of Banking and Insurance pursuant to paragraph (2) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), the commissioner shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an insurance holding company supervised by the Federal Reserve Board or any US group wide supervisor.
(2) For purposes of the information reported and provided to the Department of Banking and Insurance pursuant to paragraph (3) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), the commissioner shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and non-US group wide supervisors.
b. Neither the commissioner nor any person who received documents, materials or other information while acting under the authority of the commissioner or with whom such documents, materials or other information are shared pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.) shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection a. of this section.
c. In order to assist in the performance of the commissioner's duties, the commissioner:
(1) May, upon request, be required to share documents, materials or other information, including the confidential and privileged documents, materials or information subject to subsection a. of this section, including proprietary and trade secret documents and materials with other state, federal and international regulatory agencies, with the National Association of Insurance Commissioners (NAIC), and with any third-party consultants designated by the commissioner, with state, federal, and international law enforcement authorities, including members of any supervisory college described in section 7 of P.L.2014, c.81 (C.17:27A-5.1), provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material or other information, and has verified in writing the legal authority to maintain confidentiality.
(2) Notwithstanding paragraph (1) of this subsection c., the commissioner may only share confidential and privileged documents, material, or information reported pursuant to paragraph (1) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3) with commissioners of states having statutes or regulations substantially similar to subsection a. of this section and who have agreed in writing not to disclose that information.
(3) May receive documents, materials or information, including otherwise confidential and privileged documents, materials or information, including propriety and trade-secret information from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information; and
(4) Shall enter into written agreements with the NAIC and any third-party consultants designated by the commissioner governing the sharing and use of information provided pursuant to P.L.2014, c.81 (C.17:27A-5.1 et al.) consistent with this subsection that shall:
(a) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant designated by the commissioner pursuant to P.L.2014, c.81 (C.17:27A-5.1 et al.), including procedures and protocols for sharing by the NAIC with other state, federal or international regulators. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials or other information and has verified in writing the legal authority to maintain that confidentiality;
(b) specify that ownership of information shared with the NAIC or a third-party consultant pursuant to this subsection remains with the commissioner and the use by the NAIC of the information or the use of a third-party consultant, as designated by the commissioner, is subject to the direction of the commissioner;
(c) excluding documents, materials or information reported pursuant to paragraph (3) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), prohibit the NAIC or third-party consultant designated by the commissioner from storing the information shared pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.) in a permanent database after the underlying analysis is completed;
(d) require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant designated by the commissioner pursuant to P.L.2014, c.81 (C.17:27A-5.1 et al.) is subject to a request or subpoena to the NAIC or a third-party consultant designated by the commissioner for disclosure or production;
(e) require the NAIC or a third-party consultant designated by the commissioner to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant designated by the commissioner may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant designated by the commissioner pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.), including with respect to the participation in supervisory colleges in accordance with section 7 of P.L.2014, c.81 (C.17:27A-5.1); and
(f) for documents, material or information reporting pursuant to paragraph (3) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), in the case of an agreement involving a third-party consultant, provide for notification of the identity of the consultant to the applicable insurer.
d. The sharing of information by the commissioner pursuant to this section shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution and enforcement of the provisions of P.L.2014, c.81 (C.17:27A-5.1 et al.).
e. No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection c. of this section.
f. Documents, materials or other information in the possession or control of the NAIC or a third-party consultant designated by the commissioner pursuant to P.L.2014, c.81 (C.17:27A-5.1 et al.) shall be confidential by law and privileged, shall not be subject to P.L.1963, c.73 (C.47:1A-1 et seq.), shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
g. The group capital calculation and resulting group capital ratio required pursuant to paragraph (2) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), and the liquidity stress test along with its results and supporting disclosures required pursuant to paragraph (3) of subsection k. of section 3 of P.L.1970, c.22 (C.17:27A-3), are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems generally. Therefore, except as otherwise may be required under the provisions of P.L.1970, c.22 (C.17:27A-1 et seq.), the making, publishing, disseminating, circulating or placing before the public, or causing directly or indirectly to be made, published, disseminated, circulated or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station or any electronic means of communication available to the public, or in any other way as an advertisement, announcement or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test results, or supporting disclosures for the liquidity stress test of any insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited; provided, however, that if any materially false statement with respect to the group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer's or insurance group's group capital calculation or resulting group capital ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer's or insurance group's liquidity stress test result or supporting disclosures is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of the statement or the inappropriateness, as the case may be, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement.
##### **§ 17:27A-7** Rules and regulations {#sec-17-27a-7 omnilex-key=us-nj-statutes--title-17--17:27A-7}
The commissioner may, upon notice and opportunity for all interested persons to be heard, issue such rules, regulations, and orders as shall be necessary to carry out the provisions of this chapter.
##### **§ 17:27A-7.1** Filing fees {#sec-17-27a-7.1 omnilex-key=us-nj-statutes--title-17--17:27A-7.1}
10. The commissioner may by rule or regulation set reasonable, necessary and appropriate fees for any filing required pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.). All fees payable to the commissioner pursuant to this section are nonrefundable.
##### **§ 17:27A-8** Injunctions; prohibitions against voting securities, sequestration of voting securities {#sec-17-27a-8 omnilex-key=us-nj-statutes--title-17--17:27A-8}
8. Injunctions; prohibitions against voting securities, sequestration of voting securities.
a. Injunctions. Whenever it appears to the commissioner that any person or any director, officer, employee or agent thereof has committed or is about to commit a violation of this chapter or of any rule, regulation, or order issued by the commissioner hereunder, the commissioner may apply to the Superior Court for an order enjoining such person or such director, officer, employee or agent thereof from violating or continuing to violate this chapter or any such rule, regulation or order, and for such other equitable relief as the nature of the case and the interests of the insurer's policyholders, creditors and shareholders or the public may require.
b. Voting of securities; when prohibited. No security or proxy which is the subject of any agreement, arrangement, or understanding regarding acquisition, or which is acquired or to be acquired, in contravention of the provisions of this chapter or of any rule, regulation or order issued by the commissioner hereunder may be voted at any shareholders' meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities, including securities that may be voted pursuant to those proxies, were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the insurer or unless the courts of this State have so ordered. If an insurer or the commissioner has reason to believe that any security or proxy of the insurer or other person controlling the insurer has been or is about to be acquired in contravention of the provisions of this chapter or of any rule, regulation or order issued by the commissioner hereunder the insurer or the commissioner may apply to the Superior Court to enjoin any offer, request, invitation, agreement or acquisition made in contravention of section 2 of P.L.1970, c.22 (C.17:27A-2) or any rule, regulation, or order issued by the commissioner thereunder to enjoin the voting of any security or proxy so acquired, to void any vote of such security or proxy already cast at any meeting of shareholders, and for such other equitable relief as the nature of the case and the interests of the insurer's policyholders, creditors and shareholders or the public may require.
c. Sequestration of voting securities. In any case where a person has acquired or is proposing to acquire any voting securities or proxies in violation of this chapter or any rule, regulation or order issued by the commissioner hereunder, the Superior Court may, on such notice as the court deems appropriate, upon the application of the insurer or the commissioner seize or sequester any voting securities or proxies of the insurer owned directly or indirectly by such person, and issue such orders with respect thereto as may be appropriate to effectuate the provisions of this chapter. Notwithstanding any other provisions of law, for the purposes of this chapter the situs of the ownership of the securities of domestic insurers shall be deemed to be in this State.
##### **§ 17:27A-9.1** Violations; penalties. {#sec-17-27a-9.1 omnilex-key=us-nj-statutes--title-17--17:27A-9.1}
8. a. Any insurer failing to file any registration statement as required by P.L.1970, c.22 (C.17:27A-1 et seq.) shall be required to pay a penalty of up to $5,000 for each day's delay.
b. Every director or officer of an insurance holding company system who violates, participates in, or assents to, or who shall permit any of the officers or agents of the insurer to engage in transactions or make investments which have not been properly reported or submitted pursuant to subsection a. of section 3 of P.L.1970, c.22 (C.17:27A-3) or paragraph (2) of subsection a., or subsection c. of section 4 of P.L.1970, c.22 (C.17:27A-4), or which otherwise violate P.L.1970, c.22 (C.17:27A-1 et seq.), shall pay, in their individual capacity, a penalty of up to $5,000 per violation.
c. Whenever it appears to the commissioner that any insurer subject to P.L.1970, c.22 (C.17:27A-1 et seq.) or any director, officer, employee or agent thereof has engaged in any transaction or entered into a contract which is subject to section 4 of P.L.1970, c.22 (C.17:27A-4) and which would not have been approved had such approval been requested, the commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing the commissioner may also order the insurer to void any such contracts and restore the status quo if such action is in the best interest of the policyholders, creditors or the public.
d. Whenever it appears to the commissioner that any insurer or any director, officer, employee or agent thereof has committed a willful violation of P.L.1970, c.22 (C.17:27A-1 et seq.), the commissioner may cause criminal proceedings to be instituted in the Superior Court against that insurer or the responsible director, officer, employee or agent thereof. An insurer which willfully violates that act may be fined up to $10,000 per violation. Any individual who willfully violates P.L.1970, c.22 (C.17:27A-1 et seq.) may be fined in his individual capacity up to $10,000 per violation or, be imprisoned for not less than one year and not more than three years, or both.
e. Any officer, director, or employee of an insurance holding company system who willfully and knowingly subscribes to or makes or causes to be made any false statements or false reports or false filings with the intent to deceive the commissioner in the performance of his duties under P.L.1970, c.22 (C.17:27A-1 et seq.), upon conviction thereof, may be imprisoned for not less than one year and not more than three years or fined up to $10,000 per violation, or both. Any fines imposed shall be paid by the officer, director, or employee in his individual capacity, if legally liable, or the insurer.
f. Whenever it appears to the commissioner that any person has committed a violation of section 2 of P.L.1970, c.22 (C.17:27A-2), which violation prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision in accordance with P.L.1993, c.245 (C.17:51A-1 et seq.).
##### **§ 17:27A-10** Receivership {#sec-17-27a-10 omnilex-key=us-nj-statutes--title-17--17:27A-10}
Whenever it appears to the commissioner that any person has committed a violation of this chapter which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders or the public, then the commissioner may proceed as provided in chapter 30 of this Title to take possession of the property of such domestic insurer and to conduct the business thereof.
##### **§ 17:27A-10.1** Right to recovery for receiver {#sec-17-27a-10.1 omnilex-key=us-nj-statutes--title-17--17:27A-10.1}
9. a. If an order for rehabilitation or liquidation of a domestic insurer has been entered, the receiver appointed under that order shall have a right to recover on behalf of the insurer:
(1) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock; or
(2) any payment in the form of a bonus, termination settlement or extraordinary lump sum salary adjustment made by the insurer or its subsidiaries to a director, officer or employee, if the distribution or payment pursuant to (1) or (2) is made at any time during the 12 months preceding the filing of the petition for liquidation, conservation or rehabilitation, as the case may be, subject to the limitations of subsections b., c. and d. of this section.
b. No such distribution shall be recoverable if the parent or affiliate shows that, when paid, the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
c. Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of the distributions or payments defined under subsection a. which that person received. Any person who otherwise controlled the insurer at the time such distributions were declared shall be liable up to the amount of distributions he would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.
d. In the case of an insurer being liquidated, the maximum amount recoverable under this section shall be the amount, in excess of all other available assets of the insurer, necessary to pay its contractual obligations and to reimburse any guaranty funds. In the case of an insurer being rehabilitated, the maximum amount recoverable shall be the full amount of any distributions which a receiver has a right to recover under this section.
e. To the extent that any person liable under subsection c. of this section is insolvent or otherwise fails to pay claims due from it pursuant to that subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from such parent corporation or holding company or person who otherwise controlled it.
##### **§ 17:27A-11** Revocation, suspension, or nonrenewal of insurer's license {#sec-17-27a-11 omnilex-key=us-nj-statutes--title-17--17:27A-11}
Whenever it appears to the commissioner that any person has committed a violation of this chapter which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke or refuse to renew such insurer's license or authority to do business in this State for such period as he finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law.
##### **§ 17:27A-12** Judicial review; order in lieu of prerogative writ {#sec-17-27a-12 omnilex-key=us-nj-statutes--title-17--17:27A-12}
a. Any person aggrieved by any act, determination, rule, regulation, or order or any other action of the commissioner pursuant to this chapter may appeal therefrom to the Superior Court. The court shall conduct its review without a jury and by trial de novo, except that if all parties, including the commissioner, so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating.
b. The filing of an appeal pursuant to this section shall stay the application of any such rule, regulation, order or other action of the commissioner to the appealing party unless the court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, shareholders, creditors or to the public.
c. Any person aggrieved by any failure of the commissioner to act or to make determination required by this chapter may commence an action in the Superior Court for an order in lieu of a prerogative writ directing the commissioner to act or make such determination forthwith.
##### **§ 17:27A-13** Conflict with other laws {#sec-17-27a-13 omnilex-key=us-nj-statutes--title-17--17:27A-13}
All laws and parts of laws of this State inconsistent with this chapter are hereby superseded with respect to matters covered by this chapter.
##### **§ 17:27A-14** Separability of provisions {#sec-17-27a-14 omnilex-key=us-nj-statutes--title-17--17:27A-14}
If any provision of this chapter or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and for this purpose the provisions of this chapter are separable.
## **Chapter 27B** {#struct-chapter-27b}
##### **§ 17:27B-1** Definitions {#sec-17-27b-1 omnilex-key=us-nj-statutes--title-17--17:27B-1}
As used in this act,
(1) "Domestic insurer" means a stock insurance company organized under the laws of this State;
(2) "Parent corporation" means a corporation organized for any purpose under any law of this State or any other jurisdiction, which owns directly or indirectly at least 95% of the aggregate issued and outstanding shares of all classes of voting stock of a domestic insurer;
(3) "Subsidiary insurer" means a domestic insurer so owned by a parent corporation; and
(4) "Commissioner" means the Commissioner of Insurance of New Jersey.
##### **§ 17:27B-2** Acquisition of minority interests {#sec-17-27b-2 omnilex-key=us-nj-statutes--title-17--17:27B-2}
(1) Any parent corporation may, in the manner hereinafter prescribed, acquire all of the issued and outstanding shares of voting stock of its subsidiary insurer not owned by the parent corporation.
(2) The method authorized by this act for acquiring shares of a subsidiary insurer is not exclusive, but is in addition to any other lawful method for the acquisition of such shares.
##### **§ 17:27B-3** Plan of acquisition {#sec-17-27b-3 omnilex-key=us-nj-statutes--title-17--17:27B-3}
(1) The board of directors of the parent corporation which seeks to acquire the minority interests in its subsidiary insurer shall adopt a plan for such acquisition.
(2) The plan of acquisition shall set forth:
(a) The name of the subsidiary insurer;
(b) The total number of issued and outstanding shares of each class of voting stock of the subsidiary insurer, the number of its shares owned by the parent corporation and, if either of the foregoing is subject to change prior to the effective date of acquisition, the manner in which any change may occur;
(c) The terms and conditions of the plan, including the manner and basis of exchanging the shares to be acquired for shares or other securities of the parent corporation, for cash, other consideration, or any combination of the foregoing, the proposed effective date of acquisition, and a statement clearly describing the rights of shareholders dissenting from the plan;
(d) If the parent corporation is not authorized to do business in this State, its consent to the enforcement against it in this State of the rights of shareholders pursuant to the plan or the rights of shareholders dissenting from the plan, and a designation of the commissioner as the agent upon whom process may be served against the parent corporation in any action or proceeding to enforce any such rights; and
(e) Such other provisions with respect to the plan as the board of directors of the parent corporation deems necessary or desirable, or as the commissioner may prescribe.
##### **§ 17:27B-4** Submission of plan of acquisition to commissioner {#sec-17-27b-4 omnilex-key=us-nj-statutes--title-17--17:27B-4}
(1) Upon adoption of the plan of acquisition, it shall be executed by the parent corporation under its corporate seal and submitted to the commissioner who shall, within 60 days from the date of such submission, endorse thereon his approval or disapproval and notify the parent corporation thereof. The commissioner in reviewing such plan of acquisition may employ such experts or consultants as he shall deem necessary. The reasonable costs of such experts and consultants are to be paid for by the parent corporation.
(2) The commissioner shall approve the plan if he is satisfied that it complies with this act and is not inconsistent with law. If the commissioner disapproves the plan, he shall advise the parent corporation in writing of the reasons for such disapproval. No plan shall take effect unless the approval of the commissioner has been obtained.
(3) The commissioner's disapproval of a plan of acquisition shall be subject to review, hearing and relief in the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:27B-5** Delivery of plan to minority shareholders; acquisition of shares {#sec-17-27b-5 omnilex-key=us-nj-statutes--title-17--17:27B-5}
(1) If the commissioner approves the plan, the parent corporation shall deliver a copy of the plan or a summary thereof approved by the commissioner to each person who, as of the date of delivery, is a holder of record of stock to be acquired pursuant to the plan. Such delivery shall be made either in person or by depositing a copy of the plan or the approved summary in the United States mails, postage prepaid, addressed to the shareholder at his address of record. On or before the date of acquisition proposed in the plan, the parent corporation shall file with the commissioner a certificate executed by its president or vice president and attested by its secretary or assistant secretary under the seal of the parent corporation, attesting to compliance by the parent corporation with this subsection (1);
(2) Upon compliance with the foregoing requirements, ownership of the shares to be acquired pursuant to the plan shall vest in the parent corporation on the date of acquisition proposed in the plan, whether or not the certificates for such shares have been surrendered for exchange, and the parent corporation shall be entitled to have new certificates therefor registered in its name. Shareholders whose shares have been so acquired shall thereafter retain only the right either to receive the consideration to be paid in exchange for their shares pursuant to the plan or to dissent from the plan and receive the fair value of their shares as hereinafter provided.
##### **§ 17:27B-6** Rights of dissenting shareholders {#sec-17-27b-6 omnilex-key=us-nj-statutes--title-17--17:27B-6}
(1) Within 30 days after delivery of the plan or a summary thereof pursuant to subsection (1) of section 5, any shareholder of the subsidiary insurer to whom the parent corporation was required to make such delivery may give to the parent corporation written notice of his dissent from the plan and of his demand for payment of the fair value of his shares.
(2) Upon giving such notice, the dissenting shareholder shall cease to have any rights of a shareholder, except the right to be paid the fair value of his shares, determined as of the day prior to the day on which the plan of acquisition was adopted by the parent corporation and excluding any appreciation or depreciation resulting from such action. Such determination of fair value shall be made in accordance with the provisions of sections 14A:11-6 through 14A:11-10 of the New Jersey Business Corporation Act, all references therein to a demand pursuant to subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) being deemed for such purpose to include a notice of dissent and demand made pursuant to subsection (1) of this section 6.
(3) Not later than 20 days after giving notice of his dissent and demand for payment as aforesaid, each dissenting shareholder shall submit the certificate or certificates representing his shares to the parent corporation for notation as provided in subsection 14A:11-2(6) of the New Jersey Business Corporation Act, the effect of which notation shall be as specified in said subsection.
## **Chapter 28** {#struct-chapter-28}
##### **§ 17:28-1** Separate risks and premiums; exceptions {#sec-17-28-1 omnilex-key=us-nj-statutes--title-17--17:28-1}
When a policy shall insure against more than one hazard or peril, the insurance against any specific hazard or peril shall not be separately cancelable unless the policy shall specify a separate premium for any such insurance so cancelable. No policy of life or endowment insurance or annuity contract authorized pursuant to paragraph "c" of section 17:17-1 of this Title shall assume any hazard or peril specified in any other paragraph of said section 17:17-1 except insurance against bodily injury or death by accident and upon the health of persons as specified in paragraph "d" of the said section. Any policy of liability insurance authorized by paragraphs "d" or "e" of said section 17:17-1 may contain a provision for payment on behalf of the injured party or for reimbursement of the assured for payment of medical, hospital, surgical and funeral expenses incurred, as a result of an accident, irrespective of legal liability of the assured, and an automobile liability policy may also contain a provision for payment of disability benefits to persons who are injured and death benefits to dependents, beneficiaries or personal representatives of persons who are killed if such injury or death is caused by accident and sustained while in or upon, entering or alighting from, or through being struck by an automobile, irrespective of legal liability of the assured, and such provisions shall not be deemed to be an accident insurance policy. The commissioner may order the discontinuance of any provision in a policy of automobile liability insurance providing for such disability or death benefits which he finds to be unjust, unfair, inequitable, misleading or contrary to law. Any policy of automobile liability insurance may also contain a provision for payment of part or all sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, or because of damage to property, sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile.
##### **§ 17:28-1.1** Required coverage; exceptions. {#sec-17-28-1.1 omnilex-key=us-nj-statutes--title-17--17:28-1.1}
2. a. Except for a basic automobile insurance policy, no motor vehicle liability policy or renewal of such policy of insurance, including a standard liability policy for an automobile as defined in section 2 of P.L.1972, c.70 (C.39:6A-2), insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle, shall be issued in this State with respect to any motor vehicle registered or principally garaged in this State unless it includes coverage in limits for bodily injury or death as follows:
(1) an amount or limit of $15,000 for plans issued or renewed prior to January 1, 2023, $25,000 for plans issued or renewed on or after January 1, 2023 but prior to January 1, 2026, and $35,000 for plans issued or renewed on or after January 1, 2026, exclusive of interest and costs, on account of injury to, or death of, one person, in any one accident, and
(2) an amount or limit, subject to such limit for any one person so injured or killed, of $30,000 for plans issued or renewed prior to January 1, 2023, $50,000 for plans issued or renewed on or after January 1, 2023 but prior to January 1, 2026, and $70,000 for plans issued or renewed on or after January 1, 2026, exclusive of interest and costs, on account of injury to or death of more than one person, in any one accident, under provisions approved by the Commissioner of Banking and Insurance, for payment of all or part of the sums which the insured or his legal representative shall be legally entitled to recover as damages from the operator or owner of an uninsured motor vehicle, underinsured motor vehicle, or hit and run motor vehicle, as defined in section 18 of P.L.1952, c.174 (C.39:6-78), because of bodily injury, sickness or disease, including death resulting therefrom, sustained by the insured, caused by accident and arising out of the ownership, maintenance, operation or use of such uninsured, underinsured or hit and run motor vehicle anywhere within the United States or Canada; except that uninsured motorist coverage shall provide that in order to recover for non-economic loss, as defined in section 2 of P.L.1972, c.70 (C.39:6A-2), for accidents to which the benefits of section 4 (C.39:6A-4) of that act apply, the tort option elected pursuant to section 8 (C.39:6A-8) of that act shall apply to that injured person.
All motor vehicle liability policies, except basic automobile insurance policies, shall also include coverage for the payment of all or part of the sums which persons insured thereunder shall be legally entitled to recover as damages from owners or operators of uninsured and underinsured motor vehicles, other than hit and run motor vehicles, because of injury to or destruction to the personal property of such insured, with a limit in the aggregate for all insurers involved in any one accident of $25,000 for plans issued or renewed on or after January 1, 2023, and subject, for each insured, to an exclusion of the first $500.00 of such damages.
b. Uninsured and underinsured motorist coverage shall be provided, as an option by an insurer to the named insured electing a standard automobile insurance policy, up to at least the following limits: $250,000.00 each person and $500,000.00 each accident for bodily injury; $100,000.00 each accident for property damage or $500,000.00 single limit, subject to an exclusion of the first $500.00 of such damage to property for each accident, except that the limits for uninsured and underinsured motorist coverage shall not exceed the insured's motor vehicle liability policy limits for bodily injury and property damage, respectively.
Rates for uninsured and underinsured motorist coverage for the same limits shall, for each filer, be uniform on a Statewide basis without regard to classification or territory.
c. Uninsured and underinsured motorist coverage provided for in this section shall not be increased by stacking the limits of coverage of multiple motor vehicles covered under the same policy of insurance nor shall these coverages be increased by stacking the limits of coverage of multiple policies available to the insured. If the insured had uninsured motorist coverage available under more than one policy, any recovery shall not exceed the higher of the applicable limits of the respective coverages and the recovery shall be prorated between the applicable coverages as the limits of each coverage bear to the total of the limits.
d. Uninsured and underinsured motorist coverage shall be subject to the policy terms, conditions and exclusions approved by the Commissioner of Banking and Insurance, including, but not limited to, unauthorized settlements, non-duplication of coverage, subrogation and arbitration.
e. For the purpose of this section, (1) "underinsured motorist coverage" means insurance for damages because of bodily injury and property damage resulting from an accident arising out of the ownership, maintenance, operation or use of an underinsured motor vehicle. Underinsured motorist coverage shall not apply to an uninsured motor vehicle. A motor vehicle is underinsured when the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits for underinsured motorist coverage afforded under the motor vehicle insurance policy held by the person seeking that recovery. A motor vehicle shall not be considered an underinsured motor vehicle under this section unless the limits of all bodily injury liability insurance or bonds applicable at the time of the accident have been exhausted by payment of settlements or judgments. The limits of underinsured motorist coverage available to an injured person shall be reduced by the amount he has recovered under all bodily injury liability insurance or bonds;
(2) "uninsured motor vehicle" means:
(a) a motor vehicle with respect to the ownership, operation, maintenance, or use of which there is no bodily injury liability insurance or bond applicable at the time of the accident;
(b) a motor vehicle with respect to the ownership, operation, maintenance, or use of which there is bodily injury liability insurance in existence but the liability insurer denies coverage or is unable to make payment with respect to the legal liability of its insured because the insurer has become insolvent or bankrupt, or the Commissioner of Banking and Insurance has undertaken control of the insurer for the purpose of liquidation;
(c) a hit and run motor vehicle as described in section 18 of P.L.1952, c.174 (C.39:6-78); or
(d) an automobile covered by a special automobile insurance policy pursuant to section 45 of P.L.2003, c.89 (C.39:6A-3.3).
"Uninsured motor vehicle" shall not include an automobile covered by a basic automobile insurance policy; an underinsured motor vehicle; a motor vehicle owned by or furnished for the regular use of the named insured or any resident of the same household; a self-insurer within the meaning of any financial responsibility or similar law of the state in which the motor vehicle is registered or principally garaged; a motor vehicle which is owned by the United States or Canada, or a state, political subdivision or agency of those governments or any of the foregoing; a land motor vehicle or trailer operated on rails or crawler treads; a motor vehicle used as a residence or stationary structure and not as a vehicle; or equipment or vehicles designed for use principally off public roads, except while actually upon public roads.
f. Notwithstanding the provisions of this section or any other law to the contrary, a motor vehicle liability policy or renewal of such policy of insurance, insuring against loss resulting from liability imposed by law for bodily injury or death, sustained by any person arising out of the ownership, maintenance or use of a motor vehicle, issued in this State to a corporate or business entity with respect to any motor vehicle registered or principally garaged in this State, shall not provide less uninsured or underinsured motorist coverage for an individual employed by the corporate or business entity than the coverage provided to the named insured under the policy. A policy that names a corporate or business entity as a named insured shall be deemed to provide the maximum uninsured or underinsured motorist coverage available under the policy to an individual employed by the corporate or business entity, regardless of whether the individual is an additional named insured under that policy or is a named insured or is covered under any other policy providing uninsured or underinsured motorist coverage.
##### **§ 17:28-1.3** Coverage for pedestrians; definitions. {#sec-17-28-1.3 omnilex-key=us-nj-statutes--title-17--17:28-1.3}
19. a. Every liability insurance policy issued in this State on a motor vehicle, exclusive of an automobile as defined in section 2 of P.L. 1972, c.70 (C.39:6A-2), but including a motorcycle and an autocycle, or on a motorized bicycle, insuring against loss resulting from liability imposed by law for bodily injury, death, and property damage sustained by any person arising out of the ownership, operation, maintenance, or use of a motor vehicle or motorized bicycle shall provide personal injury protection coverage benefits, in accordance with section 4 of P.L. 1972, c. 70 (C.39:6A-4), to pedestrians who sustain bodily injury in the State caused by the named insured's motor vehicle or motorized bicycle or by being struck by an object propelled by or from the motor vehicle or motorized bicycle.
b. For purposes of this section:
"Autocycle" means a three-wheeled motorcycle designed to be controlled with a steering wheel and pedals in which the operator and passenger may ride in a completely or partially enclosed seating area that is equipped with a roll cage or roll hoops, safety seat belts for each occupant, and anti-lock brakes.
"Motorcycle" includes motorcycles, autocycles, motor bikes, bicycles with motor attached and all motor-operated vehicles of the bicycle or tricycle type, except motorized bicycles as defined in this section, whether the motive power be a part thereof or attached thereto and having a saddle or seat with the driver sitting astride or upon it or a platform on which the driver stands.
"Motorized bicycle" means a pedal bicycle having a helper motor characterized in that either the maximum piston displacement is less than 50 cc. or said motor is rated at no more than 1.5 brake horsepower or is powered by an electric drive motor and said bicycle is capable of a maximum speed of no more than 25 miles per hour on a flat surface.
##### **§ 17:28-1.4** Mandatory coverage. {#sec-17-28-1.4 omnilex-key=us-nj-statutes--title-17--17:28-1.4}
18. Any insurer authorized to transact or transacting automobile or motor vehicle insurance business in this State, or controlling or controlled by, or under common control by, or with, an insurer authorized to transact or transacting insurance business in this State, which sells a policy providing automobile or motor vehicle liability insurance coverage, or any similar coverage, in any other state or in any province of Canada, shall include in each policy coverage to satisfy at least the personal injury protection benefits coverage pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4) or section 19 of P.L.1983, c.362 (C.17:28-1.3) for any New Jersey resident who is not required to maintain personal injury protection coverage pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4) or section 4 of P.L.1998, c.21 (C.39:6A-3.1) and who is not otherwise eligible for such benefits, whenever the automobile or motor vehicle insured under the policy is used or operated in this State. In addition, any insurer authorized to transact or transacting automobile or motor vehicle insurance business in this State, or controlling or controlled by, or under common control by, or with, an insurer authorized to transact or transacting automobile or motor vehicle insurance business in this State, which sells a policy providing automobile or motor vehicle liability insurance coverage, or any similar coverage, in any other state or in any province of Canada, shall include in each policy coverage to satisfy at least the liability insurance requirements of subsection a. of section 1 of P.L.1972, c.197 (C.39:6B-1) or section 3 of P.L.1972, c.70 (C.39:6A-3), the uninsured motorist insurance requirements of subsection a. of section 2 of P.L.1968, c.385 (C.17:28-1.1), and personal injury protection benefits coverage pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4) or of section 19 of P.L.1983, c.362 (C.17:28-1.3), whenever the automobile or motor vehicle insured under the policy is used or operated in this State.
Any liability insurance policy subject to this section shall be construed as providing the coverage required herein, and any named insured, and any immediate family member as defined in section 14.1 of P.L.1983, c.362 (C.39:6A-8.1), under that policy, shall be subject to the tort option specified in subsection a. of section 8 of P.L.1972, c.70 (C.39:6A-8).
Each insurer authorized to transact or transacting automobile or motor vehicle insurance business in this State and subject to the provisions of this section shall file and maintain with the Department of Banking and Insurance written certification of compliance with the provisions of this section.
"Automobile" means an automobile as defined in section 2 of P.L.1972, c.70 (C.39:6A-2).
##### **§ 17:28-1.5** Definitions {#sec-17-28-1.5 omnilex-key=us-nj-statutes--title-17--17:28-1.5}
1. As used in this act:
"Commissioner" means the Commissioner of Insurance.
"Hospital expenses" means:
a. The cost of a semiprivate room, based on rates customarily charged by the institution in which the recipient of benefits is confined;
b. The cost of board, meals and dietary services;
c. The cost of other hospital services, such as operating room; medicines, drugs, anesthetics; treatments with X-ray, radium and other radioactive substances; laboratory tests, surgical dressings and supplies; and other medical care and treatment rendered by the hospital;
d. The cost of treatment by a physiotherapist;
e. The cost of medical supplies, such as prescribed drugs and medicines; blood and blood plasma; artificial limbs and eyes; surgical dressings, casts, splints, trusses, braces, crutches; rental of wheelchair, hospital bed or iron lung; oxygen and rental of equipment for its administration.
"Medical expenses" means expenses for medical treatment, surgical treatment, dental treatment, professional nursing services, hospital expenses, rehabilitation services, X-ray and other diagnostic services, prosthetic devices, ambulance services, medication and other reasonable and necessary expenses resulting from the treatment prescribed by persons licensed to practice medicine and surgery pursuant to R.S.45:9-1 et seq., dentistry pursuant to R.S.45:6-1 et seq., psychology pursuant to P.L.1966, c.282 (C.45:14B-1 et seq.) or chiropractic pursuant to P.L.1953, c.233 (C.45:9-41.1 et al.) or by persons similarly licensed in other states and nations or any nonmedical remedial treatment rendered in accordance with a recognized religious method of healing.
"Motor bus" means an omnibus, as defined in R.S.39:1-1, except that "motor bus" shall not include:
a. Vehicles engaged in the transportation of passengers for hire in the manner and form commonly called taxicab service unless such service becomes or is held out to be regular service between stated termini;
b. Hotel buses used exclusively for the transportation of hotel patrons to or from local railroad or other common carrier stations including local airports;
c. Buses operated for the transportation of enrolled children and adults only when serving as chaperones to or from a school, school connected activity, day camp, summer day camp, nursery school, child care center, pre-school center or other similar places of education, including "School Vehicle Type I" and "School Vehicle Type II" as defined in R.S.39:1-1;
d. Any autobus with a carrying capacity of not more than 13 passengers operated under municipal consent upon a route established wholly within the limits of a single municipality or with a carrying capacity of not more than 20 passengers operated under municipal consent upon a route established wholly within the limits of not more than four contiguous municipalities within any county of the fifth or sixth class, which route in either case does not in whole or in part parallel upon the same street the line of any street railway or traction railway or any other autobus route;
e. Autocabs, limousines or livery services as defined in R.S.48:16-13, unless such service becomes or is held out to be regular service between stated termini;
f. Any vehicle used in a "ridesharing" arrangement, as defined by the "New Jersey Ridesharing Act of 1981," P.L.1981, c.413 (C.27:26-1 et al.);
g. Any motor bus owned and operated by the New Jersey Transit Corporation; or
h. Any special paratransit vehicle as defined in R.S.48:4-1.
"Noneconomic loss" means pain, suffering and inconvenience.
"Passenger" means any person occupying, entering into or alighting from a motor bus, except employees of the owner or operator of the motor bus while they are on duty.
##### **§ 17:28-1.6** Owner, operator of motor bus to maintain medical expense benefits coverage {#sec-17-28-1.6 omnilex-key=us-nj-statutes--title-17--17:28-1.6}
a. Every owner, registered owner or operator of a motor bus registered or principally garaged in this State shall maintain medical expense benefits coverage, under provisions approved by the commissioner, for the payment of benefits without regard to negligence, liability or fault of any kind, to any passenger who sustained bodily injury as a result of an accident while occupying, entering into or alighting from a motor bus.
b. Medical expense benefits coverage shall include the payment of reasonable medical expenses in an amount not to exceed $250,000 per person per accident. In event of death, payments shall be made to the estate of the decedent.
##### **§ 17:28-1.7** Exemption from tort liability for owner, registrant, operator of motor bus. {#sec-17-28-1.7 omnilex-key=us-nj-statutes--title-17--17:28-1.7}
3. Every owner, registrant or operator of a motor bus registered or principally garaged in this State and every person or organization legally responsible for his acts or omissions, is hereby exempted from tort liability for noneconomic loss to a passenger who has a right to receive benefits under section 2 of this act as a result of bodily injury arising out of the ownership, operation, maintenance or use of a motor bus in this State, unless that person has sustained a personal injury which results in death; dismemberment; significant disfigurement or significant scarring; displaced fractures; loss of a fetus; or a permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement. An injury shall be considered permanent when the body part or organ, or both, has not healed to function normally and will not heal to function normally with further medical treatment. For the purposes of this subsection, "physician" means a physician as defined in section 5 of P.L.1939, c.115 (C.45:9-5.1).
In order to satisfy the provisions of this section, the plaintiff shall, within 60 days following the date of the answer to the complaint by the defendant, provide the defendant with a certification from the licensed treating physician or a board-certified licensed physician to whom the plaintiff was referred by the treating physician. The certification shall state, under penalty of perjury, that the plaintiff has sustained an injury described above. The certification shall be based on and refer to objective clinical evidence, which may include medical testing, except that any such testing shall be performed in accordance with medical protocols pursuant to subsection a. of section 4 of P.L.1972, c.70 (C.39:6A-4) and the use of valid diagnostic tests administered in accordance with section 12 of P.L.1998, c.21 (C.39:6A-4.7). Such testing may not be experimental in nature or dependent entirely upon subjective patient response. The court may grant no more than one additional period not to exceed 60 days to file the certification pursuant to this section upon a finding of good cause.
A person is guilty of a crime of the fourth degree if that person purposefully or knowingly makes, or causes to be made, a false, fictitious, fraudulent, or misleading statement of material fact in, or omits a material fact from, or causes a material fact to be omitted from, any certification filed pursuant to this section. Notwithstanding the provisions of subsection e. of N.J.S. 2C:44-1, the court shall deal with a person who has been convicted of a violation of this section by imposing a sentence of imprisonment unless, having regard to the character and condition of the person, the court is of the opinion that imprisonment would be a serious injustice which overrides the need to deter such conduct by others. If the court imposes a noncustodial or probationary sentence, such sentence shall not become final for 10 days in order to permit the appeal of such sentence by the prosecution. Nothing in this section shall preclude an indictment and conviction for any other offense defined by the laws of this State. In addition, any professional license held by the person shall be forfeited according to the procedures established by section 4 of P.L.1997, c.353 (C.2C:51-5).
##### **§ 17:28-1.8** Evidence of amounts collectible, paid to injured passenger inadmissible in civil action {#sec-17-28-1.8 omnilex-key=us-nj-statutes--title-17--17:28-1.8}
Evidence of the amounts collectible or paid to an injured passenger pursuant to section 2 of this act is inadmissible in a civil action against an owner, registrant or operator of a motor bus for recovery of damages for bodily injury by such injured passenger.
The court shall instruct the jury that, in arriving at a verdict as to the amount of the damages for noneconomic loss to be recovered by the injured passenger, the jury shall not speculate as to the amount of the medical expense benefits paid or payable under section 2 to the injured passenger.
Nothing in this section shall be construed to limit the right of recovery, against the tortfeasor, of uncompensated economic loss sustained by the injured passenger.
##### **§ 17:28-1.9** Immunity from liability for certain auto insurance providers {#sec-17-28-1.9 omnilex-key=us-nj-statutes--title-17--17:28-1.9}
1. a. Notwithstanding any other provision of law to the contrary, no person, including, but not limited to, an insurer, an insurance producer, as defined in section 2 of P.L.1987, c.293 (C.17:22A-2), a servicing carrier or non-insurer servicing carrier acting in that capacity pursuant to P.L.1983, c.65 (C.17:30E-1 et al.) or section 88 of P.L.1990, c.8 (C.17:33B-11), the New Jersey Automobile Full Insurance Underwriting Association created pursuant to section 16 of P.L.1983, c.65 (C.17:30E-4), the Market Transition Facility created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), and any plan established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1), shall be liable in an action for damages on account of the election of a given level of motor vehicle insurance coverage by a named insured as long as those limits provide at least the minimum coverage required by law or on account of a named insured not electing to purchase underinsured motorist coverage, collision coverage or comprehensive coverage. Nothing in this section shall be deemed to grant immunity to any person causing damage as the result of his willful, wanton or grossly negligent act of commission or omission.
b. The coverage selection form required pursuant to section 17 of P.L.1983, c.362 (C.39:6A-23) shall contain an acknowledgement by the named insured that the limits available to him for uninsured motorist coverage and underinsured motorist coverage have been explained to him and a statement that no person, including, but not limited to, an insurer, an insurance producer, as defined in section 2 of P.L.1987, c.293 (C.17:22A-2), a servicing carrier or non-insurer servicing carrier acting in that capacity pursuant to P.L.1983, c.65 (C.17:30E-1 et al.) or section 88 of P.L.1990, c.8 (C.17:33B-11), the New Jersey Automobile Full Insurance Underwriting Association created pursuant to section 16 of P.L.1983, c.65 (C.17:30E-4), the Market Transition Facility created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), and any plan established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1), shall be liable in an action for damages on account of the election of a given level of motor vehicle insurance coverage by a named insured as long as those limits provide at least the minimum coverage required by law or on account of a named insured not electing to purchase underinsured motorist coverage, collision coverage or comprehensive coverage, except for that person causing damage as the result of his willful, wanton or grossly negligent act of commission or omission.
##### **§ 17:28-2** Effect of insolvency or bankruptcy on paying damages; policy provisions {#sec-17-28-2 omnilex-key=us-nj-statutes--title-17--17:28-2}
No policy of insurance against loss or damage resulting from accident to or injury suffered by an employee or other person and for which the person insured is liable, or against loss or damage to property caused by animals or by any vehicle drawn, propelled or operated by any motive power, and for which loss or damage the person insured is liable, shall be issued or delivered in this state by any insurer authorized to do business in this state, unless there is contained within the policy a provision that the insolvency or bankruptcy of the person insured shall not release the insurance carrier from the payment of damages for injury sustained or loss occasioned during the life of the policy, and stating that in case execution against the insured is returned unsatisfied in an action brought by the injured person, or his personal representative in case death results from the accident, because of the insolvency or bankruptcy, then an action may be maintained by the injured person, or his personal representative, against the corporation under the terms of the policy for the amount of the judgment in the action not exceeding the amount of the policy. No such policy shall be issued or delivered in this state on or after July first, nineteen hundred and twenty-four, by any corporation or other insurer authorized to do business in this state, unless there is contained within the policy a provision that notice given by or on behalf of the insured to any authorized agent of the insurer within this state, with particulars sufficient to identify the insured, shall be deemed to be notice to the insurer, and also a provision that failure to give any notice required to be given by the policy within the time specified therein shall not invalidate any claim made by the insured if it is shown not to have been reasonably possible to give the notice within the prescribed time and that notice was given as soon as was reasonably possible. Unless any such policy of insurance against loss or damage resulting from accident to or injury suffered by an employee or other person and for which the person insured is liable, hereafter issued or renewed in this state, sets forth expressly in words at length and in bold-faced type, "This policy does not insure against loss or damage arising out of claims for loss of services of the person injured and for which loss or damage the insured is legally liable" , the policy shall be deemed to insure against such loss or damage.
A policy issued in violation of this section shall, nevertheless, be held valid but be deemed to include the provisions required by this section, and when any provision in the policy or rider is in conflict with the provisions required to be contained by this section, the rights, duties and obligations of the insurer, the policyholder and the injured person shall be governed by the provisions of this section.
##### **§ 17:28-3** Maximum premium stated in policy of mutual company {#sec-17-28-3 omnilex-key=us-nj-statutes--title-17--17:28-3}
The maximum premium shall be expressed in the policy of a mutual company organized under any law of this State, and, in a company other than a life insurance company, it may be solely a cash premium or a cash premium and an additional contingent premium, which contingent premium shall not be less than the cash premium, but no such company shall issue an insurance policy for a cash premium and without an additional contingent premium until and unless it possesses a surplus above all liabilities of at least $300,000.00.
Wherever any company shall issue policies for cash premiums only, in pursuance of the authority of this section, it may waive all contingent premiums set forth in policies then outstanding. The issuance of policies for cash premiums only in pursuance of this section may not be exercised by any such company until written notice of intention to do so, accompanied with a certified copy of the resolution of the board of directors providing for the issuance of such policies, shall have been furnished the Commissioner of Banking and Insurance.
##### **§ 17:28-4** Definitions {#sec-17-28-4 omnilex-key=us-nj-statutes--title-17--17:28-4}
As used in this act "financed automobile" shall include (a) an automobile or other motor vehicle sold at retail, the purchase price whereof is not paid in full at the time of its purchase, but all or part whereof is advanced by the seller to the purchaser by extension of credit or otherwise, or is realized by the seller through the assignment, sale or pledge of the right to receive from the purchaser the unpaid balance of the purchase price whether or not title is retained by the seller until the purchase price is paid in full, or a mortgage or other lien is given or received to secure such payment, or (b) an automobile or other motor vehicle which is pledged as security for the repayment of a loan; an "other automobile" shall include any automobile or other motor vehicle which is not a "financed automobile;" a "master policy" shall include any policy of insurance covering financed automobiles not used, maintained or operated by the policyholder; an "individual contract" shall include any policy of insurance covering any financed automobile which is not a master policy; a "certificate of insurance" shall mean any certificate constituting evidence of the existence of a master policy; and a "policyholder" shall mean the holder of a master policy or an individual policy; except in the case of the insuring of new or secondhand automobiles, held for sale by authorized dealers of manufacturers of automobiles, to which cases the provisions of this act shall not apply.
##### **§ 17:28-5** Policy provisions {#sec-17-28-5 omnilex-key=us-nj-statutes--title-17--17:28-5}
From and after the first day of September, nineteen hundred and thirty-nine, no master policy, individual contract or certificate of insurance upon or affecting any financed automobile shall be issued or delivered in this State unless the form of such policy, contract or certificate shall conform to all the requirements or restrictions appropriate thereto as hereinafter set forth.
a. Any policy covering a financed automobile, whether issued as a master policy or as an individual contract, shall contain in substance the same provisions as those contained in policies insuring against similar perils otherwise generally issued in this State upon other automobiles by the company issuing such policy or contract;
b. Any certificate of insurance issued in connection with a master policy shall contain such provisions of the master policy, to the extent and in such form, as the Commissioner of Banking and Insurance shall require;
c. Every master policy, individual contract or certificate of insurance covering any financed automobile shall be printed in type not less than eight point and shall state the perils insured against, the limits of coverage and the premiums applicable to each such peril;
d. Every master policy shall contain a provision that there shall be delivered by the insurer to the owner or purchaser of a financed automobile insured thereunder a certificate of insurance not later than twenty days after the effective date of the insurance represented thereby;
e. Every master policy shall contain a provision that, in the event of the cancellation of the insurance represented by any certificate of insurance, evidence of the payment of the return premium to the purchaser or owner of the automobile covered by such insurance as his interest may appear must be presented to the insurance company before payment of the return premium is made to the policyholder;
f. Every master policy or individual contract issued by any mutual or other company issuing participating policies shall contain a provision that any dividend apportioned thereto shall be paid to the purchaser or owner and the policyholder as their respective interests may appear;
g. No master policy, individual contract or certificate of insurance shall contain any provision which is unfair, unjust, inequitable or contrary to public interest.
##### **§ 17:28-6** Special provisions {#sec-17-28-6 omnilex-key=us-nj-statutes--title-17--17:28-6}
No distinction shall be made in the premium rates or rates of dividends between policies covering financed automobiles and policies covering other automobiles. No certificate of insurance shall be issued or delivered in this State except in connection with a master policy issued or delivered in this State. Every certificate of insurance required to be issued under a master policy and every individual contract issued shall be delivered by the insurer to the purchaser or owner. The Commissioner of Banking and Insurance shall have authority to issue, amend, supplement and rescind such regulations as are in his judgment necessary to enforce the requirements of this act.
##### **§ 17:28-7** Penalty {#sec-17-28-7 omnilex-key=us-nj-statutes--title-17--17:28-7}
The Commissioner of Banking and Insurance shall have the power to revoke the authority to issue policies of insurance upon financed automobiles in this State of any insurance company violating any provision of this act.
##### **§ 17:28-8** Filing of endorsement to automobile liability insurance policy; "named excluded driver"; rules, regulations. {#sec-17-28-8 omnilex-key=us-nj-statutes--title-17--17:28-8}
63. a. An insurer authorized to transact or transacting automobile insurance business in this State shall file with the commissioner, for the commissioner's approval, an endorsement to its automobile liability insurance policy which contains a "named excluded driver" provision that would exclude physical damage coverage on an automobile covered by an automobile liability insurance policy if it is operated by the "named excluded driver." For purposes of this section, "named excluded driver" means a driver in the household of the named insured who is specifically identified in the endorsement as a person whose operation of an automobile covered under the automobile liability insurance policy at the time of an accident would result in the denial of a physical damage claim for that automobile.
b. The premium charged for the physical damage coverage on a policy containing a "named excluded driver" endorsement shall not reflect the claim experience or driving record of the "named excluded driver" or drivers.
c. Election of a "named excluded driver" endorsement shall be in writing and signed by the named insured on a form prescribed by the commissioner. The "named excluded driver" endorsement shall continue in force as to subsequent renewal or replacement policies until the insurer or its authorized representative receives a properly executed form electing to discontinue the endorsement.
d. Notwithstanding any other provision of the law to the contrary, no person, including, but not limited to, an insurer or an insurance producer, shall be liable in an action for damages on account of the election of a "named excluded driver" endorsement.
e. The commissioner may promulgate rules and regulations necessary to implement the provisions of this section.
## **Chapter 28A** {#struct-chapter-28a}
##### **§ 17:28A-3** Repeal {#sec-17-28a-3 omnilex-key=us-nj-statutes--title-17--17:28A-3}
Section four of "An act concerning group life insurance, amending sections 17:34-19, 17:34-31 and 17:34-32, and supplementing chapter thirty-four of Title 17 of the Revised Statutes," approved May twenty-fifth, one thousand nine hundred and thirty-eight, is repealed.
## **Chapter 29** {#struct-chapter-29}
##### **§ 17:29-11** Substitution of policies; charges prohibited; exception {#sec-17-29-11 omnilex-key=us-nj-statutes--title-17--17:29-11}
No lender or other legal entity servicing mortgages shall make in connection with any mortgage loan any charge for the substitution of an insurance policy or policies except as may be permitted by regulation of the Commissioner of Banking and Insurance.
##### **§ 17:29-12** Maximum charge; regulation {#sec-17-29-12 omnilex-key=us-nj-statutes--title-17--17:29-12}
The Commissioner of Banking and Insurance shall, pursuant to chapter 66 of the laws of 1958, hold a hearing and promulgate an appropriate regulation establishing the maximum amount which may be charged by a lender or other legal entity servicing mortgages for the substitution of an insurance policy or policies.
## **Chapter 29A** {#struct-chapter-29a}
##### **§ 17:29A-1** Definitions {#sec-17-29a-1 omnilex-key=us-nj-statutes--title-17--17:29A-1}
1. As used in this act,
(a) "Rate" means the unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.
(b) "Premium" means the consideration paid or to be paid to an insurer for the issuance and delivery of any binder or policy of insurance.
(c) "Rate-making" means the examination and analysis of factors and influences related to and bearing upon the hazard and risk made the subject of insurance; the collection and collation of such factors and influences into rating-systems; and the application of such rating-systems to individual risks.
(d) "Rating-system" means every schedule, class, classification, rule, guide, standard, manual, table, rating plan, or compilation, by whatever name described, containing the rates used by any rating organization or by any insurer, or used by any insurer or by any rating organization in determining or ascertaining a rate and includes any policy form, or part thereof, used therewith.
(e) "Policy of insurance," without otherwise limiting its meaning, shall include guaranty and surety bonds.
(f) "Rating organization" means every person or persons, corporation, partnership, company, society, or association engaged in the business of rate-making for two or more insurers.
(g) "Insurer" means any person or persons, corporation, association, partnership or company authorized by the laws of this State to transact the business of insurance in this State.
(h) "Commissioner" means the Commissioner of Insurance of New Jersey.
(i) "Risk," as the context may require, means, (1) as to fire insurance or any other kind of insurance which, by law, may be embraced in a policy of fire insurance, as part thereof or as supplemental thereto, any property, real or personal, described in a policy, exposed to any hazard or peril named in such policy; and (2) as to all other kinds of insurance not specifically included in subsection (i)(1) of this section, the hazard or peril named in a policy of insurance.
(j) "Filer" means a rating organization or any insurer making its own rates.
(k) "Commission" means the commission paid by the insurer to the producer or, for those insurers whose sales compensation, as reported on the insurer's expense exhibits, is not classified as a commission, such compensation shall be treated as a commission.
##### **§ 17:29A-2** License required; application; fee {#sec-17-29a-2 omnilex-key=us-nj-statutes--title-17--17:29A-2}
No rating organization shall do business in this State until it shall have been licensed to do so by the commissioner. Application for such license shall be made on such forms as the commissioner shall prepare for that purpose. Upon applying for such license, every rating organization shall file with the commissioner (1) a copy of its constitution, its articles of agreement or association, or its certificate of incorporation, and of its by-laws or rules governing the conduct of its business, or such of the foregoing, if any, as such rating organization may have; (2) a list of insurers who are or who have agreed to become members of or subscribers to such rating organization; (3) the name and address of a person or persons in this State upon whom notices, or orders of the commissioner affecting such rating organization may be served; and (4) such other information as the commissioner may require. If the commissioner finds that the applicant for license (a) has complied with the provisions of this act; (b) is equipped with an adequate staff of experts and clerks qualified in rate-making; and (c) is otherwise qualified to function as a rating organization, he shall issue a license to such rating organization authorizing it to engage in rate-making for the kinds of insurance specified in such license. If the commissioner shall determine that the applicant is not entitled to a license, he shall make an order denying its application, specifying his reasons for such denial. Licenses issued pursuant to this section shall remain in effect until suspended in the manner provided by this act. Every rating organization doing business in this State on the effective date of this act, may continue to transact such business thereafter, subject to the provisions of this act, pending its application to the commissioner, to be made within thirty days after the effective date of this act, for a license to do business as required by this section. A fee of twenty-five dollars ($25.00) shall be paid for each license issued under this section.
##### **§ 17:29A-3** Insurers may be members of rating organizations {#sec-17-29a-3 omnilex-key=us-nj-statutes--title-17--17:29A-3}
Every rating organization shall make reasonable provision in its bylaws, rules, constitution, or otherwise, to permit any insurer engaged in the kind of insurance for which rate-making is done by such rating organization, to become a member thereof, or a subscriber for any kind of insurance or subdivision of a kind of insurance found by the commissioner to be a proper basis for service by the rating organization upon application therefor by such insurer. No insurer shall be a member of or a subscriber to more than one rating organization for the purpose of making rates for the same kind or for the same subdivision of a kind of insurance. No rating organization shall discriminate unfairly between insurers in the condition imposed for admission as subscribers, or in the services rendered to either members or subscribers. The refusal of any rating organization to admit an insurer as a subscriber shall, at the request of such insurer, be reviewed by the commissioner at a hearing held upon at least 10 days' notice to such rating organization and such insurer. If the commissioner shall find that the insurer has been refused admittance to such rating organization as a subscriber without justification, he shall make an order directing such rating organization to admit such insurer as a subscriber. If he shall find that the action of the rating organization in refusing admittance to an insurer as a subscriber is justified, he shall make an order affirming its action.
##### **§ 17:29A-4** Rates; establishment; considerations {#sec-17-29a-4 omnilex-key=us-nj-statutes--title-17--17:29A-4}
Every rating organization, and every insurer which makes its own rates, shall make rates that are not unreasonably high or inadequate for the safety and soundness of the insurer, and which do not unfairly discriminate between risks in this State involving essentially the same hazards and expense elements, and shall, in rate-making, and in making rating systems:
(a) Adopt basic classifications, which shall be used as the basis of all manual, minimum, class, schedule, experience or merit rates;
(b) Adopt reasonable standards for construction, for protective facilities, and for other conditions that materially affect the hazard or peril, which shall be applied in the determination or fixing of rates;
(c) Give consideration to past and prospective loss experience, including where pertinent, the conflagration and catastrophe hazards, if any, both within and without the State; to all factors reasonably related to the kind of insurance involved; to a reasonable profit for the insurer; and, in the case of participating insurers, to policyholders' dividends. In the case of fire insurance, consideration shall be given to the latest available experience of the fire insurance business during a period of not less than 5 years preceding the year in which rates are made or revised;
(d) Give a rate reduction, to be approved by the commissioner, for fire insurance on structures equipped with operative smoke detection devices of a design approved by the Commissioner of Insurance.
##### **§ 17:29A-5** Statistical plans; rules and regulations; reports of experience; statistical agent {#sec-17-29a-5 omnilex-key=us-nj-statutes--title-17--17:29A-5}
The commissioner shall promulgate rules and regulations as to statistical plans, reasonably adapted to each of the rating systems on file with him, which may be modified from time to time and which shall be used thereafter by each insurer in the recording and reporting of its loss and countrywide expense experience, in order that the experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid him in determining whether such rating systems comply with the standards set forth in this chapter. Such rules and regulations shall provide for the recording and reporting of loss experience of this State and of any combination of states where such combined experience is used in any manner for ratemaking, and may provide for the recording and reporting of expense experience of this State for items of expense which are specially applicable to this State. In promulgating such rules and regulations the commissioner shall give due consideration to the rating systems on file with him and in order that such rules and regulations may be as uniform as is practicable among the several states, to the rules and statistical plans used for such rating systems in other states. The commissioner shall designate the format in which such reports shall be prepared and he may require, in his discretion, that reports of experience be accompanied by punch cards or other means used for data processing, or such other source material as he deems appropriate.
The commissioner may designate one or more agencies to assist him in gathering such experience. The commissioner shall give preference in such designation to entities organized by and functioning on behalf of the insurance companies operating in this State for the kinds of insurance to which the chapter applies. If the commissioner, in his judgment, determines that one or more of such organizations designated as statistical agent is unable or unwilling to perform its statistical functions according to reasonable requirements established from time to time by him, he may, after consultation with such statistical agent and upon 20 days' notice to any affected companies, designate another person to act on his behalf in the gathering of statistical experience. The commissioner shall in such case establish the fee to be paid to such designated person by the affected companies in order to pay the total cost of gathering and compiling such experience. Agencies designated by the commissioner shall assist him in making compilations of the reported data, and such compilations shall be made available, subject to reasonable rules and regulations promulgated by the commissioner, to insurers, rating organizations and any other interested parties.
##### **§ 17:29A-5.1** Motor vehicle insurance; rating systems; rules and regulations {#sec-17-29a-5.1 omnilex-key=us-nj-statutes--title-17--17:29A-5.1}
The Commissioner of Insurance in promulgating rules and regulations as to statistical plans adapted to rating systems for motor vehicle liability and collision insurance for reporting an insurer's loss experience may include sufficient detail to enable him to determine whether varying rates should be established based upon the type of safety features and equipment of various types and models of motor vehicles.
##### **§ 17:29A-5.6** Definitions. {#sec-17-29a-5.6 omnilex-key=us-nj-statutes--title-17--17:29A-5.6}
1. As used in this act:
a. "Actual investment income" means that portion of income generated by investment of policyholder-supplied funds. Policyholder-supplied funds are the assets that offset the insurer's total New Jersey private passenger automobile insurance unearned premium and loss reserves without regard to whether those funds came from private passenger automobile insurance policyholders or other policyholders or were from policyholder funds from the last seven calendar years or earlier years.
b. "Actuarial gain" means the remainder obtained by subtracting the allowance for profit and contingencies from underwriting income, which remainder may be positive or negative.
c. "AIRE charges" and "AIRE compensation" mean, respectively, amounts paid to or received from the New Jersey Automobile Insurance Risk Exchange pursuant to section 16 of P.L.1983, c.362 (C.39:6A-22).
d. "Anticipated investment income" means the amount obtained by multiplying earned premium by the percentage of premium representing investment income and used in the insurer's approved rate filings or filings made pursuant to section 29 of P.L.1988, c.119 (C.17:29A-42), during the period of the three calendar-accident years being calculated, to calculate the allowance for profit and contingencies.
e. "Calendar-accident year" means the period from January 1 to December 31, during which, in the appropriate context:
(1) premium or investment income was earned;
(2) expenses were incurred; or
(3) accidents occurred which resulted in losses, loss adjustment expenses or AIRE compensation.
f. "Car year" means the unit of exposure equivalent to the insuring of one automobile for 12 months, two automobiles for six months each, three automobiles for four months each, and so forth.
g. "Commissioner" means the Commissioner of Banking and Insurance.
h. "Development adjustment," for a given calendar-accident year, means the difference obtained by subtracting:
(1) The sum of
(a) Losses and loss adjustment expenses for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year preceding the year in which the profits report required by section 2 of this act is due; plus
(b) AIRE compensation for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year in which the profits report is due; from
(2) The sum of
(a) Losses and loss adjustment expenses for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year in which the profits report is due; plus
(b) AIRE compensation for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year preceding the year in which the profits report is due.
i. "Excess investment income" means the remainder obtained by subtracting the anticipated investment income from the actual investment income earned by the insurer, which remainder may be positive or negative.
j. "Insurer" means an entity authorized or admitted to transact private passenger automobile insurance business in New Jersey.
k. "Private passenger automobile insurance business" means direct insurance on private passenger automobiles as defined in subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2), excluding personal excess liability insurance and insurance on commercial vehicles.
l. "Total actuarial gain" means the sum of the actuarial gains for the seven calendar-accident years immediately preceding the due date of the profits report required by section 2 of this act, less the development adjustments submitted at the option of the insurer for the calendar-accident years beginning with the eleventh calendar-accident year immediately preceding the due date of the profits report and ending with the eighth calendar-accident year immediately preceding the due date of the profits report.
m. "Underwriting income" means the remainder obtained by subtracting the sum of all losses developed to an ultimate basis, all loss adjustment expenses developed to an ultimate basis, and all other expenses exclusive of UCJF assessments, from the sum of premiums earned and AIRE compensation developed to an ultimate basis, which remainder may be positive or negative.
n. "UCJF assessments" means amounts paid by insurers to the Unsatisfied Claim and Judgment Fund pursuant to section 3 of P.L.1952, c.174 (C.39:6-63).
o. "UCJF reimbursements" means amounts received by an insurer from the Unsatisfied Claim and Judgment Fund as a result of excess medical expense benefit payments by the insurer pursuant to section 2 of P.L.1977, c.310 (C.39:6-73.1).
##### **§ 17:29A-5.7** Annual profits report. {#sec-17-29a-5.7 omnilex-key=us-nj-statutes--title-17--17:29A-5.7}
2. a. Each insurer, except those exempt from filing pursuant to section 6 of this act, shall annually file with the commissioner, on or before July 1 of each year, a profits report containing the information and calculations required by this section. The information shall be provided with respect to the insurer's New Jersey private passenger automobile insurance business separately for each of the following coverages and for all these coverages combined:
(1) Personal injury protection, including all options;
(2) Bodily injury liability, reported at total limits;
(3) Other liability, consisting of property damage liability and uninsured and underinsured motorist coverages, all reported at total limits;
(4) Physical damage, consisting of comprehensive and collision coverages, including all deductibles.
A separate profits report shall be filed for each insurer and each insurer in an insurance holding company system. Each insurance holding company system shall file a separate combined profits report for all insurers in its system. The excess profits computation for an insurance holding company system shall be performed on its combined profits report, except that the commissioner may order an adjustment in the combined profits report if in his judgment, upon examining each insurer's profits report in the insurance holding company system, one or more of the insurers in that system are excessively subsidizing other insurers in that system.
b. The profits report shall contain the following information, in a manner and for a time period as prescribed by the commissioner by regulation:
(1) Losses paid;
(2) Losses developed to an ultimate basis;
(3) Loss adjustment expenses paid;
(4) Loss adjustment expenses developed to an ultimate basis;
(5) AIRE compensation received; and
(6) AIRE compensation developed to an ultimate basis.
c. The profits report shall contain the following information for the calendar-accident year ending December 31 immediately preceding the date the profits report is due:
(1) Premiums written;
(2) Premiums earned;
(3) All other expenses, itemized separately as follows:
(a) All commissions and all brokerage fees;
(b) All taxes, all licenses and all fees;
(c) All AIRE charges;
(d) All UCJF assessments;
(e) All other acquisition costs and all general expenses;
(f) All policyholder dividends incurred by the insurer, including any excess profits refunded or credited to policyholders;
(g) The net of all catastrophe reinsurance premiums incurred to unaffiliated catastrophe reinsurers and all sums paid or owed by unaffiliated catastrophe reinsurers for losses that occurred during the calendar-accident year, subject to such substantiation of expense as the commissioner may require;
(h) All expenses incurred for the services of a limited assignment distribution carrier pursuant to subsection c. of section 1 of P.L.1970, c.215 (C.17:29D-1);
(4) Allowance for profit and contingencies, calculated by multiplying the premiums earned by the profit and contingency factors authorized for use with the insurer's approved rate filings, which profit and contingency factors shall be based on the insurer's targeted rate of return, method of doing business, the cost of capital and other relevant economic considerations of the insurer;
(5) Anticipated investment income;
(6) Actual investment income; and
(7) UCJF reimbursements received.
d. The profits report shall include a clear and explicit calculation of each of the following items, in a manner and for a time period as prescribed by the commissioner by regulation:
(1) Underwriting income;
(2) Actuarial gain;
(3) Excess investment income;
(4) Development adjustment;
(5) Total actuarial gain; and
(6) Excess profits.
##### **§ 17:29A-5.8** Excess profits. {#sec-17-29a-5.8 omnilex-key=us-nj-statutes--title-17--17:29A-5.8}
3. Excess profits shall exist if for the seven calendar-accident years immediately preceding the date the profits report is due, the sum of an insurer's total actuarial gain and excess investment income for all private passenger automobile coverages combined exceeds 2.5 percent of earned premiums, except that the effect of a negative excess investment income shall be limited in the computation of excess profits, at the discretion of the commissioner, which discretion shall be exercised pursuant to a standard on the investment of policyholder-supplied funds pursuant to regulations promulgated by the commissioner not later than April 1 of the year in which excess profits reports are filed.
##### **§ 17:29A-5.9** First profits report {#sec-17-29a-5.9 omnilex-key=us-nj-statutes--title-17--17:29A-5.9}
The due date for the first profits report required by subsection a. of section 2 of this act is July 1, 1989. For the first report required by this act:
a. The seven most recent calendar-accident years referred to in subsection b. of section 2 of this act are 1982 through 1988, inclusive.
b. The three calendar-accident years immediately preceding the due date referred to in subsection l. of section 1, subsection d. of section 2, section 3 and section 6 of this act are 1986, 1987, and 1988.
c. The seventh calendar-accident year immediately preceding the due date referred to in subsection l. of section 1 of this act is 1982.
d. The fourth calendar-accident year immediately preceding the date the profits report is due referred to in subsection l. of section 1 of this act is 1985.
e. The calendar-accident year immediately preceding the date the profits report is due referred to in subsection c. of section 2 of this act is 1988.
f. All remaining references to specific calendar years, calendar-accident years, and evaluation dates shall be consistent with the provisions of this section.
##### **§ 17:29A-5.10** Excess profit carry forward {#sec-17-29a-5.10 omnilex-key=us-nj-statutes--title-17--17:29A-5.10}
In the event an excess profit is returned by an insurer in accordance with section 7 of this act and subsequent development demonstrates that an excess profit did not exist or was overstated, an "excess profit carry forward" in the amount of the excess profit refunded or the amount overstated, whichever is less, shall be established. This "excess profit carry forward" shall be applied by such insurer as a credit against future determinations of excess profits until such credit is exhausted or the expiration of a 15-year period from the date such carry forward was established, whichever occurs first.
##### **§ 17:29A-5.11** Certification {#sec-17-29a-5.11 omnilex-key=us-nj-statutes--title-17--17:29A-5.11}
An insurer having fewer than 150 car years of exposure in New Jersey during the three calendar-accident years immediately preceding the date the profits report is due shall file a certification to that effect, in lieu of all other requirements of this act.
##### **§ 17:29A-5.12** Plan for refund, credit. {#sec-17-29a-5.12 omnilex-key=us-nj-statutes--title-17--17:29A-5.12}
7. If the commissioner finds that an insurer has excess profits, the insurer shall establish, subject to the approval of the commissioner, a fair, practicable, and nondiscriminatory plan for the refund or credit of the excess profits to such group or groups of policyholders as the commissioner may determine to be reasonable in consideration of the insurer's financial and business circumstances.
##### **§ 17:29A-5.13** Filing of report {#sec-17-29a-5.13 omnilex-key=us-nj-statutes--title-17--17:29A-5.13}
An insurer shall file the profits report, including all incidental calculations, in the formats and media to be prescribed by the commissioner.
##### **§ 17:29A-5.14** Alteration of aberrant, unusual, irregular data {#sec-17-29a-5.14 omnilex-key=us-nj-statutes--title-17--17:29A-5.14}
If, after examination thereof, the commissioner finds that any information or calculation contained in a profits report filed by an insurer contains, results in or is based upon aberrant, unusual or irregular data, utilization of data, judgments or assumptions, the commissioner shall issue an order to the insurer, directing that the information or calculation be altered in a manner necessary to eliminate the effect of the aberrant, unusual or irregular data, utilization of data, judgments, or assumptions.
##### **§ 17:29A-5.15** Submission of additional data {#sec-17-29a-5.15 omnilex-key=us-nj-statutes--title-17--17:29A-5.15}
Notwithstanding any other provision of this act, the commissioner may require the submission of any other data and information he deems relevant or appropriate for evaluating the profits of an insurer.
##### **§ 17:29A-5.16** Rules, regulations {#sec-17-29a-5.16 omnilex-key=us-nj-statutes--title-17--17:29A-5.16}
The commissioner shall promulgate rules and regulations in accordance with the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), that he deems necessary to implement the provisions of this act.
##### **§ 17:29A-5.17** Review of filing; "qualified independent actuary" defined. {#sec-17-29a-5.17 omnilex-key=us-nj-statutes--title-17--17:29A-5.17}
65. a. The Commissioner of Banking and Insurance may, in connection with any profits report made under P.L.1988, c.118 (C.17:29A-5.6 et seq.), require a review of all or part of the filing by a qualified independent actuary, including, but not limited to, the filer's assumptions with respect to the development of losses or loss adjustment expenses developed to an ultimate basis, allowance for profit and contingencies and anticipated investment income.
b. For the purposes of this section, "qualified independent actuary" means a person or firm with annual billings of at least $5,000,000, who has not worked for the insurer or filer whose filing is under review during the previous three-year period.
##### **§ 17:29A-6** Rating system to be filed {#sec-17-29a-6 omnilex-key=us-nj-statutes--title-17--17:29A-6}
Beginning with the sixtieth day after this act takes effect, every insurer shall, before using or applying any rate to any kind of insurance, file with the commissioner a copy of the rating-system upon which such rate is based, or by which such rate is fixed or determined. The filing herein required may, on written notice by an insurer to the commissioner, be made on behalf of such insurer, by a rating organization of which such insurer is a member or subscriber. The provisions of this section shall be deemed to have been complied with by any insurer which had, before the effective date of this act, directly or by a rating organization of which it is a member or subscriber, or by a designated agent or expert, filed with the commissioner a rating-system, substantially in the form required by this section to be filed. From and after the date of the filing of such rating-systems, every insurer shall charge and receive rates fixed or determined in strict conformity therewith, except as in this act otherwise expressly provided.
##### **§ 17:29A-7** Rating system, approval of; revision or modification {#sec-17-29a-7 omnilex-key=us-nj-statutes--title-17--17:29A-7}
If, after examination thereof, the commissioner shall find that such rating-systems filed by or on behalf of an insurer provide for, result in, or produce rates that are unreasonably high or excessive, or are not adequate for the safeness and soundness of the insurer, or are unfairly discriminatory between risks in this State involving essentially the same hazards and expense elements, he shall issue an order to such insurer, or to the rating organization of which such insurer is a member or subscriber, directing that such rating-systems be altered in the manner and to the extent stated in such order, to produce rates that are reasonable and adequate, and not unfairly discriminatory. If the commissioner shall find that such rating-systems provide for, result in, or produce rates that are not unreasonably high, and are not inadequate for the safeness and soundness of the insurer, and are not unfairly discriminatory between risks in this State involving essentially the same hazards and expense elements, he shall approve such rates, and such approval shall continue in effect until the commissioner shall, by order, direct that such rating-systems be changed or modified, as in this section provided. If the commissioner shall fail to approve or disapprove any rating-systems within ninety days from the filing thereof such rating-systems shall be deemed to be approved by him. Whenever the commissioner shall find that rating-systems theretofore approved by him provide for, result in, or produce rates which are unreasonable, or inadequate, or which discriminate unfairly between risks in this State involving essentially the same hazards and expense elements, he shall issue an order to all insurers employing such rating-systems, or to the rating organizations of which such insurers are members or subscribers, directing that such rating-systems be altered or revised in the manner and to the extent stated in such order to provide for, result in, or produce rates which are reasonable, adequate, and do not discriminate unfairly between risks in this State involving essentially the same hazards and expense elements. Rating-systems filed with the commissioner on or before the effective date of this act pursuant to the provisions of this section, shall be deemed to have been approved by the commissioner, such approval to continue in effect until the commissioner shall, by order, direct that such rating-system be altered or modified as in this section provided.
##### **§ 17:29A-7.1** Excess rate on specific risk; application; approval {#sec-17-29a-7.1 omnilex-key=us-nj-statutes--title-17--17:29A-7.1}
Upon written application of an insurance company, broker or agent, which application shall include the signed consent of the applicant for insurance, the commissioner may approve, on any specific risk, a rate in excess of that provided by a rate filing which would otherwise be applicable.
##### **§ 17:29A-8** Information as to rates {#sec-17-29a-8 omnilex-key=us-nj-statutes--title-17--17:29A-8}
Every rating organization, and every insurer which does its own rate-making shall, within ten days after written request therefor, and upon payment to it of such reasonable charge as such rating organization or such insurer shall make therefor, furnish to any person affected by any rate made by it, or to the authorized representative of such person, full information as to such rate, including the schedule or schedules, if any, pursuant to which such rate was made.
##### **§ 17:29A-9** Reduction of rates; hearings; notes; order {#sec-17-29a-9 omnilex-key=us-nj-statutes--title-17--17:29A-9}
Every rating organization, and every insurer which does its own rate-making, shall provide reasonable means within this State, to be approved by the commissioner, whereby any person or persons affected by a rate made by it may be heard, on an application to reduce such rate. If such rating organization or such insurer shall refuse to reduce such rate, the person or persons affected thereby may make a like application to the commissioner within thirty days after receipt of notice in writing that the application for reduction of rate has been denied by such rating organization or by such insurer. If, upon the expiration of twenty days after application for the reduction of a rate, such rating organization or such insurer fails to grant or reject the application, the person or persons affected may make the application to the commissioner in the same manner as if the application had been rejected by such rating organization or by such insurer. The commissioner shall fix a time and place for hearing on such application, upon not less than ten days' notice, for the applicant and such rating organization or such insurer to be heard. The commissioner shall make such order as he shall deem just and lawful upon the evidence placed before him at such hearing.
##### **§ 17:29A-10** Uniform change in rates; application; order of approval or denial {#sec-17-29a-10 omnilex-key=us-nj-statutes--title-17--17:29A-10}
A member of or subscriber to a rating organization may make a written application to the commissioner for permission to file a uniform percentage decrease or increase to be applied to the premiums produced by the rating system filed on its behalf by such rating organization for a kind of insurance, a subdivision of a kind of insurance or for a class of insurance which is found by the commissioner to be a proper rating unit for the application of such uniform percentage decrease or increase, or otherwise deviate from the rating plans or rules so filed. The commissioner shall, make an order approving the application if he shall deem it consistent with the establishment and maintenance of reasonable, adequate, and nondiscriminatory rates. If the commissioner shall find that such increase or decrease will result in rates that are unreasonable, inadequate, or unfairly discriminatory, he shall make an order denying the application.
##### **§ 17:29A-11** Commissioner, determination as to rates; factors to be considered {#sec-17-29a-11 omnilex-key=us-nj-statutes--title-17--17:29A-11}
In every case where, pursuant to the provisions of this act, the commissioner is authorized or required to determine whether rates are reasonable and adequate, and not unfairly discriminatory, he may avail himself of the services of such experts as he may deem necessary or advisable for that purpose. In making such determination, the commissioner shall consider the factors applied by insurers and rating organizations generally in determining the bases for rates; the financial condition of the insurer; the method of operation of such insurer; the loss experience of the insurer, past and prospective, including where pertinent, the conflagration and catastrophe hazards, if any, both within and without this State; to all factors reasonably related to the kind of insurance involved; to a reasonable profit for the insurer, and, in the case of participating insurers, to policyholders' dividends. In the case of fire insurance, he shall consider the latest available experience of the fire insurance business during a period of not less than five years preceding the year in which such rates are reviewed by him.
##### **§ 17:29A-12** Examination of rating organizations; costs {#sec-17-29a-12 omnilex-key=us-nj-statutes--title-17--17:29A-12}
The commissioner may, whenever he deems it expedient, but at least once in every five years, make or cause to be made an examination of the business, affairs, and methods of operation of every rating organization doing business in this State. The reasonable costs of such examination shall be determined and fixed by the commissioner, and shall be paid by the rating organization examined upon presentation to it of a detailed account of such cost. The commissioner may, in his discretion, waive such examination upon proof that such rating organization has, within a reasonably recent period, been examined by a public official or department of another State, pursuant to the laws of such State, and upon the filing with the commissioner of a copy of the report of such examination. The officers, managers, agents, and employees of such rating organization shall exhibit all its books, records, documents, or agreements governing its method of operation, its rating systems, and its accounts for the purpose of such examination. The commissioner may, for the purpose of facilitating and furthering such examination, examine, under oath, the officers, managers, agents, and employees of such rating organization.
##### **§ 17:29A-13** Notice of withdrawal or expulsion of member of rating organization; readmission {#sec-17-29a-13 omnilex-key=us-nj-statutes--title-17--17:29A-13}
Every rating organization shall notify the commissioner promptly upon the withdrawal or expulsion therefrom of any member or subscriber. No rating organization shall expel or otherwise exclude a subscriber except upon the refusal or failure of such subscriber to pay such rating organization the subscribership fee agreed upon. A rating organization shall readmit such insurer as a subscriber upon payment to it of any delinquent charges. No insurer shall, after expulsion or withdrawal from a rating organization, use any rate or any rating-system made by such rating organization during the period that such expulsion or withdrawal continues.
##### **§ 17:29A-14** Filing of rate changes; hearing. {#sec-17-29a-14 omnilex-key=us-nj-statutes--title-17--17:29A-14}
14. a. With regard to all property and casualty lines, a filer may, from time to time, alter, supplement, or amend its rates, rating systems, or any part thereof, by filing with the commissioner copies of such alterations, supplements, or amendments, together with a statement of the reason or reasons for such alteration, supplement, or amendment, in a manner and with such information as may be required by the commissioner. If such alteration, supplement, or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate, and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate, or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate, or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement or amendment.
b. (Deleted by amendment, P.L.1984, c.1.)
c. If an insurer or rating organization files a proposed alteration, supplement or amendment to its private passenger automobile insurance rating system, or any part thereof, the commissioner shall transmit the filing to the appropriate office in the Division of Insurance, which office shall issue a preliminary determination within 90 days of receipt of a rate filing, except that the commissioner may, for good cause, extend the time for a preliminary determination by not more than 30 days. The preliminary determination shall set forth the basis for accepting, rejecting or modifying the rates as filed. A copy of the preliminary determination shall be provided to the filer and other interested parties. Unless the filer or other interested party, including the Director of the Division of Rate Counsel in, but not of, the Department of the Treasury, requests a hearing, the commissioner may adopt the preliminary determination as final within 30 days of the preliminary determination. If a hearing is requested, it shall proceed on an expedited basis in accordance with the provisions of this section. If a preliminary determination is not made within the time provided, a filing shall be transmitted to the Office of Administrative Law for a hearing and the commissioner shall adopt the determination of the administrative law judge as a final decision on the filing.
For filings other than private passenger automobile, if an insurer or rating organization files a proposed alteration, supplement or amendment to its rating system, or any part thereof, which would result in a change in rates, the commissioner may, or upon the request of the filer or the appropriate office in the Division of Insurance shall, certify the matter for a hearing. The hearing shall, at the commissioner's discretion, be conducted by himself, by a person appointed by the commissioner pursuant to section 26 of P.L.1944, c.27 (C.17:29A-26), or by the Office of Administrative Law, created by P.L.1978, c.67 (C.52:14F-1 et seq.), as a contested case. The following requirements shall apply to the hearing:
(1) The hearing shall commence within 30 days of the date of the request or decision that a hearing is to be held. The hearing shall be held on consecutive working days, except that the commissioner may, for good cause, waive the consecutive working day requirement. If the hearing is conducted by an administrative law judge, the administrative law judge shall submit his findings and recommendations to the commissioner within 30 days of the close of the hearing. The commissioner may, for good cause, extend the time within which the administrative law judge shall submit his findings and recommendations by not more than 30 days. A decision shall be rendered by the commissioner not later than 60 days, or, if he has granted a 30-day extension, not later than 90 days, from the close of the hearing. A filing shall be deemed to be approved unless rejected or modified by the commissioner within the time period provided herein.
(2) The commissioner, or the Director of the Office of Administrative Law, as appropriate, shall notify all interested parties, including the Director of the Division of Rate Counsel on behalf of insurance consumers, of the date set for commencement of the hearing, on the date of the filing of the request for a hearing, or within 10 days of the decision that a hearing is to be held.
(3) The insurer or rating organization making a filing on which a hearing is held shall bear the costs of the hearing.
(4) The commissioner may promulgate rules and regulations (a) to establish standards for the submission of proposed filings, amendments, additions, deletions and alterations to the rating system of filers, which may include forms to be submitted by each filer; and (b) making such other provisions as he deems necessary for effective implementation of this act.
d. (Deleted by amendment, P.L.1984, c.1.)
e. (Deleted by amendment, P.L.2003, c.89.)
f. The notice provisions set forth in section 51 of P.L.2005, c.155 (C.52:27EE-51), shall apply to this section.
##### **§ 17:29A-15** Rates to be observed; rebates {#sec-17-29a-15 omnilex-key=us-nj-statutes--title-17--17:29A-15}
No insurer or employee thereof, and no broker or agent shall knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the respective rating-systems on file with and approved by the commissioner or, as required by the commissioner, to be used on an interim basis in accordance with subsection e. of section 14 of P.L.1944, c. 27 (C. 17:29A-14). No insurer or employee thereof, and no broker or agent shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage or consideration may be provided for in rating-systems filed by or on behalf of such insurer and approved by the commissioner. No insured named in a policy of insurance, nor any employee of such insured, shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any such special favor or advantage or valuable consideration or inducement. Nothing herein contained shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this State, nor as prohibiting a discount, abatement, or reduction in premium on policies issued to or on behalf of the State of New Jersey.
##### **§ 17:29A-15.1** Premium credits {#sec-17-29a-15.1 omnilex-key=us-nj-statutes--title-17--17:29A-15.1}
Premium credits shall be provided for each deductible and exclusion on personal injury protection coverage offered in accordance with section 13 of P.L. 1983, c. 362 (C. 39:6A-4.3), and for the tort limitation options on bodily injury liability coverage offered in accordance with section 8 of P.L. 1972, c. 70 (C. 39:6A-8). All premium credits to which this section applies shall be calculated and represented to the insured as a percentage of the applicable premium for each coverage option, and the percentage for each coverage option shall be uniform by filer on a Statewide basis.
The premium charged for each coverage shall be clearly set forth in any policy or endorsement provided the insured.
The percentage rate of commission or rate of other compensation payable by an automobile insurer to a producer shall not vary by reason of the selection or nonselection of any option provided in section 13 of P.L. 1983, c. 362 (C. 39:6A-4.3) and section 8 of P.L. 1972, c. 70 (C. 39:6A-8).
##### **§ 17:29A-15.2** Commission of producer unaffected by tort option. {#sec-17-29a-15.2 omnilex-key=us-nj-statutes--title-17--17:29A-15.2}
14. Notwithstanding any other provision of law to the contrary, the dollar amount of the commission paid to a producer for residual bodily injury coverage provided pursuant to section 8 of P.L.1972, c.70 (C.39:6A-8) shall be the same whether the named insured elects the tort option provided for in subsection a. of that section or the tort option provided for in subsection b. of that section. This section shall not apply to commissions on a basic automobile insurance policy issued pursuant to section 4 of P.L.1998, c.21 (C.39:6A-3.1).
##### **§ 17:29A-16** False information forbidden {#sec-17-29a-16 omnilex-key=us-nj-statutes--title-17--17:29A-16}
No insurer, and no officer, agent, or employee thereof, shall give false or misleading information to any rating organization of which it is a member or subscriber, or to the commissioner, which will in any manner affect the proper determination of reasonable, adequate, and nondiscriminatory rates.
##### **§ 17:29A-17** Violations {#sec-17-29a-17 omnilex-key=us-nj-statutes--title-17--17:29A-17}
Any insurer which violates any provision of this act, or which fails to comply with the terms of any order made by the commissioner pursuant to the provisions of this act, shall be deemed to have violated the law within the meaning of section one of chapter thirty of Title 17 of the Revised Statutes.
##### **§ 17:29A-18** Suspension of license; procedure {#sec-17-29a-18 omnilex-key=us-nj-statutes--title-17--17:29A-18}
Any rating organization which violates any provision of this act shall be subject to suspension of its license. Failure of a rating organization to comply with the provisions of any order of the commissioner within the time limited by such order, or any extension thereof as the commissioner may, in his discretion grant, shall, if no proceeding in lieu of prerogative writ has been taken for review of such order, automatically suspend the license of such rating organization. No order suspending a license because of a violation of any provision of this act shall be made by the commissioner, except upon ten days' notice to such rating organization, specifying the particular violation. If such rating organization shall make a request therefor in writing within the ten-day period, the commissioner shall name a time and place for a hearing, at which such rating organization shall be given opportunity to make its defense. At the conclusion of such hearing, the commissioner shall make such order as in his judgment the evidence shall warrant. A suspension of license shall be effective until modified or rescinded by order of the commissioner upon proof that the violation of the provisions of this act no longer continue, or upon proof that the rating organization has complied with the terms of any prior order made by the commissioner, or until the order of the commissioner upon which such suspension is based is reversed or modified upon a review thereof by a proceeding in lieu of prerogative writ.
##### **§ 17:29A-19** Contributions to suspended organizations prohibited {#sec-17-29a-19 omnilex-key=us-nj-statutes--title-17--17:29A-19}
No insurer shall contribute to the financial support of any rating organization with knowledge that its license has been suspended and not reinstated.
##### **§ 17:29A-20** Suspended organizations not to do business {#sec-17-29a-20 omnilex-key=us-nj-statutes--title-17--17:29A-20}
No rating organization shall conduct the business of rate-making during the period that its license has been suspended. The provisions of this section shall apply also to the officers, partners, or managers in charge of the business and affairs of such rating organization.
##### **§ 17:29A-21** Doing business without license a misdemeanor {#sec-17-29a-21 omnilex-key=us-nj-statutes--title-17--17:29A-21}
Any person, corporation, partnership or association which conducts the business of rate-making in this State for two or more insurers without having obtained a license therefor pursuant to the provisions of this act, shall be guilty of a misdemeanor.
##### **§ 17:29A-22** Penalties {#sec-17-29a-22 omnilex-key=us-nj-statutes--title-17--17:29A-22}
Any person, partnership, association, corporation, insurer, or rating organization who or which shall willfully violate the provisions of this act shall be liable to a penalty in the sum of five hundred dollars ($500.00) for each such violation, to be sued for and recovered for the use of the State in a civil action brought in the name of the State by the commissioner in a court of competent jurisdiction.
##### **§ 17:29A-23** Commissioner, power to assess penalties; procedure {#sec-17-29a-23 omnilex-key=us-nj-statutes--title-17--17:29A-23}
In lieu of the penalty provided for in section twenty-two of this act but in addition to any other penalty or forfeiture provided by this act, or otherwise provided by law, the commissioner may, if he finds that any person, partnership, association, corporation, insurer, or rating organization has willfully violated any provision of this act, impose a penalty of not less than twenty-five dollars ($25.00) and not more than five hundred dollars ($500.00) for each such violation. No such penalty shall be imposed, except upon at least ten days' written notice to such person, partnership, association, corporation, insurer, or rating organization, specifying the specific violation, and naming a date and place for a hearing on the violation so charged. If the commissioner shall find, upon the evidence placed before him at such hearing, that such person, partnership, association, corporation, insurer, or rating organization is guilty of any violation of the provisions of this act, he shall make an order briefly stating his findings, and specifying the penalty imposed. The imposition of such a penalty shall, in the case of a licensed broker, or agent, or in the case of a rating organization, automatically suspend the license of such broker or agent or rating organization until such time as such penalty shall be paid. The commissioner may file in the office of the Clerk of the Superior Court, a certificate stating the amount of any penalty assessed pursuant to the provisions of this section, and the name of the person, partnership, association, corporation, insurer, or rating organization against whom or which the penalty has been assessed, and thereupon the Clerk of Superior Court shall enter upon his record of docketed judgments such certificate, or an abstract thereof, and shall duly index the same. From the time of such docketing, such certificate shall have the same force and effect as a judgment obtained in the Superior Court, Law Division, and the commissioner shall have all remedies and may take all the proceedings for the collection thereof which may be had or taken upon the recovery of such a judgment. Before any such penalty is imposed the proceeding before the commissioner may be removed to the Superior Court by a proceeding in lieu of prerogative writ and there determined.
##### **§ 17:29A-24** Review; stay {#sec-17-29a-24 omnilex-key=us-nj-statutes--title-17--17:29A-24}
Any order made by the commissioner pursuant to the provisions of this act shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ. Upon the institution of the proceeding, the court may, in the following cases, stay the provisions of such order:
(a) Where, pursuant to section two of this act, a rating organization, which was engaged in the business of rate-making on the effective date of this act, has been refused a license by the commissioner. Such rating organization may, with leave of court, be allowed to continue to engage in business, subject to the provisions of this act, pending final disposition of its application for review; or
(b) Where any order of the commissioner shall provide for a change in any rating-system which results in an increase or decrease in rates, any insurer affected thereby may, with leave of court, pending final disposition of the proceedings in the Superior Court, continue to charge rates which obtained prior to such order, on condition that the difference in the rates be deposited in a special account by the insurer affected, to be held in trust by such insurer, and to be retained by the insurer or paid to the holders of policies issued after the order of the commissioner, as the court may determine.
##### **§ 17:29A-25** Exceptions to application of act; investigations as to classes of risks exempted {#sec-17-29a-25 omnilex-key=us-nj-statutes--title-17--17:29A-25}
The provisions of this act shall not apply to any policy or contract of reinsurance, other than joint reinsurance to the extent stated in section two of this amendatory act; any policy of insurance against loss or damage to or legal liability in connection with property located outside this State, or any motor vehicle or aircraft principally garaged and used outside of this State, or any activity wholly carried on outside this State; insurance of vessels or craft, their cargoes, marine builder's risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine, insurance policies, nor to such classes of inland marine insurance for which no class rates, rating plans or special rates are customarily fixed by a rating bureau or bureaus; accident, health, or life insurance; annuities; title insurance; mortgage guaranty insurance; or workmen's compensation and employer's liability insurance. The provisions of this act shall not apply to hospital service or medical service corporations, investment companies, mutual benefit associations, or fraternal beneficiary associations. The commissioner may from time to time make investigations with respect to classes of risks of the kinds of insurance herein exempted. The commissioner may call upon all authorized insurers and rating organizations rating such risks within this State to furnish such information relative thereto as he may deem necessary.
##### **§ 17:29A-26** Deputies {#sec-17-29a-26 omnilex-key=us-nj-statutes--title-17--17:29A-26}
Wherever, under the provisions of this act, the commissioner is authorized or required to do any act, he may designate a deputy commissioner, or any salaried employee of the Department of Banking and Insurance to act in his place and stead, who shall report to the commissioner and advise the commissioner on the nature of the matter delegated. The commissioner shall make such order, based upon such advice and report, as he shall, in his discretion, determine, and such order shall have the same force and effect as if the commissioner had acted thereon personally.
##### **§ 17:29A-27** Repeals {#sec-17-29a-27 omnilex-key=us-nj-statutes--title-17--17:29A-27}
Sections 17:29-1, 17:29-2, 17:29-3, 17:29-4, 17:29-5, 17:29-6, 17:29-8, 17:29-9 of the Revised Statutes and all other acts or parts of acts inconsistent with the provisions of this act are hereby repealed.
##### **§ 17:29A-28** Partial invalidity of act {#sec-17-29a-28 omnilex-key=us-nj-statutes--title-17--17:29A-28}
The invalidity of any part or section of this act shall not affect the validity of the remaining parts or sections.
##### **§ 17:29A-29** Advisory organizations; requirements; unfair practices {#sec-17-29a-29 omnilex-key=us-nj-statutes--title-17--17:29A-29}
(a) Every group, association or other organization of insurers, whether located within or outside this State, which assists insurers which make their own filings or rating organizations, in rate making, by the collection and furnishing of loss or expense statistics, or by the submission of recommendations, but which does not make filings under any of the laws referred to in section four of this act, shall be known as an advisory organization.
(b) Every advisory organization shall file with the commissioner (1) a copy of its constitution, its articles of agreement or association or its certificate of incorporation and of its by-laws, rules and regulations governing its activities, (2) a list of its members, (3) the name and address of a resident of this State upon whom notices or orders of the commissioner or process issued at his direction may be served, and (4) an agreement that the commissioner may examine such advisory organization in accordance with the provisions of section three of this act.
(c) If, after a hearing, the commissioner finds that the furnishing of such information or assistance involves any act or practice which is unfair or unreasonable or otherwise inconsistent with the provisions of this act, or with the applicable provisions of the laws referred to in section four of this act, he may issue a written order specifying in what respects such act or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this act, or with the applicable provisions of the laws referred to in section four of this act, and requiring the discontinuance of such act or practice.
(d) No insurer which makes its own filings nor any rating organization shall support its filings by statistics or adopt rate making recommendations, furnished to it by an advisory organization which has not complied with this section or with an order of the commissioner involving such statistics or recommendations issued under subsection (c) of this section. If the commissioner finds such insurer or rating organization to be in violation of this subsection he may issue an order requiring the discontinuance of such violation.
##### **§ 17:29A-30** Joint reinsurance; joint underwriting; laws governing; organization deemed insurer; unfair practices {#sec-17-29a-30 omnilex-key=us-nj-statutes--title-17--17:29A-30}
(a) Every group, association or other organization of insurers which engages in joint reinsurance or joint underwriting shall be subject to regulation with respect thereto as herein provided, subject, however, with respect to joint reinsurance, to P.L.1944, chapter 27, sections 23, 24, 26, 27 and 28, and, with respect to joint underwriting, to all the provisions of the laws referred to in section four of this act, except that any such group, association or other organization of insurers which engages in joint underwriting shall not, with respect to such joint underwriting, be deemed to be a "rating organization" as defined in P.L.1944, chapter 27, section 1(f), but shall be deemed to be an "insurer" as defined in subsection (g) of P.L.1944, chapter 27, section 1.
(b) If, after a hearing, the commissioner finds that any activity or practice of any such group, association or other organization is unfair or unreasonable or otherwise inconsistent with the provisions of this act, or with the applicable provisions of the laws referred to in section 4 of this act, he may issue a written order specifying in what respects such activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this act, or with the applicable provisions of the laws referred to in section four of this act, and requiring the discontinuance of such activity or practice.
##### **§ 17:29A-31** Examination of group engaged in joint reinsurance or joint underwriting {#sec-17-29a-31 omnilex-key=us-nj-statutes--title-17--17:29A-31}
The commissioner may, whenever he deems it expedient, but at least once in every five years, make or cause to be made an examination of the business, affairs, and method of operation of each group, association or other organization referred to in sections one and two of this act. The reasonable costs of such examination shall be determined and fixed by the commissioner, and shall be paid by the group, association or other organization examined upon presentation to it of a detailed account of such cost. The commissioner may, in his discretion, waive such examination upon proof that such group, association or other organization has, within a reasonably recent period, been examined by a public official or department of another State, pursuant to the laws of such State and upon the filing with the commissioner of a copy of the report of such examination. The officers, managers, agents and employees of such group, association or other organization shall exhibit all its books, records, documents, or agreements, governing its method of operation, and its accounts for the purpose of such examination. The commissioner may, for the purpose of facilitating and furthering such examination, examine, under oath, the officers, managers, agents, and employees of such group, association or other organization. In lieu of any such examination the commissioner may accept the report of an examination made by the insurance supervisory official of another State, pursuant to the laws of such State.
##### **§ 17:29A-32** Application of act {#sec-17-29a-32 omnilex-key=us-nj-statutes--title-17--17:29A-32}
This act applies to the kinds of insurance and to the insurers subject to "An act concerning insurance, regulating the making and applying of insurance rates, and providing for the licensing of rating organizations, and repealing sections 17:29-1, 17:29-2, 17:29-3, 17:29-4, 17:29-5, 17:29-6, 17:29-8 and 17:29-9 of the Revised Statutes," approved March ninth, one thousand nine hundred and forty-four (P.L.1944, c. 27).
##### **§ 17:29A-33** Short title {#sec-17-29a-33 omnilex-key=us-nj-statutes--title-17--17:29A-33}
Sections 1 to 12 of this act shall be known and may be cited as the "New Jersey Automobile Insurance Reform Act of 1982."
##### **§ 17:29A-34** Intent and purpose of act. {#sec-17-29a-34 omnilex-key=us-nj-statutes--title-17--17:29A-34}
2. It is the intent and purpose of this act:
a. To require each insurer to apply on a flat and uniform fee basis per insured automobile Statewide its miscellaneous taxes, licenses, fees and at least 90% of its general expenses and acquisition, field supervision, and collection expense portions of the premium, excluding commissions.
b. To require that each insurer flatten the tax portion of the automobile insurance premium paid pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.) and certain assessments made pursuant to sections 4, 6 and 7 of P.L.1952, c.174 (C.39:6-64, 39:6-66 and 39:6-67) on a flat uniform fee basis per insured automobile Statewide.
c. To establish the New Jersey Merit Rating Plan for convictions for motor vehicle violations and an accident surcharge system for motor vehicles, based on criteria set forth in this act.
d. To require that automobile insurance rates charged any insured shall not exceed certain average rates, as determined in the act.
e. To provide that every senior citizen will receive the benefit of at least a 5% rate reduction as a result of this act.
f. (Deleted by amendment, P.L.1984, c.1.)
g. To establish a time guideline to assist in speeding the rate review process for all property and casualty lines, including automobile insurance, and to provide that a filing shall be deemed approved unless disapproved by the commissioner within the specified time.
h. To provide for higher deductibles on collision and comprehensive coverage, an increase in uninsured motorist coverage, and underinsured motorist coverage for private passenger automobile insurance.
i. To provide the funds necessary to modernize the operations and improve the effectiveness and efficiencies of the New Jersey Motor Vehicle Commission so as to permit the commission to discharge its statutory obligations relating to the automobile insurance system.
j. To provide by the enactment of all these reforms that automobile insurance will be affordable, available, and more equitable to the motorists of this State.
##### **§ 17:29A-35** Motor Vehicle Violations Surcharge System. {#sec-17-29a-35 omnilex-key=us-nj-statutes--title-17--17:29A-35}
6. a. (Deleted by amendment, P.L.1997, c.151.)
b. There is created a Motor Vehicle Violations Surcharge System which shall apply to all drivers and shall include, but not be limited to, the following provisions:
(1) (a) Surcharges shall be levied, beginning on or after January 1, 1984 but before the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the Chief Administrator of the New Jersey Motor Vehicle Commission, by the commission established by section 4 of P.L.2003, c.13 (C.39:2A-4) on any driver who, in the preceding 36-month period, has accumulated six or more motor vehicle points, as provided in Title 39 of the Revised Statutes; except that the allowance for a reduction of points in Title 39 of the Revised Statutes shall not apply for the purpose of determining surcharges under this paragraph. The accumulation of points shall be calculated as of the date the point violation is posted to the driver history record and shall be levied pursuant to rules promulgated by the commission. Surcharges assessed pursuant to this paragraph shall be $150 for six points, and $25 for each additional point. No offense shall be selected for billing which occurred prior to February 10, 1983. No offense shall be considered for billing in more than three annual assessments.
The commission shall not select any offense for billing which occurred on or after the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the Chief Administrator of the New Jersey Motor Vehicle Commission, and shall have no legal authority to collect any surcharge, together with any interest and administrative fees, that have been billed but remain unpaid, or that may be billed and required to be paid, on or after the that date.
(b) (Deleted by amendment, P.L.1984, c.1.)
(2) (a) Surcharges shall be levied pursuant to subsection f. of section 1 of P.L.2000, c.75 (C.39:4-97.2) for each offense of unsafe driving under subsection a. of that section occurring on or after July 24, 2000 but before the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the chief administrator of the commission. The commission shall have no legal authority to collect any surcharge, together with any interest and administrative fees, that have been levied but remain unpaid, or that may be levied and required to be paid, on or after that date.
(b) Surcharges shall be levied for convictions (i) under R.S.39:4-50 for violations occurring on or after February 10, 1983 but before the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the chief administrator of the commission, and (ii) under section 2 of P.L.1981, c.512 (C.39:4-50.4a), or for offenses committed in other jurisdictions of a substantially similar nature to those under R.S.39:4-50 or section 2 of P.L.1981, c.512 (C.39:4-50.4a), for violations occurring on or after January 26, 1984 but before the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the chief administrator of the commission. The commission shall have no legal authority to collect any surcharge, together with any interest and administrative fees, that have been levied but remain unpaid, or that may be levied and required to be paid, on or after that date.
Except as hereinafter provided, surcharges under this subparagraph (b) shall be levied annually for a three-year period, and shall be $1,000 per year for each of the first two convictions, for a total surcharge of $3,000 for each conviction, and $1,500 per year for the third conviction occurring within a three-year period, for a total surcharge of $4,500 for the third conviction. If a driver is convicted under both R.S.39:4-50 and section 2 of P.L.1981, c.512 (C.39:4-50.4a) for offenses arising out of the same incident, the driver shall be assessed only one surcharge for the two offenses.
The commission, for good cause, may authorize payment of any surcharge on an installment basis over a period not to exceed 36 months. If a driver fails to pay the surcharge or any installments on the surcharge, the total surcharge shall become due immediately, except as otherwise prescribed by rule of the commission.
The commission may authorize any person to pay the surcharge levied under this section and collectible by the commission by use of a credit card, debit card or other electronic payment device, and the chief administrator is authorized to require the person to pay all costs incurred by the commission in connection with the acceptance of the credit card, debit card or other electronic payment device. If a surcharge or related administrative fee is paid by credit or debit cards or any other electronic payment device and the amount is subsequently reversed by the credit card company or bank, the driver shall be subject to the fee imposed for dishonored checks pursuant to section 31 of P.L.1994, c.60 (C.39:5-36.1).
In addition to any other remedy provided by law, the commission is authorized to utilize the provisions of the SOIL (Set off of Individual Liability) program established pursuant to P.L.1981, c.239 (C.54A:9-8.1 et seq.) to collect any surcharge levied under this section and collectible by the commission that is unpaid on or after the effective date of this act but before the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the chief administrator of the commission. As an additional remedy, the commission may issue a certificate to the Clerk of the Superior Court stating that the person identified in the certificate is indebted under this surcharge law in such amount as shall be stated in the certificate. The certificate shall reference the statute under which the indebtedness arises. Thereupon the clerk to whom such certificate shall have been issued shall immediately enter upon the record of docketed judgments the name of such person as debtor; the State as creditor; the address of such person, if shown in the certificate; the amount of the debt so certified; a reference to the statute under which the surcharge is assessed, and the date of making such entries. The docketing of the entries shall have the same force and effect as a civil judgment docketed in the Superior Court, and the commission shall have all the remedies and may take all of the proceedings for the collection thereof which may be had or taken upon the recovery of a judgment in an action, but without prejudice to any right of appeal. Upon entry by the clerk of the certificate in the record of docketed judgments in accordance with this provision, interest in the amount specified by the court rules for post-judgment interest shall accrue from the date of the docketing of the certificate, however payment of the interest may be waived by the commission or its designee. In the event that the surcharge remains unpaid following the issuance of the certificate of debt and the commission takes any further collection action including referral of the matter to the Attorney General or his designee, the fee imposed, in lieu of the actual cost of collection, may be 20 percent of surcharges of $1,000 or more. The chief administrator or his designee may establish a sliding scale, not to exceed a maximum amount of $200, for surcharge principal amounts of less than $1,000 at the time the certificate of debt is forwarded to the Superior Court for filing. The commission shall provide written notification to a driver of the proposed filing of the certificate of debt at least 10 days prior to the proposed filing; such notice shall be mailed to the driver's last address of record with the commission. Upon the filing of a certificate of debt with the Clerk of the Superior Court, the surcharged driver shall not be eligible for the restoration of his driving privilege until at least five percent of each outstanding surcharge assessment that has resulted in the suspension, including interest and costs, if any, is paid to the commission. If a certificate of debt is satisfied following a credit card payment, debit card payment or payment by other electronic payment device and that payment is reversed, a new certificate of debt shall be filed against the surcharged driver unless the original is reinstated.
If the chief administrator or his designee approves a special payment plan, of such duration as the chief administrator or his designee deems appropriate, for repayment of the certificate of debt, and the driver is complying with the approved plan, the plan may be continued for any new surcharge not part of the certificate of debt.
A certificate of indebtedness shall not be issued for any surcharge levied under this section and collectible by the commission that remains unpaid on or after the first day of the first month next following the date the written notification required pursuant to subsection b. of section 2 of P.L.2019, c.301 (C.52:9S-3.1) is transmitted to the State Treasurer and the chief administrator of the commission. Any certificate issued on or before that date shall be deemed to be satisfied by the commission.
All moneys collectible by the commission under subparagraph (b) of paragraph (2) of this subsection shall be billed and collected by the commission except as provided in P.L.1997, c.280 (C.2B:19-10 et al.) for the collection of unpaid surcharges. Commencing on September 1, 1996, or such earlier time as the Commissioner of Banking and Insurance shall certify to the State Treasurer that amounts on deposit in the New Jersey Automobile Insurance Guaranty Fund are sufficient to satisfy the current and anticipated financial obligations of the New Jersey Automobile Full Insurance Underwriting Association, all surcharges collected by the commission under subparagraph (b) of paragraph (2) of this subsection shall be remitted to the Division of Motor Vehicles Surcharge Fund:
(i) for transfer to the Market Transition Facility Revenue Fund, as provided in section 12 of P.L.1994, c.57 (C.34:1B-21.12), for the purposes of section 4 of P.L.1994, c.57 (C.34:1B-21.4) until such a time as all the Market Transition Facility bonds, notes and obligations and all Motor Vehicle Commission bonds, notes and obligations issued pursuant to that section 4 of P.L.1994, c.57 (C.34:1B-21.4) and the costs thereof are discharged and no longer outstanding; and
(ii) from and after the date of certification by the Commissioner of Banking and Insurance that the moneys collectible under subparagraph (b) of paragraph (2) of this subsection are no longer needed to fund the association or at such time as all Market Transition Facility bonds, notes and obligations and all Motor Vehicle Commission bonds, notes and obligations issued pursuant to section 4 of P.L.1994, c.57 (C.34:1B-21.4) and the costs thereof are discharged and no longer outstanding, for transfer to the Motor Vehicle Surcharges Revenue Fund established pursuant to section 6 of the "Motor Vehicle Surcharges Securitization Act of 2004," P.L.2004, c.70 (C.34:1B-21.28) to be applied as set forth in section 6 of that act. From and after such time as all bonds issued under section 4 of the "Motor Vehicle Surcharges Securitization Act of 2004," P.L.2004, c.70 (C.34:1B-21.26) and the costs thereof are discharged and no longer outstanding, all surcharges collected by the commission under subparagraph (b) of paragraph (2) of this subsection shall, subject to appropriation, be remitted to the New Jersey Property-Liability Insurance Guaranty Association created pursuant to section 6 of P.L.1974, c.17 (C.17:30A-6) to be used for payment of any loans made by that association to the New Jersey Automobile Insurance Guaranty Fund pursuant to paragraph (10) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8); provided that all such payments shall be subject to and dependent upon appropriation by the State Legislature.
All surcharges collected by the courts pursuant to subparagraph (a) of paragraph (2) of this subsection shall be forwarded not less frequently than monthly to the Division of Revenue in the Department of the Treasury. The Division of Revenue shall transfer: all such surcharges received prior to July 1, 2006, to the General Fund, and commencing July 1, 2006, all such surcharges to the Unsafe Driving Surcharge Revenue Fund established pursuant to section 5 of the "Motor Vehicle Surcharges Securitization Act of 2004," P.L.2004, c.70 (C.34:1B-21.27) to be applied as set forth in section 5 of that act. From and after such time as all bonds (including refunding bonds), notes and other obligations issued under section 4 of the "Motor Vehicle Surcharges Securitization Act of 2004," P.L.2004, c.70 (C.34:1B-21.26), and the costs thereof are discharged and no longer outstanding, all such surcharges collected by the courts pursuant to subparagraph (a) of paragraph (2) of this subsection and forwarded to the Division of Revenue shall be transferred to the General Fund.
Upon request, the Administrative Office of the Courts shall provide a monthly report to the Division of Revenue containing information on the number of convictions for the offense of unsafe driving pursuant to section 1 of P.L.2000, c.75 (C.39:4-97.2) that were entered during such month, the amount of the surcharges that were assessed by the courts pursuant to subsection f. of section 1 of P.L.2000, c.75 (C.39:4-97.2) for such month, and the amount of the surcharges collected by the courts pursuant to subsection f. of section 1 of P.L.2000, c.75 (C.39:4-97.2) during such month.
(3) In addition to any other authority provided in P.L.1983, c.65 (C.17:29A-33 et al.), the commissioner, after consultation with the commission, is specifically authorized (a) (Deleted by amendment, P.L.1994, c.64), (b) to impose, in accordance with subparagraph (a) of paragraph (1) of this subsection b., surcharges for motor vehicle violations or convictions for which motor vehicle points are not assessed under Title 39 of the Revised Statutes, or (c) to reduce the number of points for which surcharges may be assessed below the level provided in subparagraph (a) of paragraph (1) of this subsection b., except that the dollar amount of all surcharges levied under the Motor Vehicle Violations Surcharge System shall be uniform on a Statewide basis for each filer, without regard to classification or territory. Surcharges adopted by the commissioner on or after January 1, 1984 for motor vehicle violations or convictions for which motor vehicle points are not assessable under Title 39 of the Revised Statutes shall not be retroactively applied but shall take effect on the date of the New Jersey Register in which notice of adoption appears or the effective date set forth in that notice, whichever is later.
c. No motor vehicle violation surcharges shall be levied on an automobile insurance policy issued or renewed on or after January 1, 1984, except in accordance with the Motor Vehicle Violations Surcharge System, and all surcharges levied thereunder shall be assessed, collected and distributed in accordance with subsection b. of this section.
d. (Deleted by amendment, P.L.1990, c.8.)
e. The Commissioner of Banking and Insurance and the commission as may be appropriate, shall adopt any rules and regulations necessary or appropriate to effectuate the purposes of this section.
##### **§ 17:29A-35.1** Surcharge debts of driver extinguished upon death. {#sec-17-29a-35.1 omnilex-key=us-nj-statutes--title-17--17:29A-35.1}
1. Notwithstanding the provisions or any law, rule or regulation to the contrary, upon the death of a driver on whom surcharges have been levied by the New Jersey Motor Vehicle Commission pursuant to section 6 of P.L.1983, c.65 (C.17:29A-35), any debt established by the imposition of those surcharges is extinguished and the commission, or any agent or representative thereof, shall cease to seek payment of that debt.
Whenever the division is unable to obtain a death certificate from a person representing the estate of any driver on whom surcharges have been levied and who was a resident of the State, the commission shall obtain a copy of the death certificate by contacting the State registrar of vital statistics in the Department of Health and, in these cases, the commission shall not require the estate of the driver to furnish a death certificate.
##### **§ 17:29A-35.2** Outstanding obligations continued; new debts not issued. {#sec-17-29a-35.2 omnilex-key=us-nj-statutes--title-17--17:29A-35.2}
4. a. Notwithstanding the provisions of any other law to the contrary, all debts, including bonds, notes, and other obligations and the costs thereof, which remain outstanding as of the effective date of P.L.2019, c.301 (C.52:9S-3.1 et al.) and that have a pledge of revenues derived specifically from a surcharge imposed pursuant to section 6 of P.L.1983, c.65 (C.17:29A-35), shall continue to be paid until those debts have been repaid in full pursuant to the terms of those debt contracts.
b. After the effective date of P.L.2019, c.301 (C.52:9S-3.1 et al.), no new debts, including bonds, refunding bonds, notes, and other obligations shall be issued which pledge or include revenues derived from a surcharge imposed pursuant to section 6 of P.L.1983, c.65 (C.17:29A-35) as a source of funding for the repayment of those new bonds, so that once the debts outstanding as of the effective date of P.L.2019, c.301 (C.52:9S-3.1 et al.) have been retired, the revenues collected pursuant to section 6 of P.L.1983, c.65 (C.17:29A-35) shall not be encumbered by a debt of any sort.
c. The provisions of this section shall not prohibit the State from refinancing or refunding any outstanding debts, including bonds, refunding bonds, notes, and other obligations, which remain outstanding as of the effective date of P.L.2019, c.301 (C.52:9S-3.1 et al.) and that have a pledge of revenues derived specifically from a surcharge imposed pursuant to section 6 of P.L.1983, c.65 (C.17:29A-35), as long as such refinancing or refunding does not extend the maturity dates beyond January 1, 2035.
##### **§ 17:29A-36** Contents of filing for automotive insurance rate making. {#sec-17-29a-36 omnilex-key=us-nj-statutes--title-17--17:29A-36}
7. a. Any filing made for the purpose of automobile insurance rate making shall indicate the actual rate needs of the filer; provided, however, that (a) each filer's rate classification definitions, as used by that filer, shall be uniform Statewide; (b) the automobile insurance rate charged an insured shall not exceed two and one-half times the filer's territorial base rate for each coverage, exclusive of driving record surcharges and discounts; and (c) the automobile insurance rate of the base class in any territory for any filer shall not exceed 1.35 times the filer's Statewide average base rate for each coverage, exclusive of driving record surcharges and discounts for any basic policy issued or renewed at any time and for any standard policy issued or renewed before January 1, 2000 or the 180th day following approval of the common territorial rating plan pursuant to section 28 of P.L.1998, c.21 (C.17:29A-50), whichever first occurs.
b. No rating plan or rate filing applicable to any policy issued or renewed on or after January 1, 2000 or the 180th day following the approval of the common territorial rating plan provided for in sections 27 and 28 of P.L.1998, c.21 (C.17:29A-49 and C.17:29A-50), whichever first occurs, shall be approved by the commissioner which creates territorial relativities which are significantly disproportionate to those in effect as of the effective date of P.L.1998, c.21 (C.39:6A-1.1 et al.).
c. The automobile insurance rate of an automobile whose principal operator is 65 years of age or older shall not exceed one and one-quarter times the Statewide average rate for principal operators 65 years of age or older for each coverage, exclusive of driving record surcharges and discounts; provided, however, that no filer shall increase rates for principal operators 65 years of age or older as a result of the implementation of this section unless more than 50% of its insureds are principal operators 65 years of age or older.
d. As a result of the filings made pursuant to sections 26 and 27 of P.L.1998, c.21 (C.17:29A-48 and C.17:29A-49) and subsections a., b. and c. of this section, the filer's aggregate premium for all territories shall not exceed the filer's aggregate premium in effect prior to the date established in subsection b. of this section.
As used in this section, base rate means the automobile insurance rate charged for an automobile that is not used in business and not used in going to and from work, except for the going to and from work distance included in the pleasure use classification of the filer, and where there is no youthful operator, as defined in the filer's classification system. The base rate class shall not include automobiles to which discounts apply under the filer's classification system, including, but not limited to, farmers' and senior citizens' automobiles or any discount from a standard rate provided for in the filer's tier rating system.
The provisions of this section shall be implemented after the implementation of the provisions of subsection a. of section 8 of P.L.1983, c.65 (C. 17:29A-37).
##### **§ 17:29A-36.1** Seat belt usage study {#sec-17-29a-36.1 omnilex-key=us-nj-statutes--title-17--17:29A-36.1}
The Commissioner of Insurance shall, within 365 days from the effective date of this act, study and determine the impact of P.L. 1984, c. 179 (C. 39:3-76.2e et seq.), on the loss experience for personal injury protection and bodily injury liability coverages for private passenger automobile insurance. If the commissioner determines that the personal injury protection premiums and bodily injury liability premiums for private passenger automobile insurance should be reduced as a result of the impact of the adoption of P.L. 1984, c. 179 (C. 39:3-76.2e et seq.) upon the loss experience for these coverages, the commissioner shall issue an order requiring that the rating plans of all insurers writing private passenger automobile insurance in this State be modified accordingly.
##### **§ 17:29A-36.2** Regulations {#sec-17-29a-36.2 omnilex-key=us-nj-statutes--title-17--17:29A-36.2}
a. Within 180 days of the effective date of this section, the commissioner shall promulgate regulations providing the following with regard to private passenger automobile insurance:
(1) Rate filing data and information specifications in a standard format;
(2)(a) A standard ratemaking methodology, and
(b) Uniform standards on ratemaking methodologies, data compilation, data evaluation and data submission;
(3) Standards of efficiency and other standards of measure based upon industrywide aggregate averages and other relevant data and factors to be utilized in the review and evaluation of the loss, expense and financial data contained in a rate filing; and
(4) The format, data specifications and other requirements for any informational filings made pursuant to subsection b. of this section.
b. Notwithstanding any provision of law to the contrary, on July 1, 1989 and annually thereafter, every insurer writing private passenger automobile insurance in this State shall make an informational filing on their private passenger automobile insurance with the commissioner regardless of whether they file for an adjustment in their automobile insurance rates.
##### **§ 17:29A-36.3** Rules, regulations {#sec-17-29a-36.3 omnilex-key=us-nj-statutes--title-17--17:29A-36.3}
The Commissioner of Insurance may promulgate any rules and regulations which he deems necessary to effectuate the provisions of this 1988 amendatory and supplementary act.
##### **§ 17:29A-37** Taxes, licenses, fees and expenses; application on a flat and uniform fee basis per insured automobile statewide; regulation regarding calculation and collection of taxes {#sec-17-29a-37 omnilex-key=us-nj-statutes--title-17--17:29A-37}
a. Every filer making automobile rates in this State shall apply on a flat and uniform fee basis per insured automobile Statewide those miscellaneous taxes, licenses, and fees, as defined in the most recent rate filing of an automobile filer, and at least 90% of its general expenses and acquisition, field supervision, and collection expenses, excluding commissions, as such expenses are defined in the filer's most recent rate filing with the commissioner.
b. The commissioner and the State Treasurer shall issue a regulation no later than 90 days after the effective date of this act to require automobile filers to calculate and collect taxes for their insureds paid pursuant to P.L. 1945, c. 132 (C. 54:18A-1 et seq.) and any assessments to be made pursuant to sections 4, 6 and 7 of P.L. 1952, c. 174 (C. 39:6-64, 39:6-66 and 39:6-67), exclusive of assessments made to reimburse a filer for medical benefits payable under section 4 of P.L. 1972, c. 70 (C. 39:6A-4) in excess of $75,000.00, on a flat and uniform fee basis per insured automobile Statewide, which shall take effect on January 1, 1984.
##### **§ 17:29A-37.1** Flat charges {#sec-17-29a-37.1 omnilex-key=us-nj-statutes--title-17--17:29A-37.1}
a. All flat charges (also referred to as flat capitation fees or policy constants, but not including premiums for uninsured motorist or towing coverage, or flattened tax and expense fees implemented pursuant to section 8 of P.L.1983, c.65 (C.17:29A-37)), authorized by the Commissioner of Insurance for use by all filers, as defined in section 1 of P.L.1944, c.27 (C.17:29A-1), writing private passenger automobile insurance in the voluntary and residual markets, which are imposed on a per car and per coverage basis on automobile insurance policies issued or renewed in the voluntary or residual market prior to April 1, 1991 shall be paid to the New Jersey Automobile Full Insurance Underwriting Association for use for association purposes. All moneys collected from the flat charges shall be certified to by the filers, including servicing carriers of the association, and transferred, net of a pro rata portion of any producer commissions and all premium taxes payable thereon, to the association in accordance with the provisions of this subsection and the association's plan of operation. No other expenses shall be payable to or deductible from the flat charges transferable to the association.
Flat charges collected under this subsection shall be transferred to the association within 10 days of the close of the month of receipt by the insurer or servicing carrier. In the case of policy premiums paid in accordance with a payment plan or other installment basis, the insurer shall, within 10 days of the close of the month of receipt of payment, transfer to the association a proportionate share of the total flat charges on the policy, based on the payment schedule or amount of payment received.
b. Flat charges shall not be deemed to include any moneys collected from any residual market equalization charge levied pursuant to section 20 of P.L.1983, c.65 (C.17:30E-8).
Flat charges collected in accordance with subsection a. of this section shall be considered in determining taxable premiums in accordance with P.L.1945, c.132 (C.54:18A-1 et seq.), but shall not be considered in determining excess profits in accordance with section 3 of P.L.1988, c.118 (C.17:29A-5.8).
c. The flat charges authorized by the Commissioner of Insurance for private passenger automobile insurance in the voluntary and residual markets may be imposed prior to April 1, 1991 upon all insured motor vehicles other than private passenger automobiles, including motor vehicles insured by the automobile insurance plan established pursuant to P.L.1970, c.215 (C.17:29D-1), and motor vehicles of a type, as is determined by the Commissioner of Insurance, which are registered with the Division of Motor Vehicles as self-insured vehicles pursuant to section 30 of P.L.1952, c.173 (C.39:6-52), in accordance with rules and regulations established by the commissioner. In the case of motor vehicles other than private passenger automobiles which are insured by an insurer in the voluntary market or in any insurance plan established pursuant to P.L.1970, c.215 (C.17:29D-1), the insurer shall forward the flat charge, net of a pro rata portion of the producer's commission, to the New Jersey Automobile Full Insurance Underwriting Association. In the case of a self-insurer required to pay a flat charge, the self-insurer shall forward the full amount of the flat charge to the association. The Division of Motor Vehicles shall not issue a certificate of self-insurance unless the association has certified that the flat charge has been paid. Failure to pay the flat charge shall constitute a reasonable ground for cancellation of a certificate of self-insurance pursuant to section 30 of P.L.1952, c.173 (C.39:6-52). Any self-insurer which fails to pay the flat charge to the association for any self-insured vehicle shall be liable to pay a fine in the amount of $100.00 per vehicle for the first offense and $200.00 for the second and each subsequent offense.
Notwithstanding any other provision of this section, flat charges shall be imposed on such motor vehicles prior to April 1, 1991 as are determined by the Commissioner of Insurance, which vehicles have been registered with the Division of Motor Vehicles in accordance with Title 39 of the Revised Statutes as commercial motor vehicles and have been issued commercial license plates or farmers' license plates, and on motor vehicles, of a type determined by the Commissioner of Insurance, which are registered with the Division of Motor Vehicles as self-insured vehicles pursuant to section 30 of P.L.1952, c.173 (C.39:6-52).
##### **§ 17:29A-38** Reduction of rates; operators 65 years of age or older {#sec-17-29a-38 omnilex-key=us-nj-statutes--title-17--17:29A-38}
Within 60 days following the effective date of this act, every filer shall reduce by at least 5% the rates of all principal operators 65 years of age or older from the rates in effect as of the effective date of this act. On or before the effective date of this reduction, every filer shall make an informational filing with the commissioner reflecting the change.
##### **§ 17:29A-39** Deductibles. {#sec-17-29a-39 omnilex-key=us-nj-statutes--title-17--17:29A-39}
10. a. Unless the named insured selects a lower deductible amount, every private passenger automobile insurance policy providing collision and comprehensive coverages, issued or renewed on or after the effective date of this act, shall provide a deductible in a minimum amount of $500.00 each for collision and comprehensive coverages, except for policies issued on or after the effective date of this section, that deductible amount shall be $750 each for collision and comprehensive coverages. The minimum deductible established by this subsection shall apply to all policies providing collision and comprehensive coverages unless the named insured provides otherwise in writing on a form approved by the commissioner.
b. The commissioner shall promulgate rules and regulations requiring insurers to offer a range of deductibles up to at least $2,000.00 for private passenger automobile collision and comprehensive coverages, which upper range may be adjusted in $100 or $250 increments periodically by order of the commissioner no more frequently than every 36 months, as the commissioner deems appropriate, to reflect the cumulative increases or decreases, since the deductibles were last set, in the components of the Consumer Price Index, All Urban Consumers (CPI-U) for the Northeast Region.
##### **§ 17:29A-40** Inexperienced operator classification; producer commission {#sec-17-29a-40 omnilex-key=us-nj-statutes--title-17--17:29A-40}
No producer commission shall be paid on the additional premium generated by an inexperienced operator classification.
##### **§ 17:29A-41** Joint legislative committee; monitoring and evaluation {#sec-17-29a-41 omnilex-key=us-nj-statutes--title-17--17:29A-41}
The Banking and Insurance Committee of the General Assembly, and the Labor, Industry and Professions Committee of the Senate, or their respective successors, are constituted as a joint committee for the purposes of monitoring and evaluating the effectiveness of the implementation of sections 4 to 11 of this act, and said joint committee shall, as it may deem appropriate, issue recommendations for administrative or legislative changes affecting the implementation of this act.
##### **§ 17:29A-46.1** Rating plans for auto insurance {#sec-17-29a-46.1 omnilex-key=us-nj-statutes--title-17--17:29A-46.1}
14. a. Every insurer transacting or proposing to transact private passenger automobile insurance may file one or more rating plans in the voluntary market. Every insurer writing private passenger automobile insurance in this State which intends to write coverage in the voluntary market using more than one rate level shall file with the commissioner the rates and underwriting rules which are applicable to each rate level.
b. An insurer which intends to use more than one rating plan may make an initial filing for additional rating plans which are based on a percentage increase or decrease of the existing rate level in its current rating plan.
c. Notwithstanding any other law to the contrary, any initial rates filed pursuant to subsection b. of this section shall be deemed to be approved if not disapproved by the commissioner within 120 days of receipt of the filing by the department. Any subsequent modification of any rate level, or any initial rate level which is not based on a percentage increase or decrease of an existing rate level as provided for in this section, shall be subject to the provisions of P.L.1944, c.27 (C.17:29A-1 et seq.).
d. Any limitation on rates established by the provisions of section 7 of P.L.1983, c.65 (C.17:29A-36) shall apply separately to each rate level established pursuant to subsection a. of this section.
##### **§ 17:29A-46.2** Underwriting rules; factors. {#sec-17-29a-46.2 omnilex-key=us-nj-statutes--title-17--17:29A-46.2}
15. a. Insurers shall put in writing all underwriting rules applicable to each rate level utilized pursuant to section 14 of P.L.1997, c.151 (C.17:29A-46.1). An insurer may take into account factors, including, but not limited to, driving record characteristics appropriate for underwriting and classification in formulating its underwriting rules; provided that no underwriting rule based on motor vehicle violations shall be formulated in such a manner as to assign any named insured to a rating tier other than the standard rating tier applicable to the insured's territory solely on the basis of accumulating four motor vehicle points or less. No underwriting rule shall operate in such a manner as to assign a risk to a rating plan on the basis of the territory in which the insured resides or any other factor which the commissioner finds is a surrogate for territory. No underwriting rule shall operate in such a manner as to assign a risk to a rating plan on the basis of an insured holding a standard motorcycle license or standard basic driver's license issued pursuant to R.S.39:3-10, or standard probationary license issued pursuant to section 4 of P.L.1950, c.127 (C.39:3-13.4). An insurer which knowingly fails to transact automobile insurance consistently with its underwriting rules shall be subject to a fine of not less than $1,000 for each violation.
b. All underwriting rules applicable to each rate level as provided for in section 14 of P.L.1997, c.151 (C.17:29A-46.1) shall be filed with the commissioner and shall be subject to the commissioner's prior approval. All underwriting rules shall be subject to public inspection. Except as provided in subsection d. of section 27 of P.L.1990, c.8 (C.17:33B-15), insurers shall apply their underwriting rules uniformly and without exception throughout the State, so that every applicant or insured conforming with the underwriting rules will be insured or renewed, and so that every applicant not conforming with the underwriting rules will be refused insurance.
c. An insurer with more than one rating plan for private passenger automobile insurance policies providing identical coverages shall not adopt underwriting rules which would permit a person to be insured for private passenger automobile insurance under more than one of the rating plans.
d. An insurer that revises its underwriting rules with respect to the assignment of insureds to rating tiers based on the number of accumulated motor vehicle points, as provided by subsection a. of this section, as amended by P.L.2003, c.89, shall certify to the commissioner that the revised rule will produce rates that are revenue neutral based upon the insurer's current coverages and book of business.
##### **§ 17:29A-46.3** Limitation of surcharges for motor vehicle points {#sec-17-29a-46.3 omnilex-key=us-nj-statutes--title-17--17:29A-46.3}
16. Except for a plan established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1), and except as otherwise provided in section 17 of this amendatory and supplementary act, no insurer shall charge or collect surcharges based on motor vehicle violation penalty points promulgated by the Director of the Division of Motor Vehicles pursuant to section 1 of P.L.1982, c.43 (C.39:5-30.5) or the schedule of automobile insurance eligibility points promulgated by the Commissioner of Banking and Insurance pursuant to section 26 of P.L.1990, c.8 (C.17:33B-14).
##### **§ 17:29A-46.4** Initial rate filing {#sec-17-29a-46.4 omnilex-key=us-nj-statutes--title-17--17:29A-46.4}
17. Any initial rate filing made on or after the effective date of this section pursuant to the provisions of section 14 of this amendatory and supplementary act shall be revenue neutral by coverage based upon the insurer's current coverages and book of business with respect to eligible persons, as defined in section 25 of P.L.1990, c.8 (C.17:33B-13), insured by the insurer. In addition to the filing of revenue neutral multiple rating plans, the initial filing shall include consideration for the cost containment measures implemented pursuant to this amendatory and supplementary act. The effective rate filing of an insurer as of the effective date of this section shall continue in effect until the initial rate filing as required by this section made by that insurer has been approved by the commissioner, or is deemed approved pursuant to subsection c. of section 14 of this amendatory and supplementary act.
##### **§ 17:29A-46.5** Rules, regulations {#sec-17-29a-46.5 omnilex-key=us-nj-statutes--title-17--17:29A-46.5}
18. To provide for an orderly transition with minimum disruption to the private passenger automobile insurance market, the Commissioner of Banking and Insurance shall establish rules and regulations and administrative processes that are reasonable, necessary, appropriate and consistent with the provisions of sections 14 through 17 of this amendatory and supplementary act.
##### **§ 17:29A-46.6** Proposed alteration to rating system, expedited. {#sec-17-29a-46.6 omnilex-key=us-nj-statutes--title-17--17:29A-46.6}
34. a. Notwithstanding section 14 of P.L.1944, c.27 (C.17:29A-14), an insurer, affiliated group of insurers or rating organization may elect to file a proposed alteration to its rating system pursuant to the expedited process set forth in this section when the filer requests either an increase of no more than 7% or any decrease in its Statewide average base rate for private passenger automobile insurance.
b. A filer electing to use this expedited process shall file with the commissioner that reasonable information and calculations necessary to support the rate change which the commissioner prescribes by regulation. The prescribed filing requirements shall recognize the intent of this section to provide an expedited process that will not produce rates that are excessive, inadequate for the safety and soundness of the insurer, or unfairly discriminatory between risks in the State involving substantially the same hazards and expense elements.
c. If the commissioner determines that the filing includes all the information and calculations required to support the rate change, the commissioner shall approve the filing.
d. A decision on a filing requesting an increase of up to 3% shall be rendered not later than 30 days after receipt of the filing, unless the commissioner grants an extension, in which case a decision shall be rendered not later than 45 days after receipt of the filing. A decision on a filing requesting an increase of more than 3%, but not more than 7%, shall be rendered not less than 45 days after receipt of the filing, unless the commissioner grants an extension, in which case a decision shall be rendered not later than 60 days after receipt of the filing. A filing shall be complete and received when the filing is accompanied by a certification by a qualified actuary which states that the material, data and documentation, which is part of the filing, includes the documents set forth in regulations, supports the requested rate change and is consistent with generally accepted ratemaking principles of the actuarial profession. A filing shall be deemed to be approved unless rejected or modified by the commissioner within the time provided.
e. The commissioner shall not approve any rate change pursuant to this expedited process that results in an overall increase of more than 7% or an increase in any single coverage of more than 10%.
f. An insurer shall not file more than one request for an increase in rates pursuant to this section in any 12-month period, provided that this limitation shall not apply to a filing for an overall reduction in rates or prohibit a filing to recover an overall reduction in rates, or to a filing reflecting a statutory change in coverage.
g. An insurer not using this expedited process in a 12-month period may elect to file a proposed alteration to its rating system that will result in a rate change of not more than double the increase permitted pursuant to subsection e. of this section if the filing complies with subsections b. and c. of this section and is made not more than once within a twenty-four month period.
##### **§ 17:29A-46.7** Regulations, administrative processes {#sec-17-29a-46.7 omnilex-key=us-nj-statutes--title-17--17:29A-46.7}
37. The Commissioner of Banking and Insurance may promulgate regulations and other administrative processes necessary to effectuate the purposes of this amendatory and supplementary act, including, but not limited to, procedures governing rating system filings to implement this amendatory and supplementary act.
##### **§ 17:29A-46.8** Definitions; standards for interventions in rate filings; offenses. {#sec-17-29a-46.8 omnilex-key=us-nj-statutes--title-17--17:29A-46.8}
66. a. For the purposes of this section:
"Qualified person" means a person qualified by the Commissioner of Banking and Insurance to intervene in public hearings pursuant to this section, who shall be deemed a "public servant" within the meaning of N.J.S.2C:30-2;
"Rate filing" means a filing for a rate increase by an automobile insurer writing private passenger automobile insurance in this State, other than an expedited prior approval rate filing made pursuant to section 34 of P.L.1997, c.151 (C.17:29A-46.6) and other than a rate filing made pursuant to any statutory change in coverage provided under a policy of private passenger automobile insurance.
b. The Commissioner of Banking and Insurance shall establish standards for qualifying persons to intervene in rate filings pursuant to this section. The standards shall include, but shall not necessarily be limited to, requiring that any person intervening in a rate filing demonstrate: (1) expertise in the insurance laws of this State; (2) an understanding of the actuarial principles employed in establishing rates and rating systems; (3) sufficient access to a qualified actuary and sufficient expertise to conduct a technical examination of a rate filing; (4) sufficient resources to intervene in the rate filing process as provided herein; and (5) that the person represents the interest of consumers and accepts a duty of fidelity to do so.
c. The commissioner shall require such documentation as he determines is necessary to qualify a person to intervene in a rate filing, and may charge a fee for registration with the department as an intervenor, which fee shall be payable annually.
d. The commissioner may remove the registration of an intervenor if he determines that (1) the intervenor no longer meets the qualifications, or (2) if the intervenor is convicted of a crime or loses a professional license for misconduct.
e. If an insurer or rating organization files for a rate increase for private passenger automobile insurance, the commissioner shall notify the public of the proposed rate change in a newspaper or newspapers of general circulation throughout the State. A qualified person may request, and shall receive, a copy of the rate filing and any amendments and supplements thereto and shall pay the expenses in connection therewith. The qualified person may request that the commissioner certify the rate filing for a hearing pursuant to section 14 of P.L.1944, c.27 (C.17:29A-14).
f. The commissioner shall establish by regulation the terms and conditions under which the proceedings under this section shall be conducted, including, but not limited to the supporting material which shall accompany the intervention.
g. Upon determining that the intervenor has demonstrated that the qualified person has made a substantial contribution to the adoption of any order or decision by the commissioner or a court in connection with a rate filing made pursuant to this section, the commissioner shall award reasonable advocacy and witness fees and expenses.
h. A person commits a crime of the third degree if he solicits, accepts or agrees to accept any benefits as consideration for knowingly violating or agreeing to violate a duty of fidelity to which he is subject pursuant to this section. In addition to any disposition authorized by law, the Commissioner of Banking and Insurance shall forever bar from registration as an intervenor any person convicted under this subsection.
i. A person commits a crime of the third degree if he confers, or offers or agrees to confer, any benefit the acceptance of which would be criminal under this section. In addition to any disposition authorized by law, the Commissioner of Banking and Insurance shall deny the rate filing of any person convicted under this subsection and the person shall be barred from filing for any rate increase for a period of one year.
j. Nothing herein shall be construed to preclude a prosecution or conviction for a violation of any other law.
k. This section shall expire 180 days after the effective date of the Public Advocate Restoration Act of 2005, P.L.2005, c.155 (C.52:27EE-1 et al.).
##### **§ 17:29A-48** Establishment of new territorial rating plans. {#sec-17-29a-48 omnilex-key=us-nj-statutes--title-17--17:29A-48}
26. Every insurer writing private passenger automobile insurance in this State and every rating organization establishing territorial rating plans on behalf of its member companies shall establish new territorial rating plans in place of the insurer's or filer's territorial rating plan in effect on June 1, 1998, which shall include territorial definitions, territorial relativity factors and territorial base rates, and which are in accordance with the provisions of sections 26 through 29 of this amendatory and supplementary act. The Commissioner of Banking and Insurance shall promulgate regulations establishing standards governing the establishment of new rating territories, which standards shall include, but not be limited to:
a. Territories shall be defined in such a manner as to recognize throughout the territorial rating plan both qualitative similarities and qualitative differences in driving environments or mix of driving environments, which may include, but not be limited to, traffic density, population density, comparative severity of loss, and the degree of homogeneity within a territory in terms of driving environments, population, and driver classification, and the territory shall be comprised of towns or cities which are contiguous;
b. Territories shall contain a sufficient number of exposures to result in statistically credible experience, in accordance with regulations established by the commissioner, and shall be defined in a manner which minimizes the effect of variability of loss in a territory on a year-to-year basis;
c. Territory definitions shall take into account the impact of the overlapping of traffic patterns on exposure to loss, including the relative number of intraterritory trips and inter-territory trips applicable to each proposed territory, for which the commissioner shall make available to the insurer, filer, or the commission established pursuant to section 28 of this amendatory and supplementary act, appropriate information collected pursuant to the provisions of section 1 of P.L.1987, c.450 (C.43:21-14a) by the Department of Labor;
d. Territories shall be created in a manner which results in an equable distribution of exposures among territories throughout the State and no territorial rating plan shall result in territories which are arbitrary, unfairly discriminatory, significantly disproportionate in terms of the number of exposures per territory, or created in a manner which is primarily for marketing purposes rather than measuring relativity of exposure to probable loss, or created in a manner which can be used to avoid the insurer's or filer's obligations under section 27 of P.L.1990, c.8 (C.17:33B-15);
e. Territories shall be created in a manner which does not result in disproportionate differences in territorial relativity factors or territorial base rates between contiguous territories with similar driving environments or similar mix of driving environments;
f. Factors to be considered in establishing territorial rate relativities shall include taking into account similarities or differences in driving environments or mix of driving environments, including traffic density, population density, mix of driver classifications within a territory, including classifications capped pursuant to the provisions of section 7 of P.L.1983, c.65 (C.17:29A-36), comparative degree of severity of loss, and the relative number of intraterritory and inter-territory trips;
g. Territories shall be defined in a manner which does not result in unfair inter-territorial subsidization among territories with significant differences in driving environments or mix of driving environments, population density, traffic density, mix of driver classifications, including classifications capped pursuant to the provisions of section 7 of P.L.1983, c.65 (C.17:29A-36) and comparative degree of severity of loss;
h. For the purpose of defining territories and establishing territorial relativity factors, loss experience allocated to any territory by an insurer or filer (1) shall take into account any recovery applicable to exposures in the territory which are attributable to subrogation or any other kind of recovery by the insurer reporting the losses and (2) shall not include any loss attributable to capping of driver classifications pursuant to section 7 of P.L.1983, c.65 (C.17:29A-36).
The commissioner shall establish by regulation the minimum number of exposures which shall be deemed to meet the standard of being statistically credible for the purpose of defining territories.
##### **§ 17:29A-49** Filing of territorial rating plan. {#sec-17-29a-49 omnilex-key=us-nj-statutes--title-17--17:29A-49}
27. a. An insurer or rate filer shall file its territorial rating plan with the commissioner for the commissioner's approval. The commissioner shall approve the plan if he finds that the plan complies with the provisions of section 26 of this amendatory and supplementary act and the regulations promulgated thereto. If the commissioner does not believe that the territorial rating plan meets the standards established by this act or by regulation, or that the territorial rating plan would serve to work against competition among insurers in this State, he shall order that the plan be modified.
b. A filer may file for its use:
(1) an individual territorial rating plan which it has developed; or
(2) the common territorial rating plan established and approved pursuant to section 28 of this act.
c. Approved individual territorial rating plans shall be on file with the commissioner and available for review by filers subject to this section.
d. Every filer shall periodically review, at least once in every five-year period, the continued validity of the territorial rating plan which it is using and shall report its findings to the commissioner, along with such data as the commissioner deems necessary. If the commissioner finds that it is not in accordance with the standards established pursuant to section 26 of this act, he may order that the filer amend its plan or, if the filer fails to do so, require the filer to adopt the common territorial rating plan established pursuant to section 28 of this act.
e. Any filer or filers may object to the territorial rating plan used by another filer on the grounds that it (1) is anticompetitive; (2) does not meet the standards established by the commissioner pursuant to section 26 of this act; or (3) results in the insurer or filer not meeting its obligations pursuant to the provisions of section 27 of P.L.1990, c.8 (C.17:33B-15).
f. No territorial rating plan of any insurer or any rating organization filed with and approved by the commissioner pursuant to section 27 of this act shall be implemented by any insurer until the 180th day following the approval of the common territorial rating plan established by the commission created pursuant to section 28 of this act, but in no event no later than January 1, 2000.
##### **§ 17:29A-50** Automobile Insurance Territorial Rating Plan Advisory Commission. {#sec-17-29a-50 omnilex-key=us-nj-statutes--title-17--17:29A-50}
28. a. There is established the Automobile Insurance Territorial Rating Plan Advisory Commission to review insurer data and establish a common territorial rating plan for use by insurers not filing a territorial rating plan pursuant to section 27 of this amendatory and supplementary act. The territorial rating plan established by the commission shall be established according to the criteria and standards provided in section 26 of this amendatory and supplementary act and in accordance with regulations established by the commissioner. The common territorial rating plan shall be subject to the prior approval of the Commissioner of Banking and Insurance, and shall be reviewed by the commissioner from time to time but not less than once every five years.
b. The commission shall consist of fifteen members: nine representatives of insurers writing private passenger automobile insurance in this State and one representative of a rating bureau filing rates on behalf of its members in this State, who shall be appointed by the Governor with the advice and consent of the Senate; four public members, of whom one shall be appointed by the President of the Senate, one by the Speaker of the General Assembly, one by the Minority Leader of the Senate and one by the Minority Leader of the General Assembly; and the Commissioner of Banking and Insurance, who shall serve ex-officio. Of the insurer members appointed by the Governor, at least two members shall be selected from member companies of the Alliance of American Insurers, and two members selected from member companies of the National Association of Independent Insurers or their successor organizations. The remaining insurer members shall be selected from insurers writing automobile insurance in this State, but no insurer or group of insurers under common control shall have more than one representative appointed to serve on the commission.
c. The members of the commission shall serve for two-year terms and until their successors are appointed and qualified.
d. The commission shall elect a chairman and a vice chairman from among the insurer members.
e. After its initial territorial rating plan has been approved, the commissioner may convene the commission at any time to review the plan and to gather data from insurers. The commissioner may, if he finds that the common territorial rating plan does not meet the standards established pursuant to section 26 of this act, order that the plan be revised.
##### **§ 17:29A-51** Filing of rates by insurer writing private passenger automobile insurance; rate reductions. {#sec-17-29a-51 omnilex-key=us-nj-statutes--title-17--17:29A-51}
67. a. Except for the plan established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1), every insurer writing private passenger automobile insurance in this State pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.) shall file rates with the Commissioner of Banking and Insurance which result in:
(1) a reduction of at least 25% from the personal injury protection territorial base rate applicable to medical expense benefits, at least 10% of which shall reflect a reduction in the actuarial value of the medical expense benefits provided pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4), within the policy limits provided for in that section;
(2) a reduction of at least 22% in the territorial base rate for bodily injury liability coverage applicable to named insureds to whom the Limitation on Lawsuit Option provided for in subsection a. of section 8 of P.L.1972, c.70 (C.39:6A-8) applies;
(3) a reduction of at least 6% in the territorial base rate for collision coverage which shall reflect the provisions of section 64 of this amendatory and supplementary act; and
(4) after the reductions required pursuant to paragraphs (1), (2) and (3) of this subsection have been applied, an additional aggregate reduction of at least 3% in the territorial base rates for personal injury protection, bodily injury, property damage, comprehensive and collision coverages, as apportioned by the insurer and approved by the commissioner, which reduction is attributable to the effect of the enhanced insurance fraud provisions of this amendatory and supplementary act and of other such laws including, but not limited to P.L.1997, c.353 (C.2C:21-4.2 et seq.) and P.L.1997, c.151 (C.17:33B-64 et al.).
b. For the purposes of an insurer's rate filing made pursuant to subsection a. of this section, in order that the filing result in an overall rate reduction of 15%, the insurer may satisfy the requirements of paragraphs (1) through (4) of subsection a. by filing a rating plan that either:
(1) provides: (a) for policies applicable to named insureds to whom the Limitation on Lawsuit Option provided for in subsection a. of section 8 of P.L.1972, c.70 (C.39:6A-8) applies, a 15% reduction by coverage in the territorial base rates and expense fees for personal injury protection coverage, property damage liability coverage, uninsured and underinsured motorist coverage, collision coverage, comprehensive coverage, and bodily injury liability coverage, and (b) for policies applicable to named insureds to whom the No Limitation on Lawsuit Option provided for in subsection b. of section 8 of P.L.1972, c.70 (C.39:6A-8) applies, a 15% reduction by coverage in the territorial base rates and expense fees for personal injury protection coverage, property damage liability coverage, collision coverage and comprehensive coverage, and a 3% reduction in the territorial base rates and a 15% reduction in the expense fees for bodily injury liability coverage and uninsured and underinsured motorist coverage; or
(2) provides, for policies applicable to named insureds to whom the Limitation on Lawsuit Option provided for in subsection a. of section 8 of P.L.1972, c.70 (C.39:6A-8) applies: (a) at least a 15% reduction in the aggregate premium for policies that contain only personal injury protection coverage, bodily injury liability coverage, property damage liability coverage, uninsured and underinsured motorist coverage; and (b) a reduction in accordance with the insurer's overall 15% rate reduction provided for in this subsection, for policies that contain personal injury protection coverage, property damage liability coverage, uninsured and underinsured motorist coverage, bodily injury liability coverage, collision coverage and comprehensive coverage, provided that the application of such overall rate reduction to individual policies shall not result in a deviation of more than 2% from that overall reduction.
c. The rate filings reflecting these reductions shall apply to policies issued or renewed on or after 90 days following:
(1) the establishment by the commissioner of basic benefits required to be provided pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4); or
(2) the adoption by rule of the professional boards of the designation of valid diagnostic tests pursuant to the provisions of section 12 of P.L.1998, c.21 (C.39:6A-4.7); whichever is later.
##### **§ 17:29A-52** Automobile Insurance Consumer Bill of Rights. {#sec-17-29a-52 omnilex-key=us-nj-statutes--title-17--17:29A-52}
43. a. Every insurer writing private passenger automobile insurance in this State shall provide each insured at least annually and each applicant upon receipt of initial application with an Automobile Insurance Consumer Bill of Rights. The Automobile Insurance Consumer Bill of Rights shall contain information that the Commissioner of Banking and Insurance establishes by regulation as necessary, relevant or appropriate to improve the understanding of the rights and responsibilities of consumers and insurers regarding automobile insurance.
b. To further assist consumers in evaluating an automobile insurer, the commissioner shall develop and disseminate an Automobile Insurance Report Card. Those insurers with more than 50,000 insured private passenger automobiles writing private passenger automobile insurance in this State shall maintain and submit annually to the commissioner customer satisfaction data. The commissioner shall establish by regulation the methodology and criteria to be used in collecting the customer satisfaction data, including, but not limited to, the use of a survey. This data, including consumer complaint ratios and other relevant consumer information designated by the commissioner, shall be included in the Automobile Insurance Report Card. The Automobile Insurance Report Card shall be available on the official website of the Department of Banking and Insurance, and shall be updated annually.
c. (Deleted by amendment, P.L.2007, c.240).
d. If the commissioner finds, after notice and hearing, that an insurer has a pattern and practice of failing to provide any of the information required by this section, the commissioner may, after notice and hearing, order the payment of a penalty not to exceed $1,000 for each offense. Each instance of a failure to provide information to an insured, an applicant or the commissioner, as the case may be, shall be a separate offense and subject to assessment of a separate penalty. Penalties assessed pursuant to this section shall be collected by the commissioner pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
##### **§ 17:29A-54** Short title. {#sec-17-29a-54 omnilex-key=us-nj-statutes--title-17--17:29A-54}
1. Sections 1 through 9 of this act shall be known and may be cited as the "Certificates of Insurance Act."
##### **§ 17:29A-55** Definitions relative to certificates of insurance. {#sec-17-29a-55 omnilex-key=us-nj-statutes--title-17--17:29A-55}
2. As used in this act:
"Certificate of insurance" means a document or instrument, regardless of how titled or described, that is prepared or issued by an insurer or insurance producer as evidence of property or casualty insurance coverage. The term shall not include a policy of insurance, insurance binder, policy endorsement, or automobile insurance identification or information card.
"Commissioner" means the Commissioner of Banking and Insurance.
"Insurance producer" means a person required to be licensed pursuant to the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.).
"Insurer" means any organization that issues property or casualty insurance.
##### **§ 17:29A-56** Prohibition. {#sec-17-29a-56 omnilex-key=us-nj-statutes--title-17--17:29A-56}
3. The commissioner shall prohibit the use of a certificate of insurance form if the form:
a. Is unfair, misleading, or deceptive, or violates public policy; or
b. Violates any law, including any regulation promulgated by the commissioner.
##### **§ 17:29A-57** Significance of certificate of insurance. {#sec-17-29a-57 omnilex-key=us-nj-statutes--title-17--17:29A-57}
4. A certificate of insurance shall not be considered a policy of insurance and shall not affirmatively or negatively amend, extend, or alter the coverage afforded by the policy to which the certificate of insurance makes reference. A certificate of insurance shall not confer to any person new or additional rights beyond what the referenced policy of insurance expressly provides.
##### **§ 17:29A-58** Prohibited practices. {#sec-17-29a-58 omnilex-key=us-nj-statutes--title-17--17:29A-58}
5. a. A person shall not:
(1) Prepare, issue, request, or require the issuance of, a certificate of insurance that contains any false or misleading information concerning the policy of insurance to which the certificate of insurance makes reference; or
(2) Prepare, issue, request, or require the issuance of, a certificate of insurance that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy of insurance to which the certificate of insurance makes reference.
b. A certificate of insurance shall not warrant that the policy of insurance referenced in the certificate complies with the insurance or indemnification requirements of a contract, and the inclusion of a contract number or description within a certificate of insurance shall not be interpreted as providing such a warranty.
##### **§ 17:29A-59** Notice. {#sec-17-29a-59 omnilex-key=us-nj-statutes--title-17--17:29A-59}
6. A person shall be entitled to notice of cancellation, nonrenewal, or any material change, and to any similar notice concerning a policy of insurance only if the person has such notice rights under the terms of the policy of insurance or any endorsement to the policy. The terms and conditions of the notice shall be governed by the policy of insurance or endorsement and shall not be altered by a certificate of insurance.
##### **§ 17:29A-60** Applicability. {#sec-17-29a-60 omnilex-key=us-nj-statutes--title-17--17:29A-60}
7. The provisions of this act shall apply to all certificates of insurance issued in connection with property, operations, or risks located in this State, regardless of where the policyholder, insurer, insurance producer, or person requesting or requiring the issuance of a certificate of insurance is located.
##### **§ 17:29A-61** Violations, null and void. {#sec-17-29a-61 omnilex-key=us-nj-statutes--title-17--17:29A-61}
8. A certificate of insurance or any other document or correspondence prepared, issued, requested, or required in violation of this act shall be null and void.
##### **§ 17:29A-62** Powers of commissioner. {#sec-17-29a-62 omnilex-key=us-nj-statutes--title-17--17:29A-62}
9. a. The commissioner shall have the power to examine and investigate the activities of any person that the commissioner reasonably believes has been or is engaged in an act or practice prohibited by this act.
b. The commissioner shall have the power to enforce the provisions of this act, including the authority to issue orders to cease and desist and to impose a fine of up to $1,000 per violation against any person who violates this act. This section shall not be construed to limit the commissioner's authority to investigate, enforce and issue penalties pursuant to any other applicable provision of New Jersey law, including, but not limited to, the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.), P.L.1947, c.379 (C.17:29B-1 et seq.), and the "New Jersey Insurance Fraud Prevention Act," P.L.1983, c.320 (C.17:33A-1 et seq.).
c. The commissioner may adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
## **Chapter 29AA** {#struct-chapter-29aa}
##### **§ 17:29AA-1** Short title {#sec-17-29aa-1 omnilex-key=us-nj-statutes--title-17--17:29AA-1}
This act shall be known and may be cited as the "Commercial Insurance Deregulation Act of 1982."
##### **§ 17:29AA-2** Purposes {#sec-17-29aa-2 omnilex-key=us-nj-statutes--title-17--17:29AA-2}
The purposes of this act are:
a. To encourage independent action by price competition among insurers in the writing of commercial lines insurance;
b. To prevent practices that tend to bring about monopoly or to lessen or destroy competition; and
c. To encourage the most efficient and economic rating and marketing practices.
##### **§ 17:29AA-3** Definitions. {#sec-17-29aa-3 omnilex-key=us-nj-statutes--title-17--17:29AA-3}
3. As used in this act:
a. "Commercial lines insurance" includes all insurance policies issued by a licensed insurer pursuant to Title 17 of the Revised Statutes, except:
(1) Insurance of vessels or craft, their cargoes, marine builders' risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine insurance policies;
(2) Title insurance;
(3) Mortgage guaranty insurance;
(4) Workers' compensation and employers' liability insurance;
(5) Any policy or contract of reinsurance, other than joint reinsurance to the extent provided for under section 22 of P.L.1982, c.114 (C.17:29AA-22);
(6) Insurance written through the New Jersey Medical Malpractice Reinsurance Association established pursuant to P.L.1975, c.301 (C.17:30D-1 et seq.);
(7) Insurance written through the New Jersey Insurance Underwriting Association established pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.);
(8) Insurance issued by hospital service corporations, medical service corporations and health service corporations; and
(9) Insurance issued for personal, family or household purposes, as determined by the commissioner.
b. "Commissioner" means the Commissioner of Banking and Insurance.
c. "Department" means the Department of Banking and Insurance.
d. "Insurer" means any person, corporation, association, joint underwriting association subject to section 22 of P.L.1982, c.114 (C.17:29AA-22), partnership or company licensed under the laws of this State to transact the business of insurance in this State.
e. "Premium" means the consideration paid or to be paid to an insurer for the issuance and delivery of any binder or policy of insurance.
f. "Rate" means the unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.
g. "Rate-making" means the examination and analysis of every factor and influence related to and bearing upon the hazard and risk made the subject of insurance; the collection and collation of such factors and influences into rating systems; and the application of such rating systems to individual risks.
h. "Rating system" means every schedule, class, classification, rule, guide, standard, manual, table, rating plan, or compilation by whatever name described, containing the rates used by any rating organization or by any insurer, or used by any insurer or by any rating organization in determining or ascertaining a rate.
i. "Reasonable degree of competition" means that degree of competition which would tend to produce rates that are not excessive, inadequate, or unfairly discriminatory, or forms that are not unfair, inequitable, misleading or contrary to law, as determined by the commissioner.
j. "Risk," as the context may require, means (1) as to fire insurance or any other kind of insurance which, by law, may be embraced in a policy of fire insurance as part thereof or as supplemental thereto, any property, real or personal, described in a policy, exposed to any hazard or peril named in such policy; and (2) as to all other kinds of insurance not specifically included in clause (1) of this subsection, the hazard or peril named in a policy of insurance.
k. "Special risks" mean (1) those commercial lines insurance risks as specified on a list promulgated by the commissioner, which are of an unusual nature or high loss hazard or are difficult to place or rate or which are excess or umbrella or which are eligible for export; (2) commercial lines insurance risks, other than medical malpractice liability insurance risks, which produce minimum annual premiums in excess of $10,000; (3) inland marine insurance; or (4) fidelity, surety or forgery bonds. Additions or deletions to the list promulgated may be made by the commissioner without a hearing upon notice to all licensed insurers.
l. "Supplementary rate information" includes any manual or plan of rates, statistical plan, classification, rating schedule, rating rule and any other rule used by an insurer in making rates.
##### **§ 17:29AA-4** Scope of application {#sec-17-29aa-4 omnilex-key=us-nj-statutes--title-17--17:29AA-4}
All policies of commercial lines insurance, issued by an insurer licensed to do business in this State shall be issued in accordance with the provisions of this act.
##### **§ 17:29AA-5** Filing of rates, supplementary rate information changes, amendments. {#sec-17-29aa-5 omnilex-key=us-nj-statutes--title-17--17:29AA-5}
5. a. Notwithstanding any other law to the contrary, every authorized and admitted insurer and every rating organization shall file with the commissioner all rates and supplementary rate information and all changes and amendments thereof made by it for use in this State not later than 30 days after becoming effective, except with respect to medical malpractice liability insurance rate changes as set forth in section 3 of P.L.2009, c.248 (C.17:29AA-5.1).
b. This section shall not apply to special risks except as provided in section 12 of P.L.1982, c.114 (C.17:29AA-12).
##### **§ 17:29AA-5.1** Annual rate change for medical malpractice liability insurance. {#sec-17-29aa-5.1 omnilex-key=us-nj-statutes--title-17--17:29AA-5.1}
3. a. With respect to medical malpractice liability insurance, the commissioner shall prescribe by regulation a designated range of annual rate change, which shall be an increase or decrease of between not less than 5% and not more than 15%, and within which any rate, supplementary rate information, or change or amendment thereof, filed by an insurer or rating organization shall become effective not less than 30 days after the filing.
(1) The commissioner may determine, pursuant to regulation, the categories, subcategories, specialties, and subspecialties of health care provider to which the application of the designated range shall apply.
(2) Only one filing by an insurer or rating organization of a proposed rate change within the designated range may take effect within any 12-month period without the express approval of the commissioner, as set forth in subsection c. of this section.
b. In prescribing the designated range of annual rate change, the commissioner may consider the availability and affordability of medical malpractice liability insurance for different categories, subcategories, specialties, and subspecialties of health care provider in relation to the capitalization and reserve requirements necessary to ensure the solvency of the insurers. The commissioner may also consider current data relating to the frequency and severity of medical malpractice claims, and trends in the cost of investigating, defending and settling claims.
c. Any filing by an insurer or rating organization proposing a rate change which exceeds the designated range established pursuant to subsection a. of this section, or proposing an additional rate change within this range during any 12-month period, shall be subject to approval by the commissioner pursuant to section 14 of P.L.1944, c.27 (C.17:29A-14).
##### **§ 17:29AA-6** Policy forms; filing; approval; special risks {#sec-17-29aa-6 omnilex-key=us-nj-statutes--title-17--17:29AA-6}
Notwithstanding any other law to the contrary, insurers shall file copies of all policy forms for approval with the commissioner at least 30 days prior to becoming effective. Unless disapproved by the commissioner prior to its effective date specifying in what respects the form is not in compliance with the standards set forth in section 11 of this act, any such policy form filed with the department shall be deemed approved as of its effective date, provided, however, that policy forms shall be effective only with respect to those policy form filings which are accompanied by an explanation and identification of the changes being made on a form prescribed by the commissioner. In his discretion, the commissioner may waive such 30-day waiting period or any portion thereof. Except as provided in section 12 of this act, this section shall not apply to policy forms exempted by order of the commissioner or those used in connection with special risks other than those which qualify pursuant to paragraph (2) of subsection k. of section 3 of this act.
##### **§ 17:29AA-7** Public inspection; filings and supporting information; copies {#sec-17-29aa-7 omnilex-key=us-nj-statutes--title-17--17:29AA-7}
Each filing and supporting information filed under this act shall, as soon as filed, be open to public inspection at any reasonable time. Copies may be obtained by any person on request and upon payment of a reasonable charge therefor.
##### **§ 17:29AA-8** Rates; establishment {#sec-17-29aa-8 omnilex-key=us-nj-statutes--title-17--17:29AA-8}
An insurer may itself establish rates and supplementary rate information, or it may use rates and supplementary rate information prepared by a rating organization of which it is a member or subscriber, with such modification for its own expense and loss experience as the credibility of that experience allows.
##### **§ 17:29AA-9** Rates; factors in establishment {#sec-17-29aa-9 omnilex-key=us-nj-statutes--title-17--17:29AA-9}
In making rates, due consideration shall be given to: past and prospective loss experience, including where pertinent, the conflagration and catastrophe hazards, if any, both within and without the State; all factors reasonably related to the kind of insurance involved; a reasonable profit for the insurer; and, in the case of participating insurers, policyholders' dividends.
##### **§ 17:29AA-10** Rates; prohibitions {#sec-17-29aa-10 omnilex-key=us-nj-statutes--title-17--17:29AA-10}
Rates shall not be excessive, inadequate or unfairly discriminatory.
##### **§ 17:29AA-11** Policy forms; prohibitions {#sec-17-29aa-11 omnilex-key=us-nj-statutes--title-17--17:29AA-11}
Policy forms shall not be unfair, inequitable, misleading or contrary to law, nor shall they produce rates that are excessive, inadequate or unfairly discriminatory.
##### **§ 17:29AA-12** Special risks; competition regarding rates and policy forms; order of commissioner {#sec-17-29aa-12 omnilex-key=us-nj-statutes--title-17--17:29AA-12}
With respect to special risks, upon a finding by the commissioner, after a hearing, that there is no reasonable degree of competition with respect (a) to rates applicable to a particular line, kind, class, subclass or type of business, he may issue an order requiring that the rates for such line, kind, class, subclass or type of business be submitted to the department pursuant to section 5 of this act; or (b) to policy forms applicable to a particular line, kind, class, subclass or type of business, he may issue an order requiring that the forms for such line, kind, class, subclass or type of business be submitted to the department for approval prior to becoming effective pursuant to section 6 of this act.
##### **§ 17:29AA-13** Order from commissioner relative to compliance with standards. {#sec-17-29aa-13 omnilex-key=us-nj-statutes--title-17--17:29AA-13}
13. a. If the commissioner finds, after a hearing, that a rate or policy form in effect for any rating organization or insurer, whether or not a member or subscriber of a rating organization, is not in compliance with the standards of this act, he shall issue an order specifying in what respects it so fails, and stating when, within a reasonable period thereafter, such rate or form shall be deemed no longer effective. The order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.
b. (Deleted by amendment, P.L.2009, c.248)
##### **§ 17:29AA-14** Premium for commercial line insurance; inducements; prohibition {#sec-17-29aa-14 omnilex-key=us-nj-statutes--title-17--17:29AA-14}
With respect to rates and supplementary rate information and all changes and amendments thereto subject to section 5 of this act, (a) no insurer or employee thereof, and no broker or agent shall knowingly charge, demand or receive a premium for a policy of commercial lines insurance except in accordance with the respective rates and supplementary rate information and all changes and amendments thereof effective pursuant to this act; (b) no insurer, or employee thereof, and no broker or agent shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as an inducement to insure, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium specified in the policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage or consideration may be provided for in such rates and supplementary rate information and all changes and amendments thereof effective pursuant to this act; and (c) no insured named in a policy of insurance, nor any employee of such insured, shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any such special favor or advantage or valuable consideration or inducement. Nothing herein contained shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this State, nor as prohibiting a discount, abatement, or reduction in premium on policies issued to or on behalf of the State.
##### **§ 17:29AA-15** Rate in excess of rate filing; application; approval {#sec-17-29aa-15 omnilex-key=us-nj-statutes--title-17--17:29AA-15}
Upon written application of an insurance company, broker or agent, which application shall include the signed consent of the applicant for insurance, the commissioner may approve, on any specific risk, a rate in excess of that provided by a rate filing which would otherwise be applicable.
##### **§ 17:29AA-16** Rating system; statistical plan; rules and regulations; reports of experience {#sec-17-29aa-16 omnilex-key=us-nj-statutes--title-17--17:29AA-16}
a. The commissioner shall promulgate rules and regulations as to statistical plans, reasonably adapted to each of the rating systems on file with him, which may be modified from time to time and which shall be used thereafter by each insurer in the recording and reporting of its loss and countrywide expense experience, in order that the experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid him in determining whether such rating systems comply with the standards set forth in this act. Such rules and regulations shall provide for the recording and reporting of loss experience of this State and of any combination of states where such combined experience is used in any manner for rate-making, and may provide for the recording and reporting of expense experience of this State for items of expense which are especially applicable to this State. In promulgating such rules and regulations the commissioner shall give due consideration to the rating systems on file with him and in order that such rules and regulations may be as uniform as is practicable among the several states, to the rules and statistical plans used for such rating systems in other states. The commissioner shall designate the format in which such reports shall be prepared and he may require, in his discretion, that reports of experience be accompanied by punch cards or other means used for data processing, or such other source material as he deems appropriate.
b. The commissioner may designate one or more agencies to assist him in gathering such experience. The commissioner shall give preference in such designation to entities organized by and functioning on behalf of the insurance companies operating in this State for the kinds of insurance to which this act applies. If the commissioner, in his judgment, determines that one or more of such organizations designated as statistical agent is unable or unwilling to perform its statistical functions according to reasonable requirements established from time to time by him, he may, after consultation with such statistical agent and upon 20 days' notice to any affected companies, designate another person to act on his behalf in the gathering of statistical experience. The commissioner shall in such case establish the fee to be paid to such designated person by the affected companies in order to pay the total cost of gathering and compiling such experience. Agencies designated by the commissioner shall assist him in making compilations of the reported data, and such compilations shall be made available, subject to reasonable rules and regulations promulgated by the commissioner, to insurers, rating organizations and any other interested parties.
##### **§ 17:29AA-17** Special risks; records; examination {#sec-17-29aa-17 omnilex-key=us-nj-statutes--title-17--17:29AA-17}
The underwriting files, loss and expense statistics, financial and other records with respect to special risks written by an insurer shall be maintained in such detail as may be required by the commissioner and shall be subject to examination by the commissioner or his designee in this State as often as deemed necessary by the commissioner.
##### **§ 17:29AA-18** Rating organization; commercial lines insurance; applicable provisions of act {#sec-17-29aa-18 omnilex-key=us-nj-statutes--title-17--17:29AA-18}
Any rating organization providing any service relating to the rates of any commercial lines insurance, and any insurer utilizing the service of such organization for such purpose shall be subject to the provisions of sections 2, 3, 12, 13, 19, 20, and 21 of P.L.1944, c. 27 (C. 17:29A-2, 17:29A-3, 17:29A-12, 17:29A-13, 17:29A-19, 17:29A-20 and 17:29A-21) to the extent applicable, provided that where the license of a rating organization is suspended under this act, such suspension shall have the same effect as a suspension under P.L.1944, c. 27 (C. 17:29A-1 et seq.).
##### **§ 17:29AA-19** False or misleading information to rating organization or commissioner {#sec-17-29aa-19 omnilex-key=us-nj-statutes--title-17--17:29AA-19}
No insurer, and no officer, agent, or employee thereof, shall knowingly give false or misleading information to any rating organization of which it is a member or subscriber, or to the commissioner, which will in any manner affect the proper determination of compliance with the rating standards of this act.
##### **§ 17:29AA-20** Suspension of rating organization's license; notice; hearing; order of commissioner {#sec-17-29aa-20 omnilex-key=us-nj-statutes--title-17--17:29AA-20}
Any rating organization which knowingly violates any provision of this act shall be subject to suspension of its license. Failure of a rating organization to comply with the provisions of any order of the commissioner within the time limited by the order, or any extension thereof as the commissioner may grant, shall, if no proceeding in lieu of prerogative writ has been taken for review of the order, automatically suspend the license of the rating organization. No order suspending a license because of a violation of any provision of this act shall be made by the commissioner, except upon 10 days' notice to the rating organization, specifying the particular violation. If the rating organization shall make a request therefor in writing within the 10-day period, the commissioner shall name a time and place for a hearing, at which the rating organization shall be given opportunity to make its defense. At the conclusion of the hearing, the commissioner shall make such order as in his judgment the evidence shall warrant. A suspension of a license shall be effective until modified or rescinded by order of the commissioner upon proof that the violation of the provisions of this act no longer continues, or upon proof that the rating organization has complied with the terms of any prior order made by the commissioner, or until the order of the commissioner upon which the suspension is based is reversed or modified upon a review thereof by a proceeding in lieu of prerogative writ.
##### **§ 17:29AA-21** Advisory organization; filing; hearing {#sec-17-29aa-21 omnilex-key=us-nj-statutes--title-17--17:29AA-21}
a. Every group, association or other organization of insurers, whether located within or outside this State, which assists insurers which make their own filings or rating organizations, in rate-making, by the collection and furnishing of loss or expense statistics, or by the submission of recommendations, but which does not make filings under this act, shall be known as an advisory organization.
b. Every advisory organization shall file with the commissioner (1) a copy of its constitution, its articles of agreement or association or its certificate of incorporation and of its bylaws, rules and regulations governing its activities, (2) a list of its members, and (3) the name and address of a resident of this State upon whom notices or orders of the commissioner or process issued at his direction may be served.
c. If, after a hearing, the commissioner finds that the furnishing of information or assistance involves any act or practice which is unfair or unreasonable or otherwise inconsistent with the provisions of this act, he may issue a written order specifying in what respects the act or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this act, and requiring the discontinuance of the act or practice.
d. No insurer which makes its own filings nor any rating organization shall support its findings by statistics or adopt rate-making recommendations, furnished to it by an advisory organization which has not complied with this section or with an order of the commissioner involving such statistics or recommendations issued under subsection c. of this section. If the commissioner finds an insurer or rating organization to be in violation of this subsection he may issue an order requiring the discontinuance of the violation.
##### **§ 17:29AA-22** Joint underwriting or joint reinsurance organization; filing; hearing {#sec-17-29aa-22 omnilex-key=us-nj-statutes--title-17--17:29AA-22}
a. Every group, association, or other organization of insurers which engages in joint underwriting or joint reinsurance through such group, association or by standing agreement among the members thereof shall be subject to the provisions of this act and shall file with the commissioner: a copy of its constitution, articles of association and bylaws, a list of its members, and the name and address of a resident of this State upon whom notices or orders of the commissioner or process may be served. Every such group, association or other organization shall notify the commissioner promptly of any change in the documents required to be filed with him.
b. If, after a hearing, the commissioner finds that any activity or practice of any such group, association or other organization is unfair or unreasonable or otherwise inconsistent with the provisions of this act, he may issue a written order specifying in what respects the activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this act, and requiring the discontinuance of the activity or practice.
##### **§ 17:29AA-23** Examination; advisory, joint underwriting or joint reinsurance organizations; costs {#sec-17-29aa-23 omnilex-key=us-nj-statutes--title-17--17:29AA-23}
The commissioner may make or cause to be made an examination of the business, affairs, and method of operation of any group, association or other organization referred to in sections 21 and 22 of this act. The reasonable costs of the examination shall be determined and fixed by the commissioner, and shall be paid by the group, association or other organization examined upon presentation to it of a detailed account of the cost. The officers, managers, agents and employees of the group, association or other organization shall exhibit all its books, records, documents, or agreements, governing its method of operation, and its accounts for the purpose of the examination. The commissioner may, for the purpose of facilitating and furthering the examination, examine, under oath, the officers, managers, agents, and employees of the group, association or other organization. In lieu of an examination the commissioner may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of that state.
##### **§ 17:29AA-24** Rates or rules; promise to use or adhere to; penalty {#sec-17-29aa-24 omnilex-key=us-nj-statutes--title-17--17:29AA-24}
No insurer shall promise, other than to a policyholder or other entities with which it is under common control or management or that are members of a joint underwriting or joint reinsurance organization, to use or adhere to certain insurance rates or rules, and no other person shall impose any penalty or other adverse consequence for failure of an insurer to adhere to certain rates or rules. This section shall not apply to apportionment agreements among insurers approved by the commissioner pursuant to section 25 of this act, and rates or rules approved for use by members of licensed rating organizations.
##### **§ 17:29AA-25** Apportionment and rate modifications; agreements among insurers; approval {#sec-17-29aa-25 omnilex-key=us-nj-statutes--title-17--17:29AA-25}
Agreements may be made among insurers with respect to equitable apportionment among them of insurance which may be afforded applicants who are in good faith entitled to but are unable to procure insurance through ordinary methods and the insurers may agree among themselves on the use of reasonable rate modifications for such insurance, provided that the agreements and rate modifications shall be effective only upon the prior approval of the commissioner.
##### **§ 17:29AA-26** Penalties; notice; hearing; suspension of licenses; certificate {#sec-17-29aa-26 omnilex-key=us-nj-statutes--title-17--17:29AA-26}
In addition to any other penalty or forfeiture provided by law, the commissioner may, if he finds that any person, partnership, association, corporation, insurer, or rating organization has willfully violated any provision of this act, impose a penalty of not less than $25.00 nor more than $500.00 for each violation. No such penalty shall be imposed, except upon at least 10 days' written notice to such person, partnership, association, corporation, insurer, or rating organization, specifying the specific violation, and naming a date and place for a hearing on the violation so charged. If the commissioner shall find, upon the evidence placed before him at the hearing, that the person, partnership, association, corporation, insurer, or rating organization is guilty of any violation of the provisions of this act, he shall make an order briefly stating his findings, and specifying the penalty imposed. The imposition of such a penalty shall, in the case of a licensed broker, or agent, or in the case of a rating organization, automatically suspend the license of the broker or agent or rating organization until such time as the penalty shall be paid. The commissioner may file in the office of the Clerk of the Superior Court, a certificate stating the amount of any penalty assessed pursuant to the provisions of this section, and the name of the person, partnership, association, corporation, insurer, or rating organization against whom or which the penalty has been assessed, and thereupon the Clerk of the Superior Court shall enter upon his record of docketed judgments the certificate, or an abstract thereof, and shall duly index the same. From the time of the docketing, the certificate shall have the same effect as a judgment obtained in the Superior Court, Law Division, and the commissioner shall have all remedies and may take all the proceedings for the collection thereof which may be had or taken upon the recovery of such a judgment.
##### **§ 17:29AA-27** Commissioner's order; review {#sec-17-29aa-27 omnilex-key=us-nj-statutes--title-17--17:29AA-27}
Any order made by the commissioner pursuant to the provisions of this act shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ. Upon the institution of the proceeding, the court may stay the provisions of the order. Where the order of the commissioner provides for an increase or decrease in rates, any insurer affected thereby may, with leave of court, pending final disposition of the proceedings in the Superior Court, continue to charge rates which obtained prior to the order, on condition that the difference in the rates be deposited in a special account by the insurer affected, to be held in trust by the insurer, and to be retained by the insurer or paid to the holders of policies issued after the order of the commissioner, as the court may determine.
##### **§ 17:29AA-28** Deputy commissioner; powers and duties {#sec-17-29aa-28 omnilex-key=us-nj-statutes--title-17--17:29AA-28}
Wherever, under the provisions of this act, the commissioner is authorized or required to do any act, he may designate a deputy commissioner, or any salaried employee of the Department of Insurance to act in his place who shall report to the commissioner and advise the commissioner on the nature of the matter delegated. The commissioner shall make such order, based upon the advice and report, as he shall determine, and the order shall have the same effect as if the commissioner had acted thereon personally.
##### **§ 17:29AA-29** Regulations; implementation and enforcement of act {#sec-17-29aa-29 omnilex-key=us-nj-statutes--title-17--17:29AA-29}
The commissioner shall promulgate regulations to implement and enforce the provisions of this act.
##### **§ 17:29AA-30** Commercial lines insurance; exemption from chapter 29A {#sec-17-29aa-30 omnilex-key=us-nj-statutes--title-17--17:29AA-30}
Commercial lines insurance shall be exempt from the provisions of P.L.1944, c. 27 (C. 17:29A-1 et seq.) except as specifically provided in this act.
##### **§ 17:29AA-31** Monitoring implementation and effect of act; recommendations {#sec-17-29aa-31 omnilex-key=us-nj-statutes--title-17--17:29AA-31}
The commissioner shall monitor the implementation and effect of this act on the commercial lines marketplace and shall report to the Legislature no later than 3 years after the enactment of this act, and recommend whether the act should be continued, repealed or modified. In making his recommendation, the commissioner shall consider, among other things, whether a reasonable degree of competition exists among commercial lines insurers.
##### **§ 17:29AA-32** Approved rates and forms {#sec-17-29aa-32 omnilex-key=us-nj-statutes--title-17--17:29AA-32}
Approved rates and forms for commercial lines insurance in effect on the effective date of this act pursuant to the provisions of P.L.1944, c. 27 (C. 17:29A-1 et seq.) shall remain in effect until changed, amended or replaced pursuant to the provisions of this act.
##### **§ 17:29AA-33** Publication of summary concerning business interruption insurance. {#sec-17-29aa-33 omnilex-key=us-nj-statutes--title-17--17:29AA-33}
1. The Department of Banking and Insurance shall publish on its internet website, on or before the 90th day after the date of enactment of P.L.2021, c.98 (C.17:29AA-33 et al.), a one page summary of common insurance clauses concerning coverage for the loss of use and occupancy of a commercial property and business interruption that may be used in a commercial insurance policy. The summary shall:
a. be developed through a public stakeholder process;
b. be written in easily understandable language; and
c. include:
(1) information concerning common coverage triggers;
(2) examples of perils typically covered;
(3) a summary of common exclusions;
(4) the following statement, in a prominent place in the summary: "Your policy may not cover pandemics or viruses";
(5) the following statement: "Most business interruption insurance policies cover losses sustained due to a suspension of business where the suspension was caused by direct physical loss of or damage to property or the insured's premises, and where the loss or damage is caused by or results from a specified peril or covered cause of loss. For such policies, a government ordered shutdown may not trigger business interruption insurance coverage in the absence of physical damage to the insured property."; and
(6) the following disclaimer: "This summary is not a replacement for the terms of the policy of insurance, shall not have the effect of altering the coverage afforded by the policy, and shall not confer new or additional rights beyond those expressly provided for in the policy. This information is only provided as guidance to the policyholder in understanding the terms of the policy of insurance. You should consult your policy, agent and insurer if you have questions about your particular coverage."
##### **§ 17:29AA-34** Provision of summary by authorized insurer. {#sec-17-29aa-34 omnilex-key=us-nj-statutes--title-17--17:29AA-34}
2. An authorized insurer shall provide the summary published pursuant to section 1 of P.L.2021, c.98 (C.17:29AA-33) to any potential purchaser of, or any policyholder seeking renewal of, a policy that provides coverage for the loss of use and occupancy of a commercial property and business interruption in this State with the application for the policy or renewal.
## **Chapter 29B** {#struct-chapter-29b}
##### **§ 17:29B-1** Declaration of purpose {#sec-17-29b-1 omnilex-key=us-nj-statutes--title-17--17:29B-1}
The purpose of this act is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Public Law 15, 79th Congress), by defining, or providing for the determination of, all such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.
##### **§ 17:29B-2** Definitions {#sec-17-29b-2 omnilex-key=us-nj-statutes--title-17--17:29B-2}
When used in this act:
(a) "Person" shall mean any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters.
(b) "Commissioner" shall mean the Commissioner of Banking and Insurance of this State.
##### **§ 17:29B-3** Unfair methods of competition or unfair acts or practices prohibited {#sec-17-29b-3 omnilex-key=us-nj-statutes--title-17--17:29B-3}
No person shall engage in this State in any trade practice which is defined in this act as or determined pursuant to this act to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.
##### **§ 17:29B-4** Unfair methods of competition, unfair, deceptive acts, practices, defined {#sec-17-29b-4 omnilex-key=us-nj-statutes--title-17--17:29B-4}
4. The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:
(1) Misrepresentations and false advertising of policy contracts. Making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance.
(2) False information and advertising generally. Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.
(3) Defamation. Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting or encouraging the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance.
(4) Boycott, coercion and intimidation. Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance, or resulting in or tending to result in unreasonable influence being exerted upon any producer that has an in-force contract as of the effective date of P.L.1997, c.151 (C.17:33B-64 et al.) for the purpose of replacing the in-force contract with a UEZ agent contract pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4).
(5) False financial statements. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to deceive.
Making any false entry in any book, report or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom such insurer is required by law to report, or who was authorized by law to examine into its condition or into any of its affairs, or, with like intent, willfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer.
(6) Stock operations and advisory board contracts. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance.
(7) Unfair discrimination. (a) Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract.
(b) Making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatsoever.
(c) Making or permitting any discrimination against any person or group of persons because of race, creed, color, national origin or ancestry of such person or group of persons in the issuance, withholding, extension or renewal of any policy of insurance, or in the fixing of the rates, terms or conditions therefor, or in the issuance or acceptance of any application therefor.
(d) Making or permitting discrimination in the use of any form of policy of insurance which expresses, directly or indirectly, any limitation or discrimination as to race, creed, color, national origin or ancestry or any intent to make any such limitation or discrimination.
(e) Making or permitting any unfair discrimination solely because of age in the issuance, withholding, extension or renewal of any policy or contract of automobile liability insurance or in the fixing of the rates, terms or conditions therefor, or in the issuance or acceptance of any application therefor, provided, that nothing herein shall be construed to interfere with the application of any applicable rate classification filed with and approved by the commissioner pursuant to P.L.1944, c. 27 (C.17:29A-1 to 17:29A-28), or any amendment or supplement thereof, which is in effect with respect to such policy or contract of insurance.
(8) Rebates. (a) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatsoever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract.
(b) Nothing in clause 7 or paragraph (a) of this clause 8 shall be construed as including within the definition of discrimination or rebates any of the following practices: (i) in the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance; provided, that any such bonuses or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the company and its policyholders; (ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expense; (iii) readjustment of the rate of premium for a group policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for such policy year.
(9) Unfair claim settlement practices. Committing or performing with such frequency as to indicate a general business practice any of the following:
(a) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
(b) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
(c) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(d) Refusing to pay claims without conducting a reasonable investigation based upon all available information;
(e) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(f) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
(g) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
(h) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
(i) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;
(j) Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made;
(k) Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
(l) Delaying the investigation or payment of claims by requiring an insured, claimant or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;
(m) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;
(n) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;
(o) Requiring insureds or claimants to institute or prosecute complaints regarding motor vehicle violations in the municipal court as a condition of paying private passenger automobile insurance claims.
(10) Failure to maintain complaint handling procedures. Failure of any person to maintain a complete record of all the complaints which it has received since the date of its last examination. This record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, and the time it took to process each complaint. For purposes of this subsection, "complaint" shall mean any written communication primarily expressing a grievance.
(11) The enumeration of this act of specific unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the commissioner or any court of review under the provisions of section 9 of this act.
##### **§ 17:29B-4.1** Certain homeowners' insurance inquiries not deemed as claim; violations, penalties. {#sec-17-29b-4.1 omnilex-key=us-nj-statutes--title-17--17:29B-4.1}
1. a. No inquiry by an insured for information regarding the insured's homeowners' insurance policy, or coverage for a particular loss under that policy, shall be categorized as a claim for the purpose of determining adverse claims experience.
b. An insurer who violates this act shall be subject to a penalty of up to $5,000 for each violation unless the insurer knew or reasonably should have known he was in violation of this act, in which case the penalty shall not be more than $25,000 for each violation. The penalty shall be collected in a summary proceeding in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, C.274 (C.2A:58-10 et seq.).
##### **§ 17:29B-5** Power of commissioner {#sec-17-29b-5 omnilex-key=us-nj-statutes--title-17--17:29B-5}
The commissioner shall have power to examine and investigate into the affairs of every person engaged in the business of insurance in this State in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by section three of this act.
##### **§ 17:29B-6** Hearings, witnesses, appearances, production of books and service of process {#sec-17-29b-6 omnilex-key=us-nj-statutes--title-17--17:29B-6}
(a) Whenever the commissioner shall have reason to believe that any such person has been engaged or is engaging in this State in any unfair method of competition or any unfair or deceptive act or practice defined in section four, and that a proceeding by him in respect thereto would be to the interest of the public, he shall issue and serve upon such person a statement of the charges in that respect and a notice of a hearing thereon to be held at a time and place fixed in the notice, which shall not be less than ten days after the date of the service thereof.
(b) At the time and place fixed for such hearing, such person shall have an opportunity to be heard and to show cause why an order should not be made by the commissioner requiring such person to cease and desist from the acts, methods or practices so complained of. Upon good cause shown, the commissioner shall permit any person to intervene, appear and be heard at such hearing by counsel or in person.
(c) Nothing contained in this act shall require the observance at any such hearing of formal rules of pleading or evidence.
(d) The commissioner, upon such hearing, may administer oaths, examine and cross-examine witnesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correspondence, or other documents which he deems relevant to the inquiry. The commissioner, upon such hearing, may, and upon the request of any party, shall cause to be made a stenographic record of all the evidence and all the proceedings had at such hearing. If no stenographic record is made and if a judicial review is sought, the commissioner shall prepare a statement of the evidence and proceeding for use on review. In case of a failure of any person to comply with any subpoena issued hereunder or to testify with respect to any matter concerning which he may be lawfully interrogated, the Superior Court, on ex parte application of the commissioner, may compel him to do so.
(e) Statements of charges, notices, orders, and other processes of the commissioner under this act may be served by anyone duly authorized by the commissioner, either in the manner provided by law for service of process in civil actions, or by registering and mailing a copy thereof to the person affected by such statement, notice, order, or other process addressed to his or its residence or principal office or place of business. An affidavit by the person so serving such statement, notice, order, or other process, setting forth the manner of such service, or the return postcard receipt for such statement, notice, order, or other process, registered and mailed as aforesaid, shall be proof of the service of the same.
##### **§ 17:29B-7** Cease and desist orders; penalties; modifications {#sec-17-29b-7 omnilex-key=us-nj-statutes--title-17--17:29B-7}
(a) If, after such hearing, the commissioner shall determine that the method of competition or the act or practice in question is defined in section four and that the person complained of has engaged in such method of competition, act or practice in violation of this act, he shall make his findings in writing and shall issue and cause to be served upon the person charged with the violation an order requiring such person to cease and desist from engaging in such method of competition, act or practice and the commissioner may order payment of a penalty not to exceed $1,000.00 for each and every act or violation unless the person knew or reasonably should have known he was in violation of this chapter, in which case the penalty shall be not more than $5,000.00 for every act or violation. The penalty shall be collected by the commissioner in the name of the State in a summary proceeding in accordance with "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.).
(b) Until the expiration of the time limited for judicial review, if no proceeding for review has been instituted within such time or, if a proceeding for review has been instituted within such time, then until the transcript of the record in the proceeding has been filed in the Superior Court, as hereinafter provided, the commissioner may at any time, upon such notice and in such manner as he shall deem proper, modify or set aside in whole or in part any order issued by him under this section.
(c) After the expiration of the time limited for judicial review if no such proceeding has been instituted within such time, the commissioner may at any time, after notice and opportunity for hearing, reopen and alter, modify or set aside, in whole or in part, any order issued by him under this section, whenever in his opinion the facts or the laws have so changed as to require such action or if the public interest shall so require.
##### **§ 17:29B-8** Judicial review of cease and desist orders {#sec-17-29b-8 omnilex-key=us-nj-statutes--title-17--17:29B-8}
An order of the commissioner under section seven shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
No order of the commissioner under this act shall in any way relieve or absolve any person affected by such order from any liability under any other law of this State.
##### **§ 17:29B-9** Procedure as to unfair methods of competition and unfair or deceptive acts or practices which are not defined {#sec-17-29b-9 omnilex-key=us-nj-statutes--title-17--17:29B-9}
(a) Whenever the commissioner shall have reason to believe that any person engaged in the business of insurance is engaging in this State in any method of competition or in any act or practice in the conduct of such business which is not defined in section four, and that such method of competition is unfair or that such act or practice is unfair or deceptive and that a proceeding by him in respect thereto would be to the interest of the public, he may issue and serve upon such person a statement of the charges in that respect and a notice of a hearing thereon to be held at a time and place fixed in the notice, which shall not be less than ten days after the date of the service thereof. Each such hearing shall be conducted in the same manner as the hearings provided for in section six. The commissioner shall, after such hearing, make a determination in writing in which he shall state his findings as to the facts, and he shall serve a copy thereof upon such person.
(b) If such determination charges a violation of this act and if such method of competition, act or practice has not been discontinued, the commissioner may, through the Attorney-General of this State, at any time after ten days after the service of such determination institute an action in the Superior Court to enjoin and restrain such person from engaging in such method, act or practice. The court may proceed in the action in a summary manner or otherwise and may make an adjudication on the record and evidence before the commissioner and such additional evidence before the court or which it directs to be taken before the commissioner, as the court may deem proper. The court may enjoin any method of competition or act or practice which it finds to be unfair or deceptive.
##### **§ 17:29B-10** Intervenor; action to enjoin violations {#sec-17-29b-10 omnilex-key=us-nj-statutes--title-17--17:29B-10}
If the determination of the commissioner does not charge a violation of this act, then any intervenor in the proceedings before him may, within thirty days after the service of such determination, institute an action, notwithstanding the determination, in the Superior Court to enjoin and restrain any method of competition, act or practice. The court may proceed in the action in a summary manner or otherwise and may make an adjudication on the record and evidence before the commissioner and such additional evidence taken before it as it deems advisable and may enjoin any method, act or practice which it finds to be a violation of this act.
##### **§ 17:29B-11** Penalty {#sec-17-29b-11 omnilex-key=us-nj-statutes--title-17--17:29B-11}
Any person who violates a cease and desist order of the commissioner under section seven, after it has become final, and while such order is in effect, shall forfeit and pay to the State of New Jersey a sum not to exceed five thousand dollars ($5,000.00) for each violation, which may be recovered in a civil action. In determining the amount of the penalty the question of whether the violation was willful shall be taken into consideration. Nothing herein shall be construed as limiting a court in enforcing its own orders.
##### **§ 17:29B-12** Provisions of act additional to existing laws {#sec-17-29b-12 omnilex-key=us-nj-statutes--title-17--17:29B-12}
The powers vested in the commissioner by this act shall be additional to any other powers to enforce any penalties, fines or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive.
##### **§ 17:29B-13** Immunity from prosecution {#sec-17-29b-13 omnilex-key=us-nj-statutes--title-17--17:29B-13}
If any person shall ask to be excused from testifying or from producing any books, papers, records, correspondence or other documents at any hearing on the ground that the testimony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture, and shall notwithstanding be directed to give such testimony or produce such evidence, he must nonetheless comply with such direction, but he shall not thereafter be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he may testify or produce evidence pursuant thereto, and no testimony so given or evidence produced shall be received against him upon any criminal action, investigation or proceeding; provided, however, that no such individual so testifying shall be exempt from prosecution or punishment for any perjury committed by him while so testifying and the testimony or evidence so given or produced shall be admissible against him upon any criminal action, investigation or proceeding concerning such perjury, nor shall he be exempt from the refusal, revocation or suspension of any license, permission or authority conferred, or to be conferred, pursuant to the insurance laws of this State. Any such person may execute, acknowledge and file in the office of the commissioner a statement expressly waiving such immunity or privilege in respect to any transaction, matter or thing specified in such statement and thereupon the testimony of such person or such evidence in relation to such transaction, matter or thing may be received or produced before any judge, court, tribunal, grand jury or other officer or body, and if so received or produced such person shall not be entitled to any immunity or privilege on account of any testimony or evidence he may so give or produce.
##### **§ 17:29B-14** Separability provision {#sec-17-29b-14 omnilex-key=us-nj-statutes--title-17--17:29B-14}
If any provision of this act, or the application of such provision to any person or circumstances, shall be held invalid, the remainder of the act, and the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.
##### **§ 17:29B-15** Enforceability of insurance release, waiver of rights under certain circumstances. {#sec-17-29b-15 omnilex-key=us-nj-statutes--title-17--17:29B-15}
3. a. No insurance release or waiver of rights by a claimant to compensation for personal injury or wrongful death arising from an accident or disaster executed within 30 days after the date on which the accident or disaster occurred shall be enforceable unless the claimant, prior to execution of the release or waiver, receives a written disclosure informing the claimant that he may seek legal representation, and further informing the claimant of his rights pursuant to this act.
The written disclosure shall be clearly readable, in 12-point bold type and shall include the following:
"New Jersey law guarantees to accident and disaster victims the right to review and cancel an insurance release or waiver of rights to compensation for personal injury or wrongful death arising from an accident or disaster if the insurance release or waiver is signed by the claimant within the 30-day period immediately following the accident or disaster. Under State law you have 10 days from the day you sign the insurance release or waiver of rights to file a notice of cancellation with the insurer or agent of the insurer that accepted your release or waiver of rights to compensation. You also may seek the advice of an attorney to review the waiver or release and to represent you if you so choose. Notice of cancellation shall be sent by certified mail to the insurer's or agent's last known address and shall be effective if received by the 10th day following the signing of the release or waiver."
b. An insurance release or waiver of rights by a claimant to compensation for personal injury or wrongful death arising from an accident or disaster, and executed within the 30-day period following the accident or disaster, may be reviewed by the claimant or the claimant's attorney and may be rescinded within the 10-day period following the execution of the waiver or release by the claimant. Any consideration or thing of value which has passed between the parties prior to rescission of a release or waiver shall be returned. An insurer may withhold payment of the proceeds from settlements made within the 30-day period until the 10-day waiting period has expired.
c. The rights and remedies accorded by the provisions of this section shall be in addition to and cumulative of any other rights and remedies under law and nothing herein shall be construed to deny, abrogate or impair any such right or remedy.
##### **§ 17:29B-16** Definitions relative to victims of domestic violence. {#sec-17-29b-16 omnilex-key=us-nj-statutes--title-17--17:29B-16}
1. As used in this act:
"Domestic violence" and "victim of domestic violence" shall have the same meaning as in section 3 of P.L.1991, c.261 (C.2C:25-19). "Domestic violence" shall also mean intentionally, knowingly or recklessly causing or attempting to cause damage to property so as to intimidate or attempt to control the behavior of a person in a relationship with a perpetrator of one or more acts of domestic violence.
"Domestic violence-related condition" means a medical condition which arises in whole or in part from one or more acts of domestic violence.
"Insurer" means:
a. any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), but shall not include health insurance, accident and health insurance, automobile medical payment insurance or personal injury protection insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.);
b. any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance that provides policies or contracts of life insurance delivered, issued, executed or renewed in this State pursuant to Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance; and
c. the State disability benefits fund established by the "Temporary Disability Benefits Law," P.L.1948, c.110 (C.43:21-25 et seq.).
##### **§ 17:29B-17** Prohibited insurance practices relative to victims of domestic violence. {#sec-17-29b-17 omnilex-key=us-nj-statutes--title-17--17:29B-17}
2. An insurer, on the basis that the insured or prospective insured: is or may be a victim of domestic violence; employs a person who is or may be a victim of domestic violence; or is a domestic violence shelter that is operating pursuant to the standards set forth in P.L.1979, c.337 (C.30:14-1 et seq.) or is employed by a domestic violence shelter, shall not discriminate by engaging in the practices set forth in subsections a., b. and c. of this section. The prohibited practices are:
a. denying, refusing to issue or renew, canceling or otherwise terminating an insurance policy;
b. (1) restricting, excluding or limiting benefits under an insurance policy, (2) denying a covered claim incurred by an insured as a result of domestic violence, or (3) failing to pay claims arising out of abuse to an innocent claimant to the extent of that claimant's legal interest in the covered property if the loss is caused by the intentional act of an insured, or using other exclusions or limitations on coverage which the Commissioner of Banking and Insurance has determined unreasonably restrict the ability of a victim of domestic violence to be indemnified for the loss; or
c. adding a premium differential to any insurance policy.
The provisions of paragraphs (2) and (3) of subsection b. of this section shall not require payment in excess of the loss or policy limits. The provisions of paragraph (3) of subsection b. of this section shall not require payment in the event that the claimant conspires with the insured to commit insurance fraud. Nothing in paragraphs (2) and (3) of subsection b. of this section shall be construed to prohibit an insurer from applying reasonable standards of proof to claims under this section.
Nothing contained in this section shall be construed to require an insurer to issue or renew an insurance policy or contract, or provide benefits or coverage for claims, solely on the basis that an insured or prospective insured: is or may be a victim of domestic violence; employs a person who is or may be a victim of domestic violence; or is a domestic violence shelter or is employed by a domestic violence shelter.
##### **§ 17:29B-18** Complaints, penalties for violations. {#sec-17-29b-18 omnilex-key=us-nj-statutes--title-17--17:29B-18}
4. a. A person aggrieved by a violation of this act may file a complaint with the Commissioner of Banking and Insurance. Upon receipt of the complaint, the commissioner shall investigate an insurer to determine whether the insurer has violated any provision of this act.
b. The commissioner may:
(1) order an insurer that is in violation to pay a monetary penalty of $5,000 for each violation;
(2) order the insurer to make restitution to the aggrieved person; or
(3) obtain equitable relief in a State or federal court of competent jurisdiction against an insurer, as well as the costs of suit, attorney's fees and expert witness fees.
##### **§ 17:29B-19** Rules, regulations. {#sec-17-29b-19 omnilex-key=us-nj-statutes--title-17--17:29B-19}
5. The Commissioner of Banking and Insurance shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the purposes of this act.
## **Chapter 29BB** {#struct-chapter-29bb}
##### **§ 17:29BB-1** Short title. {#sec-17-29bb-1 omnilex-key=us-nj-statutes--title-17--17:29BB-1}
1. This act shall be known and may be cited as the "New Jersey Insurance Fair Conduct Act."
##### **§ 17:29BB-2** Definitions. {#sec-17-29bb-2 omnilex-key=us-nj-statutes--title-17--17:29BB-2}
2. As used in this act:
"First-party claimant" or "claimant" means an individual injured in a motor vehicle accident and entitled to the uninsured or underinsured motorist coverage of an insurance policy asserting an entitlement to benefits owed directly to or on behalf of an insured under that insurance policy.
"Insurer" means any individual, corporation, association, partnership or other legal entity which issues, executes, renews or delivers an insurance policy in this State, or which is responsible for determining claims made under the policy. "Insurer" shall not include an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28) or a public entity.
"Public entity" means the State, any county, municipality, district, public authority, public agency and any other political subdivision or public body in the State, including a joint insurance fund of a public entity.
##### **§ 17:29BB-3** Claimant's rights, civil action; unreasonable delay, denial. {#sec-17-29bb-3 omnilex-key=us-nj-statutes--title-17--17:29BB-3}
3. a. In addition to the enforcement authority provided to the Commissioner of Banking and Insurance pursuant to the provisions of P.L.1947, c.379 (C.17:29B-1 et seq.) or any other law, a claimant, who is unreasonably denied a claim for coverage or payment of benefits, or who experiences an unreasonable delay for coverage or payment of benefits, under an uninsured or underinsured motorist policy by an insurer may, regardless of any action by the commissioner, file a civil action in a court of competent jurisdiction against its automobile insurer for:
(1) an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy; or
(2) any violation of the provisions of section 4 of P.L.1947, c.379 (C.17:29B-4).
b. In any action filed pursuant to this act, the claimant shall not be required to prove that the insurer's actions were of such a frequency as to indicate a general business practice.
c. No rate increase shall be passed on to the consumer or policyholder as a result of compliance with P.L.2021, c.388 (C.17:29BB-1 et seq.) and dissemination of inaccurate or misleading information to policyholders or consumers concerning P.L.2021, c.388 (C.17:29BB-1 et seq.) shall be strictly prohibited.
The commissioner may determine whether an insurer's rates are constitutionally adequate pursuant to the provisions of P.L.2021, c.388 (C.17:29BB-1 et seq.). If the commissioner determines that rate relief is necessary, the commissioner shall determine an appropriate rate adjustment.
d. Upon establishing that a violation of the provisions of this act has occurred, the plaintiff shall be entitled to: (1) actual damages caused by the violation of this act which shall include, but need not be limited to, actual trial verdicts that shall not exceed three times the applicable coverage amount; and
(2) pre- and post-judgment interest, reasonable attorney's fees, and reasonable litigation expenses.
e. If any portion of P.L.2021, c.388 (C.17:29BB-1 et seq.) is determined to be invalid, the remaining portion of P.L.2021, c.388 (C.17:29BB-1 et seq.) shall remain in full force.
## **Chapter 29C** {#struct-chapter-29c}
##### **§ 17:29C-1** Policy provision; written notice {#sec-17-29c-1 omnilex-key=us-nj-statutes--title-17--17:29C-1}
In addition to the powers conferred upon him by any other law, the Commissioner of Banking and Insurance is hereby authorized and empowered to direct, by rule or regulation as hereinafter provided, that insurance companies organized under the laws of this State or organized to do business in this State, shall include provisions in policies of insurance written by any such company in this State, whereby 30 days' written notice shall be given; (1) to the insured, of the cancellation of any such policy; and, (2) to any designated mortgagee not named therein as the insured of the cancellation of any interest in such policy; and, (3) to the insured, of intent not to renew any such policy.
##### **§ 17:29C-1.1** Definitions relative to senior citizen insureds. {#sec-17-29c-1.1 omnilex-key=us-nj-statutes--title-17--17:29C-1.1}
1. For purposes of this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Insurer" means:
a. Any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes;
b. Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
c. Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
d. Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.);
e. Any health maintenance organization established pursuant to the provisions of P.L.1973, c.337 (C.26:2J-1 et seq.);
f. Any insurance plan operating pursuant to P.L.1970, c.215 (C.17:29D-1); and
g. The New Jersey Insurance Underwriting Association operating pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.).
"Policy of personal lines insurance" means any policy or contract of insurance issued or issued for delivery in this State for personal, family or household purposes, as determined by the commissioner, by an insurer on a risk located or resident in this State for which the premiums are paid directly to the insurer by the senior citizen insured.
"Senior citizen insured" means any named insured pursuant to a policy of personal lines insurance who is an individual and is at least 62 years of age.
##### **§ 17:29C-1.2** Senior citizen insured to designate third party to receive copies of certain notices. {#sec-17-29c-1.2 omnilex-key=us-nj-statutes--title-17--17:29C-1.2}
2. Every insurer shall permit its senior citizen insureds to designate a third party to whom the insurer shall transmit a copy of notices of cancellation, nonrenewal and conditional renewal. The senior citizen insured shall notify the insurer that a third party has been so designated. Such notification shall be delivered to the insurer by certified mail, return receipt requested, and shall be effective not later than ten business days from the date of receipt by the insurer. The notification shall contain, in writing, an acceptance by the third party designee to receive copies of notices of cancellation, nonrenewal and conditional renewal from the insurer. Should the third party designee desire to terminate the status as a third party designee, the designee shall provide written notice to both the insurer and the senior citizen insured. Should the senior citizen insured desire to terminate the third party designation, the insured shall provide written notice to the insurer. The transmission to the third party designee of a copy of any notice of cancellation, nonrenewal or conditional renewal shall be in addition to the original document transmitted to the senior citizen insured and when a third party is so designated all such notices and copies shall be mailed in an envelope clearly marked on its face with the following: "IMPORTANT INSURANCE POLICY INFORMATION: OPEN IMMEDIATELY." The copy of the notice of cancellation, nonrenewal or conditional renewal transmitted to the third party shall be governed by the same law and policy provisions which govern the notice being transmitted to the senior citizen insured. Designation as a third party shall not constitute acceptance of any liability on the part of the third party for services provided to the senior citizen insured, nor on the part of the insurer. The insurer shall notify its senior citizen insureds annually in writing, except in cases in which the age of the senior citizen insured is unknown to the insurer, of the availability of the third party designee notice procedures and provide information on how the insured can commence this procedure, except that notice need not be provided once a senior citizen insured has made a designation. An insurer may provide this required annual notice to its senior citizen insureds in any manner that it determines.
##### **§ 17:29C-2** Direction that specific provisions be included; exception {#sec-17-29c-2 omnilex-key=us-nj-statutes--title-17--17:29C-2}
The commissioner may direct that any or all of the aforesaid provisions, which he is herein authorized and empowered to direct, be included in any or all types of insurance policies covering any or all insurance risks written in this State or in any part of this State, when, in his discretion, the need for same exists as a result of conditions in the market for such types of insurance; provided, however, that any direction of the commissioner pursuant to this act shall treat all insurance companies writing any particular type or types of insurance in a uniform manner; and, provided further, that the aforesaid provisions shall not apply in the case of cancellation of a policy or of any interest in a policy for the nonpayment of premiums or for "moral hazard," as such is defined by the commissioner.
##### **§ 17:29C-2.1** Dangerous drivers {#sec-17-29c-2.1 omnilex-key=us-nj-statutes--title-17--17:29C-2.1}
No insurer, including the New Jersey Automobile Full Insurance Underwriting Association, shall be required to issue or renew collision or comprehensive insurance coverage, or both, at standard market rates, for an automobile, as defined in section 2 of P.L. 1972, c. 70 (C. 39:6A-2), or as defined in section 15 of P.L. 1983, c. 65 (C. 17:30E-3), in the case of the New Jersey Automobile Full Insurance Underwriting Association, to any person identified as a dangerous driver or as having excessive claims in accordance with standards and guidelines to be adopted by the Commissioner of Insurance. Insurers writing in the voluntary market may, and the New Jersey Full Insurance Underwriting Association shall, issue collision or comprehensive insurance coverage, or both, to a person whose coverage was not issued or not renewed pursuant to this section on the basis of the person's experience. With regard to the identification of dangerous drivers, the standards and guidelines adopted by the commissioner shall take into consideration the total driving record of the driver, as well as any serious driving offenses, as defined by the commissioner, committed within a three year period, including motor vehicle violations resulting in an at-fault automobile accident. In the case of the New Jersey Full Insurance Underwriting Association, the plan of operation may provide that certain risks may be excluded from collision and comprehensive coverages altogether.
The commissioner shall adopt rules and regulations necessary or appropriate to effectuate the purposes of this section.
##### **§ 17:29C-3** Revocation of direction; duration of direction {#sec-17-29c-3 omnilex-key=us-nj-statutes--title-17--17:29C-3}
The commissioner may revoke the direction of any or all of the aforesaid provisions at any time when, in his discretion, the need for same no longer exists, and no such direction by the commissioner shall be valid for a period in excess of 1 year from the date it is made; provided, however, that any such direction shall remain valid after 1 year upon certification to the Legislature of the continued need for same by the commissioner.
##### **§ 17:29C-4** Reports from insurers; rules and regulations {#sec-17-29c-4 omnilex-key=us-nj-statutes--title-17--17:29C-4}
The commissioner may require such reports from insurers and may make any reasonable rules and regulations to carry out the purposes of this act as he shall deem necessary.
##### **§ 17:29C-4.1** Return of unearned premiums; penalty {#sec-17-29c-4.1 omnilex-key=us-nj-statutes--title-17--17:29C-4.1}
1. Whenever an insurance policy or contract is canceled, the insurer on notice thereof shall return to the insured, within a reasonable time not to exceed 60 days of cancellation or notice, whichever occurs last, or 60 days after the completion of any payroll audit necessary to determine the amount of premium earned while the policy was in force, on a short rate basis the amount of gross unearned premiums paid; except for a policy or contract for private passenger automobile insurance, which amount of gross unearned premium shall be determined on a pro rata basis. In the event that the insurer fails to return the gross unearned premiums to the insured within the period provided for herein, the insurer shall, as a penalty, in addition to the gross unearned premium, return to the insured an additional amount equal to 5% of the gross unearned premium computed on a monthly basis for each month or part thereof past the final date on which the refund was due.
##### **§ 17:29C-5** County or municipal liability insurance; moratorium on cancellation {#sec-17-29c-5 omnilex-key=us-nj-statutes--title-17--17:29C-5}
Notwithstanding the provisions of any other law, no insurance policy which has been issued to a county or municipality covering liability for damages to real or personal property or person for which such county or municipality is liable pursuant to the provisions of chapter 48 of Title 2A of the New Jersey Statutes, shall be cancelled by the insurer, except in the case of nonpayment of premium, and there is hereby declared to be a moratorium on the cancellation of such insurance policies, which moratorium shall be retroactive to June 1, 1968, and shall be in force and effect until October 1, 1968.
##### **§ 17:29C-6** Definitions {#sec-17-29c-6 omnilex-key=us-nj-statutes--title-17--17:29C-6}
As used in this act:
(A) "Policy" means an automobile liability, automobile physical damage or automobile collision policy, or any combination thereof, delivered or issued for delivery in this State, insuring a single individual or husband and wife resident of the same household, as named insured, and under which the insured vehicles therein designated are of the following types only:
1. A motor vehicle of the private passenger or station wagon type that is not used as a public or livery conveyance for passengers, nor rented to others; or
2. Any other 4-wheel motor vehicle with a load capacity of 1,500 pounds or less which is not customarily used in the occupation, profession or business of the insured;
provided, however, that this act shall not apply (1) to any policy issued under an automobile assigned risk plan, or (2) to any policy insuring more than 4 automobiles, or (3) to any policy covering garage, automobile sales agency, repair shop, service station or public parking place operation hazards.
(B) "Automobile liability coverage" includes only coverage of bodily injury and property damage liability, medical payments and uninsured motorists coverage.
(C) "Automobile physical damage coverage" includes all coverage of loss or damage to an automobile insured under the policy except loss or damage resulting from collision or upset.
(D) "Automobile collision coverage" includes all coverage of loss or damage to an automobile insured under the policy resulting from collision or upset.
(E) "Renewal" or "to renew" means the issuance and delivery by an insurer of a policy replacing at the end of the policy period a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term; provided, however, that any policy with a policy period or term of less than 6 months shall for the purpose of this act be considered as if written for a policy period or term of 6 months. Provided, further, that any policy written for a term longer than 1 year or any policy with no fixed expiration date, shall for the purpose of this act, be considered as if written for successive policy periods or terms of 1 year, and such policy may be terminated at the expiration of any annual period upon giving 20 days' notice of cancellation prior to such anniversary date, and such cancellation shall not be subject to any other provisions of this act.
(F) "Nonpayment of premium" means failure of the named insured to discharge when due any of his obligations in connection with the payment of premiums on a policy, or any installment of such premium, whether the premium is payable directly to the insurer or its agent or indirectly under any premium finance plan or extension of credit.
##### **§ 17:29C-7** Notice of cancellation; reasons. {#sec-17-29c-7 omnilex-key=us-nj-statutes--title-17--17:29C-7}
2. (A) A notice of cancellation of a policy shall be effective only if it is based on one or more of the following reasons:
(a) Nonpayment of premium or nonpayment of a residual market equalization charge imposed pursuant to the provisions of section 20 of P.L.1983, c.65 (C.17:30E-8); or
(b) The driver's license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under the policy has been under suspension or revocation during the policy period or, if the policy is a renewal, during its policy period; or
(c) Knowingly providing materially false or misleading information in connection with any application for insurance, renewal of insurance or claim for benefits under an insurance policy; or
(d) The insurer determines, within 60 days of issuance of the policy, that the named insurer does not meet the approved underwriting rules of the insured then in effect.
(B) (Deleted by amendment, P.L.2003, c.89.)
(C) (Deleted by amendment, P.L.2003, c.89.)
(D) This section shall not apply to nonrenewal.
(E) Nothing in this section shall be interpreted to limit the ability of an insurer to void a policy ab initio as otherwise provided by law.
(F) The commissioner shall adopt rules and regulations necessary or appropriate to effectuate the purposes of this section.
##### **§ 17:29C-7.1** Refusal to renew, conditions {#sec-17-29c-7.1 omnilex-key=us-nj-statutes--title-17--17:29C-7.1}
26. a. Notwithstanding the provisions of section 3 of P.L.1972, c.70 (C.39:6A-3), a licensed insurer may, in accordance with subsections b. and c. of this section, refuse to renew a policy of private passenger automobile insurance that provides coverage required to be maintained pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.), except that no insurer shall refuse to renew a policy pursuant to subsections b. and c. of this section:
(1) in an amount in excess of 20% of the entire private passenger automobile insurance book of business of any one producer in force with the insurer at the end of the previous calendar year. For purposes of this paragraph, "producer" means a person licensed pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.), who earned $10,000 or more from the insurer in the prior calendar year; and
(2) unless the insured or operator insured under the policy in the five years immediately preceding renewal has had at least two of the following or any combination thereof: (a) an at-fault accident; or (b) a moving violation which was assessed at least four automobile insurance eligibility points; or (c) had been required, but failed, to maintain coverage mandated by section 4 of P.L.1972, c.70 (C.39:6A-4) without lapse.
b. For each calendar year period, an insurer may issue notices of intention not to renew an automobile insurance policy in the voluntary market in an amount not to exceed 2% of the total number of voluntary market automobile insurance policies of the insurer, rounded to the nearest whole number, which are in force at the end of the previous calendar year in each of the insurer's rating territories in use in this State.
c. For every two newly insured automobiles which an insurer voluntarily writes in each territory during each calendar year period, the insurer shall be permitted to refuse to renew insurance on one additional automobile in that territory in excess of the 2% limitation established by subsection b. of this section, subject to a fair and nondiscriminatory formula developed by rule or regulation of the commissioner. The provisions of this subsection shall only apply to an insurer whose aggregate voluntary market share in an automobile insurance urban enterprise zone is reasonably proportionate to the insurer's voluntary Statewide market share as determined by the commissioner by regulation or in a rating territory in which the insurer demonstrates growth in the aggregate number of in-force exposures.
d. The provisions of this section shall not apply to any cancellation made pursuant to subsection (A) of section 2 of P.L.1968, c.158 (C.17:29C-7).
e. (Deleted by amendment, P.L.1997, c.151.)
f. Nothing in this section shall prohibit an insurer from refusing to renew, in addition to nonrenewals permitted in subsections b. and c. of this section, the policy of any insured who has: (1) provided false or misleading information in connection with any application for insurance, renewal of insurance or claim for benefits under an insurance policy; or (2) who has failed to provide, after written request by an insurer, the minimum information necessary to accurately rate the policy under terms and conditions set forth by the commissioner in regulations .
##### **§ 17:29C-8** Time for notice {#sec-17-29c-8 omnilex-key=us-nj-statutes--title-17--17:29C-8}
No notice of cancellation of a policy to which section 2 applies shall be effective unless mailed or delivered by the insurer to the named insured at least 20 days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium at least 15 days' notice of cancellation accompanied by the reason therefor shall be given. Unless the reason accompanies or is included in the notice of cancellation, the notice of cancellation shall state or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the insurer not less than 15 days prior to the effective date of cancellation, the insurer will specify the reason for such cancellation.
This section shall not apply to nonrenewal.
##### **§ 17:29C-9** Intention not to renew, notice required. {#sec-17-29c-9 omnilex-key=us-nj-statutes--title-17--17:29C-9}
4. No insurer shall fail to renew a policy unless it shall mail or deliver to the named insured, at the address shown in the policy, at least 60 days' advance notice of its intention not to renew, except that the commissioner may extend the advance notice period up to an additional 30 days by regulation. This section shall not apply:
(a) If the insurer has manifested its willingness to renew; nor
(b) In case of nonpayment of premium;
provided that, notwithstanding the failure of an insurer to comply with this section, the policy shall terminate on the effective date of any other insurance policy with respect to any automobile designated in both policies.
Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal.
##### **§ 17:29C-10** Written notice of cancellation or intention not to renew; effectiveness {#sec-17-29c-10 omnilex-key=us-nj-statutes--title-17--17:29C-10}
No written notice of cancellation or of intention not to renew sent by an insurer to an insured in accordance with the provisions of an automobile insurance policy shall be effective unless a. (1) it is sent by certified mail or (2) at the time of the mailing of said notice, by regular mail, the insurer has obtained from the Post Office Department a date stamped proof of mailing showing the name and address of the insured and b. the insurer has retained a duplicate copy of the mailed notice which is certified to be a true copy.
##### **§ 17:29C-11** Cancellation or nonrenewal of automobile liability insurance; contents of notice {#sec-17-29c-11 omnilex-key=us-nj-statutes--title-17--17:29C-11}
When a policy of automobile liability insurance is canceled, other than for nonpayment of premium, or in the event of failure to renew a policy of automobile liability insurance to which section 4 applies, the insurer shall notify the named insured of his possible eligibility for automobile liability insurance through the automobile liability assigned risk plan. Such notice shall accompany or be included in the notice of cancellation or the notice of intent not to renew.
##### **§ 17:29C-12** Reason for cancellation; request {#sec-17-29c-12 omnilex-key=us-nj-statutes--title-17--17:29C-12}
Where the reason for cancellation does not accompany or is not included in the notice of cancellation, the insurer shall upon written request of the named insured, mailed or delivered to the insurer not less than 15 days prior to the effective date of cancellation, specify in writing the reason for such cancellation. Such reason shall be mailed or delivered to the named insured within 5 days after receipt of such request.
##### **§ 17:29C-13** Immunity from liability {#sec-17-29c-13 omnilex-key=us-nj-statutes--title-17--17:29C-13}
There shall be no liability on the part of and no cause of action of any nature shall arise against the Commissioner of Insurance or against any insurer, its authorized representative, its agents, its employees, or any firm, person or corporation furnishing to the insurer information as to reasons for cancellation, for any statement made by any of them in any written notice of cancellation, or in any other communication, oral or written specifying the reasons for cancellation, or the providing of information pertaining thereto, or for statements made or evidence submitted at any hearings conducted in connection therewith.
## **Chapter 29D** {#struct-chapter-29d}
##### **§ 17:29D-1** Rules, regulations for insurance plans; administration; requirements for automobile plan. {#sec-17-29d-1 omnilex-key=us-nj-statutes--title-17--17:29D-1}
1. The Commissioner of Banking and Insurance may adopt, issue and promulgate rules and regulations establishing a plan for the providing and apportionment of insurance coverage for applicants therefor who are in good faith entitled to, but are unable to procure the same, through ordinary methods. Every insurer admitted to transact and transacting any line, or lines, of insurance in the State of New Jersey shall participate in such plan and provide insurance coverage to the extent required in such rules and regulations.
The governing board of any plan established pursuant to the commissioner's rules and regulations shall continue to exercise such administrative authority, subject to the commissioner's oversight and as provided in any rules and regulations promulgated pursuant to this section, as is necessary to ensure the plan's efficient operation, including, but not limited to, the authority to investigate complaints and hear appeals from applicants, insureds, producers, servicing carriers or participants about any matter pertaining to the plan's proper administration, as well as the authority to appoint subcommittees to hear such appeals. Any determination of an appeal by a plan's governing board shall be subject to review by the commissioner on the record below, and shall not be considered a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The commissioner's determination shall be a final order and shall be subject to review by the Superior Court.
Any plan established pursuant to this section to provide insurance for automobiles, as defined in section 2 of P.L.1972, c.70 (C.39:6A-2), shall provide:
a. For a rating system which shall produce rates for each coverage which are adequate for the safeness and soundness of the plan, and are not excessive nor unfairly discriminatory with regard to risks in the plan involving essentially the same hazards and expense elements, which rates may be changed from time to time by a filing with the commissioner in a manner and form approved by the commissioner;
b. For rates charged to plan insureds which shall be sufficient to meet the plan's expenses and the plan's losses on an incurred basis, including the establishment and maintenance of actuarially sound loss reserves to cover all future costs associated with the exposure;
c. For a limited assignment distribution system permitting insurers to enter into agreements with other mutually agreeable insurers or other qualified entities to transfer their applicants and insureds under such plan to such insurers or other entities, including applicants and insureds who may be covered by special automobile insurance policies issued pursuant to section 45 of P.L.2003, c.89 (C.39:6A-3.3);
d. That it shall not provide insurance coverage for more than 10 percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State. The plan shall provide for the cessation of the acceptance of applications or the issuance of new policies to eligible persons at any time it reaches 10 percent of marketshare, as certified by the commissioner, until such time that the commissioner certifies that the plan is insuring less than 10 percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State;
e. Except for risks written in automobile insurance urban enterprise zones pursuant to subsection i., or risks written pursuant to subsection j. of this section, that it shall not provide coverage to an eligible person as defined pursuant to section 25 of P.L.1990, c.8 (C.17:33B-13);
f. (Deleted by amendment, P.L.1997, c.151.)
g. That the plan shall not be subsidized by any source external to the plan;
h. That a qualified insurer who writes automobile insurance risks in those automobile insurance urban enterprise zones designated by the commissioner pursuant to section 20 of P.L.1997, c.151 (C.17:33C-2) shall receive assigned risk credits for voluntary risks written in those designated automobile insurance urban enterprise zones as a direct writer or through a UEZ agent or agents or through any agent with whom the insurer has an in-force contract as of the effective date of P.L.1997, c.151 (C.17:33B-64 et al.). The commissioner shall establish by regulation the manner in which any qualified automobile insurer may utilize the provisions of this subsection. In no event shall that credit apply to reduce an insurer's obligations under subsection i. of this section;
i. (1) For a voluntary rating tier to accommodate eligible persons, as defined in section 25 of P.L.1990, c.8 (C.17:33B-13), residing in automobile insurance urban enterprise zones, designated by the commissioner pursuant to section 20 of P.L.1997, c.151 (C.17:33C-2), to provide increased availability and encourage the voluntary writing of eligible persons residing in those zones;
(2) The rates utilized in this voluntary rating tier shall be the voluntary market rates in use by the insurer to whom the risk is assigned in that territory;
(3) The voluntary rating tier shall not provide insurance coverage for more than five percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State, and the number of exposures written in the voluntary rating tier shall be included for computing the maximum number of exposures permitted to be written in the plan;
(4) The plan shall distribute risks submitted by qualified producers to insurers authorized to write automobile insurance in this State pursuant to a fair and nondiscriminatory formula established by the commissioner. The formula shall provide that insurers which have, and maintain, an aggregate voluntary automobile insurance marketshare in automobile insurance urban enterprise zones, which is reasonably equal to the insurer's voluntary Statewide marketshare excluding risks written in automobile insurance urban enterprise zones, shall be exempt from these distributions;
(5) Qualified producers may submit eligible person risks from automobile insurance urban enterprise zones to the plan for coverage in the voluntary rating tier. As used in this subsection i.: a "qualified producer" means a UEZ agent, as defined in section 19 of P.L.1997, c.151 (C.17:33C-1), who has met any limit on exposures that may be written in accordance with the UEZ agent's agreement with the appointing insurer pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4); and a producer who: is duly licensed with property/casualty authority for the three years immediately preceding the effective date of P.L.1997, c.151 (C.17:33B-64 et al.); has no affiliation with a voluntary market insurer for the placement of automobile insurance; had an affiliation with a voluntary market insurer for the placement of automobile insurance that was terminated by the insurer in the last three years; demonstrates to the plan his competency, efficiency and effectiveness in the solicitation, negotiation and effectuation of automobile insurance as evidenced by any history of disciplinary actions or complaints against the producer, and other relevant factors; conducts his business in an office in an automobile insurance urban enterprise zone; and meets such other requirements as may be established by the commissioner by regulation. For purposes of this subsection i., "insurer" means an insurer or group of affiliated insurers admitted or authorized to transact the business of automobile insurance in this State;
(6) This subsection shall expire on April 1, 2009;
j. For a voluntary rating tier to accommodate eligible persons, as defined in section 25 of P.L.1990, c.8 (C.17:33B-13), denied or refused renewal of automobile insurance in a rating territory by an insurer granted relief pursuant to subsection d. of section 27 of P.L.1990, c.8 (C.17:33B-15);
k. That an insurer granted relief pursuant to subsection d. of section 27 of P.L.1990, c.8 (C.17:33B-15) shall receive assigned risk credits for voluntary risks written in excess of the percentage growth standard established by that subsection d. The commissioner shall establish by regulation the manner in which such an insurer may utilize the provisions of this subsection. In no event shall that credit apply to reduce an insurer's obligations under subsection i. of this section; and
l. That an insurer granted relief pursuant to subsection d. of section 27 of P.L.1990, c.8 (C.17:33B-15) shall also receive assigned risk credits for the voluntary first renewal of an eligible person written pursuant to subsection j. of this section.
Prior to the adoption or amendment of such rules and regulations, the commissioner shall consult with such members of the insurance industry as he deems appropriate. Such consultation shall be in addition to any otherwise required public hearing or notice with regard to the adoption or amendment of rules and regulations.
The governing body administering the plan shall report annually to the Legislature and the Governor on the activities of the plan. The report shall contain an actuarial analysis regarding the adequacy of the rates for each coverage for the safeness and soundness of the plan.
## **Chapter 29E** {#struct-chapter-29e}
##### **§ 17:29E-1** Definitions relative to the Insurance Claims Ombudsman. {#sec-17-29e-1 omnilex-key=us-nj-statutes--title-17--17:29E-1}
47. For the purposes of sections 48 through 61 of this amendatory and supplementary act:
"Commissioner" means the Commissioner of Banking and Insurance;
"Claim" means any claim filed under a policy of insurance issued pursuant to R.S.17:17-1, P.L.1972, c.70 (C.39:6A-1 et seq.) or any policy of life or health insurance issued pursuant to Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes;
"Insurance" means any contract of direct insurance written pursuant to R.S.17:17-1, P.L.1972, c.70 (C.39:6A-1 et seq.) or any policy of life or health insurance issued pursuant to Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes;
"Ombudsman" means the Insurance Claims Ombudsman appointed pursuant to section 48 of this amendatory and supplementary act.
##### **§ 17:29E-2** Office of the Insurance Claims Ombudsman. {#sec-17-29e-2 omnilex-key=us-nj-statutes--title-17--17:29E-2}
48. There is created within the Department of Banking and Insurance the Office of the Insurance Claims Ombudsman. The ombudsman shall be appointed by the Governor with the advice and consent of the Senate and shall serve at the pleasure of the Governor during the Governor's term of office. The ombudsman shall devote his entire time to the duties of his office. Any vacancy occurring in the position of ombudsman shall be filled in the same manner as the original appointment. If the ombudsman shall be unable for any reason to serve his full term of office, the Governor may designate an acting ombudsman until a successor is appointed and qualified. The ombudsman shall have at least a baccalaureate degree and at least seven years' experience in property and casualty or life and health insurance, which may include experience as a broker or an agent.
##### **§ 17:29E-3** Duties of ombudsman. {#sec-17-29e-3 omnilex-key=us-nj-statutes--title-17--17:29E-3}
49. The ombudsman shall:
a. Administer and organize the work of the office and hire such persons as shall be deemed necessary to effectuate his duties, subject to Title 11A (Civil Service) of the New Jersey Statutes, and within the limits of funds made available by the Department of Banking and Insurance;
b. Appoint and employ attorneys, in accordance with any applicable law, regulation or executive order, and any consultants, independent adjusters, claims specialists or others for the purpose of providing professional advice as the ombudsman may from time to time require, within the limits of the funds provided therefor;
c. Investigate consumer complaints regarding policies of insurance, including the payment of claims on policies of insurance;
d. Establish procedures to monitor the implementation of P.L.1985, c.179 (C.17:23A-1 et seq.), P.L.1947, c.379 (C.17:29B-1 et seq.), P.L.1982, c.95 (C.17:35C-1 et seq.) and chapter 30 of Title 17B of the New Jersey Statutes and investigate violations of section 8 of P.L.1992, c.144 (C.17:35C-11).
e. Respond to inquiries from consumers, including, but not limited to, those regarding policy provisions and the availability of coverage;
f. Publish and disseminate buyers' guides and, where provided by law, comparative rates; provided, however, that this shall not apply to any policy of health insurance issued pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.);
g. Review conduct of arbitrators appointed under the terms of the policy to arbitrate disputes, except policies issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.);
h. Promulgate such rules and regulations as shall be necessary to effectuate the purposes of sections 48 through 61 of this amendatory and supplementary act; and
i. Perform such other functions as may be prescribed by this or by any other law or regulation.
##### **§ 17:29E-4** Application for review of claims settlement; exemptions. {#sec-17-29e-4 omnilex-key=us-nj-statutes--title-17--17:29E-4}
50. Any person who: a. has reasonable cause to believe that an insurer has failed or refuses to settle a claim in accordance with the provisions of the insurance contract or engaged in any practice in violation of the provisions of P.L.1985, c.179 (C.17:23A-1 et seq.), P.L.1947, c.379 (C.17:29B-1 et seq.), P.L.1982, c.95 (C.17:35C-1 et seq.), chapter 30 of Title 17B of the New Jersey Statutes or section 8 of P.L.1992, c.144 (C.17:35C-11); and, in the case of disputed claims, b. has previously filed an appeal with the insurer's internal appeals procedure established pursuant to section 55 of this amendatory and supplementary act, which has been adjudicated, or other dispute resolution procedure established pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.), P.L.1997, c.192 (C.26:2S-1 et seq.), or sections 1 through 12 of P.L.1983, c.358 (C.39:6A-24 through 39:6A-35, inclusive) may file an application with the ombudsman for a review of the claims settlement. Any disputes which may be or have been filed or adjudicated pursuant to sections 24 and 25 of P.L.1998, c.21 (C.39:6A-5.1 and C.39:6A-5.2) shall not be subject to the ombudsman's review.
##### **§ 17:29E-5** Powers of ombudsman involving disputed claim. {#sec-17-29e-5 omnilex-key=us-nj-statutes--title-17--17:29E-5}
51. In any investigation involving a disputed claim, the ombudsman may:
a. Investigate whether the claims settlement was appropriate and in accordance with the contract;
b. Make the necessary inquiries and obtain such information as he deems necessary;
c. Hold a hearing on the disputed claim;
d. Inspect any books or records which are relevant to the claim;
e. Compel any person to produce at a specific time and place, by subpoena, any documents, books, records, papers, objects or other evidence which he believes may relate to a claim under investigation.
##### **§ 17:29E-6** Refusal of ombudsman to investigate complaint; grounds. {#sec-17-29e-6 omnilex-key=us-nj-statutes--title-17--17:29E-6}
52. The ombudsman need not investigate any complaint if he determines that:
a. The complaint is trivial, frivolous, vexatious or not made in good faith;
b. The complaint has been too long delayed to justify present investigation;
c. The resources available, considering the established priorities, are insufficient for an adequate investigation; or
d. The matter complained of is not within the investigatory authority of the office.
##### **§ 17:29E-7** Maintenance of central registry of claims investigations; reports. {#sec-17-29e-7 omnilex-key=us-nj-statutes--title-17--17:29E-7}
53. The ombudsman shall maintain a central registry of all claims investigations which have been disposed of and closed, the nature of the investigation, findings, and recommended actions. No information so compiled shall be construed to be a public record. In addition, the ombudsman shall:
a. Report to the commissioner any evidence that an insurer has established a pattern of settlement practices which would constitute an unfair claims settlement practice within the meaning of P.L.1947, c.379 (C.17:29B-1 et seq.) or any violations of P.L.1985, c.179 (C.17:23A-1 et seq.), P.L.1947, c.379 (C.17:29B-1 et seq.), P.L.1982, c.95 (C.17:35C-1 et seq.) chapter 30 of Title 17B of the New Jersey Statutes or section 8 of P.L.1992, c.144 (C.17:35C-11);
b. Report to the commissioner any contract provision, including any endorsements, which are unfairly discriminatory, confusing, misleading or contrary to public policy, along with a recommendation as to whether the policy form should be modified or withdrawn.
##### **§ 17:29E-8** Powers relative to trade, marketing practices. {#sec-17-29e-8 omnilex-key=us-nj-statutes--title-17--17:29E-8}
54. With respect to trade or marketing practices, the ombudsman may:
a. Conduct an investigation regarding an insurer's trade practices, including claims settlement practices and marketing practices;
b. Make the necessary inquiries and obtain such information as he deems necessary;
c. Hold a hearing;
d. Inspect any books or records which may be necessary for the investigation;
e. Compel any person to produce at a specific time and place, by subpoena, any documents, books, records, papers, objects or other evidence which he believes may relate to the investigation.
The ombudsman shall report his findings to the commissioner with respect to the trade practices or marketing practices under investigation.
##### **§ 17:29E-9** Insurer to establish internal appeals procedure. {#sec-17-29e-9 omnilex-key=us-nj-statutes--title-17--17:29E-9}
55. Every insurer writing property and casualty insurance or life insurance in this State shall establish an internal appeals procedure for the review of disputed claims, in accordance with terms set forth by the commissioner by rule and regulation or as otherwise provided by law or regulation. The review shall be conducted by a panel of the insurer's employees, who shall be personnel other than those responsible for claims payment on a day-to-day basis and shall be conducted within 10 business days of the receipt of the complaint.
##### **§ 17:29E-10** Form for filing complaints; recommendation of ombudsman. {#sec-17-29e-10 omnilex-key=us-nj-statutes--title-17--17:29E-10}
56. Complaints shall be filed on a form set forth by the ombudsman. The office of the ombudsman shall acknowledge the receipt of complaints, and advise the applicants of any action taken or opinions and recommendations which may have been made by it to the insurer. The ombudsman shall make recommendations to the commissioner as he deems necessary, including, but not limited to:
a. A recommendation that a policy form or endorsement thereon which he finds unfairly discriminatory, misleading or contrary to public policy be modified;
b. A recommendation that specific rules and regulations promulgated by the commissioner, including rules concerning trade practices and claims settlement practices, be modified or repealed;
c. A recommendation that the claims settlement practices of a specific insurer or insurers be further investigated by the commissioner;
d. A recommendation that the commissioner impose penalties or other sanctions against an insurer or insurers as a result of the insurer's claims settlement practices.
##### **§ 17:29E-11** Publicizing of information pertaining to ombudsman. {#sec-17-29e-11 omnilex-key=us-nj-statutes--title-17--17:29E-11}
57. Every buyer's guide which is required to be provided to insureds for any line of insurance shall contain a notice describing the functions of the ombudsman, the mailing address of the ombudsman, and a toll-free information telephone number. The ombudsman may publicize his existence, function and activities to the public at large.
##### **§ 17:29E-12** Confidentiality of information; privilege. {#sec-17-29e-12 omnilex-key=us-nj-statutes--title-17--17:29E-12}
58. a. Any correspondence or written communication from any complainant and any written material submitted by an insurer shall remain confidential and shall not be part of any public record, unless the parties authorize, in writing, the release of the information, or except for such disclosures as may be necessary to enable the ombudsman to perform his duties and to support any opinions or recommendations or as may be necessary to enable the commissioner to perform any function authorized by law.
b. Any person conducting or participating in any investigation of a complaint who discloses to any person, other than the office of the ombudsman or the Department of Banking and Insurance, or those authorized by the ombudsman or the commissioner to receive it, any information collected during the investigation, is guilty of a disorderly person's offense.
c. Any statement or communication made by the office of the ombudsman relevant to a complaint received by the ombudsman, to proceedings conducted either by the ombudsman or by or on behalf of the commissioner, or relating to an investigation conducted by the ombudsman, which is provided to the office in good faith, shall be absolutely privileged.
d. The ombudsman shall not be required to testify in court with respect to matters held to be confidential except as the court may deem necessary to enforce the provisions of sections 48 through 61 of this amendatory and supplementary act or as the commissioner may deem necessary in conjunction with the execution of any power of the commissioner authorized by law.
e. Nothing in this section shall be deemed to limit the disclosure of information to law enforcement and regulatory agencies.
##### **§ 17:29E-13** Notification of disposition of claim; admissibility. {#sec-17-29e-13 omnilex-key=us-nj-statutes--title-17--17:29E-13}
59. Upon making his determination as to the appropriate disposition of a claim, the ombudsman shall notify the insurer and the claimant of his decision. The decision shall be admissible in any court action or any other proceeding which is instituted to determine final disposition of the claim. The ombudsman may file a brief with the court in connection with an action relating to the disposition of a claim.
##### **§ 17:29E-14** Violations, penalties. {#sec-17-29e-14 omnilex-key=us-nj-statutes--title-17--17:29E-14}
60. Any person who willfully hinders the lawful actions of the ombudsman or willfully refuses to comply with his lawful demands, including the demand for the inspection of records, shall be subject to a penalty of not more than $5,000. The penalty shall be collected and enforced by summary proceedings pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq. Each violation of sections 48 through 61 of this amendatory and supplementary act shall constitute a separate offense. Notwithstanding any other provision of law to the contrary, no investigation or determination made by the ombudsman shall be dispositive of a violation of P.L.1960, c.39 (C.56:8-1 et seq.) but may be considered relevant in determining whether a violation of such act has occurred.
##### **§ 17:29E-15** Annual report to Governor, Legislature. {#sec-17-29e-15 omnilex-key=us-nj-statutes--title-17--17:29E-15}
61. The ombudsman shall report to the Governor and the Legislature on or before September 30 of each year, summarizing his activities for the preceding year, documenting any significant insurance industry problems with regard to claims settlement practices in any line of insurance, and setting forth any recommendations for statutory or regulatory change which will further the State's capacity to resolve claims disputes.
## **Chapter 30A** {#struct-chapter-30a}
##### **§ 17:30A-1** Short title {#sec-17-30a-1 omnilex-key=us-nj-statutes--title-17--17:30A-1}
This act shall be known and may be cited as the "New Jersey Property-Liability Insurance Guaranty Association Act."
##### **§ 17:30A-2** Payment of covered claims. {#sec-17-30a-2 omnilex-key=us-nj-statutes--title-17--17:30A-2}
2. a. The purpose of this act is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment, to minimize financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, to provide an association to assess the cost of such protection among insurers, and to provide a mechanism to run off, manage, administer and pay claims asserted against the Unsatisfied Claim and Judgment Fund, created pursuant to P.L.1952, c.174 (C.39:6-61 et seq.), the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.), the Market Transition Facility, created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), and "the workers' compensation security fund," created pursuant to R.S.34:15-105.
b. This act shall apply to all kinds of direct insurance, except life insurance, accident and health insurance, workers' compensation insurance, except as provided by P.L.2009, c.327 (C.34:15-105.1 et al.), title insurance, annuities, surety bonds, credit insurance, mortgage guaranty insurance, municipal bond coverage, fidelity insurance, investment return assurance, ocean marine insurance and pet health insurance.
##### **§ 17:30A-2.1** Findings, declarations relative to automobile insurance and consolidation of operations. {#sec-17-30a-2.1 omnilex-key=us-nj-statutes--title-17--17:30A-2.1}
1. With respect to sections 2 through 34 of this act, the Legislature finds and declares that:
a. The Unsatisfied Claim and Judgment Fund, created pursuant to P.L.1952, c.174 (C.39:6-61 et seq.) currently serves a dual purpose: its original intent to pay the claims of victims of hit and run or uninsured motor vehicle accidents in certain circumstances, and a subsequent objective to reimburse private passenger automobile insurers when medical expense benefits payments exceed $75,000 per person per accident.
b. When the Unsatisfied Claim and Judgment Fund was charged with reimbursing an insurer for medical expense benefits in excess of $75,000 per person per accident, the amount of medical expense benefits provided on a per person, per accident basis was unlimited. However, insurers are required at present to provide medical expense benefits only up to $250,000 per person per accident. Prospective elimination of the reimbursement function of the Unsatisfied Claim and Judgment Fund for medical expense benefits in excess of $75,000 per person for an injury suffered in an accident covered by a policy issued or renewed on or after January 1, 2004 is deemed appropriate. Insurers would continue to be reimbursed for medical benefits in excess of $75,000 per person per accident for injuries suffered in accidents covered by policies issued or renewed prior to January 1, 2004.
c. Since all motor vehicle liability policies issued in this State, except basic automobile insurance policies, include coverage for the payment of all or part of the sums which a person insured thereunder shall be legally entitled to recover as compensatory damages from owners or operators of uninsured motor vehicles (other than hit and run motor vehicles), the number of third party claims made against the Unsatisfied Claim and Judgment Fund is not substantial. It would be more efficient to have these claims administered by the New Jersey Property-Liability Insurance Guaranty Association, established pursuant to P.L.1974, c.17 (C.17:30A-1 et seq.).
d. The New Jersey Automobile Full Insurance Underwriting Association, created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.) and the Market Transition Facility, created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11) have both ceased issuing private passenger automobile insurance policies and are currently in run off, operating only to process the remaining claims against them. Currently, the funding for the claims payment and other operational activities of the New Jersey Automobile Full Insurance Underwriting Association and the Market Transition Facility is primarily provided by the New Jersey Automobile Insurance Guaranty Fund, created pursuant to section 23 of P.L.1990, c.8 (C.17:33B-5). However, existing statutes do not state how the consolidation or runoff operations of these entities will be handled. Administrative and operational efficiencies would result from consolidating these entities and transferring the claims handling and other administrative duties of these entities to the New Jersey Property-Liability Insurance Guaranty Association.
e. Based upon recent financial and actuarial analysis, it is anticipated that the value of all residual New Jersey Automobile Full Insurance Underwriting Association and Market Transition Facility assets, including the balances in the New Jersey Automobile Insurance Guaranty Fund, to be transferred to the New Jersey Property-Liability Insurance Guaranty Association will be adequate to allow the association to discharge all remaining obligations of the New Jersey Automobile Full Insurance Underwriting Association and Market Transition Facility which are now to be administered by the association. Since no asset shortfall is projected, no additional assessment or other revenue generating powers are being conferred upon the association at this time with respect to such remaining obligations.
f. It is in the public interest to authorize the transfer and consolidation of compatible operations of the Unsatisfied Claim and Judgment Fund, the New Jersey Automobile Full Insurance Underwriting Association, and the Market Transition Facility to the New Jersey Property-Liability Insurance Guaranty Association.
g. Following transfer to the New Jersey Property-Liability Insurance Guaranty Association by the Unsatisfied Claim and Judgment Fund of all its management, administrative and claim functions, the Unsatisfied Claim and Judgment Fund shall continue to exist as a separate legal entity subject to the provisions of P.L.2003, c.89 (C.17:30A-2.1 et al.).
h. The New Jersey Property-Liability Insurance Guaranty Association will run off the remaining policyholder claim obligations of the New Jersey Automobile Full Insurance Underwriting Association and Market Transition Facility. The New Jersey Property-Liability Insurance Guaranty Association will also run off the obligations of the Unsatisfied Claim and Judgment Fund pursuant to section 2 of P.L.1977, c.310 (C.39:6-73.1) and take over all governance, administrative and financial functions of the Unsatisfied Claim and Judgment Fund, including the claim payment function.
i. As part of the consolidation being accomplished by P.L.2003, c.89 (C.17:30A-2.1 et al.), the New Jersey Property-Liability Insurance Guaranty Association is formally designated as a servicing facility for several statutory entities for which it currently provides administrative services and also for the Unsatisfied Claim and Judgment Fund which, pursuant to P.L.2003, c.89 (C.17:30A-2.1 et al.), is transferring specified functions to the New Jersey Property-Liability Insurance Guaranty Association. The association is also authorized to serve, either by designation or by contract, as a servicing facility for other entities which may be recommended by the association's board of directors and approved by the commissioner.
j. This act is not intended to abrogate in any way the settlement agreement entered into by the State and member insurers of the Market Transition Facility in June, 1994.
##### **§ 17:30A-2.2** Findings, declarations relative to transfer, consolidation of "the workers' compensation security fund." {#sec-17-30a-2.2 omnilex-key=us-nj-statutes--title-17--17:30A-2.2}
7. The Legislature finds and declares that:
a. It is in the public interest to authorize the transfer and consolidation of compatible operations of "the workers' compensation security fund" to the New Jersey Property-Liability Insurance Guaranty Association.
b. Following the transfer to the New Jersey Property-Liability Insurance Guaranty Association of its respective management, administrative and claim functions, "the workers' compensation security fund" shall continue to exist as a separate legal entity subject to the provisions of P.L.2009, c.327 (C.34:15-105.1 et al.).
c. The New Jersey Property-Liability Insurance Guaranty Association will administer the obligations of "the workers' compensation security fund" pursuant to R.S.34:15-105 et seq., and take over all governance, administrative and financial functions of "the workers' compensation security fund," including the claim payment function.
d. The New Jersey Property-Liability Insurance Guaranty Association is formally designated as the servicing facility for several statutory entities for which it currently provides administrative services and also for "the workers' compensation security fund."
##### **§ 17:30A-3** Severability {#sec-17-30a-3 omnilex-key=us-nj-statutes--title-17--17:30A-3}
If any provision of this act or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and for this purpose the provisions of this act are declared to be separable.
##### **§ 17:30A-4** Construction of act; inconsistent laws {#sec-17-30a-4 omnilex-key=us-nj-statutes--title-17--17:30A-4}
a. This act shall be liberally construed to effect the purpose under section 2 which shall constitute an aid and guide to interpretation.
b. All laws and parts of laws of this State inconsistent with this act are hereby deemed superseded to the extent of such inconsistency.
##### **§ 17:30A-5** Definitions relative to the Property-Liability Insurance Guaranty Association. {#sec-17-30a-5 omnilex-key=us-nj-statutes--title-17--17:30A-5}
5. As used in this act:
"Affiliate" means a person who directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer;
"Association" means the New Jersey Property-Liability Insurance Guaranty Association created under section 6;
"Commissioner" means the Commissioner of Banking and Insurance of this State;
"Covered claim" means an unpaid claim, including one of unearned premiums, which arises out of and is within the coverage, and not in excess of the applicable limits of an insurance policy to which this act applies, issued by an insurer, if such insurer becomes an insolvent insurer after January 1, 1974, and (1) the claimant or insured is a resident of this State at the time of the insured event provided that for an entity other than an individual, the residence of the claimant or insured is the state in which its principal place of business was located at the time of the insured event; or (2) the claim is a first party claim made by an insured for damage to property with a permanent location in this State.
"Covered claim" shall not include: (1) any amount due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise; provided, that a claim for any such amount, asserted against a person insured under a policy issued by an insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool, or underwriting association, would be a "covered claim," may be filed directly with the receiver of the insolvent insurer, but in no event may any such claim be asserted in any legal action against the insured of such insolvent insurer; (2) amounts for interest on unliquidated claims; (3) punitive damages unless covered by the policy; (4) counsel fees for prosecuting suits for claims against the association;(5) assessments or charges for failure of such insolvent insurer to have expeditiously settled claims; (6) counsel fees and other claim expenses incurred prior to the date of insolvency; (7) a claim filed with the association, liquidator or receiver of an insolvent insurer after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer or, in the event a final date is not set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer, two years from the date of the order of liquidation, unless the claimant demonstrates unusual hardship and the commissioner approves of treatment of the claim as a "covered claim." "Unusual hardship" shall be defined in regulations promulgated by the commissioner. With respect to insurer insolvencies pending as of the effective date of P.L.2004, c.175, a "covered claim" shall not include a claim filed with the association, liquidator or receiver of an insolvent insurer: (a) more than one year after the effective date of P.L.2004, c.175; or (b) the date set by the court for the filing of claims against the liquidator or receiver of the insolvent insurer, whichever date occurs later;
and (8) any first party claim by an insured whose net worth exceeds $25 million on December 31 of the year prior to the year in which the insurer becomes an insolvent insurer; provided that an insured's net worth on that date shall be deemed to include the aggregate net worth of the insured and all of its affiliates as calculated on a consolidated basis;
"Credit insurance" means credit life, credit disability, credit property, credit unemployment, involuntary unemployment, mortgage life, mortgage guaranty, mortgage disability, automobile dealer gap insurance and any other form of insurance offered in connection with an extension of credit that the commissioner determines should be designated a form of credit insurance;
"Exhaust" means with respect to other insurance, the application of a credit for the maximum limit under the policy, except that in any case in which continuous indivisible injury or property damage occurs over a period of years as a result of exposure to injurious conditions, exhaustion shall be deemed to have occurred only after a credit for the maximum limits under all other coverages, primary and excess, if applicable, issued in all other years has been applied. With respect to health insurance and workers' compensation insurance, "exhaust" means the application of a credit for the amount of recovery under the insurance policy. With respect to another insurance guaranty association or its equivalent, "exhaust" means the application of a credit for the maximum statutory limit of recovery from that other guaranty association or its equivalent. The amount of a covered claim payable by the association shall be reduced by the amount of any applicable credits;
"Insolvent insurer" means (1) a licensed insurer admitted pursuant to R.S.17:32-1 et seq. or authorized pursuant to R.S.17:17-1 et seq., or P.L.1945, c.161 (C.17:50-1 et seq.) to transact the business of insurance in this State either at the time the policy was issued or when the insured event occurred, and (2) against whom an order of liquidation has been entered with a finding of insolvency by a court of competent jurisdiction. "Insolvent insurer" does not include any unauthorized or nonadmitted insurer whether or not deemed eligible for surplus lines pursuant to P.L.1960, c.32 (C.17:22-6.37 et seq.);
"Member insurer" means any person who (1) writes any kind of insurance to which this act applies under section 2 b. including the exchange of reciprocal or interinsurance contracts and (2) is a licensed insurer admitted or authorized to transact the business of insurance in this State. "Member insurer" does not include any unauthorized or nonadmitted insurer whether or not deemed eligible for surplus lines pursuant to P.L.1960, c.32 (C.17:22-6.37 et seq.);
"Net direct written premiums" means direct gross premiums written in this State on insurance policies to which this act applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers, and does not include premiums on policies issued by an insurer as a member of the New Jersey Insurance Underwriting Association pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.);
"Ocean marine insurance" means any form of insurance, regardless of the name, label or marketing designation of the insurance policy, which insures against maritime perils or risks and other related perils or risks, which are usually insured against by traditional marine insurance, such as hull and machinery, marine builders risk, and marine protection and indemnity. Perils and risks insured against include, without limitation, loss damage, expense or legal liability of the insured for loss, damage or expense arising out of or incident to ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways for commercial purposes, including liability of the insured for personal injury, illness or death or for loss or damage to the property of the insured or another person; and
"Person" means any individual, corporation, partnership, association or voluntary organization.
##### **§ 17:30A-6** New Jersey Property-Liability Insurance Guaranty Association. {#sec-17-30a-6 omnilex-key=us-nj-statutes--title-17--17:30A-6}
6. There is created a private, nonprofit, unincorporated, legal entity to be known as the New Jersey Property-Liability Insurance Guaranty Association. All insurers defined as member insurers in section 5 shall be and remain members of the association as a condition of their authority to transact insurance in this State. The association shall perform its functions under a plan of operation established and approved under section 9 and shall exercise its powers through a board of directors established under section 7.
The association is also authorized and shall have all of the powers necessary and appropriate for the management and administration of the affairs of the New Jersey Surplus Lines Insurance Guaranty Fund, in accordance with the provisions of the "New Jersey Surplus Lines Insurance Guaranty Fund Act," P.L.1984, c.101 (C.17:22-6.70 et seq.).
The association is also authorized and shall have all of the powers necessary and appropriate for the management and administration of the affairs of, and the payment of valid claims asserted against: the Unsatisfied Claim and Judgment Fund, created pursuant to the provisions of P.L.1952, c.174 (C.39:6-61 et seq.); the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to the provisions of P.L.1983, c.65 (C.17:30E-1 et seq.); the Market Transition Facility created pursuant to the provisions of section 88 of P.L.1990, c.8 (C.17:33B-11); and "the workers' compensation security fund" created pursuant to R.S.34:15-105.
##### **§ 17:30A-6.1** Transfer of functions, powers, duties to PLIGA. {#sec-17-30a-6.1 omnilex-key=us-nj-statutes--title-17--17:30A-6.1}
6. a. Notwithstanding the provisions of any other law to the contrary, all of the functions, powers and duties of the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.), and the Market Transition Facility, created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), shall be transferred to the New Jersey Property-Liability Insurance Guaranty Association, established pursuant to P.L.1974, c.17 (C.17:30A-1 et seq.).
b. Notwithstanding the provisions of any other law to the contrary, the commissioner shall provide for the liquidation of the policyholder liabilities and an orderly transfer and transition of the operations, functions, powers and duties, including all the remaining assets and policyholder liabilities of the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.), and the Market Transition Facility, created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), to the New Jersey Property-Liability Insurance Guaranty Association.
c. Notwithstanding the provisions of any other law to the contrary, all balances in the New Jersey Automobile Insurance Guaranty Fund created pursuant to section 23 of P.L.1990, c.8 (C.17:33B-5) are hereby transferred to the New Jersey Property-Liability Insurance Guaranty Association.
d. Notwithstanding any other law to the contrary, the commissioner may in his discretion provide for the liquidation of the liabilities and an orderly transition of the operations, functions, powers and duties of the Unsatisfied Claim and Judgment Fund, created pursuant to P.L.1952, c.174 (C.39:6-61 et seq.) regarding its obligations pursuant to section 2 of P.L.1977, c.310 (C.39:6-73.1) to the New Jersey Property-Liability Insurance Guaranty Association.
e. Notwithstanding any other law to the contrary, the commissioner may in his discretion by order determine when the status as separate legal entities of the New Jersey Automobile Full Insurance Underwriting Association and the Market Transition Facility may be terminated.
##### **§ 17:30A-7** Board of directors {#sec-17-30a-7 omnilex-key=us-nj-statutes--title-17--17:30A-7}
a. The board of directors of the association shall consist of not less than five nor more than nine members serving terms as established in the plan of operation hereinafter described. One member of the board shall be appointed by the commissioner from and among the officers of the various mutual insurance companies, and one member of the board shall be appointed by the commissioner from among the officers of the various stock insurance companies. The remaining members of the board shall be selected by member insurers subject to the approval of the commissioner. Vacancies on the board shall be filled for the remaining period of the term in the manner described in the plan of operation. To select the initial board of directors, and initially organize the association, the commissioner shall give notice to all member insurers of the time and place of the organizational meeting. In determining voting rights at the organizational meeting, each member insurer shall be entitled to one vote in person or by proxy. If the board of directors is not selected within 60 days after notice of the organizational meeting, the commissioner may appoint all the initial members;
b. In approving selections or in appointing members to the board, the commissioner shall consider, among other things, whether all member insurers are fairly represented;
c. Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.
##### **§ 17:30A-8** Association's obligations, powers and duties. {#sec-17-30a-8 omnilex-key=us-nj-statutes--title-17--17:30A-8}
8. a. The association shall:
(1) Be obligated to the extent of the covered claims against an insolvent insurer incurred prior to or 90 days after the determination of insolvency, or before the policy expiration date if less than 90 days after said determination, or before the insured replaces the policy or causes its cancellation, if he does so within 90 days of the determination, except that in the case of private passenger automobile insurance, the commissioner may, depending upon factors such as the level of that insurance written by the insolvent insurer, the volume of claims arising under that insurance, and conditions currently relating to the voluntary market for that insurance in this State, order the association to treat all or a portion of claims arising under that insurance as covered claims if they are incurred prior to or after the determination of insolvency, but before the policy expiration date or the date upon which the insured replaces the policy or causes its cancellation, and otherwise qualify as covered claims under the act. That obligation shall include only that amount of each covered claim which is less than $300,000.00 per claimant and subject to any applicable deductible and self-insured retention contained in the policy, except that the $300,000.00 limitation shall not apply to a covered claim arising out of insurance coverage mandated by section 4 of P.L.1972, c.70 (C.39:6A-4), or to a valid claim for compensation or death benefits arising out of workers' compensation insurance coverage under R.S.34:15-1 et seq. or under the federal "Longshore and Harbor Workers' Compensation Act," 44 Stat. 1424 (33 U.S.C. s.901 et seq.). In the case of benefits payable under subsection a. of section 4 of P.L.1972, c.70 (C.39:6A-4), the association shall be liable for payment of benefits in an amount not to exceed the amount set forth in section 4 of P.L.1972, c.70 (C.39:6A-4). In the case of workers' compensation claims, the association shall administer the payment of valid claims with respect to the injury or death of workers under R.S.34:15-1 et seq., or the federal "Longshore and Harbor Workers' Compensation Act," 44 Stat. 1424 (33 U.S.C. s.901 et seq.), arising from insurance coverage of risks located or resident in this State, as provided in R.S.34:15-105 and secured through a standard, primary workers' compensation policy. The commissioner may pay a portion of or defer the association's obligations for covered claims based on the monies available to the association. In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the limits of liability stated in the policy of the insolvent insurer from which the claim arises. Any obligation of the association to defend an insured shall cease upon the association's payment or tender of an amount equal to the lesser of the association's covered claim statutory limit or the applicable policy limit;
(2) Be 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;
(3) Assess member insurers in amounts necessary to pay:
(a) The obligations of the association under paragraphs (1) and (11) of this subsection;
(b) The expenses of handling covered claims;
(c) The cost of examinations under section 13; and
(d) Other expenses authorized by this act.
The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment.
Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer of the association may be assessed pursuant to this paragraph (3) in any year in an amount greater than 2% of that member insurer's net direct written premiums for the calendar year preceding the assessment with regard to the association's obligation to pay covered claims and related expenses arising under coverages issued by insolvent insurers pursuant to P.L.1974, c.17 (C.17:30A-1 et seq.).
The association may, subject to the approval of the commissioner, exempt, abate or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. In the event an assessment against a member insurer is exempted, abated, or deferred, in whole or in part, because of the limitations set forth in this section, the amount by which such assessment is exempted, abated, or deferred shall be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum assessment, together with the other assets of the association, does not provide in any one year an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as it is permitted by this act. Each member insurer serving as a servicing facility may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by such member insurer;
(4) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested;
(5) Notify such persons as the commissioner directs under paragraph (1) of subsection b. of section 10 of P.L.1974, c.17 (C.17:30A-10);
(6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such designation may be declined by a member insurer. The association is designated as a servicing facility for the administration of claim obligations of: (a) the New Jersey Surplus Lines Insurance Guaranty Fund; (b) the New Jersey Medical Malpractice Reinsurance Association; (c) the Unsatisfied Claim and Judgment Fund; and (d) "the workers' compensation security fund." The association may also be designated or may contract as a servicing facility for any other entity which may be recommended by the association's board of directors and approved by the commissioner;
(7) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this act;
(8) Make loans to the New Jersey Surplus Lines Insurance Guaranty Fund, the Unsatisfied Claim and Judgment Fund, and "the workers' compensation security fund" in such amounts and on such terms as the board of directors may determine are necessary or appropriate to effectuate the purposes of P.L.1974, c.17 (C.17:30A-1 et seq.), P.L.1984, c.101 (C.17:22-6.70 et seq.), P.L.1952, c.174 (C.39:6-61 et seq.) and R.S.34:15-103 et seq. in accordance with the plan of operation; provided, however, no such loan transaction shall be authorized to the extent the federal tax exemption of the association or any entity for which it serves as administrator would be withdrawn or the association or any such serviced entity would otherwise incur any federal tax or penalty as a result of such transaction;
(9) (Deleted by amendment, P.L.2004, c.175.)
(10) (Deleted by amendment, P.L.2004, c.175.)
(11) Reimburse an insurer for medical expense benefits in excess of $75,000 per person per accident as provided in section 2 of P.L.1977, c.310 (C.39:6-73.1) for injuries covered under an automobile insurance policy issued prior to January 1, 2004;
(12) Undertake all of the management, administrative, and claims activities of the Unsatisfied Claim and Judgment Fund, created pursuant to P.L.1952, c.174 (C.39:6-61 et seq.), the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.), the Market Transition Facility, created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11) and "the workers' compensation security fund," created pursuant to R.S.34:15-105.
b. The association may:
(1) Employ or retain such persons as are necessary to handle claims and perform such other duties of the association;
(2) Borrow and separately account for funds from any source, including, but not limited to, the New Jersey Surplus Lines Insurance Guaranty Fund, the Unsatisfied Claim and Judgment Fund, and "the workers' compensation security fund," in such amounts and on such terms, as the board of directors may determine are necessary or appropriate to effectuate the purpose of this act in accordance with the plan of operation; provided, however, no such borrowing transaction shall be authorized to the extent the federal tax exemption of the association or any entity for which it serves as administrator would be withdrawn or the association or any such serviced entity would otherwise incur any federal tax or penalty as a result of such transaction;
(3) Sue or be sued;
(4) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this act;
(5) Perform such other acts as are necessary or proper to effectuate the purpose of this act;
(6) Refund to the member insurers in proportion of the contribution of each member insurer that amount by which the assets exceed the liabilities if, at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities, as estimated by the board of directors for the coming year.
##### **§ 17:30A-9** Plan of operation. {#sec-17-30a-9 omnilex-key=us-nj-statutes--title-17--17:30A-9}
9. a. (1) The association shall submit to the commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the commissioner;
(2) If the association fails to submit a plan of operation acceptable to the commissioner within 90 days following the effective date of this act, or if at any time thereafter the association fails to submit an acceptable amendment to the plan, the commissioner shall, after notice and hearing adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this act. Such rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
b. All member insurers shall comply with the plan of operation.
c. The plan of operation shall:
(1) Establish the procedures whereby all the powers and duties of the association under section 8 of this act will be performed;
(2) Establish procedures for handling assets of the association;
(3) Establish the amount and method of reimbursing members of the board of directors under section 7 of this act;
(4) Establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of such claims shall be periodically submitted to the association by the receiver or liquidator;
(5) Establish regular places and times for meetings of the board of directors;
(6) Establish procedures for records to be kept in all financial transactions of the association, its agents, and the board of directors;
(7) Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner within 30 days after the action or decision;
(8) Establish the procedures whereby selections for the board of directors will be submitted to the commissioner;
(9) Contain additional provisions necessary or proper for the execution of the powers and duties of the association;
(10) Establish procedures for the transition and consolidation of compatible functions of the Unsatisfied Claim and Judgment Fund, the New Jersey Automobile Full Insurance Underwriting Association, the Market Transition Facility, and "the workers' compensation security fund" in order to eliminate redundant operational activities and promote greater efficiencies in claims handling and other operations;
(11) Establish procedures as necessary or proper to finance the operation of and account for receipts and disbursements as well as other financial transactions involving the Unsatisfied Claim and Judgment Fund, the New Jersey Automobile Full Insurance Underwriting Association, the Market Transition Facility, and "the workers' compensation security fund";
(12) Create such advisory boards as necessary or proper to assist in the administration and management of the operations of the Unsatisfied Claim and Judgment Fund.
d. The plan of operation may provide that any or all powers and duties of the association except those under sections 8a.(3) and 8b.(2), are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent. Such a corporation, association or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of the functions of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this act.
##### **§ 17:30A-10** Insolvent insurers; notices; revocation or suspension of certificate or authority. {#sec-17-30a-10 omnilex-key=us-nj-statutes--title-17--17:30A-10}
10. a. The commissioner shall:
(1) Notify the association of the existence of an insolvent insurer not later than three days after he receives notice of the determination of the insolvency. The association shall be entitled to a copy of any complaint seeking an order of liquidation with a finding of insolvency against a member insurer at the same time that such complaint is filed with a court of competent jurisdiction;
(2) Upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.
b. The commissioner may:
(1) Require that the association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this act. Such notification shall be by publication in newspapers of general circulation as the commissioner shall direct;
(2) Suspend or revoke, after notice and hearing, the certificate or authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a fine on any member insurer which fails to pay an assessment when due. Such fine shall not exceed 5% of the unpaid assessment per month, except that no fine shall be less than $100.00 per month;
(3) Revoke the designation of any servicing facility if he finds claims are being handled unsatisfactorily.
##### **§ 17:30A-11** Subrogation; cooperation of claimant; settlement of claims; filing statements of claims paid; access to records. {#sec-17-30a-11 omnilex-key=us-nj-statutes--title-17--17:30A-11}
11. a. Any person recovering under this act shall be deemed to have assigned his rights under the policy to the association to the extent of his recovery from the association. Every insured or claimant seeking the protection of this act shall cooperate with the association to the same extent as such person would have been required to cooperate with the insolvent insurer. The association shall have no cause of action against the insured of the insolvent insurer for any sums it has paid out except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with an assessment liability, payments of claims of the association shall not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments;
b. The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the association or its representatives. The court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this act against the assets of the insolvent insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the liquidator's expenses;
c. The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer;
d. The liquidator, receiver, or statutory successor of an insolvent insurer covered by this act shall permit access by the board or its representative to all of the insolvent insurer's records which would assist the board in carrying out its functions under this act with regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide the board or its representative with copies or permit it to make copies of such records upon the request of the board and at the expense of the board;
e. The association shall have the right to recover from the following persons the amount of any covered claim paid to or on behalf of that person pursuant to P.L.1974, c.17 (C.17:30A-1 et seq.):
(1) An insured whose net worth on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer exceeds $25 million and whose liability obligations to other persons are satisfied in whole or in part by payments made under P.L.1974, c.17 (C.17:30A-1 et seq.); and
(2) Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under P.L.1974, c.17 (C.17:30A-1 et seq.).
##### **§ 17:30A-12** Recovery of covered claims, exhaustion of other sources. {#sec-17-30a-12 omnilex-key=us-nj-statutes--title-17--17:30A-12}
12. a. Any person having a covered claim which may be recovered from more than one insurance guaranty association or its equivalent shall be required to exhaust first his rights under the statute governing 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. If recovery is denied or deferred by that association, a person may proceed to seek recovery from any other insurance guaranty association or its equivalent from which recovery may be legally sought.
b. Any person having a claim, except for a claim for coverage for personal injury protection benefits issued pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4) and section 4 of P.L.1998, c.21 (C.39:6A-3.1), under an insurance policy other than a policy of an insolvent insurer, shall be required to exhaust first his right under that other policy.
For purposes of this subsection b., a claim under an insurance policy shall include a claim under any kind of insurance, whether it is a first-party or third-party claim, and shall include without limitation, general liability, accident and health insurance, workers' compensation, health benefits plan coverage, primary and excess coverage, if applicable, and all other private, group or governmental coverages except coverage for personal injury protection benefits issued pursuant to section 4 of P.L.1972, c.70 (C.39:6A-4) and section 4 of P.L.1998, c.21 (C.39:6A-3.1).
##### **§ 17:30A-13** Examination of insurers possibly in financial condition hazardous to public; reports and recommendations on insolvency of insurers {#sec-17-30a-13 omnilex-key=us-nj-statutes--title-17--17:30A-13}
a. The commissioner shall examine any member insurer who the commissioner has reasonable cause to believe may be insolvent or in a financial condition hazardous to the policyholders or to the public. It shall be the duty of the board of directors, upon majority vote, to notify the commissioner of any information indicating any member insurer may be insolvent or in financial condition hazardous to the policyholders or the public;
b. The board of directors may, upon majority vote, request that the commissioner order an examination of any member insurer which the board in good faith believes may be in a financial condition hazardous to the policyholders or to the public. The commissioner shall begin such examination within a reasonable time after receipt of such request. Any examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the commissioner designates. The cost of any examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the board of directors prior to its becoming a public record, but this shall not preclude the commissioner from complying with subsection c. of this section. The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it shall not be open to public inspection prior to the release of the examination report to the public;
c. It shall be the duty of the commissioner to report to the board of directors when he has reasonable cause to believe that any member insurer examined or being examined at the request of the board of directors may be insolvent or in a financial condition hazardous to the policyholders or to the public;
d. The board of directors may, upon majority vote, make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer. Such reports and recommendations shall not be considered public documents;
e. The board of directors may, upon majority vote, make recommendations to the commissioner for the detection and prevention of insurer insolvencies;
f. The board of directors shall, at the conclusion of any insurer insolvency proceedings in which the association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the association, and submit such report to the commissioner.
##### **§ 17:30A-14** Examination and regulation by commissioner; financial report {#sec-17-30a-14 omnilex-key=us-nj-statutes--title-17--17:30A-14}
The association shall be subject to examination and regulation by the commissioner. The board of directors shall submit, not later than March 31 of each year, a financial report for the preceding calendar year in a form approved by the commissioner.
##### **§ 17:30A-15** Exemption from fees and taxes {#sec-17-30a-15 omnilex-key=us-nj-statutes--title-17--17:30A-15}
The association shall be exempt from payment of all fees and all taxes levied by this State or any of its subdivisions except taxes levied on real or personal property.
##### **§ 17:30A-16** Surcharges. {#sec-17-30a-16 omnilex-key=us-nj-statutes--title-17--17:30A-16}
16. a. The commissioner shall adopt rules permitting member insurers to recoup over a reasonable length of time, a sum reasonably calculated to recoup assessments paid by the member insurer pursuant to paragraph (3) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8) by way of a surcharge on premiums charged for insurance policies to which this act applies. The amount of any surcharge shall be determined by the commissioner. The commissioner may permit an insurer to omit collection of the surcharge from its insureds when the expense of collecting the surcharge would exceed the amount of the surcharge, provided that nothing in this subsection shall relieve the insurer of its obligation to remit the amount of surcharge otherwise collectible.
b. No member insurer shall impose a surcharge on the premiums of any policy to recoup assessments paid pursuant to paragraph (9) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8).
c. Members shall recoup assessments paid by member insurers pursuant to paragraph (11) of section 8 of P.L.1974, c.17 (C.17:30A-8) by way of a surcharge on premiums charged for insurance policies to which this act applies. Members shall recoup these assessments within two years of the date they are paid. The commissioner may permit an insurer to omit collection of the surcharge from its insureds when the expense of collecting the surcharge would exceed the amount of the surcharge, provided that nothing in this subsection shall relieve the insurer of its obligation to remit the amount of the surcharge otherwise collectible.
##### **§ 17:30A-17** Immunity from liability of persons acting under this law {#sec-17-30a-17 omnilex-key=us-nj-statutes--title-17--17:30A-17}
There shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer, the association or its agents or employees, the board of directors, or the commissioner or his representatives for any action taken by them in the performance of their powers and duties under this act.
##### **§ 17:30A-18** Stay of actions or set aside of judgments against insolvent insurers, certain. {#sec-17-30a-18 omnilex-key=us-nj-statutes--title-17--17:30A-18}
18. All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this State shall, subject to full or partial waiver by the association in specific cases involving covered claims, be stayed for 120 days and such additional time thereafter as may be determined by the court from the date of the order of liquidation or any ancillary proceeding initiated in the State, whichever is later, to permit proper defense by the association of all pending causes of action. Public notice of the stay shall be by publication in three newspapers of general circulation in this State within 10 days of the order of liquidation. With respect to any covered claims arising from a judgment under any decision, verdict or finding based on the default of the insolvent insurer or its failure to defend an insured, the association either on its own behalf or on behalf of such insured may apply to have such judgment, order, decision, verdict or finding set aside by the court in which such judgment, order, decision, verdict or finding is entered and shall be permitted to defend against such claim on the merits.
##### **§ 17:30A-19** Termination of association as to kind of insurance with statutory or voluntary plan {#sec-17-30a-19 omnilex-key=us-nj-statutes--title-17--17:30A-19}
a. The commissioner shall by order terminate the operation of the association as to any kind of insurance covered by this act with respect to which he has found, after hearing, that there is in effect a statutory or voluntary plan which:
(1) Is a permanent plan which is adequately funded or for which adequate funding is provided; and
(2) Extends, or will extend to the New Jersey policyholders and residents protection and benefits with respect to insolvent insurers not substantially less favorable and effective to such policyholders and residents than the protection and benefits provided with respect to such kinds of insurance under this act.
b. The commissioner shall by the same such order authorize discontinuance of future payments by insurers to the New Jersey Property-Liability Insurance Guaranty Association with respect to the same kinds of insurance; provided, the assessments and payments shall continue, as necessary, to liquidate covered claims of insurers adjudged insolvent prior to said order and the related expenses not covered by such other plan;
c. In the event the operation of the New Jersey Property-Liability Insurance Guaranty Association shall be so terminated as to all kinds of insurance otherwise within its scope, the association as soon as possible thereafter shall distribute the balance of moneys and assets remaining (after discharge of the functions of the association with respect to prior insurer insolvencies not covered by such other plan, together with related expenses) to the insurers which are then writing in this State policies of the kinds of insurance covered by this act and which had made payments to the association, pro rata upon the basis of the aggregate of such payments made by the respective insurers during the period of 5 years next preceding the date of such order. Upon completion of such distribution with respect to all of the kinds of insurance covered by this act, this act shall be deemed to have expired.
##### **§ 17:30A-20** Prohibition of advertisement using association for purpose of sales or solicitation {#sec-17-30a-20 omnilex-key=us-nj-statutes--title-17--17:30A-20}
No person, including an insurer, agent, or affiliate of an insurer shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement which uses the existence of the New Jersey Property-Liability Insurance Guaranty Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by the New Jersey Property-Liability Insurance Guaranty Association Act; provided, however, this section shall not apply to the New Jersey Property-Liability Insurance Guaranty Association or to any other entity which does not sell or solicit insurance.
## **Chapter 30B** {#struct-chapter-30b}
##### **§ 17:30B-1** Short title {#sec-17-30b-1 omnilex-key=us-nj-statutes--title-17--17:30B-1}
This act shall be known as and may be cited as the Joint Underwriting Association Act.
##### **§ 17:30B-2** Purpose; types of insurance, annuities and surety bonds to which act applicable {#sec-17-30b-2 omnilex-key=us-nj-statutes--title-17--17:30B-2}
a. The purpose of this act is to avoid financial loss to and to reduce financial burdens on claimants and policyholders because of the insolvency of insurers, to authorize the creation of special underwriting associations to assume certain obligations of insolvent insurers and to continue, without interruption and without additional cost, coverage for claimants and policyholders who transfer their rights for unearned premiums from the said insolvent insurers to said associations, and to provide a means by which the costs of such coverage can be equitably assumed.
b. This act shall apply to all kinds of direct insurance, except ocean or wet marine, life insurance, accident and health insurance, workers' compensation insurance, title insurance, annuities and surety bonds written by any company enumerated in section 10 c. of this act.
##### **§ 17:30B-3** Definitions {#sec-17-30b-3 omnilex-key=us-nj-statutes--title-17--17:30B-3}
As used in this act:
a. "Commissioner" means the Commissioner of Insurance of this State;
b. "Guaranty Association" means the New Jersey Property-Liability Insurance Guaranty Association, created under P.L.1974, c. 17 (C. 17:30A-1 et seq.);
c. "Association" means a Special Joint Underwriting Association created pursuant to section 4;
d. "Insolvent insurance company" means (1) an insurer admitted or authorized to transact the business of insurance in this State either at the time the policy was issued or when the insured event occurred, and (2) who is determined to be insolvent by a court of any competent jurisdiction;
e. "Servicing carrier" means a carrier licensed to provide insurance of the kind specified in section 2 B. and designated by an association, with the approval of the commissioner, to assist an association in fulfilling its obligations.
##### **§ 17:30B-4** Establishment; membership; immunity from liability for execution of powers and duties {#sec-17-30b-4 omnilex-key=us-nj-statutes--title-17--17:30B-4}
The commissioner shall have authority to establish, as he shall deem necessary, one or more associations to assume the unexpired policy obligations of insolvent insurance companies from the date of assumption established by regulation of the commissioner. The membership of each association shall consist of all insurers authorized to write, within this State, on a direct basis, the same kind of direct insurance in which the commissioner has authorized participation by the association. Every such insurer shall be a member of the association and shall remain a member so long as the association is in existence as a condition of its authority to continue to transact such kinds of insurance in this State. The provision of any other law of this State notwithstanding, there shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer, the association or its agents or its employees, the board of directors or the commissioner or his representatives for any action taken by them in the performance of their powers and duties under this act; provided, however, that such immunity from liability shall not extend to such individuals with respect to fraudulent or criminal acts.
##### **§ 17:30B-5** Powers {#sec-17-30b-5 omnilex-key=us-nj-statutes--title-17--17:30B-5}
An association shall, pursuant to the provisions of this act and the plan of operation, have the power:
a. To assume the unexpired policy obligations of insolvent insurance companies:
b. To assess each of its members and to reimburse them for such assessments, at such times as directed by the commissioner;
c. To reimburse the servicing carriers out of the Joint Underwriting Association Fund;
d. To present claims to the Guaranty Association for unearned premiums on the assumed policies;
e. To adopt bylaws for the regulation of its affairs and the conduct of its business;
f. To sue and be sued;
g. To employ, subject to the approval of the commissioner, such employees as may be required in the judgment of the association, to carry out the purposes of this act, and to fix and pay their reasonable compensation from the Joint Underwriting Association Fund;
h. To borrow funds at prevailing interest rates;
i. To perform such other functions as may be deemed necessary by the commissioner to carry out the purposes of this act.
##### **§ 17:30B-6** Board of directors; treasurer; bonds {#sec-17-30b-6 omnilex-key=us-nj-statutes--title-17--17:30B-6}
a. The board of directors of an association shall consist of not less than five nor more than nine members serving terms as established in the plan of operation hereinafter described. All directors of the board shall be appointed by the commissioner, after consultation with the members of the association, from and among the officers of the members of the association. Vacancies on the board shall be filled for the remaining period of the term by the commissioner in the same manner.
b. The commissioner shall also appoint a treasurer who shall serve as the custodian of each association fund.
c. Each director of the association shall execute a bond to be conditioned upon the faithful performance of the duties of such director in such form and amount as may be prescribed by the commissioner. Such bonds shall be filed in the office of the Secretary of State. At all times thereafter the directors and treasurer of the association shall maintain such bonds in full force and effect. All costs of such bonds shall be borne by the association.
##### **§ 17:30B-7** Plan of operation; submission by directors; certification of approval; enactment by commissioner; amendments {#sec-17-30b-7 omnilex-key=us-nj-statutes--title-17--17:30B-7}
a. The directors of the association shall submit to the commissioner, within such time as he sets forth by regulation, for his review and approval, a proposed plan of operation. Such a proposed plan shall include provisions for: assessment of all members of an amount necessary to finance a Joint Underwriting Association Fund; notification to insureds regarding the assumption of their policies from the insolvent insurance companies; recoupment of unearned premiums for all insureds whose policies are assumed; procedures for processing applications from servicing carriers for reimbursement; management of the association; and such other provisions as may be deemed necessary by the commissioner to carry out the purposes of this act.
b. The proposed plan shall be reviewed by the commissioner and approved by him if he finds that such plan fulfills the purposes set forth in section 2 a. of this act. In his review of the proposed plan the commissioner may consult with the directors and the members of the association and any other individual or organization. If the commissioner approves the proposed plan he shall certify such approval to the directors and said plan shall take effect at such date as directed by the commissioner. If the commissioner disapproves all or any part of the proposed plan of operation, he shall return same to the directors with a statement, in writing, of the reasons for his disapproval and any recommendations he may wish to make. The directors shall either accept within 5 days the commissioner's recommendation, or propose a new plan, which shall be submitted to the commissioner within 10 days. If the directors fail to comply with the foregoing terms of this paragraph, the commissioner shall promulgate a plan of operation and certify same to the directors. Any such plan promulgated by the commissioner shall take effect no later than 10 days after certification to the directors.
c. The directors may, for good cause, amend the plan of operation at any time, subject to the approval of the commissioner.
d. The commissioner may review the plan of operation whenever he deems necessary and amend said plan after consultation with the directors.
##### **§ 17:30B-8** Joint underwriting association fund; assessment of members; exemption from fees and taxes {#sec-17-30b-8 omnilex-key=us-nj-statutes--title-17--17:30B-8}
a. There shall be created within each association a fund to be known as the Joint Underwriting Association Fund for the purpose of providing the finances necessary for the plan of operation of the association. The fund shall also be used to reimburse the servicing carriers for all sums expended in fulfilling their obligations arising under the assumed policies, including all reasonable administrative costs. The funds shall be administered by the association with the approval of the commissioner.
b. For the purpose of obtaining the moneys necessary to meet the requirements of the fund, each association shall assess each member according to the plan of operation as approved by the commissioner.
c. Any insurer, which becomes authorized to write insurance after the effective date of this act and which would have been required to join an association created under the terms of this act if it had been authorized to write insurance at that time, shall become a member of the association immediately following such authorization. The determination of any such insurer's participation in the association shall be made according to the plan of operation as approved by the commissioner.
d. Upon termination of an association pursuant to section 14d of this act and after discharge and satisfaction of all liabilities then outstanding to claimants, policyholders, servicing carriers, and member insurers, all moneys and assets still remaining in the Joint Underwriting Association Fund shall be paid over by the association treasurer into the Guaranty Association.
e. Associations shall be exempt from payment of all fees and all taxes levied by this State or any of its subdivisions.
##### **§ 17:30B-9** Custodian; disbursements {#sec-17-30b-9 omnilex-key=us-nj-statutes--title-17--17:30B-9}
The treasurer of each association shall be the custodian of the Joint Underwriting Association Fund. All disbursements from said fund shall be made by the treasurer according to the plan of operation and any rules and regulations promulgated by the commissioner.
##### **§ 17:30B-10** Surcharge on policies; credit to joint underwriting association fund of recovered moneys {#sec-17-30b-10 omnilex-key=us-nj-statutes--title-17--17:30B-10}
a. A surcharge on insurance policies of the kind which are being assumed by the associations created hereunder shall be levied in amounts sufficient to recoup over a reasonable length of time a sum equal to the amounts necessary for reimbursement pursuant to section 5 b. of this act. The surcharge shall be a separate charge to the insured in addition to the premium to be paid and shall be reflected as such in the policy. The insurer shall be prohibited from absorbing such surcharge as an inducement for insurance or any other reason.
b. The amount of such surcharge shall be determined by the commissioner, but in no event shall the surcharge on any policy exceed one-half of 1% of the policy premium.
c. Whenever moneys are recovered as a result of claims arising on or after September 19, 1974 from Gateway Insurance Company, Empire Mutual Insurance Company or Allcity Insurance Company insurers or lending institutions financing insurance policies for any of said companies with respect to policies for New Jersey residents or any of their brokers or agents, said moneys shall be credited to the Joint Underwriting Association Fund for use by the commissioner with respect to future insolvencies.
##### **§ 17:30B-11** Statement; filing {#sec-17-30b-11 omnilex-key=us-nj-statutes--title-17--17:30B-11}
An association shall file at such time as directed by the commissioner a statement which shall contain such information and be in such form as required by the commissioner. The commissioner may at any time require an association to furnish him with additional information with respect to its operations.
##### **§ 17:30B-12** Examination by commissioner; hearings {#sec-17-30b-12 omnilex-key=us-nj-statutes--title-17--17:30B-12}
The commissioner may make an examination into the affairs of an association or any of its members whenever he deems it necessary. In undertaking any examination he may hold hearings pursuant to the procedures provided in chapter 1 of this Title and P.L.1968, c. 410 (C. 52:14B-1 et seq.).
##### **§ 17:30B-13** Annual reports of commissioner {#sec-17-30b-13 omnilex-key=us-nj-statutes--title-17--17:30B-13}
In addition to the annual reports of the commissioner required by R.S. 17:1-9, the commissioner shall submit to the Legislature an annual report embracing the activities, affairs and condition of any association. Said report may contain specific recommendations the commissioner may wish to make concerning the association, including his evaluation of the association's effectiveness in fulfilling the purposes of this act.
##### **§ 17:30B-14** Powers of commissioner {#sec-17-30b-14 omnilex-key=us-nj-statutes--title-17--17:30B-14}
The commissioner may:
a. Promulgate reasonable rules and regulations to carry out the purposes of this act;
b. Suspend or revoke, after notice and hearing, the certificate or authority to transact insurance in the State of any member insurer which fails to comply with the provisions of this act, rules or regulations promulgated thereunder or any plan of operation. In addition to any other sanctions herein or otherwise provided by law, the commissioner may levy a penalty on any member insurer which fails to pay or delays in paying an assessment when due. For each month that an insurer fails to pay or delays in paying the assessment on a timely basis, the penalty shall not exceed 5% of the unpaid assessment then outstanding. For all other violations, the penalty shall not exceed $5,000.00 per violation.
c. Revoke the designation of any servicing carrier if he finds claims are being handled unsatisfactorily;
d. Terminate any association when he deems its existence no longer necessary to effectuate the purposes of this act.
e. Require upon the termination of any association, a report of its activities which shall set forth a complete operating and financial statement; make inspections of any association's books, accounts and records including its receipts and disbursements, as he shall deem necessary.
##### **§ 17:30B-15** Severability {#sec-17-30b-15 omnilex-key=us-nj-statutes--title-17--17:30B-15}
If any provision of this act or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and for this purpose the provisions of this act are declared to be severable, provided however that if section 10 is held invalid, the entire act shall be invalid.
##### **§ 17:30B-16** Construction; supersedure of inconsistent laws {#sec-17-30b-16 omnilex-key=us-nj-statutes--title-17--17:30B-16}
a. This act shall be liberally construed to effectuate the purposes set forth in section 2 a.
b. All laws and parts of laws of this State inconsistent with this act are hereby deemed superseded to the extent of such inconsistency.
## **Chapter 30C** {#struct-chapter-30c}
##### **§ 17:30C-1** Definitions {#sec-17-30c-1 omnilex-key=us-nj-statutes--title-17--17:30C-1}
1. a. "Impairment or insolvency" means the capital of a stock insurer or the surplus of a mutual insurer, shall be deemed to be impaired and the insurer shall be deemed to be insolvent, when such insurer is not possessed of assets at least equal to all liabilities and required reserves together with its total issued and outstanding capital stock of a stock insurer, or the minimum surplus if a mutual insurer required by this title to be maintained for the kind or kinds of insurance it is then authorized to transact.
b. "Insurer" shall include a person subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization or conservation by, the commissioner or the equivalent insurance supervisory official of another state; also all persons purporting to be engaged as insurer in this State, and persons in process of organization to become insurers, pursuant to the provisions of Title 17 of the Revised Statutes.
c. "Delinquency proceeding" means any proceeding commenced against an insurer pursuant to this act for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer.
d. "Domiciliary state" means the state in which an insurer has its domicile, or in the case of an alien insurer the State in which such insurer, having become authorized to do business in such state, has at the commencement of delinquency proceedings, the largest amount of its assets held in trust and assets held on deposit for the benefit of its policyholders or policyholders and creditors in the United States, and any such insurer is deemed to be domiciled in such state.
e. "Ancillary state" means any state other than a domiciliary state.
f. "Reciprocal state" means any state other than this State in which in substance and effect the provisions of the Uniform Insurers Liquidation Act, as defined in section 23 of this act are in force, including the provisions requiring that the commissioner or equivalent insurance supervisory official be the receiver of a delinquent insurer.
g. "General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons, and as to such specifically encumbered property the term includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders or all policyholders and creditors in the United States shall be deemed general assets.
h. "Preferred claim" means any claim with respect to which the law of the State or of the United States accords priority of payment from the general assets of the insurer.
i. "Special deposit claim" means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any general assets.
j. "Secured claim" means any claim secured by mortgage, trust, deed, pledge, deposit as security, escrow or otherwise, but not including special deposit claim or claims against general assets. The term also includes claims which more than 4 months prior to the commencement of delinquency proceedings in the state of the insurer's domicile have become liens upon specific assets by reason of judicial process.
k. "Receiver" means receiver, liquidator, rehabilitator or conservator as the context may require.
l. "Federal home loan bank" means a bank as defined in 12 U.S.C. s.1422(1)(A).
m. "Insurer-member" means an insurer that is a member of a Federal Home Loan Bank.
n. "Advance" shall have the same meaning as that term is defined at 12 C.F.R. s.1266.1.
##### **§ 17:30C-2** Jurisdiction of delinquency proceedings {#sec-17-30c-2 omnilex-key=us-nj-statutes--title-17--17:30C-2}
The Superior Court shall have original jurisdiction of delinquency proceedings under this act.
##### **§ 17:30C-3** Exclusive remedy--appeal {#sec-17-30c-3 omnilex-key=us-nj-statutes--title-17--17:30C-3}
Delinquency proceedings pursuant to this act shall constitute the sole and exclusive method of liquidating, rehabilitating, reorganizing or conserving an insurer, and no court shall entertain a petition for the commencement of such proceedings, or any other similar procedure, unless the same has been instituted by the commissioner.
##### **§ 17:30C-4** Commencement of delinquency proceeding {#sec-17-30c-4 omnilex-key=us-nj-statutes--title-17--17:30C-4}
4. a. The commissioner shall commence any such proceeding by an application to the court or to any judge thereof, for an order directing the insurer to show cause why the commissioner should not have the relief prayed for.
b. The application shall be by verified petition, setting forth the ground or grounds for the proceeding and the relief demanded.
c. If the court is satisfied from reading the commissioner's petition that the facts therein alleged, if established, would constitute grounds for a delinquency proceeding under this act, it shall issue an order to show cause as referred to in a. above.
d. On the return of the order to show cause, the court shall either deny the application or grant the application together with such other relief as the nature of the case and the interests of the policyholders, creditors, stockholders, members, subscribers or the public may require.
e. Notwithstanding any provision of law to the contrary, the commencement of a delinquency proceeding with respect to an insurer-member shall not operate as a stay, injunction, or prohibition of exercise by a federal home loan bank of its rights regarding collateral pledged by that insurer-member.
##### **§ 17:30C-5** Injunctions {#sec-17-30c-5 omnilex-key=us-nj-statutes--title-17--17:30C-5}
5. a. Upon application by the commissioner for such an order to show cause, or at any time thereafter, the court may, without notice, issue an injunction restraining the insurer, its officers, directors, stockholders, policyholders, agents, and all other persons from the transaction of its business or the waste or disposition of its property until the further order of the court.
b. The court may, at any time during a proceeding under this act, issue such other injunctions or orders as may be deemed necessary to prevent interference with the commissioner or the proceeding, or waste of the assets of the insurer, or the commencement or prosecution of any actions, or the obtaining of preferences, judgments, attachments or other liens, or the making of any levy against the insurer or against its assets or any part thereof.
c. Notwithstanding any provision of law to the contrary, the commencement of a delinquency proceeding with respect to an insurer-member shall not operate as a stay, injunction, or prohibition of exercise by a federal home loan bank of its rights regarding collateral pledged by that insurer-member.
##### **§ 17:30C-6** Grounds for rehabilitation--domestic insurers {#sec-17-30c-6 omnilex-key=us-nj-statutes--title-17--17:30C-6}
The commissioner may apply to the court for an order directing him to rehabilitate a domestic insurer upon one or more of the following grounds:
That the insurer
a. Is impaired or insolvent; or
b. Has refused to submit its books, records, accounts or affairs to the reasonable examination of the commissioner; or
c. Has concealed or removed records or assets in violation of regulations which the commissioner may adopt; or
d. Has failed to comply with the commissioner's order, made pursuant to law, to make good an impairment of capital (if a stock insurer) or an impairment of surplus (if a mutual insurer) within the time prescribed by law; or
e. Has transferred or attempted to transfer substantially its entire property or business, or has entered into any transaction the effect of which is to merge substantially its entire property or business in that of any other insurer without first having obtained the written approval of the commissioner; or
f. Is found, after examination, to be in such condition that its further transaction of business will be hazardous to its policyholders, or to its stockholders, or to its creditors, or to the public; or
g. Has willfully violated its charter or any law of this State; or
h. Has an officer, director, or manager who has unlawfully refused to be examined under oath, concerning its affairs; or
i. Has failed or refused to take such steps as may be necessary to remove from office any officer or director whom the commissioner has found, after notice to and hearing of such insurance company and of such officer or director, to be a dishonest or untrustworthy person; or
j. Has been the subject of an application for the appointment of a receiver, trustee, custodian or sequestrator of the insurer or of its property, otherwise than pursuant to the provisions of this act but only if such appointment has been made or is imminent; or
k. Has consented to such an order through a majority of its directors, stockholders, or policyholders; or
l. Has failed to pay a final judgment rendered against it in any state upon any insurance contract issued or assumed by it, within 30 days after the judgment became final or within 30 days after time for taking an appeal has expired, or within 30 days after dismissal of an appeal before final determination, whichever date is the later.
##### **§ 17:30C-7** Nature of rehabilitation order--termination of rehabilitation--domestic insurers {#sec-17-30c-7 omnilex-key=us-nj-statutes--title-17--17:30C-7}
a. An order to rehabilitate a domestic insurer shall direct the commissioner forthwith to take possession of the property of the insurer and to conduct the business thereof, and to take such steps toward removal of the causes and conditions which have made rehabilitation necessary, as the court may direct.
b. If at any time the commissioner deems that further efforts to rehabilitate the insurer would be useless, he may apply to the court for an order of liquidation.
c. The commissioner, or any interested person upon due notice to the commissioner, at any time may apply for an order terminating the rehabilitation proceeding and permitting the insurer to resume possession of its property and the conduct of its business.
##### **§ 17:30C-8** Grounds for liquidation {#sec-17-30c-8 omnilex-key=us-nj-statutes--title-17--17:30C-8}
The commissioner may apply to the court for an order directing him to liquidate the business of a domestic insurer or of the United States branch of an alien insurer having trusteed assets in this State, regardless of whether or not there has been prior order directing him to rehabilitate such insurer, upon any of the grounds specified in section 6, or upon any one or more of the following grounds: That the insurer
a. Has ceased transacting business for a period of 1 year; or
b. Is an insolvent insurer and has commenced voluntary liquidation or dissolution, or attempts to commence or prosecute any action or proceeding to liquidate its business or affairs, or to dissolve its corporate charter, or to procure the appointment of a receiver, trustee, custodian, or sequestrator under any laws except this act; or
c. Has not organized or completed its organization and obtained a certificate of authority as an insurer.
##### **§ 17:30C-9** Order of liquidation--domestic insurers {#sec-17-30c-9 omnilex-key=us-nj-statutes--title-17--17:30C-9}
a. An order to liquidate the business of a domestic insurer shall direct the commissioner forthwith to take possession of the property of the insurer, to liquidate its business, to deal with the insurer's property and business in his own name as commissioner or in the name of the insurer as the court may direct and to give notice to all creditors who may have claims against the insurer to present such claims.
b. The commissioner may apply under this act for an order dissolving the corporate existence of a domestic insurer:
(1) Upon his application for an order of liquidation of such insurer, or at any time after such order has been granted; or
(2) Upon the grounds specified in section 8 c., regardless of whether an order of liquidation is sought or has been obtained.
##### **§ 17:30C-10** Order of liquidation--alien insurers {#sec-17-30c-10 omnilex-key=us-nj-statutes--title-17--17:30C-10}
An order to liquidate the business of a United States branch of an alien insurer having trusteed assets in this State shall be in the same terms as those prescribed for domestic insurers, save and except only that the assets of the business of such United States branch shall be the only assets included therein.
##### **§ 17:30C-11** Grounds for conservation--foreign insurers {#sec-17-30c-11 omnilex-key=us-nj-statutes--title-17--17:30C-11}
The commissioner may apply for an order directing him to conserve the assets within this State of a foreign insurer upon any one or more of the following grounds:
a. Upon any of the grounds specified in section 6, and in section 8 b.
b. That its property has been sequestrated in its domiciliary sovereignty or in any other sovereignty.
##### **§ 17:30C-12** Grounds for conservation--alien insurers {#sec-17-30c-12 omnilex-key=us-nj-statutes--title-17--17:30C-12}
The commissioner may apply for an order directing him to conserve the assets within this State of an alien insurer upon any one or more of the following grounds:
a. Upon any of the grounds specified in section 6 and in section 8 b.
b. Upon the ground that the insurer has failed to comply within the time designated by the commissioner, with an order made by him to make good an impairment of its trusteed funds, or
c. Upon the ground that the property of the insurer has been sequestrated in its domiciliary sovereignty or elsewhere.
##### **§ 17:30C-13** Conservation or ancillary receivership--foreign insurers {#sec-17-30c-13 omnilex-key=us-nj-statutes--title-17--17:30C-13}
a. An order to conserve the assets of a foreign insurer shall direct the commissioner forthwith to take possession of the property of the insurer within this State and to conserve it, subject to the further direction of the court.
b. Whenever a domiciliary receiver is appointed for any such insurer in its domiciliary state the court shall, on application of the commissioner, appoint the commissioner as the ancillary receiver in this State.
c. An order to liquidate the assets in this State of a foreign insurer shall require the commissioner forthwith to take possession of the property of the insurer within this State and to liquidate it subject to the orders of the court and with due regard to the rights and powers of the domiciliary receiver, as provided in this act.
##### **§ 17:30C-14** Conservation or ancillary receivership--alien insurers {#sec-17-30c-14 omnilex-key=us-nj-statutes--title-17--17:30C-14}
An order to conserve the assets of an alien insurer shall direct the commissioner forthwith to take possession of the property of the insurer within this State and to conserve it, subject to the further direction of the court.
##### **§ 17:30C-15** Conduct of delinquency proceedings--domestic insurers {#sec-17-30c-15 omnilex-key=us-nj-statutes--title-17--17:30C-15}
a. Whenever under the laws of this State a receiver is to be appointed in delinquency proceedings for a domestic insurer, the court shall appoint the commissioner as such receiver. The court shall direct the commissioner forthwith to take possession of the assets of the insurer and to administer the same under the orders of the court.
b. As domiciliary receiver, the commissioner shall be vested by operation of law, with the title to all property, contracts, and rights of action, and all of the books and records of the insurer wherever located, as of the date of entry of the order directing him to rehabilitate or liquidate a domestic insurer and he shall have the right to recover the same and reduce the same to his possession.
c. The filing or recording of the order, directing possession to be taken, or a certified copy thereof, in the office where instruments affecting title to property are required to be filed or recorded, shall impart the same notice as would be imparted by a deed, bill of sale, or other evidence of the title duly filed or recorded.
d. The commissioner, as domiciliary receiver, shall be responsible on his official bond for the proper administration of all assets coming into his possession or control. The court may at any time require an additional bond from him or his deputies, if deemed desirable for the protection of the assets.
e. Upon taking possession of the assets of an insurer, the domiciliary receiver shall, subject to the direction of the court, immediately proceed to conduct the business of the insurer or to take such steps as are authorized by the laws of this State for the purpose of liquidating, rehabilitating, reorganizing, or conserving the affairs of the insurer.
##### **§ 17:30C-16** Conduct of delinquency proceedings--foreign and alien insurers {#sec-17-30c-16 omnilex-key=us-nj-statutes--title-17--17:30C-16}
a. Whenever under this act an ancillary receiver is to be appointed in delinquency proceedings for an insurer not domiciled in this State, the court shall appoint the commissioner as ancillary receiver. The commissioner shall file a petition requesting the appointment on the grounds set forth in section 13 b. of this act:
(1) If he finds that there are sufficient assets of the insurer located in this State to justify the appointment of an ancillary receiver; or
(2) If 10 or more persons resident in this State having claims against such insurer file a petition with the commissioner requesting the appointment of such ancillary receiver.
b. The domiciliary receiver for the purpose of liquidating an insurer domiciled in a reciprocal state shall be vested by operation of law with the title to all of the property, contracts and rights of action, and all of the books and records of the insurer located in this State, and he shall have the immediate right to recover balances due from local agents and to obtain possession of any books and records of the insurer found in this State. He shall also be entitled to recover the other assets of the insurer located in this State, except that upon the appointment of an ancillary receiver in this State, the ancillary receiver shall during the ancillary receivership proceedings have the sole right to recover such other assets. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this State, and shall pay the necessary expenses of the proceedings. All remaining assets he shall promptly transfer to the domiciliary receiver. Subject to the foregoing provisions, the ancillary receiver and his deputies shall have the same powers and be subject to the same duties with respect to the administration of such assets as a receiver of an insurer domiciled in this State.
c. The domiciliary receiver of an insurer domiciled in a reciprocal state may sue in this State to recover any assets of such insurer to which he may be entitled under the laws of this State.
##### **§ 17:30C-17** Deputies and assistants {#sec-17-30c-17 omnilex-key=us-nj-statutes--title-17--17:30C-17}
In connection with delinquency proceedings, the commissioner may appoint one or more special deputy commissioners to act for him, and may employ such counsel, clerks, and assistants as he deems necessary. The compensation of the special deputies, counsel, clerks, or assistants, and all expenses of taking possession of the insurer and of conducting the proceedings, shall be fixed by the receiver subject to the approval of the court, and shall be paid out of funds or assets of the insurer. Within the limits of the duties imposed upon them, special deputies shall possess all the powers given to, and, in the exercise of those powers, shall be subject to all of the duties imposed upon the receiver with respect to such proceedings.
##### **§ 17:30C-18** Claims of nonresidents against domestic insurers {#sec-17-30c-18 omnilex-key=us-nj-statutes--title-17--17:30C-18}
a. In a delinquency proceeding begun in this State against a domestic insurer, claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in domiciliary delinquency proceedings.
b. Controverted claims belonging to claimants residing in reciprocal states may either:
(1) Be proved in this State; or
(2) If ancillary proceedings have been commenced in such reciprocal states, may be proved in those proceedings. In the event a claimant elects to prove his claim in ancillary proceedings, if notice of the claim and opportunity to appear and be heard is afforded the domiciliary receiver of this State, as provided in section 19 of this act with respect to ancillary proceedings in this State, the final allowance of such claim by the courts in the ancillary state shall be accepted in this State as conclusive as to its amount and shall also be accepted as conclusive as to its priority, if any, against special deposits or other security located within the ancillary state.
##### **§ 17:30C-19** Claims against foreign insurers {#sec-17-30c-19 omnilex-key=us-nj-statutes--title-17--17:30C-19}
a. In a delinquency proceeding in a reciprocal state against an insurer domiciled in that state, claimants against such insurer who reside within this State may file claims either with the ancillary receiver, if any, appointed in this State, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings:
b. Controverted claims belonging to claimants residing in this State may either:
(1) Be proved in the domiciliary state as provided by the law of that state; or
(2) If ancillary proceedings have been commenced in this State, be proved in those proceedings. In the event that any such claimant elects to prove his claim in this State, he shall file his claim with the ancillary receiver and shall give notice in writing to the receiver in the domiciliary state, either by registered mail or by personal service at least 40 days prior to the date set for hearing. The notice shall contain a concise statement of the amount of the claim, the facts on which the claim is based, and the priorities asserted, if any. If the domiciliary receiver within 30 days after the giving of such notice shall give notice in writing to the ancillary receiver and to the claimant, either by registered mail or by personal service of his intention to contest such claim, he shall be entitled to appear or to be represented in any proceeding in this State involving adjudication of the claim. The final allowance of the claim by the courts of this State shall be accepted as conclusive as to its amount and shall also be accepted as conclusive as to its priority if any, against special deposits or other security located within this State.
##### **§ 17:30C-20** Form of claim--notice--hearing {#sec-17-30c-20 omnilex-key=us-nj-statutes--title-17--17:30C-20}
a. All claims against an insurer against which delinquency proceedings have been begun shall set forth in reasonable detail the amount of the claim, or the basis upon which such amount can be ascertained, the facts upon which the claim is based, and the priorities asserted, if any. All such claims shall be verified by the affidavit of the claimant, or someone authorized to act on his behalf and having knowledge of the facts, and shall be supported by such documents as may be material thereto.
b. All claims filed in this State shall be filed with the receiver, whether domiciliary or ancillary, in this State, on or before the last date for filing as specified in this act.
c. Within 10 days of the receipt of any claim, or within such further period as the court may fix, the receiver shall report the claim to the court, specifying in such report his recommendation with respect to the action to be taken thereon. Upon receipt of such report, the court shall fix a time for hearing the claim and shall direct that the claimant or the receiver, as the court shall specify, shall give such notice as the court shall determine to such persons as shall appear to the court to be interested therein. All such notices shall specify the time and place of the hearing and shall concisely state the amount and nature of the claim, the priorities asserted, if any, and the recommendation of the receiver with reference thereto.
d. At the hearing all persons interested shall be entitled to appear and the court shall enter an order allowing, allowing in part, or disallowing the claim. Any such order shall be deemed to be an appealable order.
##### **§ 17:30C-21** Priority of certain claims {#sec-17-30c-21 omnilex-key=us-nj-statutes--title-17--17:30C-21}
a. In a delinquency proceeding against an insurer domiciled in this State, claims owing to residents of ancillary states shall be preferred claims if like claims are preferred under the laws of this State. All such claims owing to residents or nonresidents shall be given equal priority of payment from general assets regardless of where such assets are located.
b. In a delinquency proceeding against an insurer domiciled in a reciprocal state, claims owing to residents of this State shall be preferred claims if like claims are preferred by the laws of that state.
c. The owners of special deposit claims against an insurer for which a receiver is appointed in this or any other state shall be given priority against their several special deposits in accordance with the provisions of the statutes governing the creation and maintenance of such deposits. If there is a deficiency in any such deposit so that the claims secured thereby are not fully discharged therefrom, the claimants may share in the general assets, but such sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from a special deposit.
d. The owner of a secured claim against an insurer for which a receiver has been appointed in this or any other state may surrender his security and file his claim as a general credit, or the claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. If the amount of the deficiency has been adjudicated in ancillary proceedings as provided in this act, or if it has been adjudicated by a court of competent jurisdiction in proceedings in which the domiciliary receiver has had notice and opportunity to be heard, such amounts shall be conclusive; otherwise the amount shall be determined in the delinquency proceeding in the domiciliary state.
##### **§ 17:30C-22** Attachment and garnishment of assets {#sec-17-30c-22 omnilex-key=us-nj-statutes--title-17--17:30C-22}
During the pendency of delinquency proceedings in this or any reciprocal state, no action or proceeding in the nature of an attachment, garnishment or execution shall be commenced or maintained in the courts of this State against the delinquent insurer or its assets. Any lien obtained by any such action or proceeding within 4 months prior to the commencement of any such delinquency proceeding or at any time thereafter shall be void as against any rights arising in such delinquency proceeding.
##### **§ 17:30C-23** Uniform insurers liquidation act {#sec-17-30c-23 omnilex-key=us-nj-statutes--title-17--17:30C-23}
a. Subsections b. through k. of section 1, subsections a. and c. of section 4, together with sections 5 and 15 through 23 constitute and may be referred to as the Uniform Insurers Liquidation Act.
b. The Uniform Insurers Liquidation Act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it. To the extent that its provisions when applicable conflict with other provisions of this act, the provisions of such act shall control.
##### **§ 17:30C-24** Borrowing on pledge of assets {#sec-17-30c-24 omnilex-key=us-nj-statutes--title-17--17:30C-24}
For the purpose of facilitating the rehabilitation, liquidations, conservation or dissolution of an insurer pursuant to this act, the commissioner may, subject to the approval of the court, borrow money and execute, acknowledge and deliver notes or other evidences of indebtedness therefor, and secure the payment of the same by the mortgage, pledge, assignment, transfer in trust or hypothecation of any or all of the property of such insurer, whether real, personal or mixed, and the commissioner, subject to the approval of the court, shall have power to take any and all other action necessary and proper to consummate any such loans and to provide for the repayment thereof. The commissioner shall be under no obligation personally or in his official capacity as commissioner to repay any loan made pursuant to this act.
##### **§ 17:30C-25** Voidable transfers. {#sec-17-30c-25 omnilex-key=us-nj-statutes--title-17--17:30C-25}
25. a. Any transfer of, or lien upon, the property of an insurer which is made or created within 4 months prior to the granting of an order to show cause under this act with the intent of giving to any creditor or of enabling him to obtain a greater percentage of his debt than any other creditor of the same class, and which is accepted by such creditor having reasonable cause to believe that such a preference will occur, shall be voidable.
b. Every director, officer, employee, stockholder, policyholder, and any other person acting on behalf of such insurer who shall be concerned in any such act or deed and every person receiving thereby any property of such insurer or the benefit thereof, shall be personally liable therefor and shall be bound to account to the commissioner.
c. The commissioner, as receiver in any proceeding under this act, may avoid any transfer of, or lien upon the property of an insurer which any creditor, stockholder or policyholder of such insurer might have avoided, and may recover the property so transferred, or its value from the person to whom it was transferred, unless such person was a bona fide holder for value prior to the date of the granting of an order to show cause under this act. Such property or its value may be recovered from anyone who has received it, except a bona fide holder for value as above specified.
d. (1) A receiver shall not void a transfer of money or other property arising under or in conjunction with a federal home loan bank security agreement provided that the transfer:
(a) is made before the commencement of a formal proceeding under P.L.1975, c.113 (C.17:30C-1 et seq.) in the ordinary course of business and in compliance with the security agreement; and
(b) the security agreement is valid pursuant to State law and the "Federal Home Loan Bank Act" (12 U.S.C. s.1421 et seq.).
(2) A receiver shall not void a redemption or repurchase of any stock or equity securities made by the federal home loan bank if the redemption or repurchase: (a) is made within four months of a formal commencement of the delinquency proceeding; or (b) has received prior approval of the receiver.
(3) A receiver may void any transfer if the transfer is made with actual intent to hinder, delay, or defraud the insurer-member, a receiver appointed for the insurer-member, or existing or future creditors.
e. Following the appointment of a receiver for an insurer-member and upon request of the receiver, the federal home loan bank shall, within 10 days of the request, provide a process and establish a timeline for:
(1) the release of the collateral that exceeds the lending value required to support secured obligations remaining after a repayment of advances, as determined in accordance with the federal home loan bank security agreement;
(2) the release of any collateral remaining in the federal home loan bank's possession following repayment of all outstanding secured obligations in full;
(3) the payment of fees and the operation of deposits and other accounts with the federal home loan bank; and
(4) the possible redemption or repurchase of federal home loan bank stock or excess stock of any class that an insurer-member is required to own.
f. Upon the request of the receiver for an insurer-member, the federal home loan bank shall provide any available options for the insurer-member to renew or restructure an advance to defer associated prepayment fees, to the extent that market conditions, the terms of the advance outstanding to the insurer-member, the applicable policies of the federal home loan bank, and compliance with the "Federal Home Loan Bank Act" (12 U.S.C. s.1421 et seq.) and corresponding regulations permit.
g. Nothing in this section shall affect the receiver's rights pursuant to 12 C.F.R. s.1266.4 regarding advances to an insurer-member in delinquency proceedings.
##### **§ 17:30C-26** Priority of claims for compensation {#sec-17-30c-26 omnilex-key=us-nj-statutes--title-17--17:30C-26}
a. Compensation actually owing to employees other than officers of an insurer, for services rendered within 3 months prior to the commencement of a proceeding against the insurer under this act, but not exceeding $1,000.00 for each such employee, shall be paid prior to the payment of any other debt or claim, and in the discretion of the commissioner, may be paid as soon as practicable after the proceeding has been commenced; except, that at all times the commissioner shall reserve such funds as will, in his opinion, be sufficient for the expenses of administration.
b. Such priority shall be in lieu of any other similar priority which may be authorized by law as to the wages or compensation of such employees.
c. The priorities of distribution in a liquidation proceeding shall be in the following order:
(1) Expenses of administration;
(2) Compensation of employees as provided in subsection (a) of this section;
(3) Claims for taxes and debts due to Federal or any state or local government which are secured by liens perfected prior to the commencement of delinquency proceedings;
(4) Claims by policyholders, beneficiaries and insurers arising from and within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the company and liability claims against insurers which claims are within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the company and claims presented by the New Jersey Property-Liability Insurance Guaranty Association and claims presented by any similar organization in another state.
(5) All other claims.
##### **§ 17:30C-27** Offsets {#sec-17-30c-27 omnilex-key=us-nj-statutes--title-17--17:30C-27}
a. In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this act, such credits and debts shall be set off and the balance only shall be allowed or paid, except as provided in subsection b. below.
b. No offset shall be allowed in favor of any such person where
(1) The obligation of the insurer to such person would not at the date of the entry of any liquidation order, or at such other date determined by the court for fixing the rights and liabilities with respect to the estate of the insurer, have entitled him to share as a claimant in the assets of the insurer; or
(2) The obligation of the insurer to such person was purchased by or transferred to such person with a view of its being used as an offset; or
(3) The obligation of such person is to pay a balance upon a subscription to the capital stock of a stock insurer.
##### **§ 17:30C-28** Allowance of certain claims {#sec-17-30c-28 omnilex-key=us-nj-statutes--title-17--17:30C-28}
a. No contingent claim shall share in a distribution of the assets of an insurer which has been adjudicated to be insolvent by an order made pursuant to section 30 a., except that such claims shall be considered, if properly presented, and may be allowed to share where
(1) Such claim becomes absolute against the insurer on or before the last day fixed for filing of proofs of claim against the assets of such insurer; or
(2) There is a surplus and the liquidation is thereafter conducted upon the basis that such insurer is solvent.
b. Where an insurer has been so adjudicated to be insolvent, any person who has a cause of action against an insured of such insurer, shall have the right to file a claim in the liquidation proceeding, regardless of the fact that such claim may be contingent, and such claim may be allowed
(1) If it may be reasonably inferred from the proof presented upon such claim that such person would be able to obtain a judgment upon such cause of action against such insured; and
(2) If such person shall furnish suitable proof, unless the court, for good cause shown, shall otherwise direct, that no further valid claims against such insurer arising out of his cause of action, other than those already presented, can be made; and
(3) If the total liability of such insurer to all claimants arising out of the same act of its insured shall be no greater than its maximum liability would be, were it not in liquidation.
c. No judgment against such an insured, taken after the date of the entry of the liquidated order, shall be considered in the liquidation proceedings as evidence of liability, or of the amount of damages, and no judgment against an insured taken by default, inquest or by collusion prior to the entry of the liquidation order, shall be considered as conclusive evidence in the liquidation proceeding, either of the liability of such insured to such person upon such cause of action, or of the amount of damage to which such person is therein entitled.
##### **§ 17:30C-29** Allowance of secured claims {#sec-17-30c-29 omnilex-key=us-nj-statutes--title-17--17:30C-29}
No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the claim without security and the value of the security itself as of the date of the entry of the order of liquidation, or such other date set by the court for fixation of rights and liabilities, unless the claimant shall surrender his security to the commissioner, in which event the claim shall be allowed in the full amount for which it is valued.
##### **§ 17:30C-30** Time to file the claims {#sec-17-30c-30 omnilex-key=us-nj-statutes--title-17--17:30C-30}
a. If upon the granting of an order of liquidation under this act, or at any time thereafter during the liquidation proceeding, the insurer shall not be clearly solvent, the court shall, after such notice and hearing as it deems proper, make an order declaring the insurer to be insolvent. Thereupon, regardless of any prior notice which may have been given to creditors, the commissioner shall notify all persons who may have claims against such insurer and who have not filed proper proofs thereof, to present the same to him, at a place specified in such notice, within 4 months from the date of the entry of such order, of, if the commissioner shall certify that it is necessary, within such longer time as the court shall prescribe. The last day for the filing of proofs of claims shall be specified in the notice. Such notice shall be given in a manner determined by the court.
b. Proofs of claim may be filed subsequent to the date specified, but no such claim shall share in the distribution of the assets until all allowed claims, proofs of which have been filed before said date, have been paid in full, with interest.
##### **§ 17:30C-31** Proposal for disbursement of assets of insolvent companies; application for approval; notice of application {#sec-17-30c-31 omnilex-key=us-nj-statutes--title-17--17:30C-31}
a. Within 120 days of a final determination of insolvency of a company by a court of competent jurisdiction of this State, the commissioner shall make application to the court for approval of a proposal to disburse assets out of such company's marshaled assets, from time to time as such assets become available, to the New Jersey Property-Liability Insurance Guaranty Association and to any similar organization in another state having substantially the same provision of law.
b. Such proposals shall at least include provision for:
(1) Reserving amounts for the payment of the expenses of administration and the claims falling within priorities established in section 26 of the act to which this act is amendatory.
(2) Disbursement of the assets marshaled to date and subsequent disbursements of assets as they become available.
(3) Equitable allocation of disbursements to the New Jersey Property-Liability Guaranty Association and similar associations established in other states which are entitled thereto; and
(4) The securing by the receiver from each of such associations entitled to disbursements pursuant to this section of an agreement to return to the receiver such assets previously disbursed as may be required to pay claims of secured creditors and claims falling within the priorities established in section 26 of P.L.1975, c. 113 (C. 17:30C-26), in accordance with such priorities. No bonds shall be required of any such association.
c. The receiver's proposal shall provide for disbursements to the associations in amounts at least equal to the payments made or to be made thereby for which such association could assert claims against the receiver and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amounts of such payments made or to be made by the associations then disbursements shall be in the amount of available assets.
d. Notice of intention to apply for approval of a disbursement of assets shall be given to the associations in and to the commissioners of insurance of each of the states. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first class postage fee paid, at least 30 days prior to submission of such application to the court. Action on the application may be taken by the court provided the above required notice has been given and provided further that the receiver's proposal complies with subsection (b)(1) and (b)(4) of this section.
## **Chapter 30D** {#struct-chapter-30d}
##### **§ 17:30D-1** Short title {#sec-17-30d-1 omnilex-key=us-nj-statutes--title-17--17:30D-1}
This act shall be known and may be cited as the "Medical Malpractice Liability Insurance Act."
##### **§ 17:30D-2** Purpose; application to medical malpractice liability insurance {#sec-17-30d-2 omnilex-key=us-nj-statutes--title-17--17:30D-2}
a. The purpose of this act is to assure that medical malpractice liability insurance is readily available to licensed medical practitioners and health care facilities by establishing a reinsurance association, requiring the association to reinsure medical malpractice liability insurance policies issued by certain providers and permitting the association to write such policies on a direct basis, to determine when the association has sustained a deficit, and to provide for recoupment of losses resulting from the operation of the association through surcharges on insureds and to grant the Commissioner of Insurance temporary emergency powers to set up and operate the reinsurance association if such insurance is unavailable for any class of licensed medical practitioners or health care facilities.
b. This act shall apply to medical malpractice liability insurance as defined herein.
##### **§ 17:30D-3** Definitions. {#sec-17-30d-3 omnilex-key=us-nj-statutes--title-17--17:30D-3}
3. As used in this act:
a. "Association" means the New Jersey Medical Malpractice Reinsurance Association established pursuant to the provisions of this act.
b. "Commissioner" means the Commissioner of Banking and Insurance.
c. "Licensed medical practitioner" means and includes all persons licensed in this State to practice medicine and surgery, chiropractic, podiatric medicine, dentistry, optometry, psychology, pharmacy, nursing, physical therapy and as a bioanalytical laboratory director.
d. "Medical malpractice liability insurance" means insurance coverage against the legal liability of the insured and against loss, damage or expense incident to a claim arising out of the death or injury of any person as the result of negligence or malpractice in rendering professional service by any licensed medical practitioner or health care facility or a claim arising out of ownership, operation or maintenance of the practitioner's or facility's business premises, including primary and excess coverages.
e. "Health care facility" means and includes all hospitals within this State, and any other health care facility as defined in the "Health Care Facilities Planning Act." P.L.1971, c.136 (C.26:2H-1 et seq.).
f. "Plan of operation" means the plan of operation of the association approved by the commissioner pursuant to the provisions of this act.
g. "Net direct premium written" means direct written personal injury liability and property damage liability insurance as provided in R.S.17:17-1 d. and e., excluding workmen's compensation and employer's liability insurance written in connection therewith, less policyholder dividends and return premiums for the unused or unabsorbed portion of premium deposits and excluding premiums ceded to or written by the association.
h. "Provider" means an insurer admitted and licensed in this State to write general liability insurance which has been qualified by the board of directors of the association and has not been disqualified by the commissioner.
##### **§ 17:30D-4** Medical malpractice reinsurance association; creation; members; funds and reserves; accounts {#sec-17-30d-4 omnilex-key=us-nj-statutes--title-17--17:30D-4}
There is hereby created an unincorporated, nonprofit association to be known as the New Jersey Medical Malpractice Reinsurance Association constituting a legal entity separate and distinct from its members. Every insurer authorized to write, and engaged in writing within this State, on a direct basis, personal injury and property damage liability insurance as provided in R.S. 17:17-1 d. and e., excluding such insurers which are engaged in writing only workmen's compensation and employer's liability insurance written in connection therewith shall be and shall continue to be a member of the association and shall be bound by the plan of operation thereof as a condition of its authority to continue to transact such personal injury and property damage liability insurance in this State. All funds and reserves of the association shall be separately held and invested. The association shall maintain complete accounts of all moneys received including investment income and all losses and expenses incurred in connection with its operation. No part of the net earnings of the association shall inure to the benefit of any member insurer.
##### **§ 17:30D-5** Powers and duties of association {#sec-17-30d-5 omnilex-key=us-nj-statutes--title-17--17:30D-5}
The association shall, pursuant to the provisions of this act and the plan of operation, have the power:
a. To assume or cede 100% reinsurance or a lesser percentage on any policy of insurance or binder subject to this act;
b. To provide separate accounts for categories and subcategories of insureds reinsured or insured by the association;
c. To maintain relevant loss, expense and premium data relative to all risks reinsured in or insured by the association and to require each member to furnish statistics in connection with insurance ceded to the association at such times and in such form and detail as may be deemed necessary;
d. To establish fair and reasonable procedures to assess members whenever the assets of the association and the New Jersey Medical Malpractice Reinsurance Recovery Fund are insufficient to pay claimants as required by this act for their appropriate shares in accordance with participation ratios to be established in the plan of operation on the basis of the ratio of the members' net direct premiums written bears to the total net direct premium written by all members in this State on insurance against liability for damages to persons or property as provided in R.S. 17:17-d. and e., excluding workmen's compensation and employer's liability insurance written in connection therewith;
e. To receive and distribute all sums required by the operation of the association;
f. To establish procedures for reviewing claims procedures and practices of providers and in the event that the claims procedures or practices of any provider are considered inadequate to properly service the risks ceded by it to the association, the association may establish a claims program that will undertake to adjust or assist in the adjustment of claims for the provider on risks ceded by it, and in such event shall charge such provider a reasonable fee for establishing and operating such claim program;
g. To audit the operations of member companies to such extent as the board of directors determines to be necessary to assure compliance with this act, in a reasonable manner and at such reasonable time or times prescribed by the board of directors;
h. To sue and be sued, provided that no judgment against the association shall create any direct liability in the individual member companies, and the association may provide for the indemnification of its member companies, members of the board of directors and officers and employees and such other persons acting on behalf of the association to the extent permitted by law;
i. To review the market for insurance subject to this act throughout this State to make certain that eligible risks can readily obtain such insurance, to provide in the plan of operation a reasonable means for achieving this objective by requiring all members, in a fair and equitable manner, to discharge their responsibilities under this act and to establish for each category or subcategory of insureds limits of liability for medical malpractice liability insurance;
j. To prepare and file rates, rating plans, rules, classifications and policy forms to be used by the association in writing medical malpractice liability insurance on a direct basis;
k. To issue binders or policies of medical malpractice liability insurance in accordance with this act and to adjust and pay losses with respect thereto, or to appoint service companies to perform those functions.
##### **§ 17:30D-6** Temporary board of directors; powers and responsibilities {#sec-17-30d-6 omnilex-key=us-nj-statutes--title-17--17:30D-6}
Within 30 days after the effective date of this act, the commissioner shall call an organization meeting of the association for the purpose of constituting a temporary board of directors. The commissioner shall appoint nine members to serve as members of the board of directors after consultation with all the members of the association, and in making such appointments he shall give due consideration to the various methods of operation and the distribution by class of risks among the members.
The commissioner shall appoint three representatives of licensed producers to be members of the board of directors.
Each member of the board of directors shall be entitled to one vote. The producer representatives on the board of directors shall be eligible to vote on all matters not directly involving the association's budget and personnel administration.
Except as may be delegated to others in the plan of operation or reserved to the members, the board of directors shall have full power and responsibility for the establishment and operation of the association.
##### **§ 17:30D-7** Plan of operation; review and approval; certification; amendment. {#sec-17-30d-7 omnilex-key=us-nj-statutes--title-17--17:30D-7}
7. a. Within such a time as shall be prescribed by the commissioner in written notice to the board, the directors shall submit to the commissioner, for his review and approval, a proposed plan of operation. Such plan shall provide for the establishment of a permanent board of directors, the length of terms of the directors and the method of their selection, for economical, fair and nondiscriminatory administration and for the prompt and efficient provision of medical malpractice liability insurance throughout the State. Such proposed plan shall include: preliminary assessment of all members for initial expenses necessary to commence operations; establishment of necessary facilities; management of the association; assessment of members; underwriting standards; procedures for acceptance and session of reinsurance; and such other provisions as may be deemed necessary by the commissioner to carry out the purposes of this act. The plan of operation shall provide that the premium charged for reinsurance shall be the premium charged for the coverage and limits ceded less than expense allowances. The expense allowances shall consist of the amounts actually incurred by the provider on the ceded risk subject to a maximum of the total expense allowances provided in rate-making for the respective categories and subcategories of medical malpractice liability insurance in the latest rate revision or experience review for the provider accepted by the commissioner.
b. The proposed plan shall be reviewed by the commissioner and approved by him if he finds that such plan fulfills the purposes of this act. In his review of the proposed plan the commissioner may, in his discretion, consult with the directors and other members of the association and any other individual or organization. If the commissioner approves the proposed plan he shall certify such approval to the directors and said plan shall take effect 10 days after such certification. If the commissioner disapproves all or any part of the proposed plan of operation he shall return same to the directors with a statement, in writing, of the reasons for his disapproval and any recommendations he may wish to make. The directors may accept the commissioner's recommendations, or may propose a new plan, which accepted recommendations or a new plan shall be submitted to the commissioner within 30 days after the return of a disapproved plan to the directors. If the directors do not submit a proposed plan of operation within the time prescribed by the commissioner, or a new plan which is acceptable to the commissioner, or accept the recommendations of the commissioner within 30 days after the disapproval of a proposed plan, the commissioner shall promulgate a plan of operation and certify same to the directors. Any such plan promulgated by the commissioner shall take effect 10 days after certification to the directors.
c. The directors of the association may, on their own initiative, amend the plan of operation at any time, subject to the approval by the commissioner.
d. The commissioner may review the plan of operation whenever he deems expedient, and shall review same at least once a year, and may amend said plan after consultation with the directors and upon certification to the directors of such amendment.
##### **§ 17:30D-8** Insureds without availability of insurance; activation of association; designation of provider or direct basis insurance; acceptance of risks; noninterference with agents {#sec-17-30d-8 omnilex-key=us-nj-statutes--title-17--17:30D-8}
On and after the date that reinsurance is available from the association:
a. The commissioner after a hearing and on the basis of the facts developed at such hearing may make a finding that medical malpractice liability insurance is not readily available for any category or subcategory of insureds to which this act applies, and after such a finding activate the facility with respect to such category or subcategory.
b. Upon such activation, the board shall issue an invitation to each member of the association which has written during the 24 months preceding the date of such activation medical malpractice liability insurance of the type for which the association was activated anywhere in the United States of America, to become a qualified provider of such coverage in this State. If the board qualifies no company as a provider or if the commissioner determines after a hearing and on the basis of facts developed at such hearing, that the company or companies were not properly qualified, the commissioner shall order the association to write medical malpractice liability insurance on a direct basis and the association shall file within 30 days rates, rating plans, rules and classifications for the category or subcategory of insureds for which the association will be writing insurance on a direct basis. If the association does not submit such a filing within the prescribed number of days or during any extension granted by the commissioner, the commissioner shall promulgate the rates, rating plans, rules and classifications, certify same and order the association to insure eligible risks in accordance with the terms of his order. Qualified providers shall be compensated in accordance with the provisions of the plan of operation.
c. No member of the association qualified as a provider in accordance with this section shall refuse to issue to any eligible risk a policy of insurance of the type normally afforded by such insurer to the public, utilizing the rates, rating plans, rules and classification systems then in effect for such insurer; provided, however, that the coverages and coverage limits to be afforded may be ceded to the association; and provided further that nothing herein contained shall require an insurer to accept any risk if such insurer's policy forms or rates do not apply to such risk;
d. No duly licensed insurance agent of a qualified provider broker or solicitor shall refuse to furnish to any eligible risk quotations of premiums for such provider with whom such agent, broker or solicitor regularly places medical malpractice liability insurance policies, or shall fail to submit any eligible risk to such provider;
e. No company shall terminate any agent or restrict the authority of any agent, directly or indirectly, or in any manner whatsoever, solely by reason of the volume of such agent's business it cedes to the association or the experience produced by such ceded business. Neither shall any company make any distinction in remuneration to the agent between business retained and business ceded, or use any promise of reward or threat of penalty, present or future, or any device whatever, related to certain classes of risks or other classes of business, which would tend to induce the agent to avoid certain classes or types of risks.
##### **§ 17:30D-9** Medical malpractice reinsurance recovery fund; creation; purpose; contents; administration {#sec-17-30d-9 omnilex-key=us-nj-statutes--title-17--17:30D-9}
There is hereby created a fund to be known as the New Jersey Medical Malpractice Reinsurance Recovery Fund (hereinafter referred to as the recovery fund). The purpose of the recovery fund is to provide a financial backup for the plan of operation of the association and shall be used to reimburse the association for any deficit sustained in the operation of the association. A deficit shall exist whenever the sum of the earned premiums collected by the association and the investment income therefrom is exhausted by virtue of payment of or allocation for the association's necessary administrative expenses, reimbursements to members for any and all assessments levied as a result of their participation in the association, losses, loss adjustment expenses and reserves, including reserves for losses incurred, losses incurred but not reported and loss adjustment expenses. The recovery fund shall consist of all payments made to it by insurers as hereinafter provided, of securities acquired by and through the use of moneys belonging to the recovery fund, moneys appropriated to the recovery fund, together with interest and accretions earned upon such payments or investments. The recovery fund shall be administered by the commissioner and the State Treasurer in accordance with the provisions of this act.
##### **§ 17:30D-10** Additional premium charges on policies of medical malpractice liability insurance {#sec-17-30d-10 omnilex-key=us-nj-statutes--title-17--17:30D-10}
For the purpose of providing moneys necessary to establish the recovery fund in an amount sufficient to meet the requirements of this act, the commissioner shall establish reasonable provisions through additional premium charges for policies of the various categories and subcategories of medical malpractice liability insurance. Such provisions may vary by category or subcategory of risk in reasonable relationship to the loss experience both past and prospective of the association and its members attributable to such category or subcategory.
##### **§ 17:30D-11** Recovery fund; custodian; disbursements; investment {#sec-17-30d-11 omnilex-key=us-nj-statutes--title-17--17:30D-11}
The fund created by this act shall be separate and apart from any other fund and from all other State moneys. The State Treasurer shall be custodian of the fund and all disbursements from said fund shall be made by the treasurer upon vouchers signed by the commissioner. The moneys in the fund shall be invested and reinvested by the Director of the Division of Investment as other trust funds in the custody of the State Treasurer in the manner provided by law.
##### **§ 17:30D-12** Rules and regulations; suspension or revocation of certificate of authority of insurer for noncompliance {#sec-17-30d-12 omnilex-key=us-nj-statutes--title-17--17:30D-12}
The commissioner may promulgate reasonable rules and regulations to carry out the purposes of this act, and may suspend or revoke, after reasonable notice and a hearing, the certificate of authority to transact insurance in this State of any insurer which fails to comply with the provisions of this act, rules or regulations promulgated thereunder or any plan of operation.
##### **§ 17:30D-13** Emergency powers of commissioner upon activation of association; duration {#sec-17-30d-13 omnilex-key=us-nj-statutes--title-17--17:30D-13}
Upon finding that immediate activation of the association for any category or subcategory of insureds is required because medical malpractice liability insurance is or will be unavailable for such category or subcategory, the commissioner shall have the following emergency powers:
a. To appoint a temporary board of directors or operate the association without such board.
b. To adopt a temporary plan of operation to meet the immediate needs of the association.
c. To perform on behalf of the association on a temporary basis all functions necessary for the operation of the association otherwise delegated to the board of directors or the members of the association.
d. To charge the association for reasonable expenses incurred on its behalf in the emergency operation of the association pursuant to this section.
e. Subject to the same standards applicable for the approval of rates and rating-systems pursuant to P.L.1944, c. 27 (C. 17:29A-1 et seq.), to promulgate rates, rules, policy forms and rating plans for such category or subcategory of insureds for limits up to $3,000,000.00 over primary limits to be used by any company qualifying or designated as a provider for such coverage which does not have rates, rules, policy forms and rating plans in effect for such coverage.
These emergency powers shall terminate 60 days after the effective date of this act.
##### **§ 17:30D-14** Severability {#sec-17-30d-14 omnilex-key=us-nj-statutes--title-17--17:30D-14}
If any provisions of this act or the application thereof to any person or circumstances is held invalid, the invalidity shall not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and for this purpose the provisions of this act are declared to be severable.
##### **§ 17:30D-15** Liberal construction {#sec-17-30d-15 omnilex-key=us-nj-statutes--title-17--17:30D-15}
This act shall be liberally construed to effectuate its purposes, and all laws or parts of laws of this State inconsistent with this act are hereby superseded to the extent of such inconsistency.
##### **§ 17:30D-17** Insurer to notify Medical Practitioner Review Panel of malpractice settlement, judgment, award. {#sec-17-30d-17 omnilex-key=us-nj-statutes--title-17--17:30D-17}
2. a. Any insurer or insurance association authorized to issue medical malpractice liability insurance in the State shall notify the Medical Practitioner Review Panel established pursuant to section 8 of P.L.1989, c.300 (C.45:9-19.8) in writing of any medical malpractice claim settlement, judgment or arbitration award involving any practitioner licensed by the State Board of Medical Examiners and insured by the insurer or insurance association. Any practitioner licensed by the board who is not covered by medical malpractice liability insurance issued in this State, who has coverage through a self-insured health care facility or health maintenance organization, or has medical malpractice liability insurance which has been issued by an insurer or insurance association from outside the State shall notify the review panel in writing of any medical malpractice claim settlement, judgment or arbitration award to which the practitioner is a party. The review panel or board, as the case may be, shall not presume that the judgment or award is conclusive evidence in any disciplinary proceeding and the fact of a settlement is not admissible in any disciplinary proceeding.
In any malpractice action against a practitioner, a settlement prohibiting a complaint against the practitioner or the providing of information to the review panel or board concerning the underlying facts or circumstances of the action is void and unenforceable.
b. An insurer or insurance association authorized to issue medical malpractice liability insurance in the State shall notify the review panel in writing of any termination or denial of coverage to a practitioner or surcharge assessed on account of the practitioner's practice method or medical malpractice claims history.
c. The form of notification shall be prescribed by the Commissioner of Banking and Insurance, shall contain such information as may be required by the board and the review panel and shall be made within seven days of the settlement, judgment or award or the final action for a termination or denial of, or surcharge on, the medical malpractice liability insurance. Upon request of the board, the review panel or the commissioner, an insurer or insurance association shall provide all records regarding the defense of a malpractice claim, the processing of the claim and the legal proceeding; except that nothing in this subsection shall be construed to authorize disclosure of any confidential communication which is otherwise protected by statute, court rule or common law.
An insurer or insurance association, or any employee thereof, shall be immune from liability for furnishing information to the review panel and the board in fulfillment of the requirements of this section unless the insurer or insurance association, or any employee thereof, knowingly provided false information.
d. An insurer, insurance association or practitioner who fails to notify the review panel as required pursuant to this section shall be subject to such penalties as the Commissioner of Banking and Insurance may determine pursuant to section 12 of P.L.1975, c.301 (C.17:30D-12). In addition to, or in lieu of suspension or revocation, the commissioner may assess a fine which shall not exceed $1,000 for the first offense and $2,000 for the second and each subsequent offense, which may be recovered in a summary proceeding, brought in the name of the State in a court of competent jurisdiction pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
e. A practitioner who fails to notify the review panel as required pursuant to this section shall be subject to disciplinary action and civil penalties pursuant to sections 8, 9 and 12 of P.L.1978, c.73 (C.45:1-21, 45:1-22 and 45:1-25).
f. An insurer or insurance association shall make available to the review panel or the board, upon request, any records of termination or denial of coverage to a practitioner or surcharge assessed on account of the practitioner's practice method or medical malpractice claims history, which occurred up to five years prior to the effective date of P.L.1989, c.300 (C.45:9-19.4 et al.).
g. For the purposes of this section, "practitioner" means a person licensed to practice: medicine and surgery under chapter 9 of Title 45 of the Revised Statutes or a medical resident or intern; or podiatric medicine under chapter 5 of Title 45 of the Revised Statutes.
h. Any insurer or insurance association authorized to issue medical malpractice liability insurance in the State shall notify the Commissioner of Banking and Insurance, in a form and manner specified by the commissioner, of any medical malpractice claim settlement, judgment or arbitration award involving any practitioner licensed by the State Board of Medical Examiners and insured by the insurer or insurance association. The notification shall include the specialty or area of professional practice of the practitioner and the amount of the settlement, judgment or arbitration award, but shall not include the name or other identifying information of the practitioner.
##### **§ 17:30D-18** Conflicts of interest; violations; penalties. {#sec-17-30d-18 omnilex-key=us-nj-statutes--title-17--17:30D-18}
13. a. On or after the effective date of P.L.2004, c.17 (C.2A:53A-37 et al.) and except as provided in subsection d. of this section, no person who is an officer, director or board member of a professional association for health care providers shall serve concurrently as an officer, director or board member of a State-domiciled medical malpractice liability insurer that is licensed in the State and offering medical malpractice liability insurance policies on that effective date.
b. As used in this section, "health care provider" means an individual or entity, which, acting within the scope of its licensure or certification, provides health care services, and includes, but is not limited to, a physician, dentist, nurse or other health care professional whose professional practice is regulated pursuant to Title 45 of the Revised Statutes, and a health care facility licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.).
c. A person or professional association who violates the provisions of this section shall be liable for a civil penalty of $10,000 for each violation. The penalty shall be sued for and collected by the Commissioner of Banking and Insurance in a summary proceeding in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
d. In the case of an officer, director or board member of a medical malpractice liability insurer who is an officer, director or board member of a professional association for health care providers on the effective date of P.L.2004, c.17 (C.2A:53A-37 et al.), the officer, director or board member shall have 180 days to comply with the requirements of this section.
##### **§ 17:30D-19** "Medical Malpractice Liability Insurance Purchasing Alliance;" definitions. {#sec-17-30d-19 omnilex-key=us-nj-statutes--title-17--17:30D-19}
14. Physicians may join together, by means of a joint contract under the procedures established by this section, to form a "Medical Malpractice Liability Insurance Purchasing Alliance" for the purpose of negotiating a reduced premium for its members in the purchase of medical malpractice liability insurance. The joint contract shall be executed by all members of the purchasing alliance.
a. As used in this section:
"Board" means a medical malpractice liability insurance purchasing alliance board of directors provided for in this section.
"Commissioner" means the Commissioner of Banking and Insurance.
"Medical Malpractice Liability Insurance Purchasing Alliance," "purchasing alliance" or "alliance" means a purchasing alliance established pursuant to this section.
"Member" means a physician who is a member of a medical malpractice liability insurance purchasing alliance as provided for in this section.
b. The purchasing alliance, which may be a corporation, shall be governed by a board of directors, elected by the members of the purchasing alliance. No person may serve as an officer or director of an alliance who has a prior record of administrative, civil or criminal violations within the financial services industry. The directors shall serve for terms of three years, and shall serve until their successors are elected and qualified. Each director shall serve without compensation, except for reimbursement for actual expenses incurred by that director.
c. The board shall adopt bylaws for the operation of the purchasing alliance, which shall be effective upon ratification by a two-thirds majority of the members. The bylaws shall include, but not be limited to:
(1) the establishment of procedures for the organization and administration of the alliance; and
(2) procedures for the qualifications and admission of the members of the alliance.
The bases for denial of membership shall include, but not be limited to:
(a) performance of an act or practice that constitutes fraud or intentional misrepresentation of material fact;
(b) previous denial of membership in the alliance; or
(c) previous expulsion from the alliance;
(3) procedures for the withdrawal of members from the alliance;
(4) procedures for the expulsion of members from the alliance.
The bases for expulsion shall include, but not be limited to:
(a) failure to pay membership or other fees required by the purchasing alliance;
(b) failure to pay premiums in accordance with the terms of the medical malpractice liability insurance policy or the terms of the joint contract; or
(c) performance of an act or practice that constitutes fraud or intentional misrepresentation of material fact; and
(5) procedures for the termination of the alliance.
d. In addition to the other powers authorized under this section, a purchasing alliance shall have the authority to:
(1) set reasonable fees for membership in the alliance that will finance reasonable and necessary costs incurred in administering the purchasing alliance;
(2) negotiate premium rates for medical malpractice liability insurance with insurers on behalf of the members of the alliance, provided that negotiations are conducted by a person other than a member of the alliance or an employee of a member of the alliance;
(3) provide premium collection services for insurance purchased through the alliance for members;
(4) contract with third parties for any services necessary to carry out the powers and duties authorized or required pursuant to this section; and
(5) establish procedures for keeping confidential all communications between the members of the purchasing alliance and for prohibiting the dissemination and discussion of pricing information and other business-related information between and among members of the alliance.
e. A purchasing alliance established pursuant to the provisions of this section shall not:
(1) assume risk for the cost or provision of medical malpractice liability insurance;
(2) exclude a member who agrees to pay fees for membership and the premium for medical malpractice liability insurance coverage and who abides by the bylaws of the alliance;
(3) engage in any trade practice or activity prohibited pursuant to P.L.1947, c.379 (C.17:29B-1 et seq.);
(4) represent more than 35% of the physicians in a county or other relevant geographic service area; or
(5) require a member to purchase medical malpractice liability insurance only through the alliance.
f. Within 30 days after its organization, the purchasing alliance board shall file with the commissioner a certificate that shall list: the members of the alliance; the names of the directors, chairman, treasurer and secretary of the alliance; the address at which communications for the alliance are to be received; a copy of the certificate of incorporation of the alliance, if any; and a copy of the joint contract executed by all of the members. Any change in the information required by the provisions of this section shall be filed with the commissioner within 30 days of the change.
g. The commissioner, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations necessary to effectuate the provisions of this section.
##### **§ 17:30D-20** Provisions concerning settlements of medical malpractice liability insurance policy. {#sec-17-30d-20 omnilex-key=us-nj-statutes--title-17--17:30D-20}
15. a. A medical malpractice liability insurance policy, which is made, issued or delivered pursuant to Subtitle 3 of Title 17 of the Revised Statutes in this State on or after the effective date of P.L.2004, c.17 (C.2A:53A-37 et al.), may contain a provision that provides a person insured under the policy with the exclusive right to require the insurer to obtain the consent of the insured to settle any claim filed against the insured; except that, if the policy contains that provision, the insurer shall offer an endorsement, to be included in the policy at the option of the insured, providing the insurer with the right to settle a claim filed under the policy without first having obtained the insured's consent. The insurer shall establish a premium for the endorsement, which premium shall reflect any savings or reduced costs attributable to the endorsement.
b. The Commissioner of Banking and Insurance, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations necessary to effectuate the provisions of this section.
##### **§ 17:30D-21** Offering of deductibles in medical malpractice liability insurance policy. {#sec-17-30d-21 omnilex-key=us-nj-statutes--title-17--17:30D-21}
16. a. Every insurer authorized to transact medical malpractice liability insurance in this State shall offer medical malpractice liability insurance policies with a deductible, at the option of the insured, in an amount of at least $5,000 per claim and up to $1,000,000 per claim, and may require the insured to provide collateral for the deductible amount to the insurer.
b. Every insurer authorized to transact medical malpractice liability insurance in this State shall provide an appropriate premium reduction for any deductible chosen pursuant to subsection a. of this section.
c. In the case of a policy with any deductible, the insurer shall be responsible for payment of the deductible and shall be reimbursed for that amount by the insured.
##### **§ 17:30D-22** Increase of premium prohibited, certain circumstances. {#sec-17-30d-22 omnilex-key=us-nj-statutes--title-17--17:30D-22}
17. Notwithstanding any other law or regulation to the contrary, an insurer authorized to transact medical malpractice liability insurance in this State shall not increase the premium of any medical malpractice liability insurance policy based on a claim of medical negligence or malpractice against the insured if the insured is dismissed from an action alleging medical malpractice within 180 days of the filing of the last responsive pleading.
##### **§ 17:30D-23** Certification as to adequacy of rates. {#sec-17-30d-23 omnilex-key=us-nj-statutes--title-17--17:30D-23}
18. Each annual statement made after the effective date of P.L.2004, c.17 (C.2A:53A-37 et al.), pursuant to the provisions of section 16 of P.L.1982, c.114 (C.17:29AA-16), by an insurer writing medical malpractice in this State, shall include a certification by the chief executive officer or chief financial officer that the rates for every category, subcategory, or risk classification are adequate to cover expected losses and expenses of the insurer and to ensure the safety and soundness of the insurer.
##### **§ 17:30D-24** Mailing of notice of renewal, nonrenewal. {#sec-17-30d-24 omnilex-key=us-nj-statutes--title-17--17:30D-24}
19. Notwithstanding the provisions of section 1 of P.L.1968, c.131 (C.17:29C-1) to the contrary, each notice of renewal or nonrenewal by an insurer authorized to transact medical malpractice liability insurance in this State shall be mailed or delivered by the insurer to the insured not less than 60 days prior to the expiration of the policy and, in the case of a nonrenewal, shall contain the reason for the nonrenewal.
##### **§ 17:30D-25** Annual review of capitalization, reserve requirements. {#sec-17-30d-25 omnilex-key=us-nj-statutes--title-17--17:30D-25}
21. Subject to standards adopted by the National Association of Insurance Commissioners, the Commissioner of Banking and Insurance shall, within 180 days after the effective date of P.L.2004, c.17 (C.2A:53A-37 et al.) and annually thereafter, review the current capitalization and reserve requirements applicable to insurers authorized or admitted to transact medical malpractice liability insurance in this State, as those requirements are established by statute or regulation, or both.
Based upon the findings of that review, the commissioner shall adopt regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to modify those requirements, as the commissioner determines necessary in order to ensure the solvency of those insurers and the availability and affordability of medical malpractice liability insurance in this State. If the commissioner determines that legislation is necessary to effect any such modification, the commissioner shall notify the Governor and the Legislature within the 180-day period provided in this section.
##### **§ 17:30D-26** Option of installments for premium payments. {#sec-17-30d-26 omnilex-key=us-nj-statutes--title-17--17:30D-26}
22. Every insurer authorized to transact medical malpractice liability insurance in this State shall offer its insureds the option to make premium payments in installments, as prescribed by the Commissioner of Banking and Insurance by regulation.
##### **§ 17:30D-27** Definitions relative to medical malpractice judgments; payment. {#sec-17-30d-27 omnilex-key=us-nj-statutes--title-17--17:30D-27}
24. a. As used in this section:
"Annuity" means an annuity issued by an insurer licensed or authorized to do business in this State which is a qualified assignment under section 130 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.130.
"Judgment creditor" means a claimant who is the recipient of an award for economic or noneconomic damages, or both, that is the result of an action filed against a health care provider for medical malpractice, which award is subject to the provisions of subsection b. of this section.
"Judgment debtor" means a health care provider who, as a defendant in an action brought for medical malpractice, is required to pay the claimant an award that is subject to the provisions of this section.
"Noneconomic damages" means damages for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium, hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature.
"Structured payment agreement" means an agreement made to settle a claim or lawsuit or respond to a judgment in an action brought for medical malpractice by an injured person whereby a series of periodic payments, rather than a lump sum payment, is made over time to a claimant, in accordance with the needs of the claimant or the claimant's family, either through the purchase of an annuity or the establishment of a trust fund, or by another means approved by the court.
b. (1) Unless otherwise agreed to by the parties, in any judgment resulting from a medical malpractice action brought by a claimant for medical malpractice in which the noneconomic damages are less than or equal to $1,000,000, the court shall enter a judgment ordering that all of the money damages, both economic and noneconomic, be paid immediately.
(2) Unless otherwise agreed to by the parties, in any judgment resulting from a medical malpractice action brought by a claimant for medical malpractice in which the noneconomic damages exceed $1,000,000, the court shall enter a judgment ordering that 50% of the noneconomic damages be paid immediately, with the costs and attorney's fees to be paid from that amount. The remaining 50% of the judgment shall be paid over 60 months in the form of a structured payment agreement by any person, organization, group, or insurer that is contractually liable to pay the judgment.
c. The structured payment agreement shall specify: the recipient of the payments; the dollar amount of the payments; the interval between payments; the number of payments or the period of time over which payments are to be made; and the persons to whom money damages are owed, if any, in the event of the judgment creditor's death.
d. In the event of the judgment creditor's death, any amounts due and owing pursuant to subsection b. of this section shall be paid to the judgment creditor's estate.
e. The judgment debtor or the judgment debtor's insurer shall be required to: post a bond or security; or, as otherwise provided by regulation of the Department of Banking and Insurance, assure full payment of the noneconomic damages awarded. A bond shall not be deemed adequate unless it is written by a company authorized to do business in this State and is rated A-, or better, by A.M. Best Company or such other company as is approved by the Department of Banking and Insurance. If the judgment debtor is unable to adequately assure full payment of the judgment, the judgment, reduced to present value, shall be paid to the claimant in a lump sum. No bond may be canceled or be subject to cancellation unless at least 60 days' advance written notice is filed with the court and the claimant. Upon termination of periodic payments, the security, or so much as remains, shall be returned to the judgment debtor.
f. Upon the purchase of an annuity, establishment of a trust, or approval of another arrangement for periodic payments by a court, any obligation of the judgment debtor with respect to the judgment shall cease.
##### **§ 17:30D-28** Definitions relative to Medical Liability Insurance Premium Assistance Fund. {#sec-17-30d-28 omnilex-key=us-nj-statutes--title-17--17:30D-28}
26. For the purposes of sections 27 and 28 of P.L.2004, c.17 (C.17:30D-29 and 17:30D-30):
"Commissioner" means the Commissioner of Banking and Insurance.
"Fund" means the Medical Malpractice Liability Insurance Premium Assistance Fund established pursuant to section 27 of P.L.2004, c.17 (C.17:30D-29).
"Health care provider" means a physician, podiatrist, dentist and chiropractor licensed pursuant to the provisions of Title 45 of the Revised Statutes, a nurse licensed pursuant to the provisions of Title 45 of the Revised Statutes who is employed by a licensed hospital, long-term care facility or assisted living facility in this State and any person who purchases professional liability insurance on behalf of or for a practitioner, including professional liability insurance protection which is provided for hospital employed physicians through hospital funding supplemented by purchased commercial insurance coverage.
"Practitioner" means a physician, podiatrist, dentist and chiropractor and a nurse employed by a licensed hospital, long-term care facility or assisted living facility in this State.
##### **§ 17:30D-29** Medical Malpractice Liability Insurance Premium Assistance Fund. {#sec-17-30d-29 omnilex-key=us-nj-statutes--title-17--17:30D-29}
27. a. There is established a Medical Malpractice Liability Insurance Premium Assistance Fund within the Department of the Treasury as a nonlapsing, revolving fund.
b. The fund shall be comprised of the following revenue:
(1) an annual surcharge of $3 per employee for all employers who are subject to the New Jersey "unemployment compensation law," R.S.43:21-1 et seq., collected by the comptroller for the New Jersey Unemployment Compensation Fund and paid over to the State Treasurer for deposit in the fund annually, as provided by the commissioner, which surcharge may, at the option of the employer, be treated as a payroll deduction to each covered employee;
(2) an annual charge of $75 to be imposed by the State Board of Medical Examiners on every physician and podiatrist licensed by the board pursuant to the provisions of R.S.45:9-1 et seq., collected by the board and remitted to the State Treasurer for deposit into the fund;
(3) an annual charge of $75 to be imposed by the State Board of Chiropractic Examiners on every chiropractor licensed by the board pursuant to the provisions of P.L.1989, c.153 (C.45:9-41.17 et seq.), collected by the board and remitted to the State Treasurer for deposit into the fund;
(4) an annual charge of $75 to be imposed by the New Jersey State Board of Dentistry on every dentist licensed pursuant to the provisions of R.S.45:6-1 et seq., collected by the board and remitted to the State Treasurer for deposit into the fund;
(5) an annual charge of $75 to be imposed by the New Jersey State Board of Optometrists on every optometrist licensed by the board pursuant to the provisions of R.S.45:12-1 et seq., collected by the board and remitted to the State Treasurer for deposit into the fund; and
(6) an annual fee of $75 to be assessed by the State Treasurer and payable by each person licensed to practice law in this State, for deposit into the fund.
The provisions of paragraphs (2) through (5) of this subsection shall not apply to physicians, podiatrists, chiropractors, dentists, or optometrists who: are statutorily or constitutionally barred from the practice of their respective profession; can show that they do not maintain a bona fide office for the practice of their profession in this State; are completely retired from the practice of their profession; are on full-time duty with the armed forces, VISTA, or the Peace Corps and not engaged in practice; or have not practiced their profession for at least one year.
The provisions of paragraph (6) of this subsection shall not apply to attorneys who: are constitutionally or statutorily barred from the practice of law; can show that they do not maintain a bona fide office for the practice of law in this State; are completely retired from the practice of law; are on full-time duty with the armed forces, VISTA, or the Peace Corps and not engaged in practice; are ineligible to practice law because they have not made their New Jersey Lawyers' Fund for Client Protection payment; or have not practiced law for at least one year.
c. The State Treasurer shall deposit all monies collected pursuant to this section into the fund. Monies credited to the fund may be invested in the same manner as assets of the General Fund and any investment earnings on the fund shall accrue to the fund and shall be available subject to the same terms and conditions as other monies in the fund.
d. The fund shall be administered by the Department of Banking and Insurance in accordance with the provisions of P.L.2004, c.17 (C.2A:53A-37 et al.).
e. The monies in the fund are specifically dedicated and shall be utilized exclusively for the following purposes:
(1) $17 million shall be allocated annually for the purpose of providing relief towards the payment of medical malpractice liability insurance premiums to health care providers in the State who have experienced or are experiencing a liability insurance premium increase in an amount as established by the commissioner by regulation and meet the criteria established pursuant to section 28 of P.L.2004, c.17 (C.17:30D-30);
(2) $6.9 million shall be allocated annually to the Health Care Subsidy Fund established pursuant to section 8 of P.L.1992, c.160 (C.26:2H-18.58) for the purpose of providing payments to hospitals in accordance with the formula used for the distribution of charity care subsidies that are provided pursuant to P.L.1992, c.160 (C.26:2H-18.51 et al.);
(3) $1 million shall be allocated annually for a student loan expense reimbursement program for obstetrician/gynecologists, to be established pursuant to section 29 of P.L.2004, c.17 (C.18A:71C-49); and
(4) $1.2 million shall be allocated annually to the Division of Medical Assistance and Health Services in the Department of Human Services for the purposes provided in section 30 of P.L.2004, c.17 (C.30:4J-7).
f. The fund and the annual surcharge, charges, and fee provided for in subsection b. of this section shall expire three years after the effective date of P.L.2004, c.17 (C.2A:53A-37 et al.).
g. The commissioner, in consultation with the Commissioner of Health, shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to carry out the purposes of sections 26 through 29 of P.L.2004, c.17 (C.17:30D-28 through C.17:30D-30 and C.18A:71C-49); except that, notwithstanding any provision of P.L.1968, c.410 to the contrary, the commissioner may adopt, immediately upon filing with the Office of Administrative Law, such regulations as the commissioner deems necessary to implement the provisions of sections 26 through 29 of P.L.2004, c.17 (C.17:30D-28 through C.17:30D-30 and C.18A:71C-49), which shall be effective for a period not to exceed six months and may thereafter be amended, adopted, or readopted by the commissioner in accordance with the requirements of P.L.1968, c.410.
##### **§ 17:30D-30** Responsibilities of commissioner. {#sec-17-30d-30 omnilex-key=us-nj-statutes--title-17--17:30D-30}
28. a. In order to carry out the purposes of section 27 of P.L.2004, c.17 (C.17:30D-29), the commissioner shall, at a minimum:
(1) establish a program to provide medical malpractice liability insurance premium subsidies to health care providers from monies that are contained in the fund;
(2) establish a methodology and procedures for determining eligibility for, and providing subsidies from, the fund;
(3) maintain confidential records on each health care provider who receives assistance from the fund;
(4) take all necessary action to recover the cost of the subsidy provided to a health care provider that the commissioner determines to have been incorrectly provided; and
(5) provide for subsidies to all practitioners who are members of specialties and subspecialties who qualify for relief under subsection b. of this section, including those whose professional liability insurance protection is provided by hospital funding supplemented by purchased commercial insurance coverage.
b. The commissioner shall certify classes of practitioners by specialty and subspecialty for each type of practitioner, whose average medical malpractice premium, as a class, on or after December 31, 2002, is in excess of an amount per year as determined by the commissioner by regulation. In certifying classes eligible for the subsidy, the commissioner, in consultation with the Commissioner of Health, may also consider if access to care is threatened by the inability of a significant number of practitioners, as applicable, in a particular specialty or subspecialty, to continue practicing in a geographic area of the State.
(1) In order to be eligible for a subsidy from the fund, a practitioner shall have received a medical malpractice liability insurance premium increase in an amount as determined by the commissioner by regulation, for one or more of the following: upon renewal on or after January 1, 2004, from the amount paid by that practitioner in calendar year 2003; upon renewal on or after January 1, 2005, from the amount paid by that practitioner in calendar year 2004; and upon renewal on or after January 1, 2006, from the amount paid by that practitioner in calendar year 2005; or
(2) In the case of a health care provider providing professional liability insurance protection through self-insured hospital funding supplemented with purchased commercial insurance coverage, in order to be eligible for a subsidy from the fund, that provider shall have increased its total professional liability funding obligation in an amount as determined by the commissioner by regulation, for one or more of the following: upon renewal on or after January 1, 2004, from the professional liability funding obligation paid by that provider in calendar year 2003; upon renewal on or after January 1, 2005, from the professional liability funding obligation paid by that provider in calendar year 2004; and upon renewal on or after January 1, 2006, from the professional liability funding obligation paid by that provider in calendar year 2005.
(3) The amount of the subsidy shall be an amount, as determined by the commissioner by regulation, of the increase from the preceding year's premium or self-insured professional liability funding obligation; except that no health care provider shall receive a subsidy in any year that is greater than an amount as determined by the commissioner by regulation.
c. A practitioner who has been subject to a disciplinary action or civil penalty by the practitioner's respective licensing board pursuant to section 8, 9 or 12 of P.L.1978, c.73 (C.45:1-21, 22 or 25), when that action or penalty relates to the practitioner's provision of, or failure to provide, treatment or care to a patient, is not eligible for a subsidy from the fund.
d. (1) A practitioner who receives a subsidy from the fund shall be required to practice in that practitioner's specialty or subspecialty in this State for a period of at least two years after receipt of the subsidy.
(2) A practitioner who fails to comply with the provisions of paragraph (1) of this subsection shall be required to repay to the commissioner the amount of the subsidy, in whole or in part as determined by the commissioner.
e. The commissioner may waive the criteria for eligibility for a subsidy established pursuant to this section, if the commissioner determines that access to care for a particular specialty is threatened because of an inability of a sufficient number of practitioners in that specialty or subspecialty to practice in a geographic area of the State.
f. The State Board of Medical Examiners, the State Board of Chiropractic Examiners, the New Jersey State Board of Dentistry, and the New Jersey Board of Nursing shall each provide to the commissioner, on a quarterly basis, the names of the practitioners who have been subject to a disciplinary action or civil penalty by the practitioner's respective licensing board.
g. For the purposes of section 29 of P.L.2004, c.17 (C.18A:71C-49), the commissioner, in consultation with the State Board of Medical Examiners, shall provide to the Higher Education Student Assistance Authority the names of obstetrician/gynecologists licensed by the board who may qualify for the student loan reimbursement program established pursuant to P.L.2004, c.17. A physician who has been subject to a disciplinary action or civil penalty by the board, as provided in subsection c. of this section, shall not be eligible for the program.
##### **§ 17:30D-31** Rules, regulations. {#sec-17-30d-31 omnilex-key=us-nj-statutes--title-17--17:30D-31}
32. The Commissioner of Banking and Insurance shall adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to carry out the purposes of sections 13, 16 through 19, 21, 22 and 24 of this act.
## **Chapter 30E** {#struct-chapter-30e}
##### **§ 17:30E-1** Short title {#sec-17-30e-1 omnilex-key=us-nj-statutes--title-17--17:30E-1}
Sections 13 to 34 of this act shall be known and may be cited as the "New Jersey Automobile Full Insurance Availability Act."
##### **§ 17:30E-2** Purpose {#sec-17-30e-2 omnilex-key=us-nj-statutes--title-17--17:30E-2}
The purpose of this act is to assure to the New Jersey insurance consumer full access to automobile insurance through normal market outlets, to encourage the use of available market facilities, to provide automobile insurance for qualified applicants who cannot otherwise obtain such insurance, through a full automobile insurance underwriting association, and to require that companies be made whole for losses in excess of regulated rates on all risks not voluntarily written by providing procedures for the spreading and recoupment of losses based on actual experience.
##### **§ 17:30E-3** Definitions {#sec-17-30e-3 omnilex-key=us-nj-statutes--title-17--17:30E-3}
As used in sections 13 to 34 of this act:
a. "Association" means the New Jersey Automobile Full Insurance Underwriting Association.
b. "Automobile" means a private passenger automobile of a private passenger or station wagon type that is owned or hired, and is neither used as a public or livery conveyance for passengers nor rented to others with a driver; a motor vehicle with a pickup body, a delivery sedan, a van, or a panel truck or a camper type vehicle used for recreational purposes, owned by an individual or by husband and wife who are residents of the same household, not customarily used in the occupation, profession or business of the insured other than farming or ranching; and, solely for the purposes of this act, a motorcycle, as defined in R.S.39:1-1. An automobile owned by a farm family copartnership or corporation, which is principally garaged on a farm or ranch and otherwise meets the definition contained in this section, shall be considered a private passenger automobile owned by two or more relatives resident in the same household.
c. "Automobile insurance" means direct insurance against injury or damage, including the legal liability therefor, arising out of the ownership, operation, maintenance or use of automobiles, including, but not limited to, personal injury protection insurance, bodily injury liability insurance, property damage liability insurance, physical damage insurance and uninsured and underinsured motorist insurance.
d. "Board" or "board of directors" means the board of directors of the association.
e. "Company" or "member" means an insurer member of the association.
f. "Commissioner" means the Commissioner of Insurance.
g. "Director" means a member of the board of directors of the New Jersey Automobile Full Insurance Underwriting Association.
h. "Net direct car years of liability exposure" means direct bodily injury liability car years of exposure, after deducting returns for cancellations, but without adding reinsurance assumed or deducting reinsurance ceded, as determined by the board and approved by the commissioner.
i. "Net direct car years of physical damage exposure" means direct physical damage car years of exposure, after deducting returns for cancellations, but without adding reinsurance assumed or deducting reinsurance ceded, as determined by the board and approved by the commissioner.
j. "Person" means every natural person.
k. "Plan of operation" means the plan of operation of the association created pursuant to section 18 of this act.
l. "Producer" means an agent or broker licensed to transact the business of automobile insurance in this State.
m. "Qualified applicant" means a person domiciled in New Jersey who is an owner of an automobile registered, or to be registered within 60 days of application, and principally garaged in this State, who has been refused coverage in the voluntary market, and who cannot be or is not placed in the voluntary market through the procedures established pursuant to subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14). Qualified applicant shall also include a member of the United States military forces, if otherwise eligible for insurance coverage issued by the association, with respect to an automobile if, at the time the application is made, he is either (1) a nonresident who is stationed in this State, whose automobile is registered in another state and garaged in this State; or (2) a resident who is stationed in another state, whose automobile is registered in this State and garaged in another state. No person shall, however, be deemed a qualified applicant, if the principal operator of the automobile to be insured does not hold a driver's license which is valid in this State; or if a regular operator of the automobile other than the principal operator does not hold such a license; or if timely payment of premium is not tendered; or if the applicant or principal operator of the automobile does not furnish the information necessary to effect insurance; or if such person is engaged in the business of renting or leasing automobiles to others or if such person uses automobiles for commercial purposes.
n. "Underinsured motorist coverage" means insurance for damages because of bodily injury and property damage caused by accident and arising out of the ownership, maintenance or use of an underinsured automobile. An automobile is underinsured when the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies available to a person against whom recovery is sought for bodily injury or property damage is, at the time of the accident, less than the applicable limits of liability afforded under the automobile insurance policy held by the person seeking such recovery.
o. "Residual market equalization charge" means the amount imposed pursuant to section 20 of P.L.1983, c.65 (C.17:30E-8) which, when added to all other sources of association income, will cause the association to operate on a no profit, no loss basis.
##### **§ 17:30E-4** New Jersey automobile full insurance underwriting association; cessation of business in state by insurer {#sec-17-30e-4 omnilex-key=us-nj-statutes--title-17--17:30E-4}
There is created in the State of New Jersey an unincorporated, nonprofit association to be known as the New Jersey Automobile Full Insurance Underwriting Association, consisting of all insurers licensed to transact automobile insurance in this State, with its headquarters located in a place within the State of New Jersey, to be determined by the board of directors, with the approval of the commissioner. Every such insurer shall be a member of the association and shall be bound by the association's plan of operation as conditions of authority to transact automobile insurance in this State. Any insurer which has ceased to transact automobile insurance in this State shall nevertheless remain liable for income, as provided in the plan of operation, with respect to business transacted prior to the effective date of its cessation of business in the State, and the commissioner may require such an insurer to deposit with the association an amount sufficient to meet such insurer's obligations.
##### **§ 17:30E-5** Reconstituted board of directors; advisory boards {#sec-17-30e-5 omnilex-key=us-nj-statutes--title-17--17:30E-5}
a. Within 45 days after the effective date of this 1988 amendatory and supplementary act, there shall be appointed a reconstituted board of directors, and within 30 days after the appointment of the reconstituted board, the commissioner shall call the first, or organizational, meeting of the reconstituted board of directors. The board shall consist of nine persons, five of whom shall be appointed by the Governor with the advice and consent of the Senate, however, no more than three of the Governor's appointees shall be of the same political party, one of whom shall be appointed by the Speaker of the General Assembly, and one by the President of the Senate; the Director of the Division of Motor Vehicles in the Department of Law and Public Safety, or his designee, and the Commissioner of Insurance, or his designee, shall be ex officio members of the board. The board members appointed by the Governor, the President and the Speaker shall be persons with a background in insurance law or practices, specifically with regard to automobile insurance in New Jersey, who shall not, during their tenure on the board be affiliated with or employed by any producer, insurer servicing carrier or non-insurer servicing carrier, or any trade association or other entity representing the interests of any producer, insurer servicing carrier or non-insurer servicing carrier in this State. Members of the board may, during their tenure on the board, be affiliated with or employed by a non-servicing carrier member company. The Governor shall name two surrogates for each director appointed to the board from a list submitted to him by each appointee. Members of the board shall be compensated from the moneys of the association for their services, pursuant to standards and procedures set forth in the plan of operation. The initial appointment of the board members appointed by the President and Speaker shall be for a term of one year. The initial term of two of the board members appointed by the Governor shall be for a term of two years. The initial term of the remaining three board members appointed by the Governor shall be for a term of three years. After the initial appointments, all directors shall be appointed for terms of three years or until such time as a successor is appointed and duly qualified. Any vacancy in the membership of the board shall be filled in the same manner as the initial appointment for the unexpired term of the director to be replaced.
Within 20 days of the appointment of the reconstituted board of directors, the Governor, upon consultation with the Commissioner of Insurance, shall appoint two advisory boards to serve the board of directors. The first advisory board, to be known as the member company and servicing carrier advisory board, shall be comprised of eight representatives of member companies, servicing carriers and non-insurer servicing carriers. The second advisory board, to be known as the producer advisory board, shall be comprised of six producer representatives. In appointing the representatives of the member company and servicing carrier advisory board, the Governor shall select two persons from a list of not fewer than three persons nominated by the American Insurance Association, or its successor organization, from the officers or employees of insurers which are licensed to transact automobile insurance in this State and which are members or subscribers of that organization; two persons from a list of not fewer than three persons nominated by the Alliance of American Insurers, or its successor organization, from the officers or employees of insurers which are licensed to transact automobile insurance in this State and which are members or subscribers of that organization; two persons from a list of not less than three persons nominated by the National Association of Independent Insurers, or its successor organization, from the officers or employees of insurers which are licensed to transact automobile insurance in this State and which are members or subscribers of that organization; and two persons from the officers or employees of any insurers which are licensed in this State and are not members or subscribers of any of the above-mentioned organizations or from the officers or employees of any noninsurer servicing carriers, as provided for in section 24 of P.L. 1983, c. 65 (C. 17:30E-12). All nominations made by the associations shall include at least one representative of an insurer which is not and does not intend to be a servicing carrier. In appointing the representatives of the producer advisory board, the Governor shall select two persons from a list of not fewer than three nominated by the Professional Insurance Agents Association or its successor organization; two persons from a list of not fewer than three nominated by the Independent Insurance Agents Association or its successor organization; and two persons from a list of not fewer than three nominated by the Insurance Brokers Association or its successor organization. The Governor shall name two surrogates for each advisory board member from a list submitted to him by each appointee.
Each trade association and producer association shall have 15 days from the effective date of this 1988 amendatory and supplementary act to submit its prescribed list of advisory board candidates to the Governor. If any of the associations named in this section fails to submit the list from which the Governor is to select advisory board members within the time provided in this subsection, the Governor shall appoint temporary advisory board members to represent each association that has failed to submit its list. In selecting temporary advisory board members, the Governor shall be guided by the selection criteria set forth herein. Upon subsequent receipt of the list from the association, the Governor shall select permanent advisory board members to replace temporary board members within 30 days. Such replacement shall become effective immediately. Advisory board members shall each serve for a three year term or until such time as their successor is appointed and qualified. Any vacancy in the membership of the member and servicing carrier or producer advisory board shall be filled in the same manner as the initial appointment for the unexpired term of the advisory board member to be replaced. Advisory board members shall not be compensated for their services, but shall be reimbursed by the association for any necessary and reasonable expenses incurred in performance of their duties as members of the advisory board.
b. After the board has been appointed, it shall elect from its membership a chairman and shall then meet thereafter at least annually, and as often as the chairman or the plan of operation shall require, or at the request of any three members of the board or the commissioner. All meetings of the board and of the advisory boards shall be held in New Jersey. Written notice setting forth the meeting agenda shall be provided for each board meeting. Written notice shall be provided, at least five days prior to the date of the meeting, to all directors, each member of the member and servicing carrier advisory board and producer advisory board, the commissioner, and the chairmen of the Assembly Insurance Committee and the Senate Labor, Industry and Professions Committee, or the successors to those committees. Minutes shall be kept of all meetings. A copy of the minutes shall be sent within five business days following the meeting to the commissioner and to the chairmen of the two legislative committees. Each member of the board shall be entitled to one vote. The commissioner, or his designated representative, shall have no right to vote. Four voting members of the board shall constitute a quorum. No votes shall be cast on any matter except at an authorized board meeting. All votes shall be recorded in the minutes of the meeting. No votes shall be cast on any matter not listed as an agenda item in the written notice for that meeting. No member or his surrogate shall be entitled to vote on any matter if not physically present at the meeting at which the vote is taken. A majority of the voting members shall determine any action of the board. No member may serve as chairman for more than two consecutive years.
c. The board shall have and exercise all powers of the association not reserved to the members by the plan of operation or as otherwise provided in this act.
##### **§ 17:30E-6** Proposed plan of operation {#sec-17-30e-6 omnilex-key=us-nj-statutes--title-17--17:30E-6}
a. Within 90 days after the organizational meeting, unless after the sixtieth day, but not later than the seventieth day, following the organizational meeting, the commissioner for good cause grants an additional period not to exceed 30 days, the board shall file with the commissioner for his approval a proposed plan of operation, consistent with the provisions of this act, which shall provide for the prompt and efficient provision of automobile insurance to qualified applicants. The plan of operation shall provide for, among other matters, methods and means for the collection, investment and disbursement of funds; methods and standards for the establishment of adequate, actuarially sound reserves for unpaid losses, including provision for incurred but not reported losses; reasonable and adequate commissions to producers; protection of the interests of producers of record without a contractual relationship with a voluntary market member company; procedures and methods for issuing policies on behalf of the association; the method for determining and means of assessing the liability of an insurer which ceases to transact automobile insurance in this State with respect to business transacted prior to the effective date of its termination of membership; minimum requirements for the selection and performance of servicing carriers; minimum requirements for the performance of producers; reasonable and adequate compensation of such servicing carriers; procedures for matching producers with servicing carriers; the methods and procedures for notifying directors of the time and place of board meetings; and the phasing out of the plan for the providing and apportionment of automobile insurance pursuant to section 1 of P.L.1970, c. 215 (C. 17:29D-1), in a manner which will minimize the shifting of insureds among carriers, except that nothing herein shall be interpreted to affect the provisions of P.L.1968, c. 158 (C. 17:29C-6 et seq.).
b. The plan of operation adopted by the board shall be submitted to the commissioner for his review and approval. If the commissioner approves the proposed plan, he shall certify such approval to the directors and said plan shall take effect on the date certified by the commissioner. If the commissioner disapproves all or any part of the proposed plan of operation, he shall return same to the directors with a statement, in writing, of the reasons for his disapproval and any recommendations he may wish to make. The directors may accept the commissioner's recommendations or may propose a new plan, which recommendations or plan shall be submitted to the commissioner within 30 days after the return of a disapproved plan to the directors. If the directors do not submit a proposed plan of operation or if the directors do not submit a new plan which is acceptable to the commissioner, or accept the recommendations of the commissioner within 30 days after the disapproval of a proposed plan, the commissioner shall promulgate a plan of operation and certify same to the directors. Any such plan promulgated by the commissioner shall take effect on the date certified by the commissioner.
c. The directors of the association may amend the plan of operation at any time, subject to approval by the commissioner.
d. The commissioner shall annually review the plan of operation and, not later than April 1, 1985 and not later than April 1 of each year thereafter, shall approve or amend the plan of operation; and any amendments to the plan adopted by the commissioner pursuant to the annual review shall be binding on the board as of the effective date of the amendments. The commissioner may review the plan of operation at any other time, and may propose amendments to the board. If the board does not adopt amendments acceptable to the commissioner within 30 days, the commissioner may certify amendments and their effective date to the board.
e. Any order of the commissioner with respect to the plan of operation, or any amendment thereto, shall be subject to review by the Appellate Division of the Superior Court.
##### **§ 17:30E-6.1** Association data bank {#sec-17-30e-6.1 omnilex-key=us-nj-statutes--title-17--17:30E-6.1}
a. The board shall, within 60 days following the effective date of this 1988 amendatory and supplementary act, contract for the establishment of an association data bank to facilitate the dissemination of information regarding association risks to all insurers transacting the business of private passenger automobile insurance in the voluntary market.
b. The board shall establish the type of information which may be made available to insurers, which may include, but not be limited to, the name, address, and classification of the insured, a description of the vehicle, the loss history of the insured, the limits of coverage on the policy, and the producer of record.
c. The board shall make this data available to all insurers writing private passenger automobile insurance in the voluntary market in a nondiscriminatory manner to facilitate the insurers' depopulation of the association.
d. The establishment of this data bank may be incorporated in the plan of operation of the association, but it shall not require the approval of the commissioner. The data bank shall be fully operational within five months of the effective date of this section.
##### **§ 17:30E-6.2** Task force {#sec-17-30e-6.2 omnilex-key=us-nj-statutes--title-17--17:30E-6.2}
a. The board of the association shall amend its plan of operation to establish a Task Force to conduct field file audits of servicing carriers. The Task Force shall conduct the audits to determine whether the servicing carriers have followed normal and prudent industry practices in their handling of claims on behalf of the association.
b. The Task Force shall report its findings to the board and to the commissioner at least semiannually, along with any findings or recommendations which have resulted from its audit.
c. The commissioner shall annually report to the Legislature his findings with respect to the audits, along with any recommendations which he may have with respect to the servicing of association claims.
##### **§ 17:30E-7** Powers and duties {#sec-17-30e-7 omnilex-key=us-nj-statutes--title-17--17:30E-7}
Pursuant to the plan of operation, the association shall have the power and duty to:
a. Enter into contracts as are necessary or proper to carry out the provisions and purposes of this act;
b. Sue or be sued in the name of the association, including taking any legal actions necessary or proper for recovery of any assessments for, on behalf of, or against members. A judgment against the association shall not create any direct liability against the servicing carrier, board of directors or the individual members, or the individual participating members of the association;
c. Indemnify its directors and employees for any and all claims, suits, costs of investigations, costs of defense, settlements or judgments against them on account of an act or omission in the scope of a director's duties or employee's employment. The association shall refuse to indemnify if it determines that the act or failure to act was because of actual fraud, willful misconduct or actual malice;
d. Take such action as is necessary to prevent and avoid the payment of improper claims against the association or the coverage provided by or through the association;
e. Arrange for the issuance of automobile insurance to any qualified applicant through servicing carriers. Each servicing carrier shall issue policies in the name of the servicing carrier, on behalf of the association, to the extent the plan of operation provides. Servicing carriers, as agents of the association, shall have no individual liability for claims or policies written by the association. However, notwithstanding the above, or any other provision of law to the contrary, the association shall not arrange for the issuance or renewal of any automobile insurance policy, either through a servicing carrier or on its own behalf, on or after October 1, 1990;
f. Appoint from among its members appropriate legal, actuarial, claims, investment and other committees as necessary to provide technical assistance in the operation of the association, policy and other contract design, and any other function within the authority of the association;
g. Establish standards for, and review operating practices of, servicing carriers and producers to determine whether such practices are adequate to properly service association business, and to take appropriate action to eliminate inadequate operating practices and develop adequate operating practices, and to appoint an audit committee to review operating practices. The audit committee shall be composed of servicing carriers, producers, and member companies who are not servicing carriers;
h. Develop criteria and establish a monitoring system to ensure that: (1) servicing carriers do not obtain an unfair advantage, because of their servicing carrier relationship with producers over other member companies which are not servicing carriers; and (2) member companies do not obtain an unfair advantage over producers of record without a contractual relationship with a voluntary market company, as a result of an offer of voluntary market coverage to an insured of the association;
i. Order the reporting of such statistics by the members of the association as it deems necessary;
j. Reimburse servicing carriers from association funds;
k. Adopt bylaws for the regulation of its internal affairs;
l. Employ a general manager, who shall serve at its pleasure and be responsible for the conduct of the administrative affairs of the association. The board may employ other necessary personnel and may delegate to the general manager and other personnel such authority as it deems necessary to assure proper administration and operation of the association consistent with the plan of operation. The board shall arrange and contract if necessary for suitable quarters within the State of New Jersey for operations of the association; for such equipment, goods and services; and incur such expenses as it deems necessary to assure efficient administration of the association consistent with the plan of operation. If required by the plan of operation, the board may establish service centers in underserviced areas, which service centers shall provide for the dissemination of full information on the coverages available under this act and for referrals to appropriate outlets for the acquisition of such coverage;
m. Hear and determine complaints of any member or producer concerning the operation of the association in accordance with procedures prescribed in section 28 of this act;
n. Annually report to the commissioner on the operation of the association;
o. Record and investigate complaints involving the conduct of producers and to take appropriate corrective action or to recommend to the commissioner appropriate disciplinary action, including suspension or revocation of authority to write association business;
p. Review servicing practices of servicing carriers to determine whether such practices are adequate to properly service the risks written by the association; and upon finding that the practices of any servicing carrier are inadequate, establish a program for that member which will assist the servicing carrier in the performance of its duties and charge that servicing carrier a reasonable fee for establishing and operating such a program;
q. Audit the operations of members for the purpose of determining compliance with this act;
r. Develop methods and standards for the establishment of adequate, actuarially sound reserves for unpaid losses and loss adjustment expenses, including provision for incurred but not reported losses; and
s. Take such other action as is necessary to effectuate the purposes of this act.
##### **§ 17:30E-8** Sources of income {#sec-17-30e-8 omnilex-key=us-nj-statutes--title-17--17:30E-8}
a. The association shall derive income from the following sources for the payment of expenses, losses, and the provision of adequate, actuarially sound reserves for unpaid losses and loss adjustment expenses, including incurred but not reported losses, in connection with association business: (1) net premiums earned; (2) income generated from any association accident surcharge system permitted or required by law; (3) that percentage of surcharges collected by the Division of Motor Vehicles prior to October 1, 1991 and deposited with the association pursuant to subsection b. of section 6 of the "New Jersey Automobile Insurance Reform Act of 1982," P.L.1983, c.65 (C.17:29A-35); (4) income collected by members of the association and by the association from the residual market equalization charge imposed prior to April 1, 1991, or flat charges (also referred to as capitation fees or policy constants, but not including premiums for uninsured motorist or towing coverage, or flattened tax and expense fees implemented pursuant to section 8 of P.L.1983, c.65 (C.17:29A-37)) imposed prior to April 1, 1991, levied on a per car and per coverage basis; (5) income from investment of moneys collected pursuant to paragraphs (1), (2), (3), (4) and (6) of this subsection; and (6) income collected by the Director of the Division of Motor Vehicles prior to October 1, 1991, pursuant to section 68 of P.L.1990, c.8 (C.17:33B-63). Residual market equalization charges collected on behalf of the association shall on a monthly basis be certified to by the carrier and shall be transferred to the association in accordance with the plan of operation. No producer commissions or premium taxes shall be paid on, or company expenses or servicing carrier compensation deducted from, the residual market equalization charge. No servicing carrier compensation or commissions shall be paid by the association on violation surcharges deposited by the Division of Motor Vehicles with the association. All premiums received by servicing carriers on behalf of the association shall on a monthly basis be certified to by the carrier and shall be transferred to the association in accordance with the plan of operation. Premiums shall be transferred to the association net of commissions paid, all premium taxes, and servicing carrier compensation, except as otherwise required by law.
All claims and claim expense payments paid on association business shall be disbursed by the servicing carriers or the association through drafts drawn on association funds in accordance with the plan of operation. Servicing carriers, as agents of the association, shall have no individual liability on claims or policies written by the association.
b. At least annually, the board shall file its experience with the commissioner, which experience shall include the projected income, expenses, losses and reserve requirements of the association for the ensuing year, any adjustment in previously established reserves for unpaid losses and loss adjustment expenses necessary to make such reserves adequate and actuarially sound, and the initial filing shall include the experience of the automobile insurance plan established pursuant to P.L.1970, c.215 (C.17:29D-1). Except in the case of the initial or other filing applicable to the first year of operation of the association, the board shall include in its filing with the commissioner, for his approval, a computation of the residual market equalization charge per insured vehicle to be collected by each member from its voluntary insureds, exclusive of principal operators 65 years of age or older, and by each servicing carrier from association insureds or insureds covered by the Market Transition Facility created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), exclusive of principal operators 65 years of age or older, to offset the anticipated losses of the association.
At the end of the first 12 months of the operation of the association and at least annually thereafter, the board shall also include in its filing with the commissioner a review of the previous year's experience, setting forth the income, losses, and reserve requirements, including any adjustment in previously established reserves for unpaid losses and loss adjustment expenses necessary to make such reserves adequate and actuarially sound, and expenses of the association during the previous year. The filing shall be accompanied by such statistics and other information as the commissioner may deem necessary. The commissioner shall, within 60 days of such filing, approve or disapprove the filing, except that the commissioner may, for good cause, extend by not more than 60 days the period for approving or disapproving the filing. Failure to act within the period allowed for the commissioner's review of the filing shall be deemed approval of the filing, except that the running of the period shall be tolled by a request for additional information by the commissioner or until the association notifies the commissioner that it will not provide such additional information, together with the reason for not supplying the information. Failure to comply with a reasonable request for information may be a ground for disapproving all or part of the filing. If the commissioner disapproves all or part of the filing, he shall state the reasons for such disapproval, and indicate such portion of the filing he approves. Such disapproval shall be subject to review by the Appellate Division of the Superior Court.
c. The residual market equalization charge last approved by the commissioner shall continue to apply while the application for the revised charge is being processed by the commissioner pursuant to this section.
d. The residual market equalization charge per insured vehicle shall be collected following the effective date of such approval, by the insurer from its policyholders, exclusive of principal operators 65 years of age or older, on a uniform net direct car year of liability exposure basis and a net direct car year of physical damage exposure basis. Any insurer or rating organization making a residual market equalization charge pursuant to this subsection shall, 15 days prior to the date of the implementation of the proposed rate adjustment, make an informational filing with the commissioner, documenting compliance with the established method of distributing such residual market equalization charge.
e. Any insurer licensed to transact automobile insurance after the effective date of this act shall become a member of the association upon receiving such license and the determination of any such insurer's participation in the association shall be made as of the date of such membership in the same manner as for all other members of the association.
f. For purposes of this section and any other applicable provision of law, the residual market equalization charge shall not be considered insurance premium unless otherwise specifically provided therein.
##### **§ 17:30E-8.1** Insufficient resources {#sec-17-30e-8.1 omnilex-key=us-nj-statutes--title-17--17:30E-8.1}
a. Beginning January 1, 1989 and annually thereafter, the commissioner shall determine whether the income of the association as provided for in paragraphs (1), (2), (3), and (5) of section 20 of P.L. 1983, c. 65 (C. 17:30E-8), and the residual market equalization charge levied pursuant to paragraph (4) of that section prior to the effective date of this 1988 amendatory and supplementary act is or will be sufficient to meet its obligations in the ensuing year. If the commissioner determines that the association has insufficient resources to meet its obligations, he shall request the board of the association to formulate a plan for the payment of no less than 50% of the aggregate residual bodily injury losses for which the association is to make payment during the ensuing 12 month period, which plan shall provide for the payment of these losses in no more than four annual installments. The board shall submit the plan to the commissioner for his approval. Interest on the balance of the unpaid claim shall be paid at the rate established by subsection (a) of R.S. 31:1-1 for loans in which there is no written contract.
b. In addition to the plan provided for in subsection a. of this section, the commissioner may also request the submission of a plan by the board for the deferral, for a period not to exceed 12 months, of payments by the association of property damage claims which are subject to subrogation.
c. No residual market equalization charge in excess of the charge levied prior to the effective date of this 1988 amendatory and supplementary act shall be approved by the commissioner unless the procedures established pursuant to subsection a. or b. of this section do not provide sufficient revenue for the association to pay its obligations.
##### **§ 17:30E-9** Qualified applicants {#sec-17-30e-9 omnilex-key=us-nj-statutes--title-17--17:30E-9}
a. Any qualified applicant shall be entitled to apply to the association for insurance coverage available pursuant to section 27 of this act. Subject to procedures established in the plan of operation, producers shall have authority to issue binders to qualified applicants.
b. If the servicing carrier determines that the applicant is a qualified applicant, the carrier, as an agent of the association, upon receipt of the appropriate premium, or such portion thereof as is prescribed in the plan of operation, shall issue or cause to be issued a policy of automobile insurance which shall include coverages and limits requested by the applicant and available under section 27 of this act.
c. No licensed insurance producer selected by the association to sell association policies shall refuse to furnish to any applicant quotations of premiums for association automobile insurance or shall fail to submit the application of a qualified applicant to the association when requested to do so by a qualified applicant.
d. No company shall terminate any agent or restrict the authority of any agent, directly or indirectly, or in any manner whatsoever, solely by reason of the volume of such agent's business written on behalf of the association or the experience produced by such business.
e. The association shall accept applications for coverage 90 days after the plan of operation has been approved.
f. The board may suspend the binding authority of any producer who has violated any provision of the plan of operation. In no event shall any failure on the part of the producer to properly perform under the provisions of the plan of operation or any directive of the association prejudice the rights of a good faith applicant to coverage through the association.
##### **§ 17:30E-10** Assignment of association business {#sec-17-30e-10 omnilex-key=us-nj-statutes--title-17--17:30E-10}
a. Association business shall be serviced by producers selected by the board, in accordance with selection procedures and eligibility standards established by the plan of operation. The selection procedures shall include an affirmative action program and the establishment of a producer-to-population ratio which shall ensure adequate service on a regional basis. The plan of operation shall also establish procedures to facilitate the transition from the procedures governing producers, which are in effect as of the effective date of this act, to the selection procedures established by the association pursuant to this subsection.
b. Producers who are exclusive representatives of a company which is a servicing carrier shall be assigned to that carrier for the servicing of association policies. Producers who are not exclusive representatives of a servicing carrier may, at the election of the producer and with the consent of the servicing carrier, contract with the association to do business through any servicing carrier. Producers who are not exclusive representatives of a company which is a servicing carrier, or who have not otherwise established a contractual relationship with a servicing carrier pursuant to this section, shall be assigned to all servicing carriers on an equitable basis by the association, pursuant to the plan of operation. The assignments shall be in proportion to the percentage of association business which each servicing carrier has contracted with the association to accept and shall be balanced among territories. The assignments shall be reviewed at least annually and upon the request of a servicing carrier or producer. Pursuant to the plan of operation, the assignments shall be reallocated if it is found that the allocations are demonstrably inequitable. Reallocations shall be made in a manner to minimize the shifting of producers.
c. Every producer shall be assigned two alternate servicing carriers, pursuant to the plan of operation. In the event that any servicing carrier normally assigned to any producer ceases, as may be provided in the plan of operation, to accept applications temporarily, such applications shall be redistributed by the association to each producer's alternate servicing carrier.
d. In order to minimize disruption of association operations in cases in which a servicing carrier withdraws or will be withdrawing from the service of association business, the association, with the approval of the commissioner, shall be authorized to reallocate all, or any part, of the withdrawing servicing carrier's producers to one or more of the remaining servicing carriers.
##### **§ 17:30E-11** Schedule of commissions {#sec-17-30e-11 omnilex-key=us-nj-statutes--title-17--17:30E-11}
a. The producer shall receive commissions on association business which shall be designed to provide reasonable compensation for services performed by producers.
b. The rate of commission payable on policies issued by the association after January 1, 1987, shall be 10%, which rate shall remain in effect until January 1, 1988, at which time the rate of commission payable on association policies shall be 9%. This rate shall remain in effect until January 1, 1989, or until the number of drivers insured by the association is no greater than 30% of the aggregate number of insured private passenger automobiles in this State, whichever occurs later, at which time the commission payable on association policies shall be 8%.
c. Notwithstanding the provisions of subsection a. of this section, a higher commission, as established by the commissioner, may be paid by the association to producers who meet criteria established by the commissioner in the plan of operation, which criteria may include, but not be limited to, the territory in which the producer is located and whether or not the producer has an affiliation with an insurer which writes private passenger automobile insurance in the voluntary market.
d. In the event that a policy issued by the association is canceled by reason of nonpayment of premium or nonpayment of an installment payment due pursuant to an insurance premium finance agreement, the unearned commission shall be retained by the association and the effective cancellation date of the policy shall be no earlier than 10 days prior to the last full day for which the premium paid by the insured, net of the producer's full annual commission, would pay for coverage on a pro rata basis.
##### **§ 17:30E-12** Servicing carrier {#sec-17-30e-12 omnilex-key=us-nj-statutes--title-17--17:30E-12}
a. Pursuant to the procedures and standards established in the plan of operation, the board shall solicit, by advertisement in at least two newspapers of general circulation in the State, proposals from members and eligible noninsurers to act as a servicing carrier for the association. Standards may include the submission of a deposit.
All proposals shall be publicly opened by the board, which, after consultation with, and the approval of, the commissioner, shall award a contract to the proposer or proposers, as the case may be, whose proposal, conforming to the solicitation for proposals, is most advantageous to the association and its policyholders in its judgment, upon consideration of price and other factors. The commissioner may reject any and all bids if he determines that the bid proposals do not serve the best interests of the association. If the bid process does not result in adequate servicing capacity for the association, capacity shall be achieved pursuant to the provisions of subsection e. of this section.
Any person who makes, or causes to be made, a false, deceptive, or fraudulent statement in any proposal to be a servicing carrier, or in the course of any proceeding in connection therewith, shall be subject to a fine of not less than $20,000.00, shall forfeit any fee which may be required to be submitted in conjunction with the proposal, and shall be permanently disqualified from submitting any further proposal under this section.
b. Insurers under common management or ownership may elect to submit an application to act as a servicing carrier in the name of any company in the group which is licensed and authorized to transact automobile insurance in this State. The commissioner may disapprove the action by the board, if he finds that the action is not in the best interests of the association, the insurer, or the purposes of this act, within 20 days of final approval by the board. The disapproval shall be made in writing and shall set forth the reasons for disapproval.
c. Any person other than a member may act as a servicing carrier if: (1) the person meets the standards of eligibility for non-insurer servicing carriers established by the commissioner in the plan of operation, after consultation with the board; and (2) the person is approved by the commissioner as being eligible. The plan of operation shall contain any standards of eligibility which the commissioner may deem appropriate for establishing the qualifications of persons desiring to become noninsurer servicing carriers, which standards may include, but not be limited to, financial soundness, the capacity to perform the services required, experience, and record of past performance.
The commissioner shall have the authority to exercise all the powers granted to him by Title 17 of the Revised Statutes, including the powers of examination, with respect to noninsurer servicing carriers deemed to be eligible pursuant to this subsection.
d. The standards of eligibility shall require that every non-insurer servicing carrier: (1) shall have minimum assets of $10,000,000.00; (2) shall have been in business for at least five years; (3) shall have had at least three years' experience in insurance related fields or activities; and (4) shall be able to demonstrate to the commissioner and the board that it has the capacity to issue and service a minimum of 100,000 private passenger automobile insurance policies.
e. After notice and hearing, the commissioner may require one or more members of the association or member of a group as provided in subsection b. of this section to act as servicing carriers, if he determines that the action is necessary to effectuate the purposes of this act, except that no company having less than 1% of the voluntary private passenger automobile insurance market in this State based on its net written car years of exposure shall be subject to the provisions of this subsection.
f. Pursuant to procedures established by the commissioner, any member of the association or eligible noninsurer which is acting as a servicing carrier may apply to the commissioner for permission to discontinue acting as a servicing carrier or to reduce its participation. After notice and a hearing, the commissioner may permit such insurer or eligible non-insurer to discontinue acting as a servicing carrier or to reduce its participation, on terms to be imposed by the commissioner, if the commissioner finds that such action is in the best interests of the insurer or eligible noninsurer, the association and the purposes of this act.
g. After notice and hearing, the association may recommend to the commissioner that the authority of a servicing carrier be terminated or the commissioner may terminate the authority of a servicing carrier to act as a servicing carrier, if the association or the commissioner determines that it is in the best interest of the association.
h. Any order of the commissioner pursuant to this section shall be subject to review by the Appellate Division of the Superior Court.
##### **§ 17:30E-13** Territorial base rates {#sec-17-30e-13 omnilex-key=us-nj-statutes--title-17--17:30E-13}
Notwithstanding the provisions of section 7 of P.L. 1983, c. 65 (C. 17:29A-36), the rates used by the association shall be as follows:
a. On January 1, 1989, the territorial base rates used by the association for policies issued or renewed following that date for qualified applicants or association insureds who, for the three years preceding the date of issuance or renewal, (1) have been convicted of two or more moving violations, or have received four or more motor vehicle points, whichever is less; or (2) have had one or more at-fault accidents shall be adjusted by the commissioner so that they exceed the territorial base rates under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State by 10%. Qualified applicants or association insureds who have not had such accidents or moving violations or motor vehicle points in the three years preceding the issuance or renewal shall be rated under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State.
b. On January 1, 1990, the territorial base rates used by the association for policies issued or renewed following that date for qualified applicants or association insureds who, for the three years preceding the date of issuance or renewal, (1) have been convicted of two or more moving violations, or have received four or more motor vehicle points, whichever is less; or (2) have had one or more at-fault accidents shall be adjusted by the commissioner so that they exceed the territorial base rates under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State by 20%, unless the commissioner reduces the amount of the rate increase based on his certification as to the needs of the association on that date. Qualified applicants or association insureds who have not had such accidents or moving violations or motor vehicle points in the three years preceding the issuance or renewal shall be rated under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State.
c. On January 1, 1991, the territorial base rates used by the association for policies issued or renewed following that date for qualified applicants or association insureds who, for the three years preceding the date of issuance or renewal, (1) have been convicted of two or more moving violations, or have received four or more motor vehicle points, whichever is less; or (2) have had one or more at-fault accidents shall be adjusted by the commissioner so that they exceed the territorial base rates under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State by 30%, unless the commissioner reduces the amount of the rate increase based on his certification as to the needs of the association on that date. Qualified applicants or association insureds who have not had such accidents or moving violations or motor vehicle points in the three years preceding the issuance or renewal shall be rated under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State.
d. On January 1, 1992, the territorial base rates used by the association for policies issued or renewed following that date for qualified applicants or association insureds who, for the three years preceding the date of issuance or renewal, (1) have been convicted of two or more moving violations, or have received four or more motor vehicle points, whichever is less; or (2) have had one or more at-fault accidents shall be adjusted by the commissioner so that they exceed the territorial base rates under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State by 40%, unless the commissioner reduces the amount of the rate increase based on his certification as to the needs of the association on that date. Qualified applicants or association insureds who have not had such accidents or moving violations or motor vehicle points in the three years preceding the issuance or renewal shall be rated under the rating plan for standard insureds which is used by the rating bureau which files rates for the greatest number of insurers transacting private passenger automobile insurance in the voluntary market in this State.
e. On January 1, 1993, the commissioner shall direct the board to prepare, adopt and file with the commissioner rates which are based upon past and prospective loss experience of the risks underwritten by the association and the expenses attendant thereto, and which maintain the association on a self-sustaining basis. The commissioner shall approve or disapprove the rates filed by the board pursuant to the provisions of P.L. 1944, c. 27 (C. 17:29A-1 et seq.).
Nothing contained in this subsection shall be deemed to affect the commissioner's ability to continue to maintain any flat charges (also known as flat capitation fees or policy constants) pursuant to section 1 of P.L. 1984, c. 1 (C. 17:29A-37.1) or any residual market equalization charge pursuant to section 20 of P.L. 1983, c. 65 (C. 17:30E-8) approved on or before 48 months following the effective date of this 1988 amendatory and supplementary act.
f. Nothing contained in subsections a. through e. of this section shall operate to cause the rates charged by the association to result in revenues to the association which exceed the needs of the association in meeting its obligations and expenses.
g. The commissioner may order the adjustment of association rates in any territory in which the relationship between the rates used by the association and the rates used by insurers in the standard voluntary market is such that the voluntary market is adversely affected.
h. The commissioner may order the establishment of association rates which are higher than the rates which are otherwise provided for by this section, which rates would be applicable to certain drivers, based on their accident or violation records. The rates applicable to these drivers shall be established additively to the rates otherwise authorized for the use of the association, shall be spread equably across all classes and territories and may, at the discretion of the commissioner, vary as to the extent of the at-fault accident or violation records of the drivers.
##### **§ 17:30E-13.1** Collision, comprehensive coverage rates {#sec-17-30e-13.1 omnilex-key=us-nj-statutes--title-17--17:30E-13.1}
Notwithstanding any other provision of law to the contrary, within 60 days of the effective date of this section, the board of directors of the association shall establish rates for collision and comprehensive coverages based on the past and prospective loss experience of the association for those coverages, which shall be filed for approval by the commissioner pursuant to P.L. 1944, c. 27 (C. 17:29A-1 et seq.). Any and all proceedings relating to a filing made pursuant to this section shall be completed on an expedited basis no later than 30 days after the date of the filing, and upon terms and conditions established by the commissioner. The rates so established shall, upon their approval by the commissioner, be applied to all qualified applicants and association insureds who, for the three years preceding the date of the approval by the commissioner, (1) have been convicted of two or more moving violations, or have received four or more motor vehicle points, whichever is less; or (2) have had one or more at-fault accidents.
##### **§ 17:30E-14** Procedures for voluntary coverage {#sec-17-30e-14 omnilex-key=us-nj-statutes--title-17--17:30E-14}
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.
##### **§ 17:30E-15** Mandatory coverage limits {#sec-17-30e-15 omnilex-key=us-nj-statutes--title-17--17:30E-15}
A qualified applicant who is eligible for coverage through the association shall be offered and entitled to coverage up to at least the following limits: a. bodily injury liability: $250,000.00 each person, $500,000.00 each accident; b. property damage liability: $100,000.00; c. bodily injury and property damage: $500,000.00 single limit each accident; d. comprehensive and collision coverage; e. uninsured motorist and underinsured motorist coverage: $250,000.00 each person and $500,000.00 each accident for bodily injury; $100,000.00 each accident for property damage or $500,000.00 single limit, subject to an exclusion of the first $500.00, unless the named insured elects a lower deductible in writing in an amount not less than $250.00, of the damage to property for each accident, except that the limits for uninsured and underinsured motorist coverages on association coverage shall not exceed the insured's policy limits for bodily injury and property damage, respectively; f. personal injury protection coverage as required by law; g. additional personal injury protection coverage required to be offered by law; and h. any other automobile insurance required to be offered by law and subject to the limits stated in the law. Motorcycles shall not be written for the coverages required or required to be offered pursuant to P.L. 1972, c. 70 (C. 39:6A-1 et seq.).
##### **§ 17:30E-16** Hearing {#sec-17-30e-16 omnilex-key=us-nj-statutes--title-17--17:30E-16}
a. A member insurer or producer aggrieved by a ruling of the association or by its alleged violation of or failure to comply with the plan of operation or the provisions of this act shall be entitled to a hearing upon a request made within 30 days after the date of the alleged violation or improper act or ruling, provided the commissioner may extend the time for requesting a hearing in extraordinary situations. The hearing shall be held within 15 days after the receipt of the request, by a panel of the board, consisting of not less than three member company representatives, one producer representative and one public member, at a time and place designated by the board. The ruling of a majority of the panel shall be deemed to be the formal ruling of the board unless the full board, on its own motion, shall modify or rescind the action of the panel.
b. Within 30 days after the conclusion of any hearing held pursuant to this section, the board shall issue a written ruling setting forth the determination of the issues presented and the facts and reasons on which such determination is based. This ruling may be appealed to the commissioner by the filing of a written notice of appeal with the board and commissioner within 30 days after issuance of the ruling.
c. The commissioner shall issue a written order approving, disapproving or modifying the action or decision of the board or directing it to reconsider its ruling.
d. Any order of the commissioner pursuant to this section shall be subject to review by the Appellate Division of the Superior Court.
##### **§ 17:30E-17** Suspension, revocation; penalties {#sec-17-30e-17 omnilex-key=us-nj-statutes--title-17--17:30E-17}
a. The commissioner may suspend or revoke, after notice and a hearing, the certificate of authority of any member insurer or the license of any producer who willfully fails to comply with the provisions of this act or the regulations or plan of operation promulgated thereunder. In addition to or in lieu of suspension or revocation, any member company violating the provisions of this act or the regulations or plan of operation promulgated thereunder may be fined by the commissioner up to $10,000.00 for each such violation; and any producer violating the provisions of this act or the regulations or plan of operation promulgated thereunder may be fined by the commissioner up to $5,000.00 for each violation. These penalties shall be enforced and collected by the commissioner in the name of the State pursuant to "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.).
b. If, after notice and opportunity to be heard, the board finds that a producer has violated the provisions of this act or the regulations, plan of operation or standards promulgated pursuant to this act, the board shall notify the commissioner and may request the commissioner to temporarily suspend the producer's authority to write new association business. The commissioner may issue an order suspending the producer's authority to write new association business, pending a hearing which shall be held within 20 days of the issuance of the order. If, after a hearing, the commissioner finds that the producer has violated the provisions of this act or the regulations, plan of operation or standards promulgated pursuant to this act, he shall take appropriate disciplinary action, including suspension or revocation of the producer's license or producer's authority to write business for the association, or both.
c. In the event the association sustains a financial loss due to any act or omission of any producer, member company or servicing carrier which violates any statutory, contractual or plan of operation requirement, the commissioner may, in addition or as an alternative to the penalties provided in subsections a. and b. of this section, order the restitution of any moneys owed to the association, and the reimbursement of reasonable costs of investigation and prosecution.
##### **§ 17:30E-17.1** Violation by servicing carrier {#sec-17-30e-17.1 omnilex-key=us-nj-statutes--title-17--17:30E-17.1}
If any servicing carrier is determined to have knowingly violated the plan of operation, or any rule of practice or guideline which has been established in connection therewith, with respect to the handling of claims or the underwriting of the policies of the association, or if a servicing carrier has been determined to have overcharged the association with respect to servicing carrier compensation, the servicing carrier shall repay any money owed to the association within 15 business days of notification by the association that such money is due, or shall pay the association interest on the money due at a rate determined by the commissioner. If the servicing carrier is determined to have willfully violated the plan of operation, or any rule of practice or guideline which has been established in connection therewith, with respect to the handling of claims or the underwriting of the policies of the association, or has willfully overcharged with respect to servicing carrier compensation, the servicing carrier shall be liable for treble damages.
##### **§ 17:30E-18** Annual report {#sec-17-30e-18 omnilex-key=us-nj-statutes--title-17--17:30E-18}
One year after the operative date of this act and annually thereafter the commissioner shall make a comprehensive report to the Governor and the Legislature assessing the effectiveness of the act in accomplishing its stated purposes.
##### **§ 17:30E-18.1** Examination {#sec-17-30e-18.1 omnilex-key=us-nj-statutes--title-17--17:30E-18.1}
The commissioner may, whenever he deems it necessary, make or cause to be made an examination of the finances, operations, methods of conducting business, and all other affairs of the association, its management and its servicing carriers. For the purpose of the examination, the commissioner may authorize, employ or otherwise engage such person, persons or other resources to conduct the examination, or to assist therein, as he deems advisable. The reasonable expenses of the examination shall be determined by the commissioner and shall be paid by the association. The association shall recover all such payments by assessment of its member companies pursuant to an equitable assessment formula established in the plan of operation.
##### **§ 17:30E-19** Copy of plan of operation sent to Senate and General Assembly {#sec-17-30e-19 omnilex-key=us-nj-statutes--title-17--17:30E-19}
For the purposes of monitoring and evaluating the effectiveness of the implementation of this act, the commissioner shall forward a copy of the plan of operation or any amended plan of operation to the Senate and General Assembly on the first day in which both Houses shall be meeting in the course of a regular or special session after a plan or amended plan has been certified to the directors.
##### **§ 17:30E-20** Regulations {#sec-17-30e-20 omnilex-key=us-nj-statutes--title-17--17:30E-20}
In addition to the general powers conferred upon the commissioner by law and this act, the commissioner shall have the authority to promulgate such regulations as he deems necessary for the effective implementation of this act.
##### **§ 17:30E-21** Recommendations regarding insurance coverage to commercial vehicles {#sec-17-30e-21 omnilex-key=us-nj-statutes--title-17--17:30E-21}
Twelve months after the operative date of this act the board shall submit to the commissioner recommendations with respect to the provision of insurance coverage to commercial vehicles through the association or a similar entity.
##### **§ 17:30E-22** Payment of taxes {#sec-17-30e-22 omnilex-key=us-nj-statutes--title-17--17:30E-22}
Taxes required to be paid pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.) on premiums earned by the association on or after the effective date of P.L.1990, c.8 (C.17:33B-1 et al.) shall be paid by the association to the State Treasurer and shall be credited to the New Jersey Automobile Insurance Guaranty Fund created by section 23 of P.L.1990, c.8 (C.17:33B-5).
##### **§ 17:30E-24** Severability {#sec-17-30e-24 omnilex-key=us-nj-statutes--title-17--17:30E-24}
The provisions of this act shall be severable, and if any of its provisions shall be held to be unconstitutional, the decision of the court shall not affect the validity of the remaining provisions of this act, except that the provisions of section 25 shall not be severable from the provisions of sections 13 to 31, and if any of the provisions of section 25 shall be held to be unconstitutional, the commissioner shall establish a plan for the providing of automobile insurance pursuant to P.L.1970, c. 215 (C. 17:29D-1).
## **Chapter 31** {#struct-chapter-31}
##### **§ 17:31-1** Surety company as bondsman; premiums on official bonds {#sec-17-31-1 omnilex-key=us-nj-statutes--title-17--17:31-1}
Any bond, undertaking, recognizance, guaranty or other obligation required or permitted to guarantee the performance of any act, duty or obligation, or the refraining from any act, required or permitted, by law, or the charter, ordinances, rules or regulations of any municipality, board, body, organization, court or public officer, to be made, given, tendered or filed with surety or sureties, may be executed by any company authorized under the laws of this state to carry on the business specified in paragraph "g" of section 17:17-1 of this title. The execution by the company of the bond, undertaking, recognizance, guaranty or other obligation shall be, in all respects, a full and complete compliance with the requirements of every law, charter, ordinance, rule or regulation that the same be executed by one surety, or one or more sureties, or that the surety be residents, householders or freeholders, or either, or both, or possess any other qualification, and all courts, judges, heads of departments, boards, bodies, municipalities and public officers of every character shall accept and treat the same as conforming to, and fully complying with, the requirements of every such law, charter, ordinance, rule or regulation.
The premium for a bond given by a public official of the state, or a county, municipality or school district, pursuant to a law or ordinance, shall be paid by the state, county, municipality or school district, as the case may be.
##### **§ 17:31-2** Agreement for deposit of property by fiduciaries {#sec-17-31-2 omnilex-key=us-nj-statutes--title-17--17:31-2}
A receiver, assignee, guardian, trustee, committee, executor, administrator, curator, or other fiduciary or party of whom a bond, undertaking or other obligation is required, may agree and arrange with the company for the deposit for safe-keeping of any money, assets or other property for which he may be responsible, with a bank, savings bank, safe deposit or trust company authorized to do business in this state, in such manner as to prevent the withdrawal or alienation of the money, assets or other property, or any part thereof, without the written consent of the company, or an order of the court or a judge thereof made on such notice to the company as the court or judge directs.
##### **§ 17:31-3** Qualifications for action as surety or guarantor {#sec-17-31-3 omnilex-key=us-nj-statutes--title-17--17:31-3}
The company, to be qualified to so act as surety or guarantor, shall comply with all the requirements of chapters 17 to 33 of this title (s. 17:17-1 et seq.), applicable to it, and shall have good available assets in excess of its liabilities. The liabilities for the purposes of said chapters 17 to 33, shall be taken to be its capital stock, its outstanding debts and a premium reserve of fifty per cent of the annual premiums on all outstanding bonds, undertakings, recognizances and obligations of like character in force.
##### **§ 17:31-4** Bond as lien on real estate {#sec-17-31-4 omnilex-key=us-nj-statutes--title-17--17:31-4}
No bond, undertaking, recognizance or other obligation heretofore or hereafter given or entered into by any company organized under the laws of this or any other State and authorized to transact in this State the business of executing bonds or entering into recognizances in civil or criminal proceedings in the courts of this State, and the business of insuring against loss or damage on account of neglect or breaches of duty or obligations guaranteed by the insurer or the business of guaranteeing bonds, undertakings or other obligations required by law or the charter, ordinances, rules or regulations of any county or municipality, or any forfeiture thereunder, shall be deemed to impose any lien upon the real estate of the company in this State.
This section shall not affect any right to a lien upon the real estate by attachment or other judicial proceeding or by judgment acquired by reason of any such bond or recognizance.
##### **§ 17:31-5** Insurance commissioner's certificate of authority as evidence {#sec-17-31-5 omnilex-key=us-nj-statutes--title-17--17:31-5}
The certificate of authority issued by the commissioner, pursuant to chapters 17 to 33 of this title (s. 17:17-1 et seq.), to a surety company of this or any other state or foreign country, shall be evidence of its qualification and authority to become and be accepted as sole surety on all bonds, undertakings, recognizances and obligations required or permitted by law or the charter, ordinances, rules or regulations of any municipality, board, body, organization or public officer, and of the solvency and credit of the company for all purposes and its sufficiency as surety.
##### **§ 17:31-6** Sureties for auto club bail bonds {#sec-17-31-6 omnilex-key=us-nj-statutes--title-17--17:31-6}
Any domestic or foreign surety company which has qualified to transact surety business in this State may, in any year, become surety in an amount not to exceed $500.00 with respect to any guaranteed arrest bond certificates issued in such year by an automobile club or association, by filing with the Commissioner of Insurance an undertaking thus to become surety.
##### **§ 17:31-7** Filing with Insurance Commissioner {#sec-17-31-7 omnilex-key=us-nj-statutes--title-17--17:31-7}
Any such undertaking shall be in a form to be prescribed by the Commissioner of Insurance, and subject to such regulations as he shall from time to time prescribe in regard thereto, and shall state the following:
a. The name and address of the automobile club or clubs or automobile association or associations with respect to guaranteed arrest bond certificates of which the surety company undertakes to be surety;
b. The unqualified obligation of the surety company to pay the fine or forfeiture in an amount not to exceed $500.00 of any person who, after posting a guaranteed arrest bond certificate with respect to which the surety company has undertaken to be surety, failed to make the appearance for which the guaranteed arrest bond certificate was posted.
##### **§ 17:31-8** $500 maximum {#sec-17-31-8 omnilex-key=us-nj-statutes--title-17--17:31-8}
Any guaranteed arrest bond certificate with respect to which a surety company has become surety, as herein provided, shall, when posted by the person whose signature appears thereon, be accepted in lieu of cash bail or other bond in an amount not to exceed $500.00, as a bail bond, to guarantee the appearance of such person in any court in this State, including all municipal courts in this State, at such time as may be required by such court, when the person is arrested for violation of any motor vehicle law of this State or any motor vehicle ordinance of any municipality in this State, except for the offense of driving under the influence of intoxicating liquors or of drugs or for any high misdemeanor, committed prior to the date of expiration shown on such guaranteed arrest bond certificate; provided that any such guaranteed arrest bond certificate so posted as bail bond in any court in this State shall be subject to the forfeiture and enforcement provisions with respect to bail bonds in criminal cases as otherwise provided by law or as hereafter may be provided by law, and that any such guaranteed arrest bond certificate posted as a bail bond in any municipal court of this State shall be subject to the forfeiture and enforcement provisions of the charter or ordinance of the particular municipality pertaining to bail bonds posted.
##### **§ 17:31-9** Surety discrimination ban {#sec-17-31-9 omnilex-key=us-nj-statutes--title-17--17:31-9}
No surety authorized to do business in this State shall discriminate against minority or women's businesses with respect to the providing of coverage, and shall provide coverage for these businesses on the same basis and to the same extent as for any other like businesses.
##### **§ 17:31-10** Definitions relative to issuance of bail bonds by surety companies. {#sec-17-31-10 omnilex-key=us-nj-statutes--title-17--17:31-10}
1. As used in this act:
"Bail agent or agency" means any person or entity that solicits, negotiates or sells bail bonds, or is affiliated in any manner with the execution of bail and is licensed as a limited lines insurance producer pursuant to P.L.2001, c.210 (C.17:22A-26 et seq.), an insurance producer or a limited insurance representative.
"Commissioner" means the Commissioner of Banking and Insurance.
"Surety company" means an insurer authorized to transact surety business in this State.
##### **§ 17:31-11** Temporary suspension, fines, restoration. {#sec-17-31-11 omnilex-key=us-nj-statutes--title-17--17:31-11}
2. a. Upon receipt of a certification from the Clerk of the Superior Court stating that a bail agent or agency has failed to provide full, accurate and truthful information to the Clerk of the Superior Court as required by section 4 of this act, or has failed to satisfy a judgment or judgments for forfeited bail, the commissioner shall notify the bail agent or agency that its authority to negotiate, solicit or sell bail bonds, or be affiliated in any manner with the execution of bail bonds in this State shall be temporarily suspended. Upon receipt of a certification from the Clerk of the Superior Court that a surety company has failed to register or provide full, accurate and truthful information to the Clerk of the Superior Court, as required by section 4 of this act or has failed to satisfy a judgment for forfeited bail, the commissioner may temporarily suspend the surety company's authority to negotiate, solicit or sell bail bonds, or be affiliated in any manner with the execution of bail bonds in this State. The temporary suspensions imposed in accordance with this section shall remain in effect until the Clerk of the Superior Court notifies the commissioner that the surety company or bail agent or agency has properly registered and has provided information in accordance with section 4 of this act or has satisfied the judgment or judgments for forfeited bail.
b. In addition to any temporary suspension imposed pursuant to subsection a. of this section, the commissioner, after notice and an opportunity for a hearing, shall impose a fine against the surety company, bail agent or agency in an amount of up to $10,000 for a first violation, up to $25,000 for a second violation and up to $100,000 for a third or subsequent violation for failure to register or provide full, accurate and truthful information to the Clerk of the Superior Court, as required by section 4 of this act or for failure to satisfy a judgment or judgments for forfeited bail.
c. The commissioner shall not restore the surety company's authority to negotiate, solicit or sell bail bonds, or be affiliated in any manner with the execution of bail bonds in this State, until the surety company has demonstrated that it has satisfied all judgments or court orders related to forfeited bail and has paid all fines imposed pursuant to this act.
d. Nothing in this act shall be construed to limit, preclude or otherwise adversely affect the commissioner's ability to pursue enforcement actions against the surety company, bail agent or agency resulting from violations of the insurance laws arising from the breach of the duties owed to the courts as provided in subsection a. of this section.
##### **§ 17:31-12** Deposit of amount of order or judgment on appeal. {#sec-17-31-12 omnilex-key=us-nj-statutes--title-17--17:31-12}
3. Whenever a surety company, or bail agent or agency acting on its behalf, files an appeal in the Superior Court of New Jersey, Appellate Division, or the Supreme Court of New Jersey, from a judgment or order entered against it by a court to enforce the forfeiture of a bail bond pursuant to the Rules Governing the Courts of the State of New Jersey, the surety company shall deposit the full amount of the order or judgment in cash or by certified, cashiers or bank check with the Clerk of the Superior Court or Supreme Court, as appropriate. The court may allow the posting of a supersedeas bond, in a form approved by the court, upon the showing of good cause; provided, however, that good cause shall not mean an application by a surety to extend the time to forfeit a bond, to stay payment of a forfeiture of default judgment, or to extend the time to locate a defendant.
##### **§ 17:31-13** Registration by surety company of bail agent, agency. {#sec-17-31-13 omnilex-key=us-nj-statutes--title-17--17:31-13}
4. a. A surety company shall register with the Clerk of the Superior Court the name and address of each bail agent or agency authorized by the surety company to write bail. The surety company shall provide written notice to the Clerk of the Superior Court when any bail agent or agency authorized to write bail is terminated or is no longer authorized by the surety company to write bail.
b. With respect to each bail agent or agency set forth in subsection a. of this section, the surety company shall disclose the name and address of any bail agent or agency that has provided a guarantee to the surety company for the satisfaction of any forfeited bail or bail forfeiture judgments entered against that surety company written by such bail agent or agency. The registration and disclosure shall include a certification by each listed bail agent or agency stating that the information provided is true and accurate.
c. Any surety company, or bail agent or agency, failing to register with the Clerk of the Superior Court, or failing to provide full, accurate and truthful information to the Clerk of the Superior Court, in accordance with the provisions of subsections a. and b. of this section shall be subject to the penalties set forth in section 2 of this act.
d. In addition to the information required in subsections a. and b. of this section, surety companies and bail agents or agencies shall provide any other information that the Rules Governing the Courts of the State of New Jersey may require.
##### **§ 17:31-14** Construction of act relative to authority of the courts. {#sec-17-31-14 omnilex-key=us-nj-statutes--title-17--17:31-14}
5. Nothing in this act shall be construed to limit, prohibit or otherwise adversely affect the authority of the Supreme Court of New Jersey to adopt rules or issue directives or procedures to preclude a surety company, or its bail agents or agencies, from negotiating, soliciting or selling bail bonds on behalf of any defendant charged with a criminal or quasi-criminal offense pending in the Superior Court or in a municipal court of this State.
##### **§ 17:31-15** Rules, regulations. {#sec-17-31-15 omnilex-key=us-nj-statutes--title-17--17:31-15}
6. The commissioner may promulgate rules and regulations in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the purposes of this act.
## **Chapter 32** {#struct-chapter-32}
##### **§ 17:32-2.1** Waiving requirements for certain foreign insurers {#sec-17-32-2.1 omnilex-key=us-nj-statutes--title-17--17:32-2.1}
1. Notwithstanding the provisions of any law, rule or regulation to the contrary, the Commissioner of Insurance may waive any requirement that a foreign or alien insurance or surety company which has applied for a certificate of authority to transact business in this State shall, for a period of five years prior to the date of the application for the New Jersey certificate of authority, have been authorized by its state or country of domicile to engage in, and in fact have been actively engaged in, the kind of insurance business for which it seeks the certificate of authority, if the insurer or surety meets all other requirements for admission to this State and upon a finding, by the commissioner, that the line or lines of insurance for which the insurer or surety has applied for a certificate of authority are presently underserved in this State.
##### **§ 17:32-1** Transaction of business by foreign companies {#sec-17-32-1 omnilex-key=us-nj-statutes--title-17--17:32-1}
Any insurance company formed by authority of another State or foreign government may be admitted to transact in this State any class or classes of insurance authorized by chapters 17 to 33 of this Title (ss.17:17-1 seq.), to be transacted by an insurance company of this State, in the manner hereinafter provided. Any corporation of any State of the United States, which by its charter or the laws of the State in which it was incorporated is authorized to write life insurance and insurance against accidents to persons, may, if possessed of a paid-up capital of not less than $1,000,000.00, be admitted to transact in this State all of the kinds of insurance specified in paragraphs "c," "d" and "e" of section 17:17-1 of this Title.
##### **§ 17:32-2** Prerequisites to admission {#sec-17-32-2 omnilex-key=us-nj-statutes--title-17--17:32-2}
No such company shall be admitted until it:
a. Files in the department a certified copy of its charter, deed settlement or certificate of organization, and a statement of its financial condition and business, in the form and detail the commissioner requires, signed and sworn to by its president and secretary or other proper officer;
b. Satisfies the commissioner that it is fully and legally organized under the laws of its State or country to do the business it proposes to transact; that its condition or methods of operation are not such as would render its operation hazardous to the public or its policyholders in this State; that it has, if a stock company, a fully paid-up, well invested and unimpaired capital and surplus of not less than the amount required by this subtitle to be possessed by a stock insurance company of this State transacting the same class or classes of insurance, or if a mutual company, that it has net cash assets of that amount;
c. Constitutes, by a duly executed instrument filed in the department, the commissioner and his successor in office its true and lawful attorney, upon whom all original process in any action or legal proceeding against it may be served, and therein agrees that any original process against it which may be served upon the commissioner shall be of the same force and validity as if served on the company, and that the authority thereof shall continue in force irrevocable so long as any liability of the company remains outstanding in this State; and
d. Obtains from the commissioner a certificate that it has complied with all the requirements of this subtitle applicable to it, and is authorized to transact business in this State. This certificate shall expire on May 1 of the following year, and shall be renewed each year before May 1; provided, that the commissioner may refuse to issue or renew any such certificate of authority if, in his judgment, such refusal will best protect the interests of the people of this State or if the company fails to comply substantially with any requirement or limitation of this subtitle applicable to it or any rule or regulation promulgated by the commissioner thereunder which in the judgment of the commission is reasonably necessary to protect the interests of the people of this State, but the commissioner may not refuse to renew any such certificate except after notice and hearing; and provided, that all such certificates outstanding and in force at the date of the passage of this act shall continue in full force and effect until May 1 next following the approval of this act, unless sooner revoked by the commissioner in accordance with section 17:32-14 of this Title; and provided, further, that no such certificate shall be issued by the commissioner if, in the judgment of the commissioner, the name of such company shall so closely resemble the name of any existing company authorized to transact business in this State as to be likely to mislead the public, unless such company shall agree to use, wherever its name shall appear or be used by it in connection with the transaction of business in this State, in type of equal size and prominence, the name of the State in which incorporated
##### **§ 17:32-3** Deposit company of foreign country {#sec-17-32-3 omnilex-key=us-nj-statutes--title-17--17:32-3}
If the company is organized under the laws of a foreign country it shall not be admitted until, in addition to complying with the foregoing conditions, it has made a deposit or deposits with the insurance commissioner or other officer of a State or States of the United State designated by the laws of such State or States to hold the same, of a total amount not less than $200,000.00, nor less than the capital required of a stock company of this State transacting the same kinds o business. The deposit or deposits must be in exclusive trust for the benefit and security of all the policyholders of the company in the United States, and shall be deemed for all purposes of this subtitle t capital of the company making it.
##### **§ 17:32-4** Evidence of authority of foreign company {#sec-17-32-4 omnilex-key=us-nj-statutes--title-17--17:32-4}
When an insurance company of another State or foreign country complies with the laws of this State and has issued to it the certific of the commissioner, authorizing it to transact business in this State then in any civil action in which the company is plaintiff or defendant or in any criminal proceedings in this State, a certified copy of the certificate of authority, under the hand and official seal of the commissioner, shall be prima facie evidence of the incorporation of the company.
##### **§ 17:32-5** Deposits by foreign surety companies; return {#sec-17-32-5 omnilex-key=us-nj-statutes--title-17--17:32-5}
An insurance company of another state or foreign country transacting the business of insuring against loss or damage on account of neglect, or breaches of duty, or obligations guaranteed by the insurer, and not engaging in the business of executing or guaranteeing bonds, undertakings, recognizances or other obligations in any actions or proceedings or which are required by law or by charter, ordinances, rules or regulations of any county or municipality for the performance of any written contract for work, or supplies or for the enforcement of a penalty or forfeiture provided for in the contract, may be authorized to transact business in this state under the same requirements and regulations as other insurance companies of other states and countries. Any such company desiring to engage in this state in the business of suretyship and indemnity as provided in paragraph "g" of section 17:17 of this title, in the same manner and to the same extent as allowed to corporations created under chapters 17 to 33 of this title (s. 17:17-1 et seq.), shall deposit with the comptroller of this state the sum of fifty thousand dollars in good securities, worth at par and at market value least that sum, to be held for the benefit of the holders of the obligations of the company in this state, and in addition thereto shall have on deposit with the superintendent of insurance, or other state officer of the state where incorporated, if a company of another state of the United States, or if a company of a foreign country, with the proper state officers of some one of the United States, the sum of one hundred thousand dollars in good securities, worth at par and at market value at least that amount, held for the security of its obligations, and has a fully paid up, safely invested and unimpaired capital of at least two hundred and fifty thousand dollars. A company which has on deposit with the superintendent of insurance, or other state officer of the state where the company is incorporated, the sum of two hundred thousand dollars invested as herein provided, and held as security for all holders of the obligations of the company, whether in the home state or elsewhere, shall not be required to make any deposit in this state, and where any such company has the deposit of two hundred thousand dollars and has made the deposit of fifty thousand dollars with the comptroller of this state, the comptroller shall forthwith return the deposit of fifty thousand dollars to the company.
##### **§ 17:32-8** Trustees of company of foreign country {#sec-17-32-8 omnilex-key=us-nj-statutes--title-17--17:32-8}
Any admitted company of a foreign country may appoint trustees who are citizens of the United States and approved by the commissioner, to hold funds in trust for the benefit of its policyholders in the United States. The trustees shall be named by the directors of the company an certified copy of record of the appointment of the trustees and of the deed of trust, shall be filed in the department. The commissioner may examine the trustees and the assets in trust and all books and papers relating thereto as he may examine the officers, agents, assets and affairs of insurance companies. The funds so held by the trustees, so far as the same are in securities, moneys or credits admissible as sou assets in the financial accounts of insurance companies, shall, together with its deposits, made in accordance with section 17:32-3 of this tit constitute the assets of the company as regards its policyholders and creditors in the United States.
##### **§ 17:32-9** Power to hold real estate {#sec-17-32-9 omnilex-key=us-nj-statutes--title-17--17:32-9}
Any insurance company of another state or foreign country transact business in this state may purchase, hold and convey real estate situa herein, for the purposes, and no other, and in the manner provided by chapters 17 to 33 of this title (s. 17:17-1 et seq.), for insurance companies of this state.
##### **§ 17:32-10** Compliance with subtitle necessary to recovery in court {#sec-17-32-10 omnilex-key=us-nj-statutes--title-17--17:32-10}
No insurance company not incorporated under the laws of this state doing business on the mutual plan, shall recover in an action in any court in this state upon any policy of insurance upon property in this state which has been or may be hereafter issued by the company, or upon any premium note given therefor, or for any assessment made upon the policy or note, unless it has, previous to the time of the issuance of the policy of insurance or the making of the premium note, complied with the provisions of this subtitle.
##### **§ 17:32-13** Surrender of certificate of authority; return of securities {#sec-17-32-13 omnilex-key=us-nj-statutes--title-17--17:32-13}
An insurance company of another state or foreign country authorize to transact the business of insuring against loss or damage on account neglect or breaches of duty or obligations guaranteed by the insurer, at any time surrender to the commissioner its certificate of authority and thereafter cease to engage in the business. The company shall thereupon be entitled to the release and return of its securities so deposited, in manner following:
The company shall file with the commissioner a statement in writing under oath, giving the date, name and amount of all its then existing obligations of suretyship or indemnity in this state, setting out the facts of each case. The commissioner after an examination of the facts, shall require the company to file with the comptroller a bond to the state, in the penalty of not less than twenty thousand nor more than fifty thousand dollars, executed by the company and two or more responsible freeholders of this state, or a company of this state, duly authorized to transact such business, conditioned for the prompt fulfillment by the company of all its said outstanding obligations of suretyship and indemnity, and stipulating that the makers of the bond may be joined as defendants in any action upon any of the said obligations of suretyship or indemnity of the company, and that if judgment in the action is rendered against the company it may at the same time be rendered and enforced against the makers of the bond, without further or other action against them. The bond shall stand for the security and benefit of all persons interested in the outstanding obligations of suretyship and indemnity. Upon approving and filing the bond the comptroller shall deliver the securities to the company.
##### **§ 17:32-14** Revocation of authority to do business {#sec-17-32-14 omnilex-key=us-nj-statutes--title-17--17:32-14}
The authority of an insurance company of another state or foreign country may be revoked, after notice and hearing, if it fails to comply with any provision of law obligatory upon it, or for any reason for which the commissioner may refuse to issue or renew its certificate of authority under section 17:32-2 of this Title, or when in the opinion the commissioner its condition is unsound, or its assets above its liabilities, exclusive of capital and inclusive of unearned premiums or reinsurance reserve, are less than the minimum amount of capital and surplus or net assets required by this subtitle for admission to transact business in this State.
##### **§ 17:32-15** Retaliatory taxation of foreign insurers {#sec-17-32-15 omnilex-key=us-nj-statutes--title-17--17:32-15}
When by the laws of any other state or foreign country any premium income or other taxes, or any fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions are imposed upon New Jersey insurance companies, or reciprocal or interinsurance exchanges, doing business in such other state or foreign country, or upon their agents therein, which are in excess of such tax fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions imposed upon insurance companies, or reciprocal or interinsurance exchanges of such other state or foreign country doing business in New Jersey, or upon their agents therein, so long as such laws continue in force the same premium or income or other taxes, or fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions and restrictions of whatever kind shall be imposed upon insurance companies, or reciprocal interinsurance exchanges of such other state or foreign country doing business in New Jersey, or upon their agents therein. Any tax obligation imposed by any city, county, school district or other political subdivision of any other state or foreign country on New Jersey insurance companies, or reciprocal or interinsurance exchanges, shall be deemed to be imposed by such state or foreign country within the meaning of this section, and the Commissioner of Insurance for the purpose of this section may compute the burden of any such tax obligation on an aggregate statewide or foreign countrywide basis as an addition to the rate of tax payable by similar New Jersey companies, or reciprocal or interinsurance exchanges, in such state or foreign country. The addition to the rate tax payable by similar New Jersey companies, or reciprocal or interinsurance exchanges, shall be calculated by dividing (i) the aggregate of their tax obligations paid to any such city, county, school district or other political subdivision of such state or foreign country by (ii) the aggregate of the taxable premiums under the premium taxing statute of such state or foreign country. The commissioner may issue regulations to carry out the purpose of this act. The provisions of this section shall not apply to ad valorem taxes on real or personal property or to personal income taxes or to special purpose assessments imposed in connection with particular kinds of insurance.
##### **§ 17:32-16** Remedial legislation; liberal construction {#sec-17-32-16 omnilex-key=us-nj-statutes--title-17--17:32-16}
This act is deemed and declared to be remedial legislation for the protection of the health and welfare of persons resident in this State by subjecting nonadmitted insurers which solicit, insure, or cause to be solicited such resident persons to the laws which govern all foreign insurers which do business in the State of New Jersey. This act shall be liberally construed to effectuate its purpose and intent.
##### **§ 17:32-17** Definitions {#sec-17-32-17 omnilex-key=us-nj-statutes--title-17--17:32-17}
The following terms whenever used or referred to in this act shall have the following respective meanings, except in those instances where the context clearly indicates otherwise:
(a) The term "commissioner" shall mean the Commissioner of Banking and Insurance.
(b) The term "insurer" shall mean any person, association or corporation engaged in the transaction of the business of insurance, a shall include, without limitation, interinsurance exchanges and mutual benefit societies.
##### **§ 17:32-18** Conditions for authority to transact business {#sec-17-32-18 omnilex-key=us-nj-statutes--title-17--17:32-18}
No insurer organized or existing under the law of another State, or of a foreign country, or any employee, agent or other representative thereof including, without limitation, promotional media, shall by mail or otherwise, transact in any manner, directly or indirectly, the business of insurance within this State unless and until:
(a) Admitted to transact the business of insurance pursuant to the provisions of this chapter; or
(b) Specifically permitted by any other law of this State to transact the business of insurance within this State.
##### **§ 17:32-19** Transacting business of insurance; acts constituting {#sec-17-32-19 omnilex-key=us-nj-statutes--title-17--17:32-19}
Without limiting the generality of the foregoing, an insurer which performs, causes or suffers to be performed within this State any of the following acts with reference to persons or property located or resident in the State of New Jersey, by mail or otherwise, directly or indirect shall be deemed to be transacting the business of insurance within this State:
(a) The solicitation of or advertising for any contract of insurance of any kind, including annuities involving life contingencies;
(b) The negotiation or effectuation of any contract of insurance of any kind, including annuities involving life contingencies;
(c) The signature, delivery or transmittal of any contract of insurance of any kind, including annuities involving life contingencies or any application therefor.
(d) The transmittal or receipt of any premium, commission, fee or other payment for any contract of insurance of any kind including annuities involving life contingencies.
(e) The maintenance or operation of any office for the transaction the business of insurance;
(f) The offering for sale, sale, promotion of, or issuance of any contract of insurance of any kind, including annuities involving life contingencies; or
(g) Any other acts normally incident to the transaction of the business of insurance.
##### **§ 17:32-20** Violations; institution of relief; process {#sec-17-32-20 omnilex-key=us-nj-statutes--title-17--17:32-20}
Whenever it shall appear to the commissioner that any insurer, or any employee, agent, promotional medium, or other representative thereof, has violated, is violating, or is about to violate the provisions of this act, the Attorney General, upon the request of the commissioner, shall institute a civil action in the Superior Court for injunctive relief and for such other relief as may be appropriate under the circumstances. Process in such action may be served in accordance with the provisions of chapter 330 of the laws of 1952 (C. 17:51-1 et seq.) or as provided in the laws of this State and the rules of the Superior Court. Such action may proceed in a summary manner or otherwise. Nothing contained in this section shall limit or abridge the right to serve any process, notice or demand upon any person or insurer in any other manner now or hereafter deemed lawful.
##### **§ 17:32-21** Nonapplicability of act. {#sec-17-32-21 omnilex-key=us-nj-statutes--title-17--17:32-21}
6. The provisions of this act shall not be construed to apply to:
(a) The investigation, settlement or litigation of claims under any policy of insurance of any kind lawful when written in this State, or liquidation of the assets and liabilities of an insurer (other than the collection of new premiums) resulting from the operations of an insurer within this State which were lawful when conducted;
(b) Transactions involving any policy of insurance of any kind, subsequent to the issuance thereof, covering only subjects of insurance not resident, located or expressly to be performed in this State at the time of issuance, and lawfully solicited, written and delivered outside this State;
(c) The continuation and servicing of life insurance or accident or health insurance policies or annuity contracts remaining in force as to residents of this State when the insurer has withdrawn from this State and is not collecting new premiums within or from this State;
(d) The lawful transaction of contracts of reinsurance by insurers;
(e) Transactions involving group life insurance, group or blanket accident and health insurance, and group annuities where the master policy for such groups was lawfully issued and delivered in a state in which the insurer is duly admitted, and such policy conforms to the laws of the state in which it is delivered;
(f) Any life insurance company organized and operated without profit to any private shareholder or individual and exclusively for the purpose of aiding educational or scientific institutions organized and operated without profit to any private shareholder or individual, which issues residents of this State directly from its home office without agents, representatives or other field operations in this State, contracts of insurance and annuity contracts only to or for the benefit of such institutions and to individuals engaged in the service of such institutions; nor shall this subsection apply to any life, accident and health or annuity contracts issued by such life insurance company, provided that any such life insurance company shall: (1) furnish to the commissioner a copy of any policy or contract form issued to residents of this State; (2) furnish to the commissioner a copy of its annual statement prepared pursuant to the laws of the state of domicile of such life insurance company, as well as such other reports, documents and financial material as may be requested by the commissioner; and (3) designate the commissioner as its true and lawful attorney upon whom may be served all lawful process in any action or proceeding against such life insurance company arising under any contract of insurance or annuity contract it has issued to, or which is held by, a resident of this State and process so served against such life insurance company shall have the same force and validity as if served upon said life insurance company; and provided further that the commissioner may, if in his judgment the interest of the public so requires, promulgate regulations affecting the contracts, investments, or other aspects of the operations of companies covered by this subparagraph (f), which shall be not more restrictive than the laws and regulations applicable to admitted life insurance companies;
(g) Insurance of vessels, crafts or hulls, cargoes, marine builder risks, marine protection and indemnity or other risks including strike and war risks commonly insured under ocean or wet marine forms of policy;
(h) Any wholly-owned insurance subsidiary or captive established by New Jersey Transit Corporation pursuant to subsection r. of section 5 of P.L.1979, c.150 (C.27:25-5).
##### **§ 17:32-22** Partial invalidity {#sec-17-32-22 omnilex-key=us-nj-statutes--title-17--17:32-22}
If any section, subsection, paragraph, sentence or other part of this act is adjudged unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remainder of this act, but shall be confined in its effect to the section, subsection, paragraph, sentence or other part of this act directly involved in the controversy in which said judgment shall have been rendered.
## **Chapter 33** {#struct-chapter-33}
##### **§ 17:33-1** Fees {#sec-17-33-1 omnilex-key=us-nj-statutes--title-17--17:33-1}
On filing any certificate, executed by an insurance company of this State, in the department, there shall be paid to the commissioner, for the use of the State, fees as follows:
Certificate of incorporation, for each $1,000.00 of the total amount of the capital stock authorized, but in no case less than $25.00, $0.20.
Increase of capital stock, for each $1,000.00 of the total increase authorized, but in no case less than $20.00, $0.20.
Consolidation and merger of companies, $20.00.
Extension of corporate existence, the same as required by this section for the original certificate of incorporation.
Dissolution of company, change of name, change of nature of business, or for amended certificates of incorporation (other than those authorizing increase of capital stock), decrease of capital stock, increase or decrease of par value of shares, $20.00.
In cases where several amendments are contained in one certificate, for each amendment, $20.00.
All certificates not hereby provided for, $5.00.
The commissioner shall also charge and collect for his services under this subtitle, in addition to any other fees and charges due and payable into the State Treasury for any of his official acts or services, and pay into the State Treasury the following fees:
Filing the certified copy of the charter, deed of settlement or certificate of organization of an insurance company of another State or foreign country, $20.00.
Filing the statement of any such company on admission, $20.00.
Filing each annual statement of each insurance company, $20.00.
Each certificate of authority to an agent of an insurance company, $5.00.
Each license to an agent to procure insurance in unauthorized fire insurance companies, $20.00.
Computing the value of policies of life insurance companies, $0.30 per $1,000.00 of value so computed for the first $1,000,000.00 of the value, $0.10 per thousand for the next $9,000,000.00, $0.05 per thousand for the next $240,000,000.00, $0.02 per thousand for the next $250,000,000.00 and $0.01 per thousand for that part of the value so computed in excess of $500,000,000.00, except that, until the time the fee so computed exceeds the fee paid for the 1930 valuation, the latter amount shall be paid instead.
Each certificate of valuation of the policies, $1.00.
Each certificate of the condition or qualification of an insurance company, $1.00.
Each service of lawful process upon the commissioner as attorney, $10.00.
Each copy of any paper filed in the department, for each sheet or folio of 100 words, $0.20.
Certifying the same, $1.00.
For services in connection with deposits of securities by domestic insurance companies, the depositing company shall pay to the commissioner an annual fee of $15.00 on January 1 of each year and on each substitution of securities and clipping and forwarding of interest coupon an additional fee of $25.00.
##### **§ 17:33-2** Penalty for violation {#sec-17-33-2 omnilex-key=us-nj-statutes--title-17--17:33-2}
Except as in this subtitle otherwise provided, the penalty for each violation of any chapter of this subtitle or any supplement thereto, other than the failure of a company to file an annual statement, shall be a penalty not exceeding $1,000.00 for the first offense and not exceeding $2,000.00 for each succeeding offense. Any penalty provided for herein shall be enforced and collected by the commissioner in the name of the State in a summary proceeding in accordance with the Penalty Enforcement Law (N.J.S. 2A:58-1 et seq.). A warrant may issue in lieu of a summons. Upon the failure of the defendant to pay forthwith the amount of any money judgment rendered against him, such defendant shall be committed to the county jail as provided in said Penalty Enforcement Law until the penalty and costs are paid. One-half of the penalty, when recovered, shall be paid by the commissioner to the local firemen's relief association in the municipality wherein the violation was committed, if there is such an association therein, and if not, then in equal shares to the several firemen's relief associations in the county wherein the violation occurred, and if none exist in the county, then to the commissioner, to be distributed by him as other funds are by law distributed to such associations, and the other half to the commissioner for the use of the State. The necessary expenses for enforcing the provisions of this subtitle when not otherwise provided for, shall be paid out of the penalties so collected and the fees and taxes paid by insurance companies of other States and foreign countries.
## **Chapter 33A** {#struct-chapter-33a}
##### **§ 17:33A-1** Short title {#sec-17-33a-1 omnilex-key=us-nj-statutes--title-17--17:33A-1}
This act shall be known and may be cited as the "New Jersey Insurance Fraud Prevention Act."
##### **§ 17:33A-2** Purpose of act {#sec-17-33a-2 omnilex-key=us-nj-statutes--title-17--17:33A-2}
The purpose of this act is to confront aggressively the problem of insurance fraud in New Jersey by facilitating the detection of insurance fraud, eliminating the occurrence of such fraud through the development of fraud prevention programs, requiring the restitution of fraudulently obtained insurance benefits, and reducing the amount of premium dollars used to pay fraudulent claims.
##### **§ 17:33A-3** Definitions. {#sec-17-33a-3 omnilex-key=us-nj-statutes--title-17--17:33A-3}
3. As used in this act:
"Attorney General" means the Attorney General of New Jersey or his designated representatives.
"Bureau" means the Bureau of Fraud Deterrence established by section 8 of P.L.1983, c.320 (C.17:33A-8).
"Commissioner" means the Commissioner of Banking and Insurance.
"Hospital" means any general hospital, mental hospital, convalescent home, nursing home or any other institution, whether operated for profit or not, which maintains or operates facilities for health care.
"Insurance company" means:
a. Any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), or Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.);
b. Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
c. Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
d. Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.);
e. Any dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.);
f. Any dental plan organization operating pursuant to P.L.1979, c.478 (C.17:48D-1 et seq.);
g. Any insurance plan operating pursuant to P.L.1970, c.215 (C.17:29D-1);
h. The New Jersey Insurance Underwriting Association operating pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.);
i. (Deleted by amendment, P.L.2010, c.32)
j. Any risk retention group or purchasing group operating pursuant to the "Liability Risk Retention Act of 1986," 15 U.S.C.s.3901 et seq.; and
k. Any health maintenance organization operating pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).
"Pattern" means five or more related violations of P.L.1983, c.320 (C.17:33A-1 et seq.). Violations are related if they involve either the same victim, or same or similar actions on the part of the person or practitioner charged with violating P.L.1983, c.320 (C.17:33A-1 et seq.).
"Person" means a person as defined in R.S.1:1-2, and shall include, unless the context otherwise requires, a practitioner.
"Principal residence" means that residence at which a person spends the majority of his time. Principal residence may be an abode separate and distinct from a person's domicile. Mere seasonal or weekend residence within this State does not constitute principal residence within this State.
"Practitioner" means a licensee of this State authorized to practice medicine and surgery, psychology, chiropractic, or law or any other licensee of this State whose services are compensated, directly or indirectly, by insurance proceeds, or a licensee similarly licensed in other states and nations or the practitioner of any nonmedical treatment rendered in accordance with a recognized religious method of healing.
"Producer" means an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28), licensed to transact the business of insurance in this State pursuant to the provisions of the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.).
"Statement" includes, but is not limited to, any application, writing, notice, expression, statement, proof of loss, bill of lading, receipt, invoice, account, estimate of property damage, bill for services, diagnosis, prescription, hospital or physician record, X-ray, test result or other evidence of loss, injury or expense.
##### **§ 17:33A-4** Violations. {#sec-17-33a-4 omnilex-key=us-nj-statutes--title-17--17:33A-4}
4. a. A person or a practitioner violates this act if he:
(1) Presents or causes to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy or the "Unsatisfied Claim and Judgment Fund Law," P.L.1952, c.174 (C.39:6-61 et seq.), knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or
(2) Prepares or makes any written or oral statement that is intended to be presented to any insurance company, the Unsatisfied Claim and Judgment Fund, or any claimant thereof in connection with, or in support of or opposition to any claim for payment or other benefit pursuant to an insurance policy or the "Unsatisfied Claim and Judgment Fund Law," P.L.1952, c.174 (C.39:6-61 et seq.), knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or
(3) Conceals or knowingly fails to disclose the occurrence of an event which affects any person's initial or continued right or entitlement to (a) any insurance benefit or payment or (b) the amount of any benefit or payment to which the person is entitled;
(4) Prepares or makes any written or oral statement, intended to be presented to any insurance company or producer for the purpose of obtaining:
(a) a motor vehicle insurance policy, that the person to be insured maintains a principal residence in this State when, in fact, that person's principal residence is in a state other than this State; or
(b) an insurance policy, knowing that the statement contains any false or misleading information concerning any fact or thing material to an insurance application or contract;
(5) Conceals or knowingly fails to disclose any evidence, written or oral, which may be relevant to a finding that a violation of the provisions of paragraph (4) of this subsection a. has or has not occurred; or
(6) Prepares, presents or causes to be presented to any insurer or other person, or demands or requires the issuance of, a certificate of insurance that contains any false or misleading information concerning the policy of insurance to which the certificate makes reference, or assists, abets, solicits or conspires with another to do any of these acts. As used in this paragraph, "certificate of insurance" means a document or instrument, regardless of how titled or described, that is, or purports to be, prepared or issued by an insurer or insurance producer as evidence of property or casualty insurance coverage. The term shall not include a policy of insurance, insurance binder, policy endorsement, or automobile insurance identification or information card.
b. A person or practitioner violates this act if he knowingly assists, conspires with, or urges any person or practitioner to violate any of the provisions of this act.
c. A person or practitioner violates this act if, due to the assistance, conspiracy or urging of any person or practitioner, he knowingly benefits, directly or indirectly, from the proceeds derived from a violation of this act.
d. A person or practitioner who is the owner, administrator or employee of any hospital violates this act if he knowingly allows the use of the facilities of the hospital by any person in furtherance of a scheme or conspiracy to violate any of the provisions of this act.
e. A person or practitioner violates this act if, for pecuniary gain, for himself or another, he directly or indirectly solicits any person or practitioner to engage, employ or retain either himself or any other person to manage, adjust or prosecute any claim or cause of action, against any person, for damages for negligence, or, for pecuniary gain, for himself or another, directly or indirectly solicits other persons to bring causes of action to recover damages for personal injuries or death, or for pecuniary gain, for himself or another, directly or indirectly solicits other persons to make a claim for personal injury protection benefits pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.); provided, however, that this subsection shall not apply to any conduct otherwise permitted by law or by rule of the Supreme Court.
f. A person who operates a motor vehicle on the public highways of this State, which motor vehicle is insured by a policy issued under the laws of another state, and who maintains a principal residence in this State or who has his motor vehicle principally garaged in this State violates the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) if he has knowingly prepared or made any written or oral statement, presented to any insurance company or producer licensed to transact the business of insurance under the laws of that other state, and which resulted in obtaining a motor vehicle insurance policy for his motor vehicle in that other state, that the person to be insured:
(1) Maintains a principal residence in the other state when, in fact, that person's principal residence is in this State; or
(2) Has his vehicle principally garaged in the other state, when, in fact, that person has his motor vehicle principally garaged in this State.
This subsection shall not apply to a person who insures a vehicle in another state, as permitted by and in accordance with the laws of that state, based on a second residence, or attendance at an educational institution, in that other state, if in obtaining the policy the person truthfully discloses to the insurance company or producer the state of the person's principal residence and the state where the vehicle is principally garaged.
g. A person, organization, or business violates the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) if such person, organization, or business purposely or knowingly:
(1) Makes a false or misleading statement, representation, or submission, including failing to properly classify employees in violation of state wage, benefit and tax laws as defined in section 1 of P.L.2009, c.194 (C.34:1A-1.11), for the purpose of evading the full payment of insurance benefits or premiums; or
(2) Coerces, solicits, or encourages, or employs, contracts, or otherwise conspires with a person to coerce, solicit, or encourage, any individual to make a false or misleading statement, representation or submission concerning any fact that is material to a claim for insurance benefits, or the payment of insurance benefits or insurance premiums, for the purpose of wrongfully obtaining the benefits or of evading the full payment of the insurance benefits or insurance premiums.
##### **§ 17:33A-5** Remedies; penalties; fund established. {#sec-17-33a-5 omnilex-key=us-nj-statutes--title-17--17:33A-5}
5. a. Whenever the commissioner determines that a person has violated any provision of P.L.1983, c.320 (C.17:33A-1 et seq.), the commissioner may either:
(1) bring a civil action in accordance with subsection b. of this section; or
(2) levy a civil administrative penalty and order restitution in accordance with subsection c. of this section.
In addition to or as an alternative to the remedies provided in this section, the commissioner may request the Attorney General to bring a criminal action under applicable criminal statutes. Additionally, nothing in this section shall be construed to preclude the commissioner from referring the matter to appropriate state licensing authorities, including the insurance producer licensing section in the Department of Banking and Insurance, for consideration of licensing actions, including license suspension or revocation.
b. Any person who violates any provision of P.L.1983, c.320 (C.17:33A-1 et seq.) shall be liable, in a civil action brought by the commissioner in a court of competent jurisdiction, for a penalty of not more than $5,000 for the first violation, $10,000 for the second violation and $15,000 for each subsequent violation, provided that if the person violates section 4 of P.L.1983, c.320 (C.17:33A-4) the penalty shall be $5,000 for the first violation, $10,000 for the second violation and $15,000 for each subsequent violation. The penalty shall be paid to the commissioner to be used in accordance with subsection e. of this section. The court shall also award court costs and reasonable attorneys' fees to the commissioner.
c. The commissioner is authorized to assess a civil and administrative penalty of not more than $5,000 for the first violation, $10,000 for the second violation and $15,000 for each subsequent violation of any provision of P.L.1983, c.320 (C.17:33A-1 et seq.) and to order restitution to any insurance company or other person who has suffered a loss as a result of a violation of P.L.1983, c.320 (C.17:33A-1 et seq.), provided that if the provision violated was subsection g. of section 4 of P.L.1983, c.320 (C.17:33A-4), the commissioner shall assess a civil and administrative penalty of $5,000 for the first violation, $10,000 for the second violation and $15,000 for each subsequent violation and shall order restitution to any insurance company or other person who has suffered a loss as a result of a violation of subsection g. of section 4 of P.L.1983, c.320 (C.17:33A-4). No assessment shall be levied pursuant to this subsection until the violator has been notified by certified mail or personal service. The notice shall contain a concise statement of facts providing the basis for the determination of a violation of P.L.1983, c.320 (C.17:33A-1 et seq.), the provisions of that act violated, a statement of the amount of civil penalties assessed and a statement of the party's right to a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The noticed party shall have 20 calendar days from receipt of the notice within which to deliver to the commissioner a written request for a hearing containing an answer to the statement of facts contained in the notice. After the hearing and upon a finding that a violation has occurred, the commissioner may issue a final order assessing up to the amount of the penalty in the notice, restitution, and costs of prosecution, including attorneys' fees. If no hearing is requested, the notice shall become a final order after the expiration of the 20-day period. Payment of the assessment is due when a final order is issued or the notice becomes a final order.
Any penalty imposed pursuant to this subsection may be collected with costs in a summary proceeding pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq. The Superior Court shall have jurisdiction to enforce the provisions of "the penalty enforcement law" in connection with P.L.1983, c.320 (C.17:33A-1 et seq.). Any penalty collected pursuant to this subsection shall be used in accordance with subsection e. of this section.
d. Nothing in this section shall be construed to prohibit the commissioner and the person or practitioner alleged to be guilty of a violation of this act from entering into a written agreement in which the person or practitioner does not admit or deny the charges but consents to payment of the civil penalty. A consent agreement may contain a provision that it shall not be used in a subsequent civil or criminal proceeding relating to any violation of this act, but notification thereof shall be made to a licensing authority in the same manner as required pursuant to subsection c. of section 10 of P.L.1983, c.320 (C.17:33A-10). The existence of a consent agreement under this subsection shall not preclude any licensing authority from taking appropriate administrative action against a licensee over which it has regulatory authority, nor shall such a consent agreement preclude referral to law enforcement for consideration of criminal prosecution.
e. The New Jersey Automobile Full Insurance Underwriting Association and Market Transition Facility Auxiliary Fund (hereinafter referred to as the "fund") is established as a nonlapsing, revolving fund into which shall be deposited all revenues from the civil penalties imposed pursuant to this section. Interest received on moneys in the fund shall be credited to the fund. The fund shall be administered by the Commissioner of Banking and Insurance and shall be used to help defray the operating expenses of the New Jersey Automobile Full Insurance Underwriting Association created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.) or shall be used to help defray the operating expenses of the Market Transition Facility created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11).
##### **§ 17:33A-5.1** Surcharge for insurance fraud. {#sec-17-33a-5.1 omnilex-key=us-nj-statutes--title-17--17:33A-5.1}
53. In addition to any other penalty, fine or charge imposed pursuant to law, a person who is found in any legal proceeding to have committed insurance fraud shall be subject to a surcharge in the amount of $1,000. If a person is charged with insurance fraud in a legal proceeding and the charge is resolved through a settlement requiring the person to pay a sum of money, the person shall be subject to a surcharge in an amount equal to 5 percent of the settlement payment. The amount of any surcharge under this section shall be payable to the Treasurer of the State of New Jersey for use by the Department of Banking and Insurance to fund the department's insurance fraud prevention programs and activities.
##### **§ 17:33A-6** Statement on insurance claim forms {#sec-17-33a-6 omnilex-key=us-nj-statutes--title-17--17:33A-6}
6. a. Insurance claim forms shall contain a statement in a form approved by the commissioner that clearly states in substance the following: "Any person who knowingly files a statement of claim containing any false or misleading information is subject to criminal and civil penalties."
b. (Deleted by amendment, P.L.1987, c.342.)
c. Insurance application forms shall contain a statement in a form approved by the commissioner that clearly states in substance the following: "Any person who includes any false or misleading information on an application for an insurance policy is subject to criminal and civil penalties."
##### **§ 17:33A-7** Actions by insurance companies against violators {#sec-17-33a-7 omnilex-key=us-nj-statutes--title-17--17:33A-7}
7. a. Any insurance company damaged as the result of a violation of any provision of this act may sue therefor in any court of competent jurisdiction to recover compensatory damages, which shall include reasonable investigation expenses, costs of suit and attorneys fees.
b. A successful claimant under subsection a. shall recover treble damages if the court determines that the defendant has engaged in a pattern of violating this act.
c. A claimant under this section shall mail a copy of the initial claim, amended claim, counterclaims, briefs and legal memoranda to the commissioner at the time of filing of such documents with the court wherein the matter is pending. A successful claimant shall report to the commissioner, on a form prescribed by the commissioner, the amount recovered and such other information as is required by the commissioner.
d. Upon receipt of notification of the filing of a claim by an insurer, the commissioner may join in the action for the purpose of seeking judgment for the payment of a civil penalty authorized under section 5 of this act. If the commissioner prevails, the court may also award court costs and reasonable attorney fees actually incurred by the commissioner.
e. No action shall be brought by an insurance company under this section more than six years after the cause of action has accrued.
##### **§ 17:33A-8** Bureau of Fraud Deterrence. {#sec-17-33a-8 omnilex-key=us-nj-statutes--title-17--17:33A-8}
8. a. (1) There is established in the Department of Banking and Insurance the Bureau of Fraud Deterrence. The bureau shall assist the commissioner in administratively investigating allegations of insurance fraud in consultation with the Office of the Insurance Fraud Prosecutor in accordance with subsection a. of section 9 of P.L.1983, c.320 (C.17:33A-9), and implementing programs to prevent insurance fraud and abuse. When so required by the commissioner and the Attorney General, the bureau shall cooperate with the Attorney General in the investigation and prosecution of criminal violations.
(2) In order to achieve administrative efficiencies, and notwithstanding the provisions of section 33 of P.L.1998, c.21 (C.17:33A-17), all civil investigators in the Office of the Insurance Fraud Prosecutor, other than those assigned to the Case Screening, Litigation and Analytical Support Unit, and those additional administrative and clerical support personnel as may be mutually agreed to by the commissioner and the Attorney General, shall be transferred to the Bureau of Fraud Deterrence in the Department of Banking and Insurance. Personnel transferred from the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety to the Department of Banking and Insurance pursuant to this paragraph shall be transferred with all tenure rights and any rights or protections provided by Title 11A of the New Jersey Statutes or other applicable statute, and any pension law or retirement system, as provided in the "State Agency Transfer Act," P.L.1971, c.375 (C.52:14D-1 et seq.).
b. The commissioner shall appoint the full-time supervisory and investigative personnel of the bureau, including the assistant commissioner, who, except as provided in subsections a. and d. of this section, shall hold their employment at the pleasure of the commissioner without regard to the provisions of Title 11A of the New Jersey Statutes and shall receive such salaries as the commissioner from time to time designates, and who shall be qualified by training and experience to perform the duties of their position.
c. When so requested by the commissioner, the Attorney General may assign one or more deputy attorneys general to assist the bureau in the performance of its duties.
d. The commissioner shall also appoint the clerical and other staff necessary for the bureau to fulfill its responsibilities under this act. The personnel shall be employed subject to the provisions of Title 11A of the New Jersey Statutes, and other applicable statutes.
e. The commissioner shall appoint an insurance fraud advisory board consisting of eight representatives from insurers doing business in this State. The members of the board shall serve for two year terms and until their successors are appointed and qualified. The members of the board shall receive no compensation. The board shall advise the commissioner with respect to the implementation of this act, when so requested by the commissioner.
f. The Director of the Division of Budget and Accounting in the Department of the Treasury shall, on or before September 1 in each year, ascertain and certify to the commissioner the total amount of expenses incurred by the State in connection with the administration of this act during the preceding fiscal year, which expenses shall include, in addition to the direct cost of personal service, the cost of maintenance and operation, the cost of retirement contributions made and the workers' compensation paid for and on account of personnel, rentals for space occupied in State owned or State leased buildings and all other direct and indirect costs of the administration thereof.
g. The commissioner shall, on or before October 15 in each year, apportion the amount so certified to him among all of the companies writing the class or classes of insurance described in Subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.), and Subtitle 3 of Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.), within this State in the proportion that the net premiums received by each of them for such insurance written or renewed on risks within this State during the calendar year immediately preceding, as reported to him, bears to the sum total of all such net premiums received by all companies writing that insurance within the State during the year, as reported, except that no one company shall be assessed for more than 5% of the amount apportioned. The commissioner shall certify the sum apportioned to each company on or before November 15 next ensuing. Each company shall pay the amount so certified as apportioned to it to the Department of Banking and Insurance on or before December 31 next ensuing, and the sum paid shall be paid into the State Treasury in reimbursement to the State for the expenses paid.
"Net premiums received" means gross premiums written, less return premiums thereon and dividends credited or paid to policyholders except that, in determining the apportionment amount pursuant to this section, the net premiums received by a company, other than a domestic insurer as defined in subsection a. of N.J.S.17B:17-7 that sells life insurance as defined in N.J.S.17B:17-3, including annuities as defined in N.J.S.17B:17-5, shall not exceed $100,000,000 on any one contract of insurance.
For the purpose of calculating the apportionment amount pursuant to this subsection, any such premium excluded from the reporting of "net premiums received" by virtue of the preceding sentence shall be allocated among those domestic insurers as defined in subsection a. of N.J.S.17B:17-7 that sell life insurance as defined in N.J.S.17B:17-3, to be included with the "net premiums received" reported by those companies. Such excluded premium shall be allocated among those domestic insurers as defined in subsection a. of N.J.S.17B:17-7 that sell life insurance as defined in N.J.S.17B:17-3, on a pro rata basis based on the proportion that the net written premiums received by each of them for insurance written or renewed on risks in this State during the calendar year immediately preceding bears to the sum total of all such net written premiums received by those domestic insurers as defined in subsection a. of N.J.S.17B:17-7 that sell life insurance as defined in N.J.S.17B:17-3, within the State during that calendar year.
h. (Deleted by amendment, P.L.2010, c.32).
##### **§ 17:33A-9** Alleged violations; civil liability; referrals; records. {#sec-17-33a-9 omnilex-key=us-nj-statutes--title-17--17:33A-9}
9. a. (1) Any person who believes that a violation of this act has been or is being made shall notify the bureau and the Office of the Insurance Fraud Prosecutor immediately after discovery of the alleged violation of this act and shall send to the bureau and office, on a form and in a manner jointly prescribed by the commissioner and the Insurance Fraud Prosecutor, the information requested and such additional information relative to the alleged violation as the bureau or office may require. The bureau and the office shall jointly review the reports and select those alleged violations as may require further investigation by the office for possible criminal prosecution, and those that may warrant investigation and possible civil action or enforcement proceeding by the bureau in lieu of or in addition to criminal prosecution. The bureau and office may consult, as necessary, the Department of Labor and Workforce Development to assist with the investigation of the failure to properly classify employees in violation of any provision of State wage, benefit and tax laws as defined in section 1 of P.L.2009, c.194 (C.34:1A-1.11) for the purpose of wrongfully obtaining the benefits or of evading the full payment of the insurance benefits or insurance premiums. The Insurance Fraud Prosecutor and the assistant commissioner shall meet monthly to ensure that reports are handled in an expedited fashion.
(2) Whenever the Bureau of Fraud Deterrence or any employee of the bureau obtains information or evidence of a reasonable possibility of criminal wrongdoing not previously known or disclosed to the Office of the Insurance Fraud Prosecutor, the bureau shall immediately refer that information or evidence to that office. In determining whether a referral to the office is appropriate, the bureau shall utilize appropriate levels of internal review, which shall include but not be limited to approval at the assistant commissioner level. Upon referral, the bureau shall provide the office with all documents related to the referral consistent with section 39 of P.L.1998, c.21 (C.17:33A-23).
b. No person shall be subject to civil liability for libel, violation of privacy or otherwise by virtue of the filing of reports or furnishing of other information, in good faith and without malice, required by this section or required by the bureau or the Office of the Insurance Fraud Prosecutor as a result of the authority conferred upon it by law.
c. The commissioner may, by regulation, require insurance companies licensed to do business in this State to keep such records and other information as he deems necessary for the effective enforcement of this act.
##### **§ 17:33A-10** Subpena powers; violations by persons licensed by State. {#sec-17-33a-10 omnilex-key=us-nj-statutes--title-17--17:33A-10}
10. a. If the bureau has reason to believe that a person has engaged in, or is engaging in, an act or practice which violates this act, or any other relevant statute or regulation, the commissioner or his designee, after consulting with the Insurance Fraud Prosecutor or his designee, may administer oaths and affirmations, request or compel the attendance of witnesses or the production of documents. The commissioner, after consulting with the Insurance Fraud Prosecutor or his designee, may issue, or designate another to issue, subpenas to compel the attendance of witnesses and the production of books, records, accounts, papers and documents. Witnesses who are not licensees of the Department of Banking and Insurance shall be entitled to receive the same fees and mileage as persons summoned to testify in the courts of the State.
If a person subpenaed pursuant to this section shall neglect or refuse to obey the command of the subpena, a judge of the Superior Court may, on proof by affidavit of service of the subpena, of payment or tender of the fees required and of refusal or neglect by the person to obey the command of the subpena, issue a warrant for the arrest of said person to bring him before the judge, who is authorized to proceed against the person as for a contempt of court.
b. If matter that the bureau or Office of the Insurance Fraud Prosecutor seeks to obtain by request is located outside the State, the person so required may make it available to the bureau or office, as the case may be, or its representative to examine the matter at the place where it is located. The bureau or office may designate representatives, including officials of the state in which the matter is located, to inspect the matter on its behalf, and it may respond to similar requests from officials of other states.
c. If (1) a practitioner, (2) an owner, administrator or employee of any hospital, (3) an insurance company, agent, broker, solicitor or adjuster, or (4) any other person licensed by a licensing authority of this State, or an agent, representative or employee of any of them is found to have violated any provision of this act, the commissioner or the Attorney General shall notify the appropriate licensing authority of the violation so that the licensing authority may take appropriate administrative action. The licensing authority shall report quarterly to the commissioner through the Bureau of Fraud Deterrence about the status of all pending referrals.
##### **§ 17:33A-11** Handling of documents, records of investigations {#sec-17-33a-11 omnilex-key=us-nj-statutes--title-17--17:33A-11}
11. Papers, documents, reports, or evidence relative to the subject of an investigation under this act shall not be subject to public inspection except as specifically provided in this act. The commissioner shall not detain subpenaed records after an investigation is closed or, if a claim for a civil penalty is filed by the commissioner pursuant to section 5 or subsection d. of section 7, upon final disposition of the claim by a court of competent jurisdiction, whichever shall be the later date. Subpenaed records shall be returned to the persons from whom they were obtained. The commissioner may, in his discretion, make relevant papers, documents, reports, or evidence available to the Attorney General, an appropriate licensing authority, law enforcement agencies, an insurance company or insurance claimant injured by a violation of this act, consistent with the purposes of this act and under such conditions as he deems appropriate. Such papers, documents, reports, or evidence shall not be subject to subpena, unless the commissioner consents, or until, after notice to the commissioner and a hearing, a court of competent jurisdiction determines that the commissioner would not be unnecessarily hindered by such subpena. Division investigators and insurance company fraud investigators shall not be subject to subpena in civil actions by any court of this State to testify concerning any matter of which they have knowledge pursuant to a pending insurance fraud investigation by the division, or a pending claim for civil penalties initiated by the commissioner.
##### **§ 17:33A-12** Regulations {#sec-17-33a-12 omnilex-key=us-nj-statutes--title-17--17:33A-12}
The commissioner may promulgate such regulations as he deems necessary for the effective implementation of this act.
##### **§ 17:33A-13** Annual report on activities and cost effectiveness {#sec-17-33a-13 omnilex-key=us-nj-statutes--title-17--17:33A-13}
The commissioner shall report annually to the Senate Labor, Industry and Professions Committee and the Assembly Banking and Insurance Committee as to the activities of the division and the cost effectiveness of the programs established by the division.
##### **§ 17:33A-14** Criminal prosecution {#sec-17-33a-14 omnilex-key=us-nj-statutes--title-17--17:33A-14}
The imposition of any fine or other remedy under this act shall not preclude prosecution for a violation of the criminal law of this State.
##### **§ 17:33A-15** Filing of plan for prevention, detection of fraudulent health, auto insurance claims {#sec-17-33a-15 omnilex-key=us-nj-statutes--title-17--17:33A-15}
1. a. Every insurer writing health insurance or private passenger automobile insurance in this State shall file with the commissioner a plan for the prevention and detection of fraudulent insurance applications and claims. The plan shall be deemed approved by the commissioner if not affirmatively approved or disapproved by the commissioner within 90 days of the date of filing. The commissioner may call upon the expertise of the director in his review of plans filed pursuant to this subsection. The commissioner may request such amendments to the plan as he deems necessary. Any subsequent amendments to a plan filed with and approved by the commissioner shall be submitted for filing and deemed approved if not affirmatively approved or disapproved within 90 days from the filing date.
b. The implementation of plans filed and approved pursuant to subsection a. of this section shall be monitored by the division. The division shall promptly notify the Attorney General of any evidence of criminal activity encountered in the course of monitoring the implementation and execution of the plans. Each insurer writing health insurance or private passenger automobile insurance in this State shall report to the director on an annual basis, on January 1st of each year, on the experience in implementing its fraud prevention plan.
c. In addition to any other penalties provided pursuant to P.L.1983, c.320 (C.17:33A-1 et seq.), the commissioner may impose a penalty of up to $25,000 per violation on any insurer for: failure to submit a plan; failure to submit any amendments to an approved plan; failure to properly implement an approved plan in a reasonable manner and within a reasonable time period; failure to provide a report pursuant to subsection b. of this section; or for any other violation of the provisions of this section.
d. For the purposes of this section, "insurer" means an insurance company as defined in subsections a., b., c., d., e., and f. of section 3 of P.L.1983, c.320 (C.17:33A-3).
##### **§ 17:33A-16** Office of the Insurance Fraud Prosecutor. {#sec-17-33a-16 omnilex-key=us-nj-statutes--title-17--17:33A-16}
32. There is established in the Division of Criminal Justice in the Department of Law and Public Safety the Office of the Insurance Fraud Prosecutor. The Insurance Fraud Prosecutor shall be appointed by, and serve at the pleasure of, the Governor with the advice and consent of the Senate and be under the direction and supervision of the Attorney General. Any person appointed as Insurance Fraud Prosecutor shall have had prosecutorial experience, including experience in the litigation of civil and criminal cases. The Attorney General shall establish standards of performance for the Office of Insurance Fraud Prosecutor, which shall include standards of accountability.
##### **§ 17:33A-17** Appointment; transfer of personnel. {#sec-17-33a-17 omnilex-key=us-nj-statutes--title-17--17:33A-17}
33. The Attorney General may appoint such personnel, including attorneys and clerical personnel, as necessary to carry out the duties of the office. The personnel charged with investigatory work in the Division of Insurance Fraud Prevention in the Department of Banking and Insurance shall be transferred to the Office of the Insurance Fraud Prosecutor as determined by the Commissioner of Banking and Insurance and the Attorney General, in accordance with a plan of reorganization, and shall become the Fraud Investigatory Section of the Office of the Insurance Fraud Prosecutor. Personnel transferred from the Division of Insurance Fraud Prevention in the Department of Banking and Insurance to the Office of the Insurance Fraud Prosecutor pursuant to this section and any such reorganization plan shall be transferred with all tenure rights and any rights or protections provided by Title 11A of the New Jersey Statutes or other applicable statutes, as provided in section 8 of P.L.1983, c.320 (C.17:33A-8), and any pension law or retirement system.
##### **§ 17:33A-18** Establishment of liaison between office, other departments; responsibilities. {#sec-17-33a-18 omnilex-key=us-nj-statutes--title-17--17:33A-18}
34. a. A section of the Office of Insurance Fraud Prosecutor shall be designated to be responsible for establishing a liaison and continuing communication between the office and the Department of Health, the Department of Human Services, the Department of Labor and Workforce Development, any professional board in the Division of Consumer Affairs in the Department of Law and Public Safety, the Department of Banking and Insurance, the Division of State Police, every county prosecutor's office, local government units as may be necessary or practicable, and insurers.
b. The section of the office responsible for such liaison shall establish procedures: (1) for receiving notice from all entities enumerated in subsection a. of this section of any case in which fraud is suspected or has been substantiated; (2) for receiving referrals for the investigation of alleged fraud; (3) for receiving referrals for the prosecution of fraud by the office; (4) for receiving and referring information regarding cases, administrative or otherwise, under investigation by any department or other entity to the appropriate authority; and (5) for providing information to and coordinating information among any referring entities on pending cases of insurance fraud which are under investigation or being litigated or prosecuted. The liaison section of the office shall maintain a record of every referral or investigation.
##### **§ 17:33A-19** Duties of Insurance Fraud Prosecutor. {#sec-17-33a-19 omnilex-key=us-nj-statutes--title-17--17:33A-19}
35. The Insurance Fraud Prosecutor shall investigate and, if warranted, prosecute, cases referred to it by insurers, State agencies, or county and municipal governments. The Insurance Fraud Prosecutor may assist county prosecutors in the investigation and prosecution of fraud, and shall give county prosecutors access to the data base maintained pursuant to section 38 of this amendatory and supplementary act.
##### **§ 17:33A-19.1** Additional investigatory and prosecutorial authority, referral for criminal prosecution. {#sec-17-33a-19.1 omnilex-key=us-nj-statutes--title-17--17:33A-19.1}
2. In addition to the investigatory and prosecutorial authority granted pursuant to section 35 of P.L.1998, c.21 (C.17:33A-19), the Insurance Fraud Prosecutor may investigate, and if warranted, prosecute, cases of failure to provide workers' compensation insurance coverage , or self-insurance for such coverage, as required pursuant to chapter 15 of Title 34 of the Revised Statutes. The Commissioner of Labor and Workforce Development shall not refer any case of failure to provide required workers' compensation insurance coverage, or self-insurance for such coverage, for criminal prosecution unless the employer has been afforded a reasonable opportunity to obtain that coverage. The provisions of this section are not jurisdictional, and the failure to afford such opportunity shall not in any manner be construed as a prerequisite to a criminal prosecution or conviction. Nothing in this section shall be deemed to limit the existing authority of the Insurance Fraud Prosecutor or any other prosecutorial entity.
##### **§ 17:33A-20** Establishment of Statewide fraud enforcement policy. {#sec-17-33a-20 omnilex-key=us-nj-statutes--title-17--17:33A-20}
36. The Attorney General shall, in consultation with county prosecutors, establish a Statewide fraud enforcement policy for all State and local agencies, including guidelines for the investigation and prosecution of fraud, which shall include standards for detecting fraud, for the investigation of alleged fraud and standards for the submission of cases for prosecution. Priorities shall be established among the cases referred to the office for prosecution or other litigation and the office shall assist referring entities in establishing priorities among investigations or cases to be disposed of by the entities themselves. The Insurance Fraud Prosecutor shall prosecute criminal cases, litigate civil cases as appropriate, or assist county prosecutors in prosecuting criminal cases in accordance with the guidelines and priorities so established.
##### **§ 17:33A-21** Standards of performance for Fraud Investigatory Section. {#sec-17-33a-21 omnilex-key=us-nj-statutes--title-17--17:33A-21}
37. Standards of performance shall be established for the Fraud Investigatory Section, which shall include, but not be limited to, recording the cases referred by insurers, local government agencies and others which are assigned to the Fraud Investigatory Section, investigating cases of alleged fraud in accordance with the priorities established by the Insurance Fraud Prosecutor, recording the disposition of the cases referred to the section, and making recommendations to the Insurance Fraud Prosecutor as to any procedural, regulatory, or statutory changes which may be necessary to carry out the provisions of this amendatory and supplementary act.
##### **§ 17:33A-22** Maintenance of data base; reporting of claims information. {#sec-17-33a-22 omnilex-key=us-nj-statutes--title-17--17:33A-22}
38. a. The Insurance Fraud Prosecutor shall maintain a data base which includes referrals, reports of fraud investigations, prosecution, or litigation, and the results of such proceedings, which shall include: (1) identification of the referring entity; (2) type of fraud; (3) disposition of case; and (4) such other data as may be necessary to the work of the office and the referring entities.
b. The Insurance Fraud Prosecutor shall provide for the reporting of claims information by insurers writing at least $2,000,000 in direct insurance premiums in any calendar year, in a standard reporting form, which shall include, but shall not be limited to, information on stolen vehicles, including the owners of such vehicles, information on automobile accidents, including date and location of accidents, persons involved in accidents, the kinds of injuries sustained in accidents and treating health care providers, for the purpose of identifying patterns of possible fraudulent activity, which information shall be shared with county prosecutors, local law enforcement officials, and the New Jersey State Police. Every insurer shall submit the data required by the Insurance Fraud Prosecutor for all claims closing with payment during a period established by the Insurance Fraud Prosecutor.
##### **§ 17:33A-23** Access to information provided to Insurance Fraud Prosecutor. {#sec-17-33a-23 omnilex-key=us-nj-statutes--title-17--17:33A-23}
39. The Insurance Fraud Prosecutor shall have access to all necessary information in the possession of the State or local public entities, including agency inspection reports, motor vehicle records and license information, individual case files, and intelligence information compiled and maintained by the Division of State Police in the Department of Law and Public Safety. Upon the request of the Insurance Fraud Prosecutor, any insurer which has referred a case to the Insurance Fraud Prosecutor or to any county or local government agency shall make available to the Office of the Insurance Fraud Prosecutor all information on the case in the insurer's possession.
##### **§ 17:33A-24** Additional duties of office; annual report. {#sec-17-33a-24 omnilex-key=us-nj-statutes--title-17--17:33A-24}
40. The Attorney General shall direct the Office of the Insurance Fraud Prosecutor to:
a. Confer from time to time with departments or other units of State government which have units which investigate fraud, in order to coordinate activities, share information, and provide any assistance necessary to any State agency in overseeing administrative enforcement activities;
b. Formulate and evaluate proposals for legislative, administrative and judicial initiatives to strengthen insurance fraud enforcement;
c. In connection with insurance fraud enforcement activities, act as the liaison for the Executive Branch of government with agencies involved in insurance fraud enforcement outside the Executive Branch, including federal agencies and the Judiciary;
d. Provide an annual report to the Governor and the Legislature, no later than March 1 of each year, as to the activities of the Insurance Fraud Prosecutor for the preceding twelve months, including, but not limited to, the number of cases referred, the number of cases investigated, the number of cases in which professional licenses were suspended or revoked, by type of license, the number of cases prosecuted, the number of convictions procured, and the aggregate amount of money collected in fines and returned in restitution to insurers or others.
##### **§ 17:33A-25** Recommendation for suspension, revocation of professional license. {#sec-17-33a-25 omnilex-key=us-nj-statutes--title-17--17:33A-25}
41. In the case of a professional licensed or certified by a professional licensing board in the Division of Consumer Affairs in the Department of Law and Public Safety who is guilty of fraud, the Insurance Fraud Prosecutor may recommend to the appropriate board a suspension or revocation of the professional license.
##### **§ 17:33A-26** Restitution; seizure of assets. {#sec-17-33a-26 omnilex-key=us-nj-statutes--title-17--17:33A-26}
42. The Insurance Fraud Prosecutor shall consider the restitution of moneys to insurers and others who are defrauded as a major priority, in order that policyholders may benefit from the prosecution of those persons guilty of insurance fraud, and to that end, any assets of any person guilty of fraud shall be subject to seizure.
##### **§ 17:33A-27** Specific goals, strategies. {#sec-17-33a-27 omnilex-key=us-nj-statutes--title-17--17:33A-27}
43. The Insurance Fraud Prosecutor shall have access to all information concerning insurance fraud enforcement activities in the possession of all State departments and agencies. The office shall meet on a regular basis with representatives of State departments and agencies and county prosecutors to set specific goals and strategies for the most effective resolution of insurance fraud cases, whether by criminal, civil, or administrative enforcement action, or a combination thereof.
##### **§ 17:33A-28** Application for reimbursement. {#sec-17-33a-28 omnilex-key=us-nj-statutes--title-17--17:33A-28}
44. Any county prosecutor may apply to the Office of the Insurance Fraud Prosecutor for reimbursement for activities undertaken in connection with investigating and prosecuting insurance fraud. The Attorney General shall allocate such funds as he deems necessary from such moneys as may be appropriated for the operation of the Office of the Insurance Fraud Prosecutor to a fund dedicated for the purpose of reimbursing county prosecutors or sharing in fines levied by the Attorney General, which reimbursement or sharing may be made by the Attorney General at his discretion.
##### **§ 17:33A-29** Provision of information from accident report. {#sec-17-33a-29 omnilex-key=us-nj-statutes--title-17--17:33A-29}
45. Every state and local law enforcement agency, including the New Jersey State Police, shall make available to investigators employed by insurers, upon presentation of appropriate identification, information from any accident report, as set forth in this section, no later than 24 hours following the time of occurrence. The information may include, but need not be limited to, the names and addresses of the owners of the vehicles, insurance information recorded on the accident report, and the names and addresses of passengers in the vehicles at the time of the occurrence and, if applicable, the name of any pedestrian injured in an accident. Every accident report form shall contain the names and addresses of any person occupying a vehicle involved in an accident, and any pedestrian injured in an accident.
##### **§ 17:33A-30** Certification of amount allocable to office expenses. {#sec-17-33a-30 omnilex-key=us-nj-statutes--title-17--17:33A-30}
46. The Attorney General shall annually, on or before October 1, certify to the Commissioner of Banking and Insurance an amount allocable to the expenses of the Office of the Insurance Fraud Prosecutor for the preceding fiscal year, which amount shall be transferred to the Department of Law and Public Safety by the Commissioner of Banking and Insurance from the amounts assessed and collected pursuant to section 8 of P.L.1983, c.320 (C.17:33A-8).
##### **§ 17:33A-31** to 17:33A-34 relocated to 2C:21-4.4 to 2C:21-4.7 {#sec-17-33a-31 omnilex-key=us-nj-statutes--title-17--17:33A-31}
## **Chapter 33B** {#struct-chapter-33b}
##### **§ 17:33B-1** Short title {#sec-17-33b-1 omnilex-key=us-nj-statutes--title-17--17:33B-1}
This act shall be known and may be cited as the "Fair Automobile Insurance Reform Act of 1990."
##### **§ 17:33B-2** Findings, declarations {#sec-17-33b-2 omnilex-key=us-nj-statutes--title-17--17:33B-2}
The Legislature finds and declares that:
a. For almost two decades the system of motor vehicle insurance in this State has been the subject of examination, reform, review and revision in all three branches of government.
b. The common public purpose throughout this period has been to provide to the motorists of this State a comprehensive program of indemnification from the injuries and damages that may arise out of the ownership or operation of motor vehicles that is equitable, efficient and economical.
c. As various legislative or executive initiatives were taken in pursuit of this public purpose, the insurance industry itself, and the businesses and professions that provide goods and services to those involved in motor vehicle accidents, were at the same time altering the way in which they conducted their businesses to respond to a changing business and regulatory climate to ensure that they continued to benefit.
d. It has become increasingly obvious to the Legislature and the public that, as a result, one of the principal goals of this common purpose has not been attained: economy. Not only has the cost of the insurance product itself escalated, but the subsidies that most drivers contribute to support the financially-troubled New Jersey Automobile Full Insurance Underwriting Association have made the system a burden, rather than a benefit, to the citizens of the State.
e. The current law developed through legislative initiative, executive administration and judicial interpretation for: (1) the underwriting and rating of motor vehicle insurance; (2) the apportionment of drivers between a voluntary and residual market based on their characterization as "good" or "bad" drivers; (3) the provision of health care services and motor vehicle repair; (4) the payment of claims and protection of the rights and remedies of those injured or damaged; and (5) the regulation and financing of this system, and its many aspects, is cumbersome, complex, and confusing and allows for and encourages inefficiency, waste, mismanagement and the potential for misuse of public and private moneys.
f. As a result of this experience, the Legislature finds that it is necessary to address the myriad aspects and issues of this complicated and interrelated system, not through piecemeal adjustment of various statutory or regulatory provisions, but through a logical, comprehensive and complete revision of the various laws and regulatory schemes that impact, in whatever fashion, on the system and its participants.
g. To provide a healthy and competitive automobile insurance system in this State, automobile insurers are entitled to earn an adequate rate of return through the ratemaking process.
h. To that end, the Legislature declares that it is in the public interest to:
(1) revise the basic options and coverages available under automobile insurance policies, including the option to make one's health insurance the primary source for payment of medical and hospital expenses;
(2) eliminate, over time, the current residual market mechanism, the New Jersey Automobile Full Insurance Underwriting Association, and certain of the market subsidies currently funding its losses;
(3) provide, through the appointment of an insolvency trustee, for the orderly evaluation, prioritization and satisfaction of obligations payable on behalf of the association;
(4) provide, through assessments on property-casualty insurers, a surtax on the premium taxes of automobile insurers, temporary assessments for the privilege of practicing certain professions and occupations, temporary and minimal increases in certain motor vehicle registration fees, as well as continuation of merit rating surcharges, for the funding of the debts and obligations of the association;
(5) create a new residual market mechanism in which insurers will share directly in the risk of insuring the "bad driver;"
(6) guarantee that "good drivers" secure motor vehicle insurance coverage in the voluntary market and control the apportionment of drivers in the residual market;
(7) eliminate anti-competitive aspects of the current rating laws as they apply to automobile insurers and completely eliminate combinations among automobile insurers for rate-making purposes;
(8) promote the efficient handling of claims and the elimination of fraud and other deceptive practices; and
(9) promote the participation of the insurance consumer in reducing losses through the installation and use of anti-theft devices, the successful completion of defensive driving courses, and similar activities.
##### **§ 17:33B-3** Appointment of trustee; plan of operation; powers of trustee; annual report {#sec-17-33b-3 omnilex-key=us-nj-statutes--title-17--17:33B-3}
a. The Legislature finds that the New Jersey Automobile Full Insurance Underwriting Association, created pursuant to section 16 of P.L.1983, c.65 (C.17:30E-4), is currently operating in a substantially impaired financial state with an operating deficit which the association has estimated to be in excess of $3 billion and that, based upon the results of a recent claim and underwriting review and financial audit, the Commissioner of Insurance stated that mismanagement by the insurance companies acting as servicing carriers cost the association $908 million between its inception in 1984 and 1988. The Legislature further finds that the association is not earning new premium income or collecting subsidies in an amount sufficient to pay its claims and expenses. The Legislature further finds that under the above enumerated circumstances the association, if it were a licensed insurer, would likely be declared financially impaired or insolvent pursuant to the provisions of P.L.1975, c.113 (C.17:30C-1).
b. Therefore,
(1) Within 90 days of the effective date of this 1990 amendatory and supplementary act, the commissioner shall appoint a trustee, who shall be a person experienced in insolvency or bankruptcy, who shall not, during his tenure as trustee be affiliated with or employed by an insurer. The trustee shall serve at the pleasure of the commissioner and shall be paid from funds available to the New Jersey Automobile Insurance Guaranty Fund created pursuant to section 23 of this act, in an amount and manner as determined by the commissioner. The trustee shall carry out his obligations as provided in this act and the plan of operation promulgated pursuant to paragraph (2) of this subsection.
(2) The trustee shall, as soon as possible upon appointment, promulgate a plan of operation to be approved by the commissioner. Pursuant to the plan of operation, the trustee shall have the authority to disburse funds made available from the New Jersey Automobile Insurance Guaranty Fund pursuant to section 23 of this act and such other monies as may be appropriated to or otherwise made available to the fund or the association, including those monies collected by the association pursuant to section 20 of P.L.1983, c.65 (C.17:30E-8), on behalf of the association for the payment of claims and other financial obligations of the association, including the contracts with the servicing carriers. The plan shall provide for the payment of covered losses on behalf of the association. Among other things necessary to the orderly evaluation, prioritization and disbursement of monies payable on behalf of the association, the plan shall contain a schedule for the prioritization of claims payments by the type of claim for which payment is due. The schedule may provide for the deferral of the payment of residual bodily injury losses over a period not to exceed four years. The schedule may also provide for the deferral of other payments only upon certification by the commissioner that the fund cannot by any other available means secure the monies necessary to pay those losses. However, the plan shall not provide for the deferral of payment of damages which are due and payable for present economic loss under any circumstance.
(3) The trustee shall report to the commissioner biannually, or more frequently if ordered by the commissioner, on the financial condition of the association and the disbursement of funds pursuant to the plan of operation. The commissioner shall make an annual report on the activities of the trustee to the Legislature and the Governor. The report shall contain an accounting of the immediately preceding annual period, including a report of the financial obligations attributable to the association; the income available to and the disbursements made by the trustee during that period; and a projection of the financial obligations, anticipated income and expected disbursements for the immediately succeeding annual period.
(4) In fulfilling his duties pursuant to this subsection, the trustee shall avail himself of the services of association staff and shall utilize association procedures, equipment and supplies to the extent such use facilitates fulfillment of the trustee's duties. The trustee shall have the authority to continue any audit being conducted with regard to the operations of the association and to conduct such audits.
##### **§ 17:33B-4** Liability under deferred payment plan {#sec-17-33b-4 omnilex-key=us-nj-statutes--title-17--17:33B-4}
Notwithstanding any provision of law to the contrary, no insured or other person covered under an association policy shall be held liable for payment of any claim attributable to damages subject to a deferred payment plan implemented pursuant to paragraph (2) of subsection b. of section 21 of this 1990 amendatory and supplementary act until payment is made to the covered person pursuant to the deferred payment plan.
##### **§ 17:33B-6** Residual market equalization charges, or flat charges, no longer imposed after April 1, 1991 {#sec-17-33b-6 omnilex-key=us-nj-statutes--title-17--17:33B-6}
Notwithstanding any of the provisions of sections 13 to 34 of P.L.1983, c.65 (C.17:30E-1 et seq.), section 1 of P.L.1984, c.1 (C.17:29A-37.1) or any other law, to the contrary, no residual market equalization charges, or flat charges (also referred to as flat capitation fees or policy constants) of any kind, other than the flattened tax and expense fees implemented pursuant to section 8 of P.L.1983, c.65 (C.17:29A-37), shall continue to be imposed or be imposed on or after April 1, 1991 on a per car or per coverage basis on automobile insurance policies or on policies insuring motor vehicles other than automobiles.
##### **§ 17:33B-7** Payment of premiums on installment basis {#sec-17-33b-7 omnilex-key=us-nj-statutes--title-17--17:33B-7}
Any plan for the payment of premiums payable to the New Jersey Automobile Full Insurance Underwriting Association on an installment basis for policies issued for a one-year period shall provide for installment payments during a period of not less than nine months.
##### **§ 17:33B-8** Written notice needed for cancellation due to nonpayment of premium {#sec-17-33b-8 omnilex-key=us-nj-statutes--title-17--17:33B-8}
a. No New Jersey Automobile Full Insurance Underwriting Association policy may be cancelled for nonpayment of premium unless written notice is provided at least 15 days prior to the effective date of cancellation accompanied by the reason for cancellation. Notice shall be provided to the named insured and the producer of record at their last known addresses.
b. The association shall notify the named insured and the producer of record at their last known addresses no later than 15 days after the nonrenewal of an association policy of such nonrenewal.
##### **§ 17:33B-9** List of licensed insurance brokers; producer assignment program {#sec-17-33b-9 omnilex-key=us-nj-statutes--title-17--17:33B-9}
a. The Commissioner of Insurance shall, on or before October 1, 1990, compile a list of insurance brokers licensed pursuant to the "New Jersey Insurance Producer Licensing Act," P.L.1987, c.293 (C.17:22A-1 et seq.), who are producers for the New Jersey Automobile Full Insurance Underwriting Association pursuant to section 22 of P.L.1983, c.65 (C.17:30E-10). The list shall include the name of the broker and any applicable fictitious, trade or firm name used by the broker; the business address of the broker; and shall set forth the authorities which the broker holds pursuant to section 10 of P.L.1987, c.293 (C.17:22A-10). The list shall be made available to all insurers licensed to transact automobile insurance in this State.
b. The commissioner shall initiate a plan to encourage the broadening of authorities held by those brokers who have been active as association producers.
c. The commissioner shall, on or before October 1, 1991, establish a producer assignment program. The program shall be available upon application to any licensed insurance producer who: (1) is a producer for the association; (2) has no affiliation with a voluntary market company for the purposes of placement of private passenger automobile insurance; (3) had an affiliation with an insurance company for the placement of automobile insurance in the voluntary market which was terminated by the insurer on or after December 31, 1980; (4) has demonstrated to the commissioner his competency, efficiency and effectiveness in servicing association and other insurance business as determined by a review of the record of the producer for complaints, violations of the licensing law and other factors deemed relevant by the commissioner; and (5) is located and services insurance in a geographic area which the commissioner has determined to lack sufficient representation for the placement of automobile insurance business in the voluntary market. The program shall provide for the assignment of qualified producers on an equitable basis to insurers writing private passenger automobile insurance in the voluntary market.
##### **§ 17:33B-10** Payment of costs to State {#sec-17-33b-10 omnilex-key=us-nj-statutes--title-17--17:33B-10}
Any costs, including attorneys' fees, incurred by the State in maintaining any action against servicing carriers of the New Jersey Automobile Full Insurance Underwriting Association, whether brought by the Commissioner of Insurance, the Attorney General or any other person on behalf of the State of New Jersey, whether or not ultimately reimbursable as costs, shall be payable from monies available to the association or the New Jersey Automobile Insurance Guaranty Fund created pursuant to section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-11** Market Transition Facility {#sec-17-33b-11 omnilex-key=us-nj-statutes--title-17--17:33B-11}
88. a. There is created a Market Transition Facility to be operated by the Commissioner of Insurance pursuant to the provisions of this section. Every insurer authorized to transact automobile insurance in this State shall be a member of the facility and shall share in its profits and losses as provided by the commissioner pursuant to the provisions of subsection d. of this section.
b. (Deleted by amendment, P.L.1994, c.57.)
c. The facility shall arrange for the issuance and renewal of automobile insurance policies for the period commencing October 1, 1990 and ending September 30, 1992 pursuant to a plan of operation promulgated by the commissioner. The facility shall not issue or renew any policies of automobile insurance on or after October 1, 1992. The plan shall provide:
(1) The applicable levels of coverage available through the facility;
(2) That the premiums payable on policies issued by the facility shall be based on rates applicable to persons insured by the New Jersey Automobile Full Insurance Underwriting Association on September 30, 1990 but shall not incorporate the rates applicable under section 25 of P.L.1983, c.65 (C.17:30E-13) and section 22 of P.L.1988, c.119 (C.17:30E-13.1). However, the applicable rates for those insureds who do not qualify as eligible persons as provided in section 25 of P.L.1990, c.8 (C.17:33B-13) shall be those set by the plan for the provision of automobile insurance established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1);
(3) Procedures for the filing and approval of changes in rates applicable to policies issued or renewed by the facility;
(4) For the issuance and renewal of automobile insurance through servicing carriers under contract with the New Jersey Automobile Full Insurance Underwriting Association pursuant to the provisions of section 24 of P.L.1983, c.65 (C.17:30E-12), utilizing, at the discretion of the commissioner, the staff of the association;
(5) Procedures for the depopulation of the facility which shall provide that: on or after April 1, 1991 no more than 29% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility and the New Jersey Automobile Full Insurance Underwriting Association created by P.L.1983, c.65 (C.17:30E-1 et seq.); on or after October 1, 1991 no more than 20% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility; on or after April 1, 1992 no more than 10% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility; and on or after October 1, 1992, 0% of the aggregate number of private passenger non-fleet exposures written in this State shall be written by the facility. In establishing the quotas set forth above, the plan shall prescribe the number of voluntary market exposures which shall be written during each six-month period set forth in this paragraph in a manner consistent with the apportionment procedure established pursuant to subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14). In the event that any of the quotas established pursuant to this paragraph have not been met by the end of the applicable period, the commissioner shall direct the facility to assign the balance of the exposures needed to meet the applicable quota to member companies pursuant to the apportionment procedure. A member company which exceeds its apportionment share for any six-month period set forth in this paragraph shall receive credit for the excess against the following period's obligation. The commissioner may excuse a member company from meeting its obligations under the depopulation procedures if he determines that the company would be placed in an unsafe or unsound condition. When an exposure is assigned to a member company under this paragraph as a result of the failure of the member company to meet an applicable quota, but only in such circumstances, the following shall apply:
(a) When an assigned exposure is written by the member company assigned the exposure, the facility 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 facility producer of record shall retain complete control, possession and ownership of all records and renewals regarding exposures assigned pursuant to this paragraph, provided, however, that the member company may maintain such records as are provided to it under the procedure established by subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14). A member company that acquires access to records pursuant to that subsection 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 facility producer of record shall be paid a commission by the member company on the business serviced by the facility 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 facility producer of record;
(e) The procedure established in subparagraphs (a), (b), (c), (d), (e) and (f) of this paragraph shall be applicable only to exposures assigned to member companies in accordance with this paragraph 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 facility producer of record authorizing the facility producer of record to write new business through the member company; provided, however, that the facility 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; and
(f) Nothing in this paragraph shall deprive an insured of the right to designate a producer of record other than the facility producer of record. Upon that designation, the rights of the facility producer of record under this paragraph shall terminate. Notwithstanding any provision in this paragraph, the rights of the facility producer of record under this paragraph shall terminate in the event of the producer's insolvency, gross and willful misconduct, fraud or license revocation;
(6) A schedule for the payment of premiums on an installment basis. Any installment payment schedule for policies issued for a one-year period shall provide for installment payments during a period of not less than nine months;
(7) That no policy issued by the facility may be cancelled for nonpayment of premium unless written notice is provided at least 15 days prior to the effective date of cancellation accompanied by the reason for cancellation. Notice shall be provided to the named insured and the producer of record at their last known addresses;
(8) For notification of the named insured and the producer of record at their last known addresses no later than 15 days after the nonrenewal of a facility policy of such nonrenewal; and
(9) Such other provisions as are deemed necessary for the operation of the facility.
Notwithstanding the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to the contrary, the commissioner shall amend the plan of operation to provide for an evaluation, prioritization and disbursement of claims payable by the facility. The amended plan of operation shall contain a schedule for the prioritization of the payment of claims from the facility's assets in accordance with the order in which each class of claims is set forth in subsection c. of section 26 of P.L.1975, c.113 (C.17:30C-26). Every claim in each class shall be paid in full, or adequate funds or other assets shall be set aside for such payment before the claims of the next class receive any payment, except that, if the facility is found to have insufficient funds to pay those claims, the commissioner may deny payment of claims to any class or classes. The commissioner shall issue final orders establishing the amounts and classes of claims payable from monies available to the facility, pursuant to procedures set forth in the plan of operation. These orders may be appealed to the Superior Court, Appellate Division. The commissioner may provide for the deferral of the payment of claims for noneconomic loss payable under policies issued by the facility over a period not to exceed four years. The commissioner may also provide for the deferral of other claim payments. In providing for such a deferral, consideration shall be given to the importance of paying claims for economic loss under policies issued by the facility in relation to other claims, of maintaining the facility's infrastructure in order to ensure the service and payment of claims, both pending and future, and of protecting the interests of facility policyholders.
The commissioner shall further amend the plan of operation to provide a procedure for the commissioner to appoint qualified claims examiners and accountants to conduct independent field examinations and claims audits of servicing carriers to determine whether the servicing carriers have followed normal and prudent industry practices in their handling of claims on behalf of the facility. These examinations and audits shall be conducted at least semi-annually, and the examiners shall provide a report to the commissioner along with any findings or recommendations which have resulted from the examinations or audits. The commissioner shall annually report to the Governor and the Legislature his finding with respect to the examinations and audits of the facility servicing carriers.
d. (1) The commissioner shall apportion any losses of the facility in an amount not to exceed $439 million among member companies based on each company's apportionment share as determined for purposes of depopulation pursuant to subsection a. of section 26 of P.L.1983, c.65 (C.17:30E-14), but no apportionment shall be made after the effective date of P.L.1994, c.57 (C.34:1B-21.1 et al.). All monies paid by a member company before the effective date of P.L.1994, c.57 (C.34:1B-21.1 et al.) shall be applied as a credit against such member company's apportioned share of losses. The facility is authorized to transfer up to $100 million to the Division of Motor Vehicles Surcharge Fund created pursuant to section 12 of P.L.1994, c.57 (C.34:1B-21.12).
(2) Any amounts actually paid by a member company to the facility as payments on account or any amounts paid to the commissioner to satisfy its apportioned share for the losses of the facility shall not be passed through to any policyholder by any member company to recoup any of the amounts so paid, except as required by subsection g. of section 2 of P.L.1990, c.8 (C.17:33B-2).
e. The facility shall be subject to the provisions of P.L.1945, c.132 (C.54:18A-1 et seq.).
f. The commissioner shall, notwithstanding the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to the contrary, amend the plan of operation from time to time as may be necessary to effectuate the purposes of P.L.1994, c.57 (C.34:1B-21.1 et al.) or for any other purpose.
g. The commissioner shall undertake a review of any executory contract for services to the facility and may modify or terminate any such contract if the commissioner determines that modification or termination is in the best interest of the facility. Notwithstanding the provisions of P.L.1954, c.48 (C.52:34-6 et seq.) or the provisions of section 24 of P.L.1983, c.65 (C.17:30E-12) to the contrary, the commissioner may enter into any contract on behalf of the facility, which may include the consolidation of the servicing of the facility's policies.
##### **§ 17:33B-11.1** Payment of claim attributable to damages subject to deferred payment plan {#sec-17-33b-11.1 omnilex-key=us-nj-statutes--title-17--17:33B-11.1}
18. Notwithstanding any provision of law to the contrary, no insured or other claimant under a Market Transition Facility policy shall be held personally liable for payment of any claim attributable to damages subject to a deferred payment plan implemented pursuant to subsection c. of section 88 of P.L.1990, c.8 (C.17:33B-11) until payment is made to the insured or claimant pursuant to any deferred payment.
##### **§ 17:33B-12** Charges under depopulation plan {#sec-17-33b-12 omnilex-key=us-nj-statutes--title-17--17:33B-12}
Notwithstanding any provision of law to the contrary, an insurer may charge premiums at the rate level applicable to eligible persons insured by the facility as provided in paragraph (2) of subsection c. of section 88 of this 1990 amendatory and supplementary act to an insured written in the voluntary market under the depopulation plan established pursuant to paragraph (5) of subsection c. of section 88 of this act. However, no insured shall be subject to facility rates for a total period in excess of three years, including the time during which the insured is covered by the facility.
##### **§ 17:33B-13** Definitions. {#sec-17-33b-13 omnilex-key=us-nj-statutes--title-17--17:33B-13}
25. As used in sections 25 through 33 of this 1990 amendatory and supplementary act:
"Automobile" means an automobile as defined in section 2 of P.L.1972, c.70 (C.39:6A-2).
"Automobile insurance" means insurance for an automobile including coverage for bodily injury liability and property damage liability, comprehensive and collision coverages, uninsured and underinsured motorist coverage, personal injury protection coverage, additional personal injury protection coverage and any other automobile insurance required by law.
"Commissioner" means the Commissioner of Banking and Insurance.
"Declination" means:
a. Refusal by an insurance agent to submit an application on behalf of an applicant to any of the insurers represented by the agent;
b. Refusal by an insurer to issue an automobile insurance policy to an eligible person upon receipt of an application for automobile insurance;
c. The offer of automobile insurance coverage with less favorable terms or conditions than those requested by an eligible person; or
d. The refusal by an insurer or agent to provide, upon the request of an eligible person, an application form or other means of making an application or request for automobile insurance coverage.
"Automobile insurance eligibility points" means points calculated under the schedule promulgated by the commissioner pursuant to section 26 of this act.
"Eligible person" means a person who is an owner or registrant of an automobile registered in this State or who holds a valid New Jersey driver's license to operate an automobile, but does not include any person:
a. Who, during the three-year period immediately preceding application for, or renewal of, an automobile insurance policy has been convicted pursuant to R.S.39:4-50 or section 2 of P.L.1981, c.512 (C.39:4-50.4a), or for an offense of a substantially similar nature committed in another jurisdiction; has been convicted of a crime of the first, second or third degree resulting from the use of a motor vehicle; or has been convicted of theft of a motor vehicle;
b. Whose driver's license to operate an automobile is under suspension or revocation;
c. Who has been convicted, within the five-year period immediately preceding application for or renewal of a policy of automobile insurance, of fraud or intent to defraud involving an insurance claim or an application for insurance; or who has been successfully denied, within the immediately preceding five years, payment by an insurer of a claim in excess of $1,000 under an automobile insurance policy, if there was evidence of fraud or intent to defraud involving the automobile insurance claim or application;
d. Whose policy of automobile insurance has been canceled because of nonpayment of premium or financed premium within the immediately preceding two-year period, unless the premium due on a policy for which application has been made is paid in full before issuance or renewal of the policy;
e. Who fails to obtain or maintain membership or qualification for membership in a club, group, or organization, if membership is a uniform requirement of the insurer as a condition of providing insurance, and if the dues or charges, if any, or other conditions for membership or qualifications for membership are applied uniformly throughout this State, are not expressed as a percentage of the insurance premium, and do not vary with respect to the rating classification of the member or potential member except for the purpose of offering a membership fee to family units. Membership fees, if applicable, may vary in accordance with the amount or type of coverage if the purchase of additional coverage, either as to type or amount, is not a condition for reduction of dues or fees;
f. Whose driving record for the three-year period immediately preceding application for or renewal of a policy of automobile insurance has an accumulation of automobile insurance eligibility points as determined under the schedule promulgated by the commissioner pursuant to section 26 of this act;
g. Who possesses such other risk factors as determined to be relevant by rule or regulation of the commissioner; or
h. Who, during the three-year period immediately preceding application for, or renewal of, an automobile insurance policy, has knowingly provided materially false or misleading information in connection with an application for insurance, renewal of insurance or claim for benefits under an insurance policy.
"Insurance agent" or "agent" means an insurance agent as defined by subsection f. of section 2 of P.L.1987, c.293 (C.17:22A-2) and shall also include an insurance broker as defined by subsection g. of section 2 of P.L.1987, c.293 (C.17:22A-2) who has a brokerage relationship with an insurer.
"Insurer" means any insurer authorized or admitted to write automobile insurance in this State, but does not include the New Jersey Automobile Full Insurance Underwriting Association created pursuant to sections 13 through 34 of P.L.1983, c.65 (C.17:30E-1 et seq.) or any residual market mechanism implemented pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1).
##### **§ 17:33B-14** Schedule of automobile insurance eligibility points. {#sec-17-33b-14 omnilex-key=us-nj-statutes--title-17--17:33B-14}
26. The commissioner shall, within 90 days of the effective date of this act, promulgate a schedule of automobile insurance eligibility points by rule or regulation adopted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The schedule shall assess a point valuation to driving experience related violations and shall include assessments for violations of lawful speed limits within such increments as determined by the commissioner, other moving violations, and at-fault accidents. For the purposes of this section, an "at-fault accident," occurring before the effective date of P.L.2003, c.89 (C.17:30A-2.1 et al.), means an at-fault accident which results in payment by the insurer of at least a $500 claim and for accidents occurring on or after the effective date of P.L.2003, c.89 (C.17:30A-2.1 et al.), means an at-fault accident which results in payment by the insurer of at least a $1,000 claim, which amount may be adjusted in $100 or $250 increments periodically by order of the commissioner no more frequently than every 36 months, as the commissioner deems appropriate, to reflect the cumulative increases or decreases in the components of the Consumer Price Index, All Urban Consumers (CPI-U) for the Northeast Region, and the adjusted amount shall apply to automobile accidents occurring at least 120 days after the effective date of the adjustment; except that an at-fault accident shall not mean an accident occurring as a result of operation of any motor vehicle in response to a medical emergency if the operator at the time of the accident was a physician responding to the medical emergency.
##### **§ 17:33B-14.1** Speeding violations, certain; surcharge unaffected {#sec-17-33b-14.1 omnilex-key=us-nj-statutes--title-17--17:33B-14.1}
1. a. In calculating a surcharge or other differential in rates based on motor vehicle penalty points promulgated by the Director of the Division of Motor Vehicles pursuant to section 1 of P.L.1982, c.43 (C.39:5-30.5), including any surcharge or differential based on the schedule of automobile insurance eligibility points promulgated by the Commissioner of Insurance pursuant to section 26 of P.L.1990, c.8 (C.17:33B-14), an insurer shall not consider any points assessed for a violation of any lawful speed limitation where the violator exceeded the speed limitation by less than 15 miles per hour, except that, the insurer may consider any such violations, in excess of one violation, of which the insured has been convicted in the three-year period immediately preceding the issuance or renewal of the policy. This section shall only apply to violations that occur on or after the effective date of this act, but shall in no case apply to a violation of subsection a. of R.S.39:4-98.
b. As used in this section, "insurer" means and includes an insurer writing private passenger automobile insurance in the voluntary market and any insurance plan established to provide private passenger automobile insurance pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1).
##### **§ 17:33B-15** Provision of automobile insurance coverage by insurers. {#sec-17-33b-15 omnilex-key=us-nj-statutes--title-17--17:33B-15}
27. a. On or after April 1, 1992, every insurer, either by one or more separate rating plans filed in accordance with the provisions of section 6 of P.L.1988, c.156 (C.17:29A-45) prior to March 1, 1998, or section 14 of P.L.1997, c.151 (C.17:29A-46.1) on or after March 1, 1998, or through one or more affiliated insurers, shall provide automobile insurance coverage for eligible persons. This subsection shall become inoperative on January 1, 2009.
b. No insurer shall refuse to insure, refuse to renew, or limit coverage available for automobile insurance to an eligible person who meets its underwriting rules as filed with and approved by the commissioner in accordance with the provisions of section 7 of P.L.1988, c.156 (C.17:29A-46) prior to March 1, 1998 or section 15 of P.L.1997, c.151 (C.17:29A-46.2) on or after March 1, 1998. This subsection shall become inoperative on January 1, 2009.
c. Notwithstanding the provisions of subsections a. and b. of this section to the contrary, any qualified insurer engaged in writing automobile insurance in an automobile insurance urban enterprise zone pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4) may limit the number of exposures written through its UEZ agent or agents, or in the case of a qualified insurer doing business on a direct writing basis, the qualified insurer may limit the number of exposures written in an automobile insurance urban enterprise zone consistent with its marketing plans and goals as provided in subsection a. of section 21 of P.L.1997, c.151 (C.17:33C-3). Nothing in this subsection shall be construed to relieve a qualified insurer from its obligation under subsections a. and b. of this section to write all eligible persons residing within an automobile insurance urban enterprise zone through its non-UEZ agent points of access.
d. (1) Notwithstanding the provisions of subsections a. and b. of this section to the contrary, an insurer may file underwriting rules by which it may refuse to issue or limit coverage available for automobile insurance in any rating territory to an eligible person if the insurer has increased its aggregate number of private passenger automobile non-fleet exposures in the rating territory during the previous year: by 5% during the one-year period beginning January 1, 2004; by 4% during the one-year period beginning January 1, 2005; by 3% during the one-year period beginning January 1, 2006; by 2% during the one-year period beginning January 1, 2007; and by 1% during the one-year period beginning January 1, 2008, provided further that an insurer may file with the commissioner for a lower percentage growth standard than that listed in this subsection and the commissioner shall approve such a filing if he finds that the insurer does not have the financial and business resources to accommodate growth statewide at a higher percentage than that proposed in the filing.
(2) Underwriting rules filed pursuant to this subsection shall provide that the rules are activated only upon the filing with the commissioner of a proper certification. The certification shall be by an officer of the insurer attesting to the aggregate number of private passenger automobile non-fleet exposures in each rating territory on June 30 and December 31 of the preceding year and clearly identify any rating territory in which the insurer has met the percentage growth standard established by this subsection. Such underwriting rules shall be operational in the identified territory on the first day of the second calendar month after the end of the calendar six-month period in which the percentage growth standard has been met. Such underwriting rules shall be operational in an identified territory for a period of six months, unless prior to their expiration, an officer of the insurer files a certification with the commissioner attesting that the percentage growth standard in an identified territory continues to be met.
(3) Notwithstanding any provision of this section to the contrary, the commissioner may make operative the provisions of subsections a. and b. of this section only by order finding one of the following circumstances:
(a) The commissioner determines, after a hearing, that a competitive market does not exist among insurers authorized to write private passenger automobile insurance in this State, which determination shall only be made pursuant to subsection f. of this section, provided, however, that there shall be a rebuttable presumption that a competitive market exists among insurers authorized to write private passenger automobile insurance in this State if the plan established pursuant to P.L.1970, c.215 (C.17:29D-1) is insuring less than 10% of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State.
(b) The commissioner certifies that the plan established pursuant to P.L.1970, c.215 (C.17:29D-1) is insuring 10% or more of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State.
(4) Any order issued by the commissioner that makes operative the provisions of subsections a. and b. of this section may limit the form of policies to which the order applies and shall establish a maximum increase in an insurer's aggregate number of private passenger automobile non-fleet exposures to which the order applies, which increase shall not exceed the maximum limit set forth in paragraph (1) of this subsection d.
(5) An eligible person denied or refused renewal of automobile insurance in a rating territory by an insurer granted relief pursuant to this subsection shall be advised by the insurer that coverage may be available from another insurer or that coverage is available from the plan established pursuant to P.L.1970, c.215 (C.17:29D-1). The commissioner shall establish by regulation the form and content of the notice to be provided to such an eligible person.
(6) The provisions of this subsection d. shall not reduce an insurer's obligation to renew policies pursuant to section 26 of P.L.1988, c.119 (C.17:29C-7.1).
e. The commissioner may suspend, revoke or otherwise terminate the certificate of authority to transact automobile insurance business in this State of any insurer who violates the provisions of this section.
f. (1) A determination that a competitive market for private passenger automobile insurance does not exist may be made by the commissioner, after notice and hearing, based on two or more of the factors set forth in paragraph (2) of this subsection. A hearing under this subsection shall be held consistent with the rulemaking provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52.14B-1 et seq.), except that an order by the commissioner pursuant to this subsection shall include specific finding of fact and be supported by clear and convincing evidence. Any ruling that finds that competition does not exist within the market for automobile insurance shall include specific findings regarding: (a) the actions the State and the commissioner have taken to return the market to a competitive market; and (b) an explanation regarding why those actions have failed to return the market to a competitive market. A ruling pursuant to this subsection shall expire one year after issued unless rescinded earlier by the commissioner or unless the commissioner renews the ruling after a hearing and a finding as to continued lack of a reasonable degree of competition.
(2) The following factors shall be considered by the commissioner for purposes of determining if a reasonable degree of competition does not exist in a particular line of private passenger automobile insurance:
(a) The number of insurers or groups of affiliated insurers actively engaged in providing coverage in the market, taking into account the specialization traditionally associated with the line of insurance;
(b) Measures of market concentration and changes of market concentration over time, including, but not limited to, the Herfindahl-Hirschman Index (HHI) and the United States Department of Justice merger guidelines for an unconcentrated market;
(c) Ease of entry and exit and the existence of financial or economic barriers that could prevent new insurers from entering the market;
(d) The extent to which any insurer or group of affiliated insurers controls all or a dominant portion of the market and has actively sought to prevent competition;
(e) Whether the total number of insurers writing the line of insurance in this State is sufficient to provide multiple options;
(f) The availability of insurance coverage to consumers in the voluntary market; and
(g) The opportunities available to consumers in the market to acquire pricing and other consumer information.
(3) The commissioner shall monitor, and take all reasonable actions to maintain, the degree and continued existence of competition in this State on an on-going basis. In doing so, the commissioner may utilize existing relevant information, analytical systems and other sources, or rely on any combination thereof. Monitoring activities may be conducted internally within the department, in cooperation with other state insurance departments, through outside contractors and in any other manner determined appropriate by the commissioner.
##### **§ 17:33B-16** Declination; reasons for {#sec-17-33b-16 omnilex-key=us-nj-statutes--title-17--17:33B-16}
An insurer or agent, upon making a declination of automobile insurance, shall inform the applicant of each specific reason for the declination and shall include a statement as to whether the applicant may qualify for insurance from an affiliate of the insurer. If the application or request for coverage was made in writing, the insurer or agent shall provide the explanation of reasons in writing. If the application or request for coverage was made orally, the insurer or agent may provide the applicant with an oral explanation instead of a written explanation, and shall offer to provide a written explanation if the applicant requests a written explanation within 90 days.
##### **§ 17:33B-17** Procedures for resolving complaints {#sec-17-33b-17 omnilex-key=us-nj-statutes--title-17--17:33B-17}
a. The commissioner shall establish procedures for resolving complaints of persons who believe that they have been improperly denied automobile insurance, including procedures for a written appeal to the commissioner.
b. If either the insurer or the person disagrees with a determination of the commissioner under this section, the commissioner, if requested to do so by either party, shall proceed to hear the matter as a contested case.
##### **§ 17:33B-18** Conditions of licensure. {#sec-17-33b-18 omnilex-key=us-nj-statutes--title-17--17:33B-18}
30. a. A licensed insurance agent shall, as a condition of licensure:
(1) (Deleted by amendment, P.L.2007, c.240).
(2) Not attempt to channel an eligible person away from an insurer or insurance coverage with the purpose or effect of avoiding an agent's obligation to submit an application or an insurer's obligation to accept an eligible person; and
(3) Upon request, submit an application of the eligible person for automobile insurance to the insurer selected by the eligible person.
If a UEZ agent has a contract with a qualified insurer pursuant to the provisions of section 22 of P.L.1997, c.151 (C.17:33C-4) and the UEZ agent is unable to place an otherwise eligible person with that qualified insurer because of the limitation on the number of exposures imposed by that qualified insurer on the UEZ agent, the UEZ agent shall be deemed to have met the requirements of this subsection, provided that the limitation on the number of exposures has been reached and the UEZ agent fulfills all applicable regulatory requirements.
b. With respect to automobile insurance, an insurer shall not penalize an agent by paying less than normal commissions or normal compensation or salary because of the expected or actual experience produced by the agent's automobile insurance business or because of the geographic location of automobile insurance business written by the agent.
##### **§ 17:33B-19** Suspension of obligation to issue policies due to unsafe, unsound financial condition {#sec-17-33b-19 omnilex-key=us-nj-statutes--title-17--17:33B-19}
a. The commissioner shall suspend, after hearing, an insurer's obligation to issue policies in compliance with the provisions of section 27 of this act if the insurer is in an unsafe or unsound financial condition.
b. If an insurer requests suspension and avers that there is an immediate need to cease issuance of policies in compliance with section 27 of this act because compliance would result in the insurer being in an unsafe or unsound financial condition, the insurer's obligation to issue policies in compliance with section 27 of this act shall be suspended beginning on the 10th business day after the insurer has filed the request and supporting documentation with the commissioner, unless within that time, the commissioner finds that continued compliance with section 27 of this act will not result in the insurer being in an unsafe or unsound financial condition.
c. Any suspension pursuant to subsection a. or b. of this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
d. For the purposes of this section, an insurer shall be deemed to be in an unsafe or unsound financial condition if the commissioner finds the insurer to have a ratio of annual net premiums written to surplus as to policyholders that threatens the financial health of the insurer.
##### **§ 17:33B-20** Suspension of obligation because of danger of future unsafe, unsound financial condition {#sec-17-33b-20 omnilex-key=us-nj-statutes--title-17--17:33B-20}
The commissioner may suspend an insurer's obligation to issue policies pursuant to section 27 of this act if the commissioner, in his discretion, determines that compliance with section 27 of this act will result in an insurer's financial condition becoming unsafe or unsound. In making this determination, the commissioner shall consider the following factors:
a. The insurer's ratio of annual net premiums written to surplus as to policyholders; and
b. Whether the insurer, in issuing policies in compliance with section 27 of this act, would experience:
(1) an adverse change in its rating by A.M. Best and Company, Dun and Bradstreet, Moody's or Standard and Poor's;
(2) financial ratios outside the acceptable ranges as established by the National Association of Insurance Commissioners or the chief financial officer of the Department of Insurance of this State; or
(3) a net reduction to the insurer's surplus as to policyholders greater than 25% during a period of two years or less.
Any suspension pursuant to this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
##### **§ 17:33B-21** Penalties for violation {#sec-17-33b-21 omnilex-key=us-nj-statutes--title-17--17:33B-21}
If the commissioner determines that any person has violated any provision of sections 26 through 30 of this 1990 amendatory and supplementary act, he may impose a civil penalty in an amount of up to $2,000 for the first violation and up to $5,000 for the second and each subsequent violation, collectible in an action brought in the name of the commissioner pursuant to the provisions of "the penalty enforcement law," N.J.S.2A:58-1 et seq. For the purposes of this section, each declination shall be deemed to constitute a separate violation.
##### **§ 17:33B-22** Automobile coverage if not qualified as "eligible person" {#sec-17-33b-22 omnilex-key=us-nj-statutes--title-17--17:33B-22}
Those persons who do not qualify as "eligible persons" as defined in section 25 of this 1990 amendatory and supplementary act but who are in good faith entitled to, but are unable to procure automobile insurance coverage, shall be provided automobile insurance coverage pursuant to the provisions of section 1 of P.L.1970, c.215 (C.17:29D-1).
##### **§ 17:33B-23** Suspension of obligation to issue policies for insurer in unsafe or unsound financial condition {#sec-17-33b-23 omnilex-key=us-nj-statutes--title-17--17:33B-23}
a. The commissioner shall suspend, after hearing, an insurer's obligation to provide insurance for automobiles in compliance with the provisions of section 1 of P.L.1970, c.215 (C.17:29D-1) if the insurer is in an unsafe or unsound financial condition.
b. If an insurer requests suspension and avers that there is an immediate need to cease providing insurance for automobiles in compliance with section 1 of P.L.1970, c.215 (C.17:29D-1) because compliance would result in the insurer being in an unsafe or unsound financial condition, the insurer's obligation to provide insurance for automobiles in compliance with section 1 of P.L.1970, c.215 (C.17:29D-1) shall be suspended beginning on the 10th business day after the insurer has filed the request and supporting documentation with the commissioner, unless within that time, the commissioner finds that continued compliance with the provisions of section 1 of P.L.1970, c.215 (C.17:29D-1) will not result in the insurer being in an unsafe or unsound financial condition.
c. Any suspension pursuant to subsection a. or b. of this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
d. For the purposes of this section, an insurer shall be deemed to be in an unsafe or unsound financial condition if the commissioner finds the insurer to have a ratio of annual net premiums written to surplus as to policyholders that threatens the financial health of the insurer.
##### **§ 17:33B-24** Suspension of obligation to provide coverage if insurer's financial condition will become unsafe or unsound {#sec-17-33b-24 omnilex-key=us-nj-statutes--title-17--17:33B-24}
The commissioner may suspend an insurer's obligation to provide insurance for automobiles in compliance with the provisions of section 1 of P.L.1970, c.215 (C.17:29D-1) if the commissioner, in his discretion, determines that compliance with section 1 of P.L.1970, c.215 (C.17:29D-1) will result in an insurer's financial condition becoming unsafe or unsound. In making this determination, the commissioner shall consider the following factors:
a. The insurer's ratio of annual net premiums written to surplus as to policyholders; and
b. Whether the insurer, in providing insurance for automobiles in compliance with section 1 of P.L.1970, c.215 (C.17:29D-1), would experience:
(1) an adverse change in its rating by A.M. Best and Company, Dun and Bradstreet, Moody's or Standard and Poor's;
(2) financial ratios outside the acceptable ranges as established by the National Association of Insurance Commissioners or the chief financial officer of the Department of Insurance of this State; or
(3) a net reduction to the insurer's surplus as to policyholders greater than 25% during a period of two years or less.
Any suspension pursuant to this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
##### **§ 17:33B-25** Refusal to issue or renew prohibited {#sec-17-33b-25 omnilex-key=us-nj-statutes--title-17--17:33B-25}
Notwithstanding the provisions of section 27 of this 1990 amendatory and supplementary act, section 2 of P.L.1968, c.158 (C.17:29C-7), section 26 of P.L.1988, c.119 (C.17:29C-7.1) or any other section of law to the contrary, if the plan for automobile insurance established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1), is not accepting new applications for coverage pursuant to subsection d. of that section, no insurer transacting automobile insurance in this State shall refuse to issue or renew any private passenger automobile insurance policy in this State.
##### **§ 17:33B-26** Refusal by insurer of coverage {#sec-17-33b-26 omnilex-key=us-nj-statutes--title-17--17:33B-26}
Nothing contained in paragraph e. of the definition of an eligible person as set forth in section 25 of this 1990 amendatory and supplementary act shall be deemed to permit an insurer subject to the provisions of that paragraph e. to refuse coverage to a person pursuant to the provisions of section 27 or section 39 of this act unless that insurer has complied with its depopulation obligation, as determined by the commissioner pursuant to the provisions of section 26 of P.L.1983, c.65 (C.17:30E-14) and paragraph (5) of subsection c. of section 88 of this act, by October 1, 1992.
##### **§ 17:33B-27** Suspension of obligation to issue policies for insurer in unsafe or unsound financial condition {#sec-17-33b-27 omnilex-key=us-nj-statutes--title-17--17:33B-27}
a. The commissioner shall suspend, after hearing, an insurer's obligation to issue policies in compliance with the provisions of section 39 of this act if the insurer is in an unsafe or unsound financial condition.
b. If an insurer requests suspension and avers that there is an immediate need to cease issuance of policies in compliance with section 39 of this act because compliance would result in the insurer being in an unsafe or unsound financial condition, the insurer's obligation to issue policies in compliance with section 39 of this act shall be suspended beginning on the 10th business day after the insurer has filed the request and supporting documentation with the commissioner, unless within that time, the commissioner finds that continued compliance with section 39 of this act will not result in the insurer being in an unsafe or unsound financial condition.
c. Any suspension pursuant to subsection a. or b. of this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
d. For the purposes of this section, an insurer shall be deemed to be in an unsafe or unsound financial condition if the commissioner finds the insurer to have a ratio of annual net premiums written to surplus as to policyholders that threatens the financial health of the insurer.
##### **§ 17:33B-28** Suspension of obligation to issue policies if insurer's financial condition will become unsafe or unsound {#sec-17-33b-28 omnilex-key=us-nj-statutes--title-17--17:33B-28}
The commissioner may suspend an insurer's obligation to issue policies pursuant to section 39 of this 1990 amendatory and supplementary act if the commissioner, in his discretion, determines that compliance with section 39 of this act will result in an insurer's financial condition becoming unsafe or unsound. In making this determination, the commissioner shall consider the following factors:
a. The insurer's ratio of annual net premiums written to surplus as to policyholders; and
b. Whether the insurer, in issuing policies in compliance with section 39 of this act, would experience:
(1) an adverse change in its rating by A.M. Best and Company, Dun and Bradstreet, Moody's or Standard and Poor's;
(2) financial ratios outside the acceptable ranges as established by the National Association of Insurance Commissioners or the chief financial officer of the Department of Insurance of this State; or
(3) a net reduction to the insurer's surplus as to policyholders greater than 25% during a period of two years or less.
Any suspension pursuant to this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
##### **§ 17:33B-29** Temporary certificate of authority {#sec-17-33b-29 omnilex-key=us-nj-statutes--title-17--17:33B-29}
a. The Commissioner of Insurance may issue a temporary certificate of authority which authorizes an insurer to issue private passenger automobile insurance policies or make contracts of private passenger automobile insurance in this State.
b. A temporary certificate of authority pursuant to subsection a. of this section shall be issued to any applicant which:
(1) Is organized as a capital stock company or mutual company;
(2) Is currently authorized and licensed to issue private passenger automobile insurance policies or make contracts of private passenger automobile insurance in one or more states of the United States;
(3) Meets the current capital or asset requirements of chapter 17 of Title 17 of the Revised Statutes for capital stock companies or mutual companies, as the case may be, which insure private passenger automobiles;
(4) Has complied with the deposit requirements pursuant to chapter 20 of Title 17 of the Revised Statutes.
c. Notwithstanding any other provision of Subtitle 3 of Title 17 of the Revised Statutes, any application for a temporary certificate of authority pursuant to this section shall be deemed approved if not disapproved by the commissioner within 30 days of the application filing date.
d. A temporary certificate of authority shall be effective for a period of one year and may be renewed for only one additional year with the approval of the Commissioner of Insurance. No temporary certificate of authority shall be issued or renewed pursuant to this section on or after January 1, 1993.
##### **§ 17:33B-30** Out-of-State insurance company, surrender of certificate. {#sec-17-33b-30 omnilex-key=us-nj-statutes--title-17--17:33B-30}
72. a. An insurance company of another state or foreign country authorized under chapter 32 of Title 17 of the Revised Statutes to transact insurance business in this State may surrender to the commissioner its certificate of authority and thereafter cease to transact insurance in this State, or discontinue the writing or renewal of private passenger automobile insurance specified in the certificate of authority only after the submission of an informational filing submitted to the commissioner, which filing shall be subject to the following provisions:
(1) the company shall send a notice to policyholders of the proposed withdrawal no later than thirty days following the submission of the informational filing to the commissioner, which shall state that the insurer intends to withdraw and has filed its intention to withdraw with the commissioner, the terms of the withdrawal, including the date of the proposed commencement of nonrenewal of policies, and the proposed duration of the nonrenewal of the company's book of business;
(2) nonrenewals shall not commence prior to one calendar year and ninety days following the submission of the informational filing;
(3) the company shall send a notice of nonrenewal to every policyholder (a) no later than one calendar year preceding the date of nonrenewal and (b) a subsequent notice of nonrenewal in accordance with any time limit otherwise established by law for that line of insurance;
(4) nonrenewals shall take place in a manner so as to be applicable to all insureds on an equitable basis with respect to risk classification and territorial or other form of rating factor, and shall be effectuated at a uniform rate over a period not exceeding three calendar years, commencing with the date established in paragraph (2) of this subsection; provided, however, that if more than one company files for withdrawal for the same line of business and the companies, in the aggregate, write more than 25% of the market share for that line of business, the commissioner may extend the period of withdrawal provided for herein to five years.
The commissioner's authority with respect to withdrawals as provided for herein shall be limited to enforcing compliance with this subsection and enforcing the terms of the withdrawal plan proposed in the informational filing.
b. Upon receiving the informational filing provided for in subsection a. of this section, the commissioner shall consider, and may require as a condition of approval, whether some or all of the company's other certificates of authority issued pursuant to Title 17 of the Revised Statutes held by the company or other companies within the same holding company system as the company submitting the plan shall be required to be surrendered.
c. Notwithstanding the provisions of subsection a. of this section, if the company finds a replacement carrier for the business that will not be renewed as the result of the withdrawal either prior to or after the date of the informational filing, the insurer may apply to the commissioner for approval to transfer the business to a replacement carrier or carriers. If the commissioner approves the replacement carrier or carriers, notwithstanding the provisions of paragraphs (1), (2), and (3) of subsection a. of this section, the notice of nonrenewal shall be in compliance with the time limits provided by law for that line of insurance, and the company shall offer every insured coverage with the replacement carrier prior to the effective date of the nonrenewal. The commissioner shall not withhold approval of a replacement carrier or carriers if that insurer is authorized to do business in the same line of business in New Jersey and has the financial and business capability to write and service the business being transferred to it by the withdrawing company. The commissioner shall approve or disapprove the replacement carrier or carriers within 60 days of (1) the date of the filing by both the withdrawing insurer requesting approval of a replacement carrier or carrier or (2) the filing by the replacement carrier or carriers requesting to be a replacement carrier, whichever is later.
d. Notwithstanding the provisions of subsection a. of this section, the commissioner may waive the requirements of paragraph (2) of that subsection, and the one-year nonrenewal notice of paragraph (3) of that subsection, as well as the three-year minimum nonrenewal period provided in paragraph (4) of that subsection if the commissioner deems a waiver to be necessary to protect the solvency of the insurer making the informational filing or if the commissioner deems the withdrawal to have a limited impact on the market.
##### **§ 17:33B-31** Use of rating or advisory organization for collection, compilation and dissemination of historical data; factors for coverage; etc. {#sec-17-33b-31 omnilex-key=us-nj-statutes--title-17--17:33B-31}
69. Notwithstanding the provisions of Subtitle 3 of Title 17 of the Revised Statutes or any other provision of law to the contrary, no insurer shall use recommendations relating to private passenger automobile insurance rates made by a rating organization or advisory organization that include expenses, other than loss adjustment expenses, or profit. A rating organization or advisory organization may:
a. collect, compile and disseminate historical data for two or more insurers;
b. develop, revise, disseminate and file:
(1) model year, vehicle series and symbol programs and factors for comprehensive and collision coverages;
(2) policy forms and endorsements;
(3) classifications, including, but not limited to, territorial definitions;
(4) policy writing rules and rating rules that include factors and relativities, such as increased limits factors, classification and territorial relativities, deductible discounts and relativities or similar factors;
(5) manuals; and
(6) prospective loss costs, including trend, loss development and all loss adjustment expenses;
c. participate in any study of the auto insurance system in New Jersey; and
d. furnish any other services approved or authorized by the commissioner.
An insurer may use information provided by a rating organization or advisory organization pursuant to subsections a. through d. of this section. If an insurer files to alter, supplement or amend its rates or rating systems by incorporating, by reference, prospective loss costs filed by a rating organization or advisory organization, the commissioner may require the insurer to furnish its loss experience. No rating organization or advisory organization shall require or make an agreement to require the use of any data, policy forms, rule, prospective loss cost, manual, symbol or endorsement by any insurer.
##### **§ 17:33B-33** Applicability; "renewal" defined {#sec-17-33b-33 omnilex-key=us-nj-statutes--title-17--17:33B-33}
a. The provisions of sections 41 through 48 shall be applicable to all automobile physical damage insurance policies covering automobiles, as defined in section 2 of P.L.1972, c.70 (C.39:6A-2), registered in this State.
b. As used in this section and section 42 of this act, "renewal" means the issuance and delivery by an insurer, at the end of the policy period, of a policy superseding a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term. Any policy with a policy period or term of less than one year shall, for the purpose of determining each renewal date pursuant to section 42 of this act, be considered as if written for a policy period or term of one year commencing with the annual anniversary date, and any policy written for a period or term of more than one year or any policy with no fixed expiration date shall, for the purpose of section 42 of this act, be considered as if written for successive policy periods or terms of one year commencing with the annual anniversary date.
c. No policy providing automobile physical damage insurance shall be issued, delivered or renewed unless the provisions of section 42 through section 48 are complied with.
##### **§ 17:33B-34** Inspection of automobile {#sec-17-33b-34 omnilex-key=us-nj-statutes--title-17--17:33B-34}
a. A newly issued policy shall not provide coverage for automobile physical damage perils prior to an inspection of the automobile by the insurer.
b. For a renewal of a policy referred to in subsection a. of this section, an insurer may require, as a condition of renewal, that the automobile be made available for inspection.
c. If an insurer requests an inspection pursuant to subsection b. of this section, the insured shall make the automobile available for inspection by the insurer, upon reasonable notice. If the insured fails to make the automobile available for inspection, the insurer may refuse to continue physical damage coverage.
##### **§ 17:33B-35** Inspection before issuance of physical damage coverage. {#sec-17-33b-35 omnilex-key=us-nj-statutes--title-17--17:33B-35}
If an automobile is acquired by the insured as a replacement for or in addition to an automobile insured for physical damage coverage, and the insured requests physical damage coverage for the replacement or additional automobile, the coverage for physical damage shall not be effective before an inspection is made. If, at the time of the request for the coverage, the automobile is unavailable for inspection because of conditions of purchase or other circumstances and is thereafter made available for inspection, the insurer shall promptly inspect the automobile, and physical damage coverage shall not become effective before the inspection has been made.
##### **§ 17:33B-36** Damage; subsequent inspection; documentation of repairs {#sec-17-33b-36 omnilex-key=us-nj-statutes--title-17--17:33B-36}
If an automobile insured for physical damage coverage by an insurer is damaged, the insurer may request that the automobile be made available for inspection regardless of whether the automobile is repaired. The results of the inspection may form a basis for determining the value of the automobile in the event of a subsequent loss. If the automobile is repaired, the insurer shall request the repair invoice and shall require the insured and the auto body repair facility or automobile repairer to certify, under the penalties of perjury, whether the applicable deductible has been paid to the auto body repair facility or automobile repairer, whether any repairs have been made and if any items allowed by the insurer were not included in the repairs.
##### **§ 17:33B-36.1** Selection of auto body repair shop; notification form. {#sec-17-33b-36.1 omnilex-key=us-nj-statutes--title-17--17:33B-36.1}
64. If an insurer has a financial arrangement with one or more auto body repair shops or other repair facilities or a network of facilities for the purpose of repairing vehicles covered under physical damage, collision, or comprehensive coverages, the insurer shall not deny a person the right to select an auto body repair shop or other repair facility of his choice for repair of a covered vehicle, provided that such auto body repair shop or other repair facility elected by the person accepts the same terms and conditions from the insurer, including, but not limited to, price, as the shop, facility, or network with which the insurer has the most generous arrangement. Prior to undertaking any repair, the auto body repair shop or other repair facility of the insured's choice shall provide the insured with written notification, in a form to be established by the Commissioner of the Department of Banking and Insurance by regulation, that, by agreeing to have the auto body shop or other repair facility of the insured's choice accept the same terms and conditions from the insurer as the shop, facility or network with which the insurer has the most generous arrangement, the insured may jeopardize any manufacturer or dealer warranty or lease agreement. Such notification form shall be signed by the insured prior to the undertaking of any repair.
##### **§ 17:33B-37** Form, photographs for inspection {#sec-17-33b-37 omnilex-key=us-nj-statutes--title-17--17:33B-37}
a. Any inspection made pursuant to section 42, 43 or 44 of this act shall be conducted by the insurer or its authorized representative and shall be recorded on a form prescribed by the commissioner and by photographs of the automobile if prescribed by the commissioner by regulation. The form and photographs, if any, shall be retained by the insurer with its policy records for the insured, and a copy of the form and photographs, if any, shall be made available to the insured upon request.
b. Any inspection made pursuant to section 42, 43 or 44 of this act shall be made at locations and times reasonably convenient to the insured. The results of any inspection may be considered in determining the value of the automobile.
##### **§ 17:33B-38** Report of wrongdoing {#sec-17-33b-38 omnilex-key=us-nj-statutes--title-17--17:33B-38}
Every insurer shall report to the Director of the Division of Motor Vehicles any evidence of overcharges, improper repairs or adjustments or other wrongdoing by auto body repair facilities or automobile repairers.
##### **§ 17:33B-39** Penalty for violation {#sec-17-33b-39 omnilex-key=us-nj-statutes--title-17--17:33B-39}
If the commissioner, after notice and hearing, finds that any insurer or its authorized representative has violated any provision of sections 42 through 46 or section 48 of this act, he shall order the payment of a penalty, to be collected by the commissioner pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq., not to exceed $500 for each offense. Each issuance, procurement or negotiation of a policy of insurance in violation shall be deemed a separate offense.
##### **§ 17:33B-40** Dissemination of information; exemption or deferral under certain circumstances {#sec-17-33b-40 omnilex-key=us-nj-statutes--title-17--17:33B-40}
a. The Commissioner of Insurance, in regulations implementing the provisions of sections 41 through 47 of this act, shall also require that insurers take appropriate action to ensure that there is wide public dissemination of the provisions of sections 41 through 47 of this act relating to the rights and obligations of insured and insurers.
b. The inspections provided for in sections 42, 43 and 44 of this act may be exempted or deferred under circumstances specified in regulations of the commissioner. The commissioner shall exempt new automobiles from inspection under conditions he establishes by regulation. Other circumstances for exemption or deferral may include but are not limited to, the insuring of an automobile whose inspection would constitute a serious hardship to the insurer, the insured or an applicant for insurance, and the insuring of an automobile for a limited specified period of time.
##### **§ 17:33B-41** Cancellation for nonpayment of premium; suspension of registration. {#sec-17-33b-41 omnilex-key=us-nj-statutes--title-17--17:33B-41}
50. a. Upon the termination of a policy of motor vehicle liability insurance by cancellation for nonpayment of premium pursuant to section 2 of P.L.1968, c.158 (C.17:29C-7), notice of that cancellation shall be filed by the insurer with the Division of Motor Vehicles not later than 30 days following the effective date of that cancellation.
b. The division shall notify the person whose policy was canceled that, unless proof of motor vehicle liability insurance is filed with the division within 30 days of the notification or some other allowable circumstance exists and the division is notified of that circumstance within 30 days of the notification, the sanctions and penalties of this section shall apply.
c. If the Director of the Division of Motor Vehicles has not received proof of motor vehicle liability insurance or other allowable circumstances within 30 days pursuant to subsection b. of this section, he shall suspend the registration of such vehicle, except that:
(1) Suspension shall not be made under this subsection upon the basis of a cancellation of motor vehicle liability insurance if the registration certificate and registration plates of the motor vehicle are surrendered prior to the time at which the cancellation of insurance becomes effective. Such surrender shall be made to such officers of the division as the director shall direct. For the purposes of this paragraph, the expiration of a registration without renewal of that registration shall be deemed to be a surrender of registration as of the date of expiration;
(2) Suspension shall not be made under this subsection upon a cancellation of motor vehicle liability insurance if the vehicle has been, or will be, prior to the date of that cancellation, removed from the United States in North America and the Dominion of Canada for the purpose of international traffic, provided that the owner of the vehicle, prior to the date of that cancellation, has filed with the director a statement, in a form prescribed by him, indicating that the vehicle has been, or will be, so removed, and agreeing to notify the director immediately upon return of the vehicle to the United States in North America or the Dominion of Canada. Upon receipt of the statement the director shall restrict the use of the registration to such international traffic until new proof that motor vehicle liability insurance has been secured for the vehicle;
(3) Suspension need not be made under this subsection upon the basis of a cancellation of motor vehicle liability insurance if the period of time during which the motor vehicle remained both registered and uninsured was not greater than 15 days. The director shall promulgate regulations governing the conditions under which suspension action may be withheld pursuant to this paragraph.
d. Notwithstanding the provisions of subsection c. of this section, an order of suspension may be rescinded if the registrant pays to the commissioner a civil penalty in the amount of $4 for each day up to 90 days for which motor vehicle liability insurance was not in effect. The provisions of this subsection shall apply only once during any 36-month period and only if the registrant surrenders the certificate of registration and registration plates to the director not more than 90 days from the date of cancellation of motor vehicle liability insurance coverage or submits to the director proof of motor vehicle liability insurance which took effect not more than 90 days from the cancellation of his previous motor vehicle liability insurance.
e. Any motor vehicle, the registration for which has been suspended pursuant to this section, shall not be registered or reregistered in the name of the same registrant, or in any other name where the director has reasonable grounds to believe that such registration or reregistration will have the effect of defeating the purposes of this section, and no other motor vehicle shall be registered in the name of such person during the period of suspension.
f. No registration plates shall be returned to the registrant until proof of motor vehicle liability insurance is submitted to the director.
g. If a registrant has not surrendered his certificate of registration and registration plates or obtained motor vehicle liability insurance within 90 days from the date of cancellation of motor vehicle liability insurance, the director shall suspend the driver's license of any such registrant. The suspension shall take effect on the date specified in the order and shall remain in effect until termination of the suspension of the registrant's registration.
h. The Director of the Division of Motor Vehicles shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to implement the provisions of this section. The director may, by regulation, require that the provisions of this section shall be applicable to the termination of policies of motor vehicle liability insurance for reasons other than cancellation for nonpayment of premium, including nonrenewals.
i. Within 180 days of the effective date of this act the Division of Motor Vehicles shall develop a format for electronic reporting by insurers writing private passenger automobile insurance, to the division, on a real-time basis, information regarding the cancellation of policies of motor vehicle insurance, the issuance of new policies of motor vehicle insurance, and changes of vehicle on policies of motor vehicle insurance in force in order to verify compliance with the motor vehicle liability insurance requirements of section 1 of P.L.1972, c.197 (C.39:6B-1), and the mandatory automobile insurance requirements of section 4 of P.L.1998, c.21 (C.39:6A-3.1). Information shall be maintained by driver's license number of the named insured. Other information to be provided by insurers shall be established by the director by regulation.
j. The director shall establish an electronic data base containing the information provided for in subsection i. of this section, which shall be made available to all law enforcement officers for the purpose of enforcing the mandatory motor vehicle insurance requirements of section 1 of P.L.1972, c.197 (C.39:6B-1). The data base shall not be made available until every insurer writing private passenger insurance has complied with regulations of the director and the information required by subsection i. of this section is reported on a real-time basis. The Division of Motor Vehicles shall establish security procedures to protect the confidentiality of the information on the data base, which shall preclude access to the information to any person not otherwise entitled to it under this or any other law.
k. The data base shall be funded from the Uninsured Motorist Prevention Fund established pursuant to section 2 of P.L.1983, c.141 (C.39:6B-3).
##### **§ 17:33B-42** Implementation of procedures or practices to control costs {#sec-17-33b-42 omnilex-key=us-nj-statutes--title-17--17:33B-42}
The Commissioner of Insurance may order insurers writing automobile insurance in this State to implement any procedure or practice that he deems necessary to more effectively control the cost of providing personal injury protection coverage to insureds in this State, including procedures or practices to increase the efficiency of the insurers or to prevent fraudulent practices by the insured, insurers, providers of services or equipment, or others.
##### **§ 17:33B-43** Structured settlement {#sec-17-33b-43 omnilex-key=us-nj-statutes--title-17--17:33B-43}
If an insurer, the New Jersey Automobile Full Insurance Underwriting Association, the trustee appointed pursuant to section 21 of this 1990 amendatory and supplementary act, the Market Transition Facility created pursuant to section 88 of this act or any insurer or other entity insuring risks under a plan providing private passenger automobile insurance pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1), offers a lump sum settlement of more than $10,000 to a claimant covered for bodily injury liability under a private passenger automobile liability insurance policy, the insurer, the association, the facility or the other entity may, at the same time, offer a structured settlement for that claim to the claimant or his attorney. If the claimant's attorney receives an offer of structured settlement pursuant to this section, he shall present it to the claimant.
##### **§ 17:33B-44** Reduction in base rates for use of anti-theft or safety devices {#sec-17-33b-44 omnilex-key=us-nj-statutes--title-17--17:33B-44}
The Commissioner of Insurance is authorized to order reductions in the base rates of comprehensive, collision, physical damage, or any combination of these coverages, as appropriate, for private passenger automobiles which are equipped with one or more anti-theft or safety devices which are approved by the commissioner.
##### **§ 17:33B-45** Approved motor vehicle defensive driving course {#sec-17-33b-45 omnilex-key=us-nj-statutes--title-17--17:33B-45}
a. An approved motor vehicle defensive driving course shall include that number of hours of classroom or field driving instruction, or both, as the Director of the Division of Motor Vehicles may by regulation prescribe. The director may adopt such other requirements concerning the subject matter and contents of courses, and school and instructor qualifications, as he may from time to time deem appropriate.
The director shall approve any motor vehicle defensive driving course which meets or exceeds the standards of the National Safety Council's defensive driving course.
b. The provisions of this section shall not apply to driver training courses offered by driving schools pursuant to P.L.1951, c.216 (C.39:12-1 et seq.), public, parochial or private school driving education courses, or to a Division of Motor Vehicles Driver Improvement Program required pursuant to P.L.1969, c.261 (C.39:5-30.2 et seq.).
c. The Director of the Division of Motor Vehicles may promulgate rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), that he deems necessary to effectuate the purposes of this section.
##### **§ 17:33B-45.1** Rate reduction for automobile insurance after approved defensive driving course {#sec-17-33b-45.1 omnilex-key=us-nj-statutes--title-17--17:33B-45.1}
1. a. Within 180 days of the effective date of this act, every rate filing for private passenger automobile insurance shall contain an appropriate reduction for personal injury protection coverage, bodily injury liability coverage, property damage coverage, and physical damage coverage for the successful completion, by the named insured or the principal operator of the insured automobile, if other than the named insured, of an approved motor vehicle defensive driving course pursuant to section 55 of P.L.1990, c.8 (C.17:33B-45). The reduction in premium charges shall be an amount justified by the insurer's actuarial experience, and shall be available to the insured for a three-year period beginning with the next succeeding policy period after the date of completion of an approved motor vehicle defensive driving course or until driver's license suspension or the accumulation of four or more motor vehicle points, whichever occurs earlier.
b. (Deleted by amendment, P.L.1999, c.130.)
##### **§ 17:33B-48** Storage expense not included {#sec-17-33b-48 omnilex-key=us-nj-statutes--title-17--17:33B-48}
No insurer or rating organization shall include any expense for storage of a private passenger automobile for more than 30 days into the base for determining private passenger automobile insurance rates used or to be used in this State.
##### **§ 17:33B-49** Annual surtax on premiums, terms defined, revenues credited to New Jersey Automobile Insurance Guaranty Fund {#sec-17-33b-49 omnilex-key=us-nj-statutes--title-17--17:33B-49}
a. In addition to the tax on net premiums paid pursuant to section 1 of P.L.1945, c.132 (C.54:18A-1), each taxpayer under that section shall pay to the Director of the Division of Taxation an annual surtax at a rate of 5%, or a rate adjusted pursuant to section 77 of this 1990 amendatory and supplementary act, on all taxable premiums collected in this State, except premiums collected by the New Jersey Automobile Full Insurance Underwriting Association created pursuant to section 16 of P.L.1983, c.65 (C.17:30E-4), and premiums collected by the Market Transition Facility created pursuant to section 88 of P.L.1990, c.8 (C.17:33B-11), in calendar years 1990, 1991 and 1992 for contracts of automobile insurance, notwithstanding section 6 of P.L.1945, c.132 (C.54:18A-6). The surtax shall be administered pursuant to the provisions of P.L.1945, c.132 (C.54:18A-1 et seq.), except that if any provision of that act is in conflict with a specific provision of this 1990 amendatory and supplementary act, the provision or provisions of this 1990 amendatory and supplementary act shall govern.
b. For the purposes of sections 76 through 78 of this 1990 amendatory and supplementary act:
"Automobile" means a private passenger automobile of a private passenger or station wagon type that is owned or hired, and is neither used as a public or livery conveyance for passengers nor rented to others with a driver; a motor vehicle with a pickup body, a delivery sedan, a van, or a panel truck or a camper type vehicle used for recreational purposes, owned by an individual or by husband and wife who are residents of the same household, not customarily used in the occupation, profession or business of the insured other than farming or ranching. An automobile owned by a farm family copartnership or corporation, which is principally garaged on a farm or ranch and otherwise meets the definition contained in this section, shall be considered a private passenger automobile owned by two or more relatives resident in the same household; and
"Automobile insurance" means direct insurance against injury or damage, including the legal liability therefor, arising out of the ownership, operation, maintenance or use of an automobile, including, but not limited to, personal injury protection insurance, bodily injury liability insurance, property damage liability insurance, physical damage insurance and uninsured and underinsured motorist insurance.
c. Each taxpayer shall:
(1) on or before the first day of the third month following enactment of this 1990 amendatory and supplementary act make an installment payment of surtax due under subsection a. of this section in an amount equal to one half of the surtax estimated to be due for taxable premiums collected in this State in calendar year 1990 if the surtax rate at the time of the payment was imposed for the entire year; and
(2) on or before the first day of the sixth month following enactment of this 1990 amendatory and supplementary act, make an installment payment of surtax due under subsection a. of this section in an amount equal to one half of the surtax estimated to be due for taxable premiums collected in this State in calendar year 1990 if the surtax rate at the time of the payment was imposed for the entire year;
provided however, that no installment payment shall be due if the payment date of such installment pursuant to this subsection falls on or after February 1, 1991.
In the calculation of the tax due in accordance with subsection a. of this section, a taxpayer shall be entitled to a credit in the amount of the tax paid under this subsection as a partial payment and shall be entitled to the return of any amount so paid which is in excess of the total amount payable in accordance with this section.
d. Failure to pay any installment payment required pursuant to subsection c. of this section shall constitute a deficiency, and there shall be added to the tax for the calendar year interest on the amount of underpayment as provided in the State Tax Uniform Procedure Law, R.S.54:48-1 et seq., for the period of the underpayment.
The amount of underpayment shall be the excess of the amount of the installment payment which would be required to be paid if the installment payment were equal to 45% of the surtax which would be shown on the return for the year if the surtax rate at the time of the payment were imposed for the entire year, or if no return was filed, 45% of the tax for that year, over the amount, if any, of the installment payment paid on or before the last date prescribed for payment.
For purposes of this subsection, the period of the underpayment shall run from the date the installment payment was required to be paid to the earlier of the date on which the surtax is due pursuant to subsection a. of this section or, with respect to any portion of the underpayment, the date on which that portion is paid.
For purposes of this subsection, a payment of any installment payment shall be considered a payment of any previous underpayment only to the extent that such payment exceeds the amount of the installment payment determined under this subsection for that installment payment.
e. All revenues collected from the surtax imposed pursuant to this section, less any refunds paid pursuant to subsection d. of section 77 of this 1990 amendatory and supplementary act, shall be credited by the State Treasurer to the New Jersey Automobile Insurance Guaranty Fund, created pursuant to section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-50** Adjustment of rate of surtax {#sec-17-33b-50 omnilex-key=us-nj-statutes--title-17--17:33B-50}
a. The Director of the Division of Taxation is hereby authorized to adjust the rate of the surtax imposed pursuant to section 76 of this 1990 amendatory and supplementary act, for any of the calendar years in which the surtax is imposed, as provided in this section.
b. The Director of the Division of Taxation, in consultation with the Commissioner of Insurance, shall, on or before the first day of the second month following enactment of this 1990 amendatory and supplementary act, prepare an estimate of the revenues anticipated to be collected from the surtax imposed pursuant to section 76 of this 1990 amendatory and supplementary act, at the rate established thereby, and credited to the New Jersey Automobile Insurance Guaranty Fund, for each of the three calendar years in which the surtax is imposed. These estimates shall be reviewed and, if appropriate, revised, on or before the first day of the month immediately preceding the due date for the second installment payment for the first calendar year in which the surtax is imposed and each subsequent installment payment and each final payment required to be made pursuant to section 76 of this 1990 amendatory and supplementary act. Such review and revision shall be based upon information available to the director and the commissioner, including actual surtax collections as reflected in final payments.
c. At any time that the estimates prepared and revised pursuant to subsection b. of this section reflect total estimated surtax revenues in excess of, or significantly less than, $300,000,000 for the three calendar years in which the surtax is imposed, the director shall provide that the surtax be imposed at a different rate, such that the total estimated revenues are as near as possible to, but do not exceed, $300,000,000, provided, however, that the rate shall not exceed 5%. That different surtax rate shall be imposed on premiums collected in the first calendar year for which final returns and final payments have not yet been made and, subject to the director's determination, may be reflected in installment payments which have not yet been made.
d. On or before April 1, 1993, the director shall make a final determination of the total amount of revenues collected under the surtax imposed pursuant to section 76 of this 1990 amendatory and supplementary act for the three calendar years in which the surtax is imposed. The director shall refund any such revenues collected in excess of $300,000,000 to taxpayers in proportion to each taxpayer's share of total surtax payments made for the three calendar years.
##### **§ 17:33B-51** Private passenger automobile insurance policyholders not to pay surtax {#sec-17-33b-51 omnilex-key=us-nj-statutes--title-17--17:33B-51}
The Commissioner of Insurance shall take such action as is necessary to ensure that private passenger automobile insurance policyholders shall not pay for the surtax imposed pursuant to section 76 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-52** Exemption, abatement, deferral of surtax imposed on insurer pursuant to C.17:33B-49 if insurer is in unsafe or unsound financial condition {#sec-17-33b-52 omnilex-key=us-nj-statutes--title-17--17:33B-52}
a. The commissioner shall, after hearing, notify the director to exempt, abate or defer, in whole or in part, the surtax imposed on an insurer pursuant to the provisions of section 76 of this 1990 amendatory and supplementary act if the insurer is in an unsafe or unsound financial condition.
b. If an insurer requests exemption, abatement or deferral and avers that there is an immediate need to exempt, abate or defer the surtax imposed pursuant to section 76 of this act because payment would result in the insurer being in an unsafe or unsound financial condition, the insurer's obligation to pay such surtax shall be exempted, abated or deferred beginning on the 10th business day after the insurer has filed the request and supporting documentation with the commissioner, unless within that time, the commissioner finds that continued payment of the surtax will not result in the insurer being in an unsafe or unsound financial condition.
c. Any exemption, abatement or deferral pursuant to subsection a. or b. of this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
d. For the purposes of this section, an insurer shall be deemed to be in an unsafe or unsound financial condition if the commissioner finds the insurer to have a ratio of annual net premiums written to surplus as to policyholders that threatens the financial health of the insurer.
##### **§ 17:33B-53** Exemption, abatement, deferral of surtax imposed on insurer pursuant to C.17:33B-49 if result will be financial condition of insurer becoming unsafe or unsound {#sec-17-33b-53 omnilex-key=us-nj-statutes--title-17--17:33B-53}
The commissioner may provide that the director exempt, abate or defer, in whole or in part, the surtax imposed on an insurer pursuant to section 76 of this 1990 amendatory and supplementary act if the commissioner, in his discretion, determines that payment of the surtax will result in an insurer's financial condition becoming unsafe or unsound. In making this determination, the commissioner shall consider the following factors:
a. The insurer's ratio of annual net premiums written to surplus as to policyholders; and
b. Whether the insurer would experience:
(1) an adverse change in its rating by A.M. Best and Company, Dun and Bradstreet, Moody's or Standard and Poor's;
(2) financial ratios outside the acceptable ranges as established by the National Association of Insurance Commissioners or the chief financial officer of the Department of Insurance of this State; or
(3) a net reduction to the insurer's surplus as to policyholders greater than 25% during a period of two years or less.
Any exemption, abatement or deferral pursuant to this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
##### **§ 17:33B-54** Payment of exempted, abated, deferred surtax on insurer {#sec-17-33b-54 omnilex-key=us-nj-statutes--title-17--17:33B-54}
After the exemption, abatement or deferral of a surtax on an insurer pursuant to the provisions of section 98 or 99 of this 1990 amendatory and supplementary act, is revoked, the commissioner may order that the director require the insurer to pay those obligations deferred pursuant to the provisions of section 98 or 99 of this act.
##### **§ 17:33B-55** Exemption, abatement, deferral of payment of assessment if insurer is in unsafe or unsound financial condition {#sec-17-33b-55 omnilex-key=us-nj-statutes--title-17--17:33B-55}
a. The commissioner shall, after hearing, provide that the New Jersey Property-Liability Guaranty Association exempt, abate or defer, in whole or in part, the assessment on any member insurer imposed pursuant to paragraph (9) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8), if the insurer is in an unsafe or unsound financial condition.
b. If an insurer requests exemption, abatement or deferral and avers that there is an immediate need to exempt, abate or defer the payment of assessments pursuant to paragraph (9) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8), because payment would result in the insurer being in an unsafe or unsound financial condition, the insurer's obligation to pay such assessments shall be exempted, abated or deferred beginning on the 10th business day after the insurer has filed the request and supporting documentation with the commissioner, unless within that time, the commissioner finds that continued payment of assessments will not result in the insurer being in an unsafe or unsound financial condition.
c. Any exemption, abatement or deferral pursuant to subsection a. or b. of this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
d. For the purposes of this section, an insurer shall be deemed to be in an unsafe or unsound financial condition if the commissioner finds the insurer to have a ratio of annual net premiums written to surplus as to policyholders that threatens the financial health of the insurer.
##### **§ 17:33B-56** Exemption, abatement, deferral if payment of assessment will result in insurer's financial condition becoming unsafe or unsound {#sec-17-33b-56 omnilex-key=us-nj-statutes--title-17--17:33B-56}
The commissioner may provide that the association exempt, abate or defer, in whole or in part, the assessment on any member insurer imposed pursuant to paragraph (9) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8), if the commissioner, in his discretion, determines that payment of the assessment will result in an insurer's financial condition becoming unsafe or unsound. In making this determination, the commissioner shall consider the following factors:
a. The insurer's ratio of annual net premiums written to surplus as to policyholders; and
b. Whether the insurer would experience:
(1) an adverse change in its rating by A.M. Best and Company, Dun and Bradstreet, Moody's or Standard and Poor's;
(2) financial ratios outside the acceptable ranges as established by the National Association of Insurance Commissioners or the chief financial officer of the Department of Insurance of this State; or
(3) a net reduction to the insurer's surplus as to policyholders greater than 25% during a period of two years or less.
Any exemption, abatement or deferral pursuant to this section shall continue until the commissioner, upon the commissioner's own motion or upon request by the insurer or any other interested party, after providing opportunity for a hearing, orders its revocation.
##### **§ 17:33B-57** Exempted, abated, deferred assessment to be assessed against other member insurers {#sec-17-33b-57 omnilex-key=us-nj-statutes--title-17--17:33B-57}
If an assessment against a member insurer is exempted, abated or deferred pursuant to the provisions of section 95 or 96 of this 1990 amendatory and supplementary act, the amount by which such assessment is exempted, abated or deferred shall be assessed against the other member insurers in a manner consistent with the basis for assessment set forth in paragraph (9) of subsection a. of section 8 of P.L.1974, c.17 (C.17:30A-8). After the exemption, abatement or deferral is revoked in whole, the commissioner may order that the association require the insurer to pay those obligations deferred pursuant to the provisions of section 95 or 96 of this act.
##### **§ 17:33B-58** $100 annual fee to be assessed by Board of Medical Examiners. {#sec-17-33b-58 omnilex-key=us-nj-statutes--title-17--17:33B-58}
63. The State Board of Medical Examiners shall assess an annual fee in the amount of $100 payable by:
a. Each physician licensed to practice medicine or surgery in this State pursuant to the provisions of R.S.45:9-1 et seq., and certified or registered pursuant to the provisions of section 1 of P.L.1971, c.236 (C.45:9-6.1), except physicians holding a certificate of registration as a retired physician pursuant to that section. As used in this subsection "physician" includes both doctors of medicine and doctors of osteopathy; and
b. Each person licensed in this State to practice podiatric medicine pursuant to the provisions of R.S.45:5-1 et seq. and registered pursuant to the provisions of R.S.45:5-9.
Fees imposed pursuant to this section shall be payable on or before July 1 of each calendar year from 1990 through 1996. Payments are to be remitted to the board and credited by the State Treasurer to the New Jersey Automobile Insurance Guaranty Fund created by section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-59** $100 annual fee to be assessed by Board of Chiropractic Examiners {#sec-17-33b-59 omnilex-key=us-nj-statutes--title-17--17:33B-59}
The State Board of Chiropractic Examiners shall assess an annual fee in the amount of $100, payable by each person licensed in this State to practice chiropractic and registered pursuant to the provisions of section 14 of P.L.1953, c.233 (C.45:9-41.11), except persons registered as retired practitioners pursuant to that section. Fees imposed pursuant to this section shall be payable on or before July 1 of each calendar year from 1990 through 1996. Payments are to be remitted to the board and credited by the State Treasurer to the New Jersey Automobile Insurance Guaranty Fund created by section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-60** $100 annual fee to be assessed by Board of Physical Therapy {#sec-17-33b-60 omnilex-key=us-nj-statutes--title-17--17:33B-60}
The State Board of Physical Therapy shall assess an annual fee in the amount of $100, payable by each person licensed or registered in this State as a physical therapist pursuant to the provisions of P.L.1983, c.296 (C.45:9-37.11 et seq.). As used in this section "physical therapist" includes a registered physical therapist as provided in section 22 of P.L.1983, c.296 (C.45:9-37.32) but shall not include a licensed physical therapist assistant as defined in subsection c. of section 3 of P.L.1983, c.296 (C.45:9-37.13). Fees imposed pursuant to this section shall be payable on or before July 1 of each calendar year from 1990 through 1996. Payments are to be remitted to the board and credited by the State Treasurer to the New Jersey Automobile Insurance Guaranty Fund created by section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-61** $100 annual assessment of auto body repair facilities {#sec-17-33b-61 omnilex-key=us-nj-statutes--title-17--17:33B-61}
The Director of the Division of Motor Vehicles in the Department of Law and Public Safety shall assess an annual fee in the amount of $100, payable by each auto body repair facility licensed pursuant to the provisions of P.L.1983, c.360 (C.39:13-1 et seq.). Fees imposed pursuant to this section shall be payable on or before July 1 of each calendar year from 1990 through 1996. Payments are to be remitted to the director and credited by the State Treasurer to the New Jersey Automobile Insurance Guaranty Fund created by section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-62** $100 annual assessment of lawyers {#sec-17-33b-62 omnilex-key=us-nj-statutes--title-17--17:33B-62}
The State Treasurer shall assess an annual fee in the amount of $100, payable by each person licensed to practice law in this State who has engaged in the practice of law for at least one year. Fees imposed pursuant to this section shall be payable on or before July 1 of each calendar year from 1990 through 1996. Payments are to be remitted to the treasurer and credited to the New Jersey Automobile Insurance Guaranty Fund created by section 23 of this 1990 amendatory and supplementary act.
##### **§ 17:33B-63** Additional registration fees; exemptions {#sec-17-33b-63 omnilex-key=us-nj-statutes--title-17--17:33B-63}
68. a. In addition to the registration fees imposed pursuant to Article 2 of chapter 3 of Title 39 of the Revised Statutes, the Director of the Division of Motor Vehicles shall impose and collect additional registration fees as follows:
(1) For all motor vehicles, except commercial motor vehicles as defined by R.S.39:1-1 that were manufactured in any model year prior to the 1989 model year, the additional fee shall be $15, except that on and after January 1, 1998 the additional fee shall be $12.50, and on and after January 1, 1999 the additional fee shall be $10 and on and after January 1, 2000 the additional fee shall be $7.50;
(2) For all motor vehicles, except commercial motor vehicles as defined by R.S.39:1-1, that were manufactured in model year 1989 and thereafter, the additional fee shall be $40, except that on and after January 1, 1998 the additional fee shall be $33.50, and on and after January 1, 1999 the additional fee shall be $27 and on and after January 1, 2000 the additional fee shall be $20 for the first two years of registration or renewal and $15, except that on and after January 1, 1998 the additional fee shall be $12.50, and on and after January 1, 1999 the additional fee shall be $10 and on and after January 1, 2000 the additional fee shall be $7.50 for each year thereafter;
(3) For all commercial motor vehicles as defined in R.S.39:1-1, the additional fee shall be $75, except that on and after January 1, 1998 the additional fee shall be $62.50, and on and after January 1, 1999 the additional fee shall be $50 and on and after January 1, 2000 the additional fee shall be $37.50;
(4) Notwithstanding the provisions of paragraphs (1) through (3) of this subsection, the additional fee on motorcycle registrations shall be $15, except that on and after January 1, 1998 the additional fee shall be $12.50, and on and after January 1, 1999 the additional fee shall be $10 and on and after January 1, 2000 the additional fee shall be $7.50 and further provided the additional registration fee on noncommercial trucks registered pursuant to section 2 of P.L.1968, c.429 (C.39:3-8.1) shall be $50, except that on and after January 1, 1997 the additional fee collected on noncommercial trucks registered pursuant to section 2 of P.L.1968, c.429 (C.39:3-8.1) shall be $15 for any vehicle manufactured in any model year prior to the 1996 model year and for any vehicle manufactured in the model year 1996 and thereafter, the additional fee shall be $40 for the first two years of registration or renewal and $15 for each year thereafter and on and after January 1, 1998 the additional fee collected on noncommercial trucks shall be collected pursuant to the provisions of paragraphs (1) and (2) of this subsection;
(5) Notwithstanding the provisions of paragraphs (1) through (3) of this subsection, there shall not be any additional fee imposed on any vehicle registered pursuant to R.S.39:3-24.
b. Fees collected pursuant to subsection a. of this section shall be collected on registrations issued and renewed on or after July 1, 1990.
(1) Fees collected pursuant to subsection a. of this section prior to October 1, 1991 shall be remitted to the New Jersey Automobile Full Insurance Underwriting Association created by section 16 of P.L.1983, c.65 (C.17:30E-4) and shall be income to the association for purposes of section 20 of P.L.1983, c.65 (C.17:30E-8).
(2) Fees collected pursuant to subsection a. of this section on or after October 1, 1991 through December 31, 1996 shall be remitted to the New Jersey Automobile Insurance Guaranty Fund created pursuant to section 23 of this 1990 amendatory and supplementary act.
(3) Fees collected pursuant to subsection a. of this section on and after January 1, 1997, shall be remitted to the General Fund and so much thereof as is required pursuant to section 20 of P.L.1984, c.73 (C.27:1B-20) shall be credited to the "Transportation Trust Fund Account" created by section 20 of P.L.1984, c.73 (C.27:1B-20), such credited funds to be used for transportation projects, pursuant to the "New Jersey Transportation Trust Fund Authority Act of 1984," P.L.1984, c.73 (C.27:1B-1 et al.).
c. Notwithstanding any provision of subsection a. of this section to the contrary, no fees shall be imposed pursuant to this section on a registration for which no fee is presently collected pursuant to Article 2 of chapter 3 of Title 39 of the Revised Statutes or on a registration for a motor vehicle, except commercial vehicles, if the registrant or, in the case of a leased vehicle, the lessee is eligible for pharmaceutical assistance to the aged and disabled pursuant to P.L.1975, c.194 (C.30:4D-20 et seq.). In the case of a leased vehicle, documentation verifying that the vehicle will be leased for the registration term to a lessee who is entitled to the exemption provided for in this subsection shall be provided according to the requirements established by the Director of the Division of Motor Vehicles. The lessor shall not collect from the lessee any payment for the registration of the vehicle that exceeds the amount that the lessor paid to register the vehicle.
##### **§ 17:33B-64** Findings, declarations relative to automobile insurance {#sec-17-33b-64 omnilex-key=us-nj-statutes--title-17--17:33B-64}
1. The Legislature finds and declares:
a. There continues to be a need to improve and expand the availability of automobile insurance in certain urban geographic areas of the State. To better serve consumers' needs and stimulate competition in these areas, it is necessary to create business opportunities aimed at increasing and promoting economic activity by establishing automobile insurance urban enterprise zones (UEZs), which will provide incentives for insurers to increase their writings in these urban centers through, among other things, the appointment of urban enterprise zone agents. To achieve that goal, the Legislature further finds:
(1) That the creation of business incentives aimed at increasing and promoting economic activity in specially designated Urban Enterprise Zones has been effectively utilized by the State in the past;
(2) That consumers located in a limited number of the State's urban centers would benefit from an increase in the number of locations at which they could secure automobile insurance;
(3) That to better serve the needs of automobile insurance consumers and stimulate competition and economic activity, access to automobile insurance needs to be expanded in certain defined urban areas of the State; and
(4) That the development of increased access to automobile insurance needs to be encouraged by establishing incentives for insurers to increase their writings in these urban centers through, among other things, the appointment of urban enterprise zone agents and the use of unused capacity in the assigned risk plan to provide additional accessible coverage.
b. Certain aspects of the current automobile insurance system are unfair and need to be reformed. To this end, it is in the public interest to:
(1) eliminate the current system of flex-rating, which guarantees insurers an increase in their rates each year regardless of need;
(2) eliminate the current surcharge system based on automobile insurance eligibility points that unfairly penalizes good drivers because of recent minor traffic infractions, and provide for a system of rating tiers to provide greater flexibility in evaluating and rating risks based on factors that more accurately reflect the driver's characteristics; and
(3) revise current provisions of the law that permit insurers to arbitrarily and unfairly nonrenew insureds without reason.
c. It is also in the public's interest to increase efforts to fight fraud that occurs in the automobile insurance system, including:
(1) toughening sanctions on insurance companies that fail to implement fraud prevention programs, and on licensed professionals and drivers who make fraudulent claims; and
(2) improving efforts to educate law enforcement and the public on how to identify fraud.
## **Chapter 33C** {#struct-chapter-33c}
##### **§ 17:33C-1** Definitions relative to automobile insurance urban enterprise zone program {#sec-17-33c-1 omnilex-key=us-nj-statutes--title-17--17:33C-1}
19. As used in sections 19 through 23 of this amendatory and supplementary act:
"Automobile" means an automobile as defined pursuant to subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2).
"Automobile insurance urban enterprise zone" means a geographic area identified and designated by the commissioner pursuant to section 20 of this amendatory and supplementary act.
"Automobile insurance urban enterprise zone program" or "program" means an automobile insurance urban enterprise zone program established pursuant to section 20 of this amendatory and supplementary act.
"Automobile insurer" means an insurer or group of affiliated insurers admitted or authorized to transact the business of automobile insurance in this State.
"Commissioner" means the Commissioner of Banking and Insurance.
"Eligible person" means an eligible person as defined in section 25 of P.L.1990, c.8 (C.17:33B-13).
"Qualified insurer" means an automobile insurer that is a qualified insurer pursuant to section 21 of this amendatory and supplementary act.
"Urban enterprise zone agent" or "UEZ agent" means an insurance producer who is licensed pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.), is appointed by a qualified insurer to represent it in an automobile insurance urban enterprise zone under the terms of this amendatory and supplementary act and maintains a bona fide office within that automobile insurance urban enterprise zone.
##### **§ 17:33C-2** Automobile insurance urban enterprise zone program {#sec-17-33c-2 omnilex-key=us-nj-statutes--title-17--17:33C-2}
20. a. The commissioner shall establish in a fair and equitable manner an automobile insurance urban enterprise zone program designed to encourage greater availability of automobile insurance in certain urban areas of this State as designated pursuant to subsection b. of this section. The program shall provide for incentives that the commissioner deems necessary to encourage qualified insurers to write automobile insurance business in those areas and that adequately safeguard the interests of policyholders and the public.
b. The commissioner shall undertake a review of the availability of automobile insurance in this State and shall identify and designate as automobile insurance urban enterprise zones those urban-based geographic areas in which consumers would benefit from increased access to automobile insurance. In making this determination, the commissioner shall consider, among other things, representation by automobile insurers in those rating territories historically deemed underserved. To assist in this review, the commissioner may appoint an advisory committee composed of representatives of automobile insurers and insurance producer associations and individuals who reside in urban areas of this State. Automobile insurance urban enterprise zones designated pursuant to this section shall be defined by regulations promulgated by the commissioner. The commissioner shall conduct periodic reviews of the availability of automobile insurance throughout the State and may amend the regulations to modify the composition of designated automobile insurance urban enterprise zones for the purpose of furthering the intent of this amendatory and supplementary act.
##### **§ 17:33C-3** Standards for qualified insurer {#sec-17-33c-3 omnilex-key=us-nj-statutes--title-17--17:33C-3}
21. a. The commissioner shall establish by regulation standards for a qualified insurer. These standards may include, but not be limited to, demonstration by the automobile insurer that it has a plan to increase access to automobile insurance for consumers residing in an automobile insurance urban enterprise zone; demonstration by the automobile insurer that it has a plan to assist newly appointed UEZ agents in developing the skills necessary to manage a successful business; procedures to monitor and evaluate the impact of efforts to expand services to urban areas; and materials designed to assist urban consumers in understanding automobile insurance coverages. For an automobile insurer doing business on a direct writing basis, the standards may include, but not be limited to, the insurer's marketing plans and goals for increasing its writing of risks in automobile insurance urban enterprise zones. Additionally, the commissioner shall consider the insurer's past performance in providing automobile insurance to persons residing in automobile insurance urban enterprise zones.
b. An automobile insurer, which meets the applicable standards established pursuant to subsection a. of this section, may certify to the commissioner that it is a qualified insurer.
c. An automobile insurer that certifies to the commissioner that it meets the standards established pursuant to subsection a. of this section shall be considered a qualified insurer for the purposes of this amendatory and supplementary act. If at any time the commissioner determines that a qualified insurer fails to meet the standards established pursuant to subsection a. of this section, or if the commissioner determines it necessary for the protection of the public, he may suspend or revoke the insurer's certification as a qualified insurer. If the commissioner determines that a qualified insurer has failed to meet its marketing plan and goals pursuant to this section, the commissioner may suspend or revoke the insurer's certification as a qualified insurer. In making this determination, the commissioner shall consider the past performance of the insurer in providing automobile insurance in urban areas. If an automobile insurer certifies that it meets the standards for becoming a qualified insurer and it does not meet those standards, that insurer shall not be a qualified insurer for purposes of this amendatory and supplementary act and may, at the discretion of the commissioner, be subject to a fine of not more than $25,000.
d. Only qualified insurers shall be eligible to participate in the automobile insurance urban enterprise zone program.
##### **§ 17:33C-4** UEZ agents {#sec-17-33c-4 omnilex-key=us-nj-statutes--title-17--17:33C-4}
22. a. A qualified insurer may appoint a UEZ agent or agents. Any appointment of a UEZ agent shall comply with the provisions of section 15 of P.L.1987, c.293 (C.17:22A-15), except when there is a conflict with a provision of this amendatory and supplementary act or any regulation promulgated hereunder, this amendatory and supplementary act is controlling. An agency contract between a qualified insurer and a UEZ agent shall be in writing, set forth specific duties and responsibilities of the parties regarding the obligations imposed pursuant to this section and section 21 of this amendatory and supplementary act, and detail the provisions of any limit on the number of exposures provided for in subsection b. of this section.
b. A qualified insurer may limit the number of exposures written through a UEZ agent or in the case of a qualified insurer doing business on a direct writing basis, the qualified insurer may limit the number of exposures written in an automobile insurance urban enterprise zone consistent with its marketing plans and goals as provided in subsection a. of section 21 of this amendatory and supplementary act. An eligible person applying for automobile insurance coverage after the limit is reached shall be advised by the UEZ agent that coverage may be available from another agent of the qualified insurer or directly from the qualified insurer if the insurer is a direct writer. Any such limit shall be imposed on an equitable and nondiscriminatory basis consistent with the provisions of subsections a. and b. of section 27 of P.L.1990, c.8 (C.17:33B-15) until the specified limit is reached.
c. The commissioner shall establish by regulation requirements that shall be satisfied if a qualified insurer limits the number of exposures written through a UEZ agent, and the manner in which a qualified insurer engaged in the business of automobile insurance on a direct writer basis may utilize the provisions of this section.
##### **§ 17:33C-5** Study on effect of territorial rating caps; report {#sec-17-33c-5 omnilex-key=us-nj-statutes--title-17--17:33C-5}
23. a. The commissioner shall study the effect of territorial rating caps imposed on automobile insurance rates pursuant to section 7 of P.L.1983, c.65 (C.17:29A-36). The study shall include an evaluation of the general market conditions resulting from the imposition of territorial rating caps, including, but not limited to: market availability; affordability of automobile insurance coverage; the actuarial soundness of, and statistical basis for, territorial cap systems; and the creation of competitive market conditions.
b. In conducting this study, the commissioner shall examine the rating systems in use in other highly urbanized areas of this nation.
c. The commissioner shall report his findings and recommendations within 12 months of the effective date of this amendatory and supplementary act to the Governor and the Legislature.
## **Chapter 35** {#struct-chapter-35}
##### **§ 17:35-1** Application of article {#sec-17-35-1 omnilex-key=us-nj-statutes--title-17--17:35-1}
Any corporation organized to insure lives, which provides for the payment of policy claims, the accumulation of reserve or emergency funds, and the expense of the management and prosecution of the business by payments to be made either at periods named in the contract or upon assessment as required, by persons holding similar contracts, and wherein the insured's liability to contribute to the payment of policy claims accrued or to accrue is not limited to a fixed sum, shall be deemed to be engaged in the business of life insurance upon the assessment plan, and be subject only to the provisions of this article. This article shall not apply to secret or fraternal societies conducting their business on the lodge system, or to associations organized solely for benevolent or charitable purposes, and which are now permitted by law to do business in this state.
##### **§ 17:35-2** Incorporation {#sec-17-35-2 omnilex-key=us-nj-statutes--title-17--17:35-2}
Nine or more persons may form a corporation for the purpose of transacting the business of life insurance upon the assessment plan, by filing in the department a declaration in writing signed and duly acknowledged by each of them, stating:
a. Their intention to form a corporation for the transaction of life insurance upon the assessment plan;
b. The name of the proposed corporation, which shall not be one in use by another corporation of the state or so nearly similar thereto as to lead to uncertainty or confusion;
c. The location of its principal office in this state; and
d. The mode in which its corporate powers are to be exercised and of electing directors or trustees.
The declaration shall have indorsed thereon or annexed thereto, and as a part thereof, the sworn statement of three of such persons that at least three hundred persons eligible under the proposed laws of the corporation to membership therein have in good faith made application in writing for membership.
The declaration, with a certificate of the attorney general that it is in accordance with this article and not inconsistent with the constitution and laws of this state, shall thereupon be filed by the commissioner, who shall deliver to the corporation a certified copy of the papers so filed. This certified copy shall be filed in the office of the clerk of the county wherein the office of the corporation is to be located, whereupon it shall be deemed to be incorporated under this article. The corporation shall pay for filing the declaration provided for herein the sum of twenty dollars.
##### **§ 17:35-3** Commencing business {#sec-17-35-3 omnilex-key=us-nj-statutes--title-17--17:35-3}
No such corporation shall commence the business of insurance until at least three hundred persons have subscribed in writing to be insured therein in the aggregate amount of at least three hundred thousand dollars, and have each paid in two per cent on the amount of the insurance severally subscribed for in cash, which is deposited in bank to the credit of the mortuary fund, in trust for the beneficiaries, and the commissioner has certified that it has complied with the provisions of this article and is authorized to transact business.
##### **§ 17:35-4** No new corporations after May 1, 1935; law applicable to corporations doing other business {#sec-17-35-4 omnilex-key=us-nj-statutes--title-17--17:35-4}
No such corporations shall be incorporated after the first day of May, one thousand nine hundred and thirty-five, to transact the business of life insurance on the assessment plan.
All corporations, associations, companies or organizations, desiring to transact the business of life insurance upon any other plan than that defined in this chapter, shall comply with all the provisions of the general insurance laws.
##### **§ 17:35-5** Return of securities to companies reincorporating under article {#sec-17-35-5 omnilex-key=us-nj-statutes--title-17--17:35-5}
The commissioner may return to any company incorporated under the laws of this state prior to March sixth, one thousand nine hundred, which shall have reincorporated under this article, all the securities deposited with him as required by any act under which the corporation was organized and doing business, upon there being filed with him the affidavits of the president and secretary thereof, and upon his being satisfied by the affidavits and other evidence to be submitted to him that all obligations or engagements for insurance of any kind made and entered into by the company before its reincorporation have been canceled and discharged and that the company has no other outstanding liabilities to answer which the deposit was made.
##### **§ 17:35-6** Reserve or emergency fund {#sec-17-35-6 omnilex-key=us-nj-statutes--title-17--17:35-6}
Every such life insurance corporation shall accumulate and maintain a reserve or emergency fund of an amount not less than the proceeds of one death assessment or periodical call on all policy or certificate holders, and at least equal to the amount of its maximum policy or certificate. The fund shall be accumulated by every corporation formed under this article, within six months from the date of its incorporation, and shall be held for the benefit or protection of the members, their legal representatives or beneficiaries. If the fund or any portion thereof is used by the corporation for the purpose for which it was created or accumulated, and the amount thereof thereby reduced to less than the amount of one death assessment or periodical call, the amount of the reduction below the amount of one death assessment or periodical call shall be made up and restored to the fund within three months thereafter. The fund may be held in cash or invested in the class of securities required by law for the investment of funds by life insurance corporations. Nothing contained herein shall prevent the creation and accumulation of other funds in excess of the amount herein required to provide for the purposes of the corporation. If the fund is in excess of the amount of one death assessment or periodical call upon all certificates or policyholders and not less than one hundred thousand dollars, the excess or any portion thereof may be used in the reduction of assessment or periodical payments by policy or certificate holders by ratable cash dividends or credits or in such other equitable division or apportionment thereof as its rules or contracts provide, or the pro rata excess on any policy or certificate terminated by death or surrender may be refunded to the holder or beneficiary as provided for in the policy or contract. Nothing contained in this article shall be construed to permit any contract promising any fixed cash payment to any living certificate or policyholder, except in the contingency of total physical disability.
##### **§ 17:35-7** Directors or trustees {#sec-17-35-7 omnilex-key=us-nj-statutes--title-17--17:35-7}
The corporation shall have a board of not less than five directors or trustees, a majority of whom shall be residents of this state, and who shall be elected by and from the members at the time and place, and for such period, not exceeding three years, as the by-laws provide. They shall have and exercise the general control and management of its affairs and funds.
##### **§ 17:35-8** Annual report {#sec-17-35-8 omnilex-key=us-nj-statutes--title-17--17:35-8}
Every life insurance company doing business under this article shall, on or before March first in each year, make and file with the commissioner a report of its affairs and operation during the year ending on December thirty-first immediately preceding, which reports shall be in lieu of any other report required by any other law of this State. The reports shall be in such form and verified by the oaths of such officers of the corporation as the commissioner requires. The commissioner may, for good cause, extend the time within which the statement may be filed. The fee for filing the report shall be twenty dollars ($20.00). Any corporation failing to make the report or to pay any fees required by law shall, upon the order of the commissioner, cease to do business in this State until the report and payment are made.
##### **§ 17:35-9** Examinations; inquiries {#sec-17-35-9 omnilex-key=us-nj-statutes--title-17--17:35-9}
All corporations to which this article is applicable, with their books, papers and vouchers, shall be subject to visitation and inspection by the commissioner, or by a person he designates. The commissioner may address any inquiries to the corporation relative to its transactions or condition, or any other matter connected with its transactions relative to the business contemplated by this article. All officers of the corporation shall promptly reply in writing to all the inquiries, under the oaths of its president or secretary or other officers, if required. The necessary expenses of examinations made under this article shall be paid to the commissioner by the corporation examined.
##### **§ 17:35-10** Fixing fee, rates, etc.; evidence of notices {#sec-17-35-10 omnilex-key=us-nj-statutes--title-17--17:35-10}
The directors or trustees, or the persons designated in the bylaws of any corporation subject to the provisions of this article shall fix the fee rates and amounts of premiums, assessments or periodical calls, the time and manner of their payment, and the risks to be assumed by the corporation and their duration, and may change the same as the experience of the corporation requires. An affidavit made by the person having charge of the mailing of notices of premiums, assessments or periodical calls, that the notice was mailed, stating the date of mailing, shall be prima facie evidence thereof.
##### **§ 17:35-11** Eligibility for insurance; insurable interest; assignment {#sec-17-35-11 omnilex-key=us-nj-statutes--title-17--17:35-11}
No corporation transacting the business of life insurance under this article shall issue a certificate or policy upon the life of any person more than sixty years of age, except in case of transfer of policyholders as provided herein, nor upon any life in which the beneficiary named has no legal insurable interest. Any assignment of the policy or certificate to a person having no insurable interest in the insured's life shall render the policy or certificate void.
##### **§ 17:35-12** Reinsurance {#sec-17-35-12 omnilex-key=us-nj-statutes--title-17--17:35-12}
No such corporation of this state shall transfer its risks to or insure them in another corporation, unless the contract of transfer or reinsurance is first submitted to and approved by a two-thirds vote of a meeting of the insured called to consider the same, of which meeting a written or printed notice shall be mailed to each member, certificate holder or policyholder at least thirty days before the day fixed. If the transfer or reinsurance is approved, every member, certificate holder or policyholder of the corporation who files with the secretary thereof, within ten days after the meeting, a written notice of his preference to be transferred to a corporation other than the one named in the contract, shall be accorded all the rights and privileges, if any, in aid of such transfer as would have been accorded under the terms of the contract, had he been transferred to the corporation named therein. No such corporation shall transfer its risks or assets or any part thereof to, or reinsure its risks or any part thereof in, any insurance corporation or association of any other state or country which is not at the time of the transfer or reinsurance authorized to do business in this state.
##### **§ 17:35-13** Provisions of policies or certificates; payment of loss {#sec-17-35-13 omnilex-key=us-nj-statutes--title-17--17:35-13}
Every policy or certificate issued by a corporation doing business under this article, and promising payment to be made upon a contingency of death or physical debility, shall specify the sum of money which it promises to pay upon the contingency, and the number of days after satisfactory proof of the happening thereof on which the payment shall be made. Upon the occurrence of the contingency, unless the contract has been avoided by fraud, or by breach of its conditions, the corporation shall be obligated to the beneficiary for the payment at the time and to the maximum amount specified in the policy or certificate. If the commissioner is satisfied upon investigation that any corporation has refused or failed to make the payment for thirty days after it became due, and after proper demand, he shall notify the corporation not to issue any new policies or certificates until the indebtedness is fully paid. No officer or agent of the corporation shall make, sign or issue any policy or certificate of insurance while the notice is in force.
##### **§ 17:35-14** Action to enjoin corporation from transacting further business {#sec-17-35-14 omnilex-key=us-nj-statutes--title-17--17:35-14}
When the commissioner, upon investigation, is satisfied that any such corporation of this State is insolvent because of matured death claims, or other obligations due and unpaid, exceeding its assets and death assessments or periodical calls made or in process of collection, or has exceeded its powers, failed to comply with any provisions of law, or is conducting business fraudulently, he shall institute an action in the Superior Court to enjoin the corporation from transacting any further business, and for such other relief as may be appropriate. The court may proceed in the action in a summary manner or otherwise.
##### **§ 17:35-14.1** Mutual life insurance company, conversion of assessment company into; requirements {#sec-17-35-14.1 omnilex-key=us-nj-statutes--title-17--17:35-14.1}
Any assessment life insurance company incorporated under chapter one hundred forty-seven of the laws of one thousand eight hundred and ninety-seven, now chapter thirty-five of Title 17 of the Revised Statutes, which has transacted an insurance business for at least ten consecutive years, next preceding, and which has outstanding contracts of insurance on which the yearly premiums amount to at least fifty thousand dollars ($50,000.00) for each kind of insurance which has been transacted, may become a mutual life insurance company by complying with all requirements for the issuance of a certificate of authority to a newly organized mutual life insurance company, except those requirements contained in Revised Statutes, section 17:17-1 specifying the number of incorporators and except that wherever reference is made to the persons proposing to incorporate the new mutual life insurance company such reference shall be construed to mean the entire board of directors of the assessment life insurance company and except the requirements of Revised Statutes, section 17:17-7; provided, that:
(a) A plan of conversion to a mutual life insurance company shall be adopted by a majority vote of the board of directors of the assessment life insurance company.
(b) Such plan shall be approved by a majority vote of all members, certificate or policy holders present in person or by proxy at a special meeting of members, certificate and policy holders of the assessment life insurance company held for that purpose. Notice of such meeting shall be published at least four times, at intervals of not less than one week, the first publication to be not more than sixty days and the last publication not less than fifteen days prior to such meeting, in at least one newspaper published in each county in the State of New Jersey. Proof of such publication shall be filed with the Commissioner of Banking and Insurance. Immediately after the election of tellers, at least three in number, at the special meeting of members, certificate and policy holders, the presiding officer, designated in the by-laws, shall cause the polls to be opened for reception of votes by the tellers and shall note and announce the time of opening the polls which shall from that time remain continuously open for the reception of votes for a period of not less than four hours after which the polls shall be closed and the presiding officer shall make announcement to that effect. No other business shall be transacted at this meeting. A majority of the tellers shall have power to determine all questions concerning the verification of ballots, ascertaining the validity thereof, the qualifications of voters and the canvass of the vote. At the conclusion of the canvass, the tellers shall report in writing to the secretary of the corporation the result thereof and he shall thereupon make a certificate, duly sworn to, setting forth the result of the voting as shown by such report and shall file the same with the Commissioner of Banking and Insurance.
(c) Such plan shall be submitted to the Commissioner of Banking and Insurance for his approval, which shall be granted unless in his judgment such plan of conversion would not be in the best interest of the members, certificate and policy holders of the assessment life insurance company.
##### **§ 17:35-14.2** Reserves; policies in force at date of conversion; assessment rights cancelled {#sec-17-35-14.2 omnilex-key=us-nj-statutes--title-17--17:35-14.2}
Upon fulfillment of the requirements prescribed in section one hereof:
(a) The mutual life insurance company shall be subject to the same requirements as to reserves as any other mutual life insurance company transacting the same kind or kinds of insurance and shall be relieved from the requirement to hold reserves or funds determined in any other manner, and specifically shall be relieved from the requirement to hold any reserves or funds held by the assessment life insurance company in accordance with Revised Statutes, Title 17, chapter thirty-five and chapter forty-five, as amended and supplemented.
(b) All persons whose life or health is insured under the terms of certificates, policies and contracts, issued or assumed by the assessment life insurance company, which are in force at the date of conversion or are thereafter duly reinstated, shall be deemed to be members and policy holders of the mutual life insurance company, without change in the terms of their several contracts except as prescribed herein, or in the plan of conversion.
(c) All rights of assessment, or reduction in benefits in lieu of assessment, prescribed in the certificate of incorporation or bylaws of such assessment life insurance company or under the terms of any certificate, policy or contract, shall be cancelled. The word assessment means the right to require the payment of a sum in addition to the weekly or other periodical dues, contributions, premiums and fees required under the terms of any certificate, policy or contract.
##### **§ 17:35-15** Application of article {#sec-17-35-15 omnilex-key=us-nj-statutes--title-17--17:35-15}
This article shall not apply to a secret or fraternal society conducting its business on the lodge system, or to any association organized solely for benevolent or charitable purposes.
##### **§ 17:35-16** Authorization to do business; requirements {#sec-17-35-16 omnilex-key=us-nj-statutes--title-17--17:35-16}
Any corporation or association organized under the laws of another state of the United States for the purpose of furnishing life, sickness or accident insurance upon the assessment plan, or that is carrying on the business of life, sickness or accident insurance upon the assessment plan, may be authorized by the commissioner to transact business in this state on depositing with him the following:
a. A certified copy of its charter or articles of incorporation.
b. A statement under oath of its president and secretary, in the form required by the commissioner of its business for the year ending December thirty-first last preceding.
c. A certificate under oath of its president and secretary that it is paying, and for the twelve months then next preceding has paid, the maximum amount named in its policies or certificates in full, and that it does not issue policies or certificates of life insurance upon lives of persons more than sixty-five years of age, nor upon any life in which the beneficiary named has no interest.
d. A copy of the application for membership or insurance and of the by-laws, also a copy of the form of policy or certificate of membership, and of each form thereof if more than one form is used.
e. A certificate from the insurance commissioner or other like officer charged with the duty of executing the insurance laws of the state where the corporation or association is organized, certifying that it is legally entitled to do business.
f. Evidence satisfactory to the commissioner that it has accumulated and maintains a reserve or emergency fund not less than the proceeds of one death assessment or periodical call on all policy or certificate holders thereof, and at least equal to the amount of its maximum policy or certificate, and that the accumulation is permitted by the law of its incorporation, and is a trust for the benefit of policy or certificate holders only, and is securely invested. No such company not authorized on May first, one thousand nine hundred and thirty-five, to transact the business of assessment life insurance in this state shall be admitted to transact such business after such date.
##### **§ 17:35-17** Certificates to agents {#sec-17-35-17 omnilex-key=us-nj-statutes--title-17--17:35-17}
After authorizing the corporation or association to do business in this state, as provided in this article, the commissioner shall issue certificates to agents thereof, to be designated by the corporation or association authorizing them to act. The certificates shall be renewed annually on January first, or within sixty days thereafter.
##### **§ 17:35-18** Doing business without authority prohibited {#sec-17-35-18 omnilex-key=us-nj-statutes--title-17--17:35-18}
No corporation or association organized under other authority than the laws of this state, for the purpose of furnishing life, sickness or accident insurance upon the assessment plan, shall do any business in this state, nor shall any person act within this state as agent in soliciting, procuring, receiving or transmitting any application for membership or insurance, in or for, or on behalf of the corporation or association, unless it is authorized to do business in this state under this article, and the agent has received a certificate of authority from the commissioner as herein provided.
##### **§ 17:35-19** Annual report {#sec-17-35-19 omnilex-key=us-nj-statutes--title-17--17:35-19}
Every corporation or association doing business in this state under the provisions of this article, shall on or before March first in each year make and file with the commissioner a report of its affairs and operations during the year ending December thirty-first next preceding. The report shall be in the form the commissioner requires and verified by the oath of the president and secretary.
##### **§ 17:35-20** Examinations {#sec-17-35-20 omnilex-key=us-nj-statutes--title-17--17:35-20}
When the commissioner deems it prudent, for the protection of the policy or certificate holders in this state, he may visit and examine, or cause to be visited and examined by a competent person appointed by him for that purpose, any such foreign assessment insurance corporation or association applying for admission or doing business in this state. The necessary expense of the examination made or ordered by the commissioner shall be certified to by him and paid by the corporation or association examined.
##### **§ 17:35-21** Inquiries concerning affairs {#sec-17-35-21 omnilex-key=us-nj-statutes--title-17--17:35-21}
The commissioner may address any inquiries he deems proper to any corporation or association authorized to do business in this state under the provisions of this article in relation to its business or condition, and its officers shall promptly reply in writing to all the inquiries under the oath of its president or secretary or other like officers.
##### **§ 17:35-22** Principal office and agent {#sec-17-35-22 omnilex-key=us-nj-statutes--title-17--17:35-22}
Every corporation or association authorized to do business in this state under this article shall designate some place within the state as the principal office therein of the corporation, and a person residing in the municipality where the office is located as a person upon whom service of legal process and papers may be made as upon the corporation. The designation shall be made by an instrument under the hand of the president and secretary or other duly authorized officers of the corporation, and be filed with the commissioner. If the person so designated dies or removes from such place another person shall be appointed in his place within thirty days. The attorney or the location of the principal office may be changed by the corporation at any time. Notice of the change or of a new designation of a person upon whom service may be made as herein provided, under the hand of the president and secretary or other officer, shall be filed with the commissioner within thirty days after the change or new designation is made. Upon failure to comply with any provision of this section within thirty days after written notice by the commissioner so to do, the corporation shall cease to do business in this state until its compliance.
##### **§ 17:35-23** "Agent" defined; penalty for acting as agent without authority {#sec-17-35-23 omnilex-key=us-nj-statutes--title-17--17:35-23}
Whoever solicits, procures or receives in or transmits from this State an application other than his own, for membership or insurance in a corporation or association included in section 17:35-18 of this Title, shall be deemed to be an agent of the corporation or association within the meaning of this article. Any person who transacts business for any such corporation or association, as an agent thereof within the meaning of this article, without having a certificate of authority from the commissioner to act as agent, or after his certificate of authority has been suspended or revoked, shall be subject to a penalty of two hundred fifty dollars ($250.00), to be enforced and collected, in the name of the State, on the complaint of the commissioner in a summary proceeding in accordance with the Penalty Enforcement Law (N.J.S. 2A:58-1 et seq.). A warrant may issue in lieu of a summons. Upon the failure of the defendant to pay forthwith the amount of any money judgment rendered against him, the defendant shall be committed to the county jail until the penalty and costs are paid. The costs recoverable in such proceeding shall be the same as are allowed in civil actions in the court in which the proceeding is instituted. The expenses of the action shall be paid by the commissioner out of any available funds not otherwise appropriated.
##### **§ 17:35-24** Revocation of authority {#sec-17-35-24 omnilex-key=us-nj-statutes--title-17--17:35-24}
If the commissioner is satisfied that the corporation or association is not paying in full the maximum amount named in its policies or certificates, or that it is conducting its business fraudulently, or that it is not carrying out its contracts with its policy or certificate holders in good faith, or if its officers fail to reply to any inquiries addressed to them by the commissioner under section 17:35-21 of this title, he shall refuse the application for admission or forthwith revoke all authority previously given to it and its agents, to do business in this state, and shall publish the revocation in a newspaper or newspapers published therein. No business shall thereafter be done by the corporation or association or its agents in this state.
##### **§ 17:35-25** Fees {#sec-17-35-25 omnilex-key=us-nj-statutes--title-17--17:35-25}
Every foreign corporation or association admitted to transact business under this article shall pay fees, as follows:
Filing the certified copy of its charter or articles of incorporation, twenty dollars.
Filing the preliminary statement on admission, twenty dollars.
Filing the annual statement thereafter, twenty dollars.
Each certificate of authority to an agent, two dollars.
##### **§ 17:35-26** Policy or certificate forms, classification of risks and premiums or rates of contribution; filing with Commissioner; disapproval of forms, review {#sec-17-35-26 omnilex-key=us-nj-statutes--title-17--17:35-26}
No policy or certificate or endorsement thereto granting benefits in the event of death, sickness, or bodily injury or death of the insured by accident shall be issued or delivered in this State by any assessment insurance company or association until a copy of the form thereof, the classification of risks and the premiums or rates of contribution thereon and the form of application therefor have been filed with the Commissioner of Banking and Insurance. If the commissioner shall at any time notify any company or association of his disapproval of any such policy or certificate form, application or endorsement because such policy, application or endorsement contains provisions which are unjust, unfair, inequitable, misleading, contrary to law or to the public policy of this State or because the policy or certificate is sold in such manner as to mislead the insured or because insurance under such policy or certificate is being solicited by any means of advertising, communication or dissemination of information which involves misleading or inadequate description of the provisions of the policy or certificate, specifying particulars, it shall be unlawful for such company or association thereafter to issue any policy or certificate or endorsement thereto or use any application in the form so disapproved. Such disapproval of the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:35-27** Policy or certificate granting natural death benefit {#sec-17-35-27 omnilex-key=us-nj-statutes--title-17--17:35-27}
No policy or certificate granting a natural death benefit shall be issued by any domestic company or association or shall be issued or delivered in this State to any resident thereof by any foreign company or association unless the policy or certificate shall conform to all laws of this State governing provisions to be contained in and provisions not to be contained in life insurance policies issued by stock or mutual life insurance companies authorized to transact business in this State. The amounts of death benefits provided in any policy or certificate issued to a child under the age of fifteen years shall not exceed the limitations now provided by law for insurance on the lives of children. Any policy or certificate may contain any provision permitted by law to be contained in policies of life insurance issued by stock or mutual life insurance companies, any other provisions of law to the contrary notwithstanding. This section shall not apply to any policy or certificate containing a natural death benefit not exceeding one hundred dollars when the policy or certificate also provides benefits in the event of sickness or bodily injury or death by accident.
##### **§ 17:35-28** Policy or certificate granting sickness, bodily injury or accidental death benefits {#sec-17-35-28 omnilex-key=us-nj-statutes--title-17--17:35-28}
No policy or certificate granting benefits in the event of sickness or bodily injury or death by accident, or any of them, shall be issued or delivered in this State to any resident thereof by any company or association unless the policy or certificate shall conform to all laws of this State governing provisions to be contained in and provisions not to be contained in accident and health insurance policies issued by stock or mutual life or casualty insurance companies authorized to transact business in this State. This section shall not apply to any policy or certificate providing a natural death benefit and an additional benefit in the event of the death of the insured by accident to which the provisions of section 17:35-27 of this chapter are applicable.
##### **§ 17:35-29** Policy or certificate requirements generally {#sec-17-35-29 omnilex-key=us-nj-statutes--title-17--17:35-29}
No policy or certificate shall be issued by any domestic company or association or shall be issued or delivered in this State to any resident thereof by any foreign company or association unless there shall be printed conspicuously at the top of the first page any one of the following: "Assessment Policy" , "Assessment Certificate" , or "Assessment Insurance." No policy or certificate shall be so issued unless the consideration clause therein shall contain a reference to the liability of the holder or member for assessment, nor unless the policy or certificate shall contain a clause setting forth fully the limitations under which assessments may be levied, the limitations on the amount and frequency thereof, if any, and a statement as to the mode and period of notice of assessment to be given to the policyholder or member by the company or association. Every policy or certificate making provision for a grace period for the payment of premiums shall provide a like period of grace for the payment of assessments, and shall also provide that any benefits available at the lapse of the policy or certificate for nonpayment of premium shall be similarly available in the event of lapse for nonpayment of an assessment. In the reinstatement of any such policy or certificate, any requirement for the payment of premiums in arrears shall apply in like manner to assessments in arrears and the policy or certificate shall so provide.
##### **§ 17:35-30** Reserve on policies or certificates granting natural death benefits {#sec-17-35-30 omnilex-key=us-nj-statutes--title-17--17:35-30}
Every assessment insurance company or association authorized to transact business in this State shall maintain a reserve on every policy or certificate granting natural death benefits issued by such company or association after the first day of October, one thousand nine hundred and thirty-eight. The minimum standard for such reserve shall be the American Experience Table of Mortality with interest at the rate of three and one-half per centum (3 1/2 %) per annum calculated according to the modified preliminary term method permitted by law for the valuation of life insurance policies issued by stock or mutual life insurance companies. Every company or association shall file annually in the department with its annual statement, the certification of a competent actuary as to the amount of all the reserves required to be held by the association on its policies or certificates. This section shall not apply to any policy or certificate containing a natural death benefit not exceeding one hundred dollars when the policy or certificate also provides benefits in the event of sickness or bodily injury or death by accident.
##### **§ 17:35-31** Penalty for violations; revocation of certificate of authority {#sec-17-35-31 omnilex-key=us-nj-statutes--title-17--17:35-31}
Any assessment company or association or any officer or agent thereof which or who issues or delivers to any person in this State any policy or certificate in willful violation of the provisions of this act shall be punished by a fine of not more than five hundred dollars ($500.00) for each offense and the commissioner may revoke the certificate of authority of any company or association of another State or country, or of the agent of any company or association, which or who willfully violates any provision of this act.
## **Chapter 35A** {#struct-chapter-35a}
##### **§ 17:35A-14** Regulation; exemption from Uniform Securities Law {#sec-17-35a-14 omnilex-key=us-nj-statutes--title-17--17:35A-14}
The Commissioner of Insurance shall have sole and exclusive authority to regulate the issuance and sale of contracts on a variable basis; and such contracts, the companies which issue them and the agents or other persons who sell them shall not be subject to the Uniform Securities Law (1967), approved June 8, 1967 (P.L.1967, c. 93) (C. 49:3-47 et seq.) in the issuance or sale of such contracts. L.1971, c. 4, s. 1, eff. Jan. 15, 1971.
## **Chapter 35B** {#struct-chapter-35b}
##### **§ 17:35B-14** Repeal {#sec-17-35b-14 omnilex-key=us-nj-statutes--title-17--17:35B-14}
Sections 17:34-18, 17:34-28, 17:34-29, 17:34-30 of the Revised Statutes and section 5 of chapter 237 of the laws of 1951 (C. 17:38-13.4) are hereby repealed.
## **Chapter 35C** {#struct-chapter-35c}
##### **§ 17:35C-1** Definitions {#sec-17-35c-1 omnilex-key=us-nj-statutes--title-17--17:35C-1}
1. For the purposes of this act:
a. "Applicant" means:
(1) In the case of an individual medicare supplement subscriber contract, the person who seeks to contract for service corporation benefits, and
(2) In the case of a group medicare supplement subscriber contract, the person eligible for service corporation benefit coverage.
b. "Certificate" means any certificate issued under an individual or group medicare supplement contract, which certificate has been delivered or issued for delivery in this State.
c. "Commissioner" means the Commissioner of Insurance.
d. "Medicare" means the program established by the "Health Insurance for the Aged Act," Title XVIII of the "Social Security Act," Pub.L.89-97, as then constituted or later amended (42 U.S.C. s.1395 et seq.).
e. "Medicare supplement contract" means a group or individual subscriber contract or certificate which is advertised, marketed, designed primarily as, or is otherwise held out to be, a supplement to reimbursements under medicare for the hospital, medical or surgical expenses of persons eligible for medicare, other than a contract issued pursuant to a contract under 42 U.S.C. s.1395l or 42 U.S.C. s.1395mm or a contract issued under a demonstration project authorized pursuant to the "Health Insurance for the Aged Act," 42 U.S.C. s.1395 et seq. The term does not include a contract issued to one or more employers or labor organizations, or to the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees or combination thereof or for members or former members, or combination thereof, of the labor organizations.
f. "Service corporation" means any medical service corporation operating pursuant to the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.), any hospital service corporation operating pursuant to the provisions of P.L.1938, c.366 (C.17:48-1 et al.), any health service corporation operating pursuant to the provisions of P.L.1985, c.236 (C.17:48E-1 et al.), or any similar organization which is authorized by law to provide health care services and supplies.
g. "Service corporation contract" means any group or individual subscriber contract issued by a service corporation.
##### **§ 17:35C-2** Contract provisions; regulations {#sec-17-35c-2 omnilex-key=us-nj-statutes--title-17--17:35C-2}
The commissioner shall issue regulations to establish specific standards for contract provisions of medicare supplement contracts, which shall be in addition to and in accordance with applicable laws of this State, and may cover, but shall not be limited to:
a. Terms of renewability;
b. Initial and subsequent conditions of eligibility;
c. Nonduplication of coverage;
d. Probationary periods;
e. Benefit limitations, exceptions and reductions;
f. Elimination periods;
g. Requirements for replacement;
h. Recurrent conditions; and
i. Definition of terms.
##### **§ 17:35C-3** Prohibited provisions {#sec-17-35c-3 omnilex-key=us-nj-statutes--title-17--17:35C-3}
3. a. No medicare supplement contract shall contain benefits which duplicate any benefits provided by medicare.
b. The commissioner may issue regulations that specify prohibited contract provisions not otherwise specifically authorized by statute which, in the opinion of the commissioner, are unjust, unfair or unfairly discriminatory to any person covered or proposed for coverage under a medicare supplement contract.
##### **§ 17:35C-4** Preexisting condition; denial of claim {#sec-17-35c-4 omnilex-key=us-nj-statutes--title-17--17:35C-4}
Notwithstanding any other provision of law of this State to the contrary, a medicare supplement contract may not deny a claim for losses incurred more than 6 months from the effective date of coverage for a preexisting condition. The contract may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within 6 months before the effective date of coverage.
##### **§ 17:35C-5** Regulations {#sec-17-35c-5 omnilex-key=us-nj-statutes--title-17--17:35C-5}
5. The commissioner shall promulgate regulations to effectuate and enforce the provisions of P.L.1982, c.95 (C. 17:35C-1 et seq.) and any regulations which are necessary to conform medicare supplement contracts and certificates with federal law. These regulations shall include, but not be limited to:
a. Establishment of minimum standards for benefits, claim payments, marketing and reporting practices and compensation arrangements;
b. Establishment of a uniform methodology for calculating and reporting loss ratios, and requiring refunds or credits if the contracts or certificates do not meet loss ratio requirements;
c. Establishment of a process for filing of all requests for premium increases and rate changes, which may include public hearings as determined appropriate by the commissioner prior to approval of any premium increases;
d. Assurance of access by the public to contract, premium and loss ratio information; and
e. Establishment of standards for Medicare Select contracts and certificates at such time as this State is authorized under federal law to authorize Medicare Select contracts and certificates.
##### **§ 17:35C-6** Requirements for medicare supplement contract forms, rates {#sec-17-35c-6 omnilex-key=us-nj-statutes--title-17--17:35C-6}
6. a. No service corporation shall deliver or issue for delivery to a resident of this State a medicare supplement contract unless it has filed with the commissioner a copy of the contract or certificate and a copy of any application, rider and endorsement for use in connection with the issuance or renewal thereof.
(1) The commissioner may, at any time, notify the service corporation of his disapproval of any form filed pursuant to the provisions of this section on the ground that the form contains provisions which are unjust, unfair, inequitable, misleading, or contrary to law or to the public policy of this State and no service corporation shall use any form in this State which has been disapproved pursuant to this paragraph.
(2) Any disapproval shall be subject to review in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
(3) The disapproval or the withdrawal of any form by the commissioner shall state in writing the grounds therefor in such detail as is reasonable to inform the service corporation of the reasons for withdrawal or disapproval.
b. Any service corporation providing medicare supplement benefits in this State shall file annually with the commissioner its rates, rating schedule and supporting documentation demonstrating that it is in compliance with the applicable loss ratio standards of this State. All filings of rates and rating schedules shall demonstrate that the actual and expected losses in relation to premiums comply with the requirements of P.L.1982, c.95 (C.17:35C-1 et seq.) and any rule or regulation promulgated thereunder.
c. Medicare supplement contracts shall be expected to return to subscribers benefits which are reasonable in relation to the premium charged. The commissioner shall issue regulations to establish minimum standards for loss ratios of medicare supplement contracts on the basis of paid claim experience and written premiums in accordance with accepted actuarial principles and practices.
##### **§ 17:35C-7** Outline of coverage {#sec-17-35c-7 omnilex-key=us-nj-statutes--title-17--17:35C-7}
7. a. In order to provide for full and fair disclosure in the sale of medicare supplement contracts, no medicare supplement contract or certificate shall be delivered or issued for delivery in this State, unless an outline of coverage is delivered to the applicant at the time application is made.
b. The commissioner shall prescribe the format and content of the outline of coverage required by subsection a. of this section. For the purposes of this section, "format" means style, arrangement and overall appearance, including such items as the size, color and prominence of the font used, paper size and weight and the arrangement of text and captions. The outline of coverage shall include:
(1) A description of the principal benefits and coverage provided in the contract;
(2) (Deleted by amendment, P.L.1992, c.144).
(3) A statement of the renewal provisions, including any reservation by the service corporation of a right to change premiums, and disclosure of the existence of any automatic renewal premium increases based on the subscriber's age; and
(4) A statement that the outline of coverage is a summary of the contract issued or applied for and that the contract should be consulted to determine governing contractual provisions.
c. The commissioner may require by regulation the publication of forms and an informational brochure with a standardized format and content, to serve as an aid in the selection of appropriate coverage, if any, by those eligible for medicare, and to aid the consumer in improving his understanding of medicare benefits. Except in the case of direct response solicitation service corporation contracts, the commissioner may require by regulation that the informational brochure be provided, concurrently with delivery of the outline of coverage, to all prospective subscribers eligible for medicare. With respect to direct response solicitation service corporation contracts, the commissioner may require by regulation that the prescribed brochure be provided upon request to any prospective subscribers eligible for medicare, but in no event later than the time of contract delivery.
d. The commissioner may promulgate regulations for captions or notice requirements for all service corporation contracts sold to persons eligible for medicare, other than for medicare supplement contracts, to inform those prospective subscribers that the particular service corporation contract is not a medicare supplement contract.
e. The commissioner may further promulgate regulations to govern the full and fair disclosure of the information in connection with the replacement of service corporation contracts by persons eligible for medicare.
##### **§ 17:35C-8** 30-day examination period; refunds {#sec-17-35c-8 omnilex-key=us-nj-statutes--title-17--17:35C-8}
8. Medicare supplement contracts or certificates shall have a notice prominently printed on the first page of the contract or certificate or attached thereto stating in substance that the applicant shall have the right to return the contract or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the contract or certificate, the applicant is not satisfied for any reason. Refunds made pursuant to this section shall be made in a timely manner and shall be paid directly to the applicant.
##### **§ 17:35C-9** Application to hospital service corporations {#sec-17-35c-9 omnilex-key=us-nj-statutes--title-17--17:35C-9}
Notwithstanding the provisions of section 17 of P.L. 1938, c. 366 (C. 17:48-17), the provisions of this act shall apply to hospital service corporations established pursuant to P.L. 1938, c. 366 (C. 17:48-1 et seq.). L.1982, c. 95, s. 9.
##### **§ 17:35C-10** Applicability of C.17:35C-1 et seq. {#sec-17-35c-10 omnilex-key=us-nj-statutes--title-17--17:35C-10}
1. Except as otherwise specifically provided:
a. The provisions of P.L.1982, c.95 (C.17:35C-1 et seq.) shall apply to all medicare supplement contracts and subscriber certificates delivered or issued for delivery in this State.
b. The provisions of P.L.1982, c.95 (C.17:35C-1 et seq.) shall not apply to subscriber certificates, including group conversion contracts, provided to medicare eligible persons that are not advertised, marketed, designed primarily as, or otherwise held out to be medicare supplement contracts.
##### **§ 17:35C-11** Filing of copy of advertising materials promoting medicare supplement contracts {#sec-17-35c-11 omnilex-key=us-nj-statutes--title-17--17:35C-11}
8. a. Every service corporation shall file with the Department of Insurance a copy of all advertising materials to be used in promoting medicare supplement contracts to which residents of this State will have access, and through which the service corporation intends, or by implication purports to the reasonable, targeted consumer its intent, to make such contracts available for purchase or enrollment in this State. The requirements of this section shall apply to all advertisements in any medium whether in print or by means of television or radio broadcast. Filings shall be made at least 30 days prior to the date on which the advertisement is to be used in this State, or made accessible to residents of this State.
b. The commissioner may, in the public interest, promulgate regulations governing medicare supplement contract advertising including, but not limited to, specific filing procedures, standards upon which review may be based, celebrity endorsements, unfair practices and review and disapproval procedures.
c. Notwithstanding the provisions of subsection b. of this section, the commissioner may disapprove any advertisement at any time if he determines that the advertisement misrepresents the product, misleads the targeted consumer, uses a strategy which involves scare tactics, unnecessarily confusing data or representation, false or fraudulent statements or otherwise violates any applicable laws of this State or regulations promulgated thereunder.
##### **§ 17:35C-12** Penalties {#sec-17-35c-12 omnilex-key=us-nj-statutes--title-17--17:35C-12}
9. In addition to any other applicable penalties for violation of the provisions of R.S.17:17-1 et seq., the commissioner may require service corporations violating the provisions of P.L.1982, c.95 (C.17:35C-1 et seq.) to cease marketing any medicare supplement contract or certificate in this State which is related directly or indirectly to the violation, require that service corporation to take such action as is necessary to comply with the provisions of that act, or both.
## **Chapter 36** {#struct-chapter-36}
##### **§ 17:36-2** Creation; application of; maintenance {#sec-17-36-2 omnilex-key=us-nj-statutes--title-17--17:36-2}
Any fire insurance company of this state having a net surplus of more than the amount of its capital stock may, by resolution of its board of directors and with the consent of the commissioner, set aside a part or the whole of its net surplus in excess of an amount equal to its capital stock and not to exceed in amount five hundred thousand dollars as a special reserve fund, which, in case of an extraordinary conflagration, shall not be liable for any claims for loss by its policyholders arising out of the conflagration, but shall, with the company's fund for unearned premiums, be held by the company for the protection of its other policyholders. In case the losses sustained by the company by conflagration exceed its general net surplus, not including therein the special reserve fund, the special reserve fund shall be applied to make up any impairment of the capital of the company. Any balance of the fund not required for that purpose shall be carried to the general surplus account of the company. Upon payment to the claimants against the company, for losses caused by the conflagration, of the amounts to which they are respectively entitled in proportion to their several claims out of the capital and general net surplus fund of the company, not including the special reserve fund, the company shall be forthwith discharged from all further liability to each of them. The special reserve fund may be increased from time to time, but shall never exceed the capital of the company, and the amount thereof shall be set forth in the company's annual statement to the department. No company, so long as it continues to operate under this law, shall diminish its special reserve fund by paying dividends therefrom.
##### **§ 17:36-5.15** Required statements in policy; copy to be filed with commissioner {#sec-17-36-5.15 omnilex-key=us-nj-statutes--title-17--17:36-5.15}
No policy or contract of fire insurance on any property in this State, except fire insurance on risks subject to the "Commercial Insurance Deregulation Act of 1982," P.L. 1982, c. 114 (C. 17:29AA-1 et seq.); shall be made, issued or delivered by any insurer or by any agent or representative thereof until a copy of the form thereof has been filed with the Commissioner of Insurance. If the commissioner shall at any time notify any insurer of his disapproval of any such policy form because it contains provisions which are unjust, unfair, inequitable, misleading or contrary to law, it shall be unlawful for such insurer thereafter to issue any policy in the form so disapproved. Such disapproval by the commissioner may be reviewed by a proceeding in lieu of prerogative writ.
There shall be printed at the head of such policy the name of the insurer or insurers issuing the policy; the location of the home office thereof; a statement whether said insurer or insurers operate on a stock or mutual plan or are reciprocal insurers or Lloyd's underwriters; provided, however, that a corporation organized under a special act of the Legislature of any state may so indicate upon its policy and may add a statement of the plan under which it operates in this State; and there may be added thereto such device or devices as the insurer or insurers shall desire.
If the policy is issued by a mutual insurer having special regulations with respect to the payment by the policyholder of assessments, such regulations shall be printed upon the policy, and any such insurer may print upon the policy such regulations as may be appropriate to or required by its form of organization.
##### **§ 17:36-5.16** Binders {#sec-17-36-5.16 omnilex-key=us-nj-statutes--title-17--17:36-5.16}
Binders or other contracts for temporary insurance may be made orally for a period which shall not exceed ten days or in writing for a period which shall not exceed 60 days and shall be deemed to include all the terms and conditions of a fire insurance policy as specified by this law and all such applicable endorsements filed with the Commissioner of Banking and Insurance as may be designated in such contract of temporary insurance, except that the cancellation clause and the clause specifying the hour of the day at which the insurance shall commence may be superseded by the express terms of such contracts of temporary insurance.
##### **§ 17:36-5.17** Combination form of fire policy; required provisions {#sec-17-36-5.17 omnilex-key=us-nj-statutes--title-17--17:36-5.17}
Two or more insurers authorized to do in this State the business of fire insurance may, with the approval of the Commissioner of Banking and Insurance, issue a combination form of fire insurance policy which shall contain the following provisions:
(a) A provision substantially to the effect that the insurers executing such policy shall be severally liable for the full amount of any loss or damage according to the terms of the policy, or for specified percentages or amounts thereof, aggregating the full amount of such insurance under such policy.
(b) A provision substantially to the effect that service of process, or of any notice or proof of loss required by such policy, upon any of the insurers executing such policy, shall be deemed to be service upon all such insurers.
##### **§ 17:36-5.18** Space for listing certain items; other data; signatures {#sec-17-36-5.18 omnilex-key=us-nj-statutes--title-17--17:36-5.18}
Every such fire insurance policy shall, in addition to the terms and conditions required by this act, provide space for listing the amounts or limits of insurance; the rates and the premiums for the coverage provided by the policy and endorsements thereto; the term, the date of inception, the date of expiration and the name of the insured. The policy may also contain such other data as may be conveniently included for duplication on daily reports or office records. Every such fire insurance policy shall contain the facsimile signature of the president and secretary of the insurer and the counter signature and date thereof of a licensed agent of the insurer. In lieu of the signatures on such policy by the president and secretary of an insurer having no such officer or officers, the same may be executed by such other person or persons as have authority so to do.
##### **§ 17:36-5.19** Insured; perils insured against; amount of insurance; assignment, provision as to {#sec-17-36-5.19 omnilex-key=us-nj-statutes--title-17--17:36-5.19}
Every such fire insurance policy shall insure, limited to the amounts of insurance specified therein, the named insured and legal representatives, to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss, without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair and without compensation for loss resulting from interruption of business or manufacture, nor in any event for more than the interest of the insured, against all direct loss by fire, lightning, and by removal from premises endangered by the perils insured against in such policy, except as thereinafter provided, to the property described therein while located or contained as described in such policy, or pro rata for 5 days at each proper place to which any of the property shall necessarily be removed for preservation from the perils insured against in such policy, but not elsewhere. Every such fire insurance policy shall contain a provision that its assignment shall not be valid except with the written consent of the insurer.
##### **§ 17:36-5.20** Standard provisions {#sec-17-36-5.20 omnilex-key=us-nj-statutes--title-17--17:36-5.20}
Every such fire insurance policy shall contain certain standard provisions which shall be in the words and in the order hereinafter set forth:
PLEASE PHOTOCOPY TEXT FROM PAMPHLET LAWS
Provided, however, that the commissioner may approve for use within the State a form of policy which does not correspond to the standard fire insurance policy as provided by this section if the coverage with respect to the peril of fire provided in such approved form is, when viewed in its entirety, substantially equivalent to or more favorable to the insured than that contained in the standard fire insurance policy established by this section.
##### **§ 17:36-5.20a** Cancellation, non-renewal of homeowners insurance prohibited under certain circumstances {#sec-17-36-5.20a omnilex-key=us-nj-statutes--title-17--17:36-5.20a}
1. No insurer authorized to do business in this State shall cancel or non-renew an insurance policy covering an owner occupied one-to-four family dwelling solely because of claims or losses due to weather-related damage or a third-party criminal act committed by someone who is not a resident of the insured dwelling, unless the claim or loss identifies or confirms an increase in hazard, a material change in the risk assumed or a breach of contractual duties, conditions or warranties that materially affect the nature or the insurability of the risk. However, this section shall not be construed to prohibit an insurer from offering to continue coverage on different terms and conditions if the insured fails to reduce the risk of additional or future claims or losses, either by effecting necessary repairs or taking other remedial action.
##### **§ 17:36-5.20b** Certain commercial lines insurance risks, exclusion from requirements of standard fire policy. {#sec-17-36-5.20b omnilex-key=us-nj-statutes--title-17--17:36-5.20b}
1. a. A fire insurance policy for commercial lines insurance risks which produce minimum annual premiums in excess of $10,000 shall be excluded from the requirements of section 6 of P.L.1954, c. 268 (C.17:36-5.20).
b. Notwithstanding any other provision of law to the contrary, no person, including, but not limited to, an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28), shall be liable in an action for damages on account of an applicant or insured purchasing a commercial lines insurance policy that does not comply with the requirements of section 6 of P.L.1954, c.268 (C.17:36-5.20).
##### **§ 17:36-5.21** Other insurances; combination policies; premium, allocation of portion to fire insurance {#sec-17-36-5.21 omnilex-key=us-nj-statutes--title-17--17:36-5.21}
Every such policy of fire insurance may, subject to the provisions of section 1 hereof as to filing with and possible disapproval by the Commissioner of Banking and Insurance, include any other insurances which the insurer is authorized to make. Two or more insurers may issue in combination a policy authorized by this section, under the terms of which policy each of such insurers will provide coverage against one or more of the specified insurances.
Whenever other insurances which the insurer is authorized to make are included in any such policy of fire insurance and there is no separate premium for fire insurance, the insurer, if not organized under the laws of this State, shall allocate that much of the premium which is fairly attributable to fire insurance for the purpose of determining taxes pursuant to R.S. 54:17-4, 54:18-1 and 54:18-2.
##### **§ 17:36-5.22** Endorsements; supplemental contracts; contracts; disapproval by commissioner {#sec-17-36-5.22 omnilex-key=us-nj-statutes--title-17--17:36-5.22}
Appropriate forms of contracts, or supplemental contracts, or extended coverage endorsements that will provide insurance in case of loss, damage or liability occasioned by any accident, incident, occurrence, or peril other than fire and lightning which the insurer is empowered to assume, also forms of endorsements whereby the insurer agrees to reimburse and indemnify the insured for the difference between the actual value of the insured property at the time any loss or damage occurs and the amount actually expended to repair, rebuild or replace with new materials of like size, kind and quality such property as has been damaged or destroyed by fire or other perils insured against may be filed with the Commissioner of Insurance for use with or as a part of such fire insurance policy, required to be filed pursuant to section 1 of P.L. 1954, c. 268 (C. 17:36-5.15), by a licensed rating organization on behalf of all its members or subscribers or on behalf of any individual member or subscriber, or by any insurer making its own filings.
Any insurer may present any such form for filing, if after a reasonable request, the rating organization of which it is a member or subscriber has failed or refused to present such form for filing.
Any such form filed as aforesaid shall be used by every insurer by whom or in whose behalf it was filed to the exclusion of any form or forms covering substantially the same agreement. Any such form may be withdrawn or it may be superseded by the filing of a new form or forms covering substantially the same agreement.
No such form of contract, supplemental contract, or extended coverage endorsement shall be made, issued or delivered by any insurer or by any agent or representative thereof until after 30 days from the date of such filing.
The use of such contracts, supplemental contracts or extended coverage endorsements as have heretofore been filed with and approved by the commissioner under the provisions of P.L. 1944, c. 171 (C. 17:36-5.1 et seq.), may be continued until withdrawn, supplemented, or amended.
If the Commissioner of Insurance shall, at any time, notify any rating organization or any insurer of his disapproval of any such filed contract, supplemental contract or extended coverage endorsement because it contains provisions which are unjust, unfair, inequitable, misleading or contrary to law, it shall be unlawful for any insurer to issue any such contract, supplemental contract or extended coverage endorsement in the form so disapproved. Such disapproval by the commissioner may be reviewed by a proceeding in lieu of prerogative writ.
##### **§ 17:36-5.23** Disapproval and other orders to be in writing {#sec-17-36-5.23 omnilex-key=us-nj-statutes--title-17--17:36-5.23}
Whenever the Commissioner of Banking and Insurance shall make any disapproval or any other order affecting any insurer, insurance agent, insurance broker or other person or persons subject to this act, such disapproval or order shall not be effective unless made in writing and signed by the Commissioner of Banking and Insurance or by his authority.
##### **§ 17:36-5.24** Violation of regulation or order {#sec-17-36-5.24 omnilex-key=us-nj-statutes--title-17--17:36-5.24}
Any insurer, insurance agent, insurance broker or other person or persons doing in this State the business of fire insurance which shall violate any regulation or order of the Commissioner of Banking and Insurance or attach to, or otherwise make a part of any contract of fire insurance any contract, supplemental contract or extended coverage endorsement which has been disapproved by the Commissioner of Banking and Insurance shall be guilty of a misdemeanor.
##### **§ 17:36-5.25** Provisions of act inapplicable to reinsurance and certain kinds of insurance {#sec-17-36-5.25 omnilex-key=us-nj-statutes--title-17--17:36-5.25}
The provisions of this act shall not apply to any policy or contract of reinsurance between insurers; nor shall the provisions of this act apply to policies of marine, inland marine, motor vehicle or aircraft insurance whose provisions insure against or include insurance against the peril of fire, but such policies or contracts may be attached to a fire insurance policy in accordance with the provisions of this act.
##### **§ 17:36-5.26** Repeal {#sec-17-36-5.26 omnilex-key=us-nj-statutes--title-17--17:36-5.26}
"An act prescribing a standard form of fire insurance policy, endorsements and supplemental contracts, and repealing sections 17:36-3, 17:36-4, 17:36-5 and 17:36-7 of the Revised Statutes," approved April 20, 1944 (P.L.1944, c. 171), is repealed but the repeal thereof shall not revive any acts or parts of acts repealed by such act.
##### **§ 17:36-5.27** Partial invalidity {#sec-17-36-5.27 omnilex-key=us-nj-statutes--title-17--17:36-5.27}
The invalidity of any part or section of this act shall not affect the validity of the remaining parts or sections.
##### **§ 17:36-5.28** Authority to exclude loss or damage caused by nuclear reaction or radiation or radioactive contamination {#sec-17-36-5.28 omnilex-key=us-nj-statutes--title-17--17:36-5.28}
Insurers issuing a fire insurance policy or any permissible variation thereof, pursuant to the act to which this act is a supplement are authorized to affix thereto or include therein a written statement that the policy does not cover loss or damage caused by nuclear reaction or nuclear radiation or radioactive contamination, all whether directly or indirectly resulting from an insured peril under said policy; provided, however, that nothing herein contained shall be construed to prohibit the attachment to any such policy of an endorsement or endorsements specifically assuming coverage for loss or damage caused by nuclear reaction or nuclear radiation or radioactive contamination.
##### **§ 17:36-5.29** Domestic servants or household employees; coverage {#sec-17-36-5.29 omnilex-key=us-nj-statutes--title-17--17:36-5.29}
Every homeowners' policy or other policy providing comprehensive personal liability insurance delivered, issued for delivery, or renewed in this State on or after the effective date of this act shall afford coverage against liability for the payment of any obligation which the policyholder may incur to an injured domestic servant or household employee or the dependents thereof pursuant to the provisions of chapter 15 of Title 34 of the Revised Statutes.
##### **§ 17:36-5.30** Insurers deemed admitted to transact workers' compensation insurance {#sec-17-36-5.30 omnilex-key=us-nj-statutes--title-17--17:36-5.30}
Notwithstanding R.S. 17:17-7, every insurer who is admitted to transact liability insurance under R.S. 17:17-1 is also deemed to be admitted to transact workers' compensation insurance for the purpose of covering those persons specified in this act.
##### **§ 17:36-5.31** Information provided to policyholders by every fire, casualty insurer {#sec-17-36-5.31 omnilex-key=us-nj-statutes--title-17--17:36-5.31}
1. Every fire and casualty insurer, including the New Jersey Insurance Underwriting Association created pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.), shall provide its policyholders of homeowners insurance, at the time of the issuance of the policy and with each renewal notice for the policy, with written notice, prescribed by the Commissioner of Banking and Insurance, that includes the following information:
a. A homeowners insurance policy does not cover property damaged by a flood;
b. That flood insurance may be available through the National Flood Insurance Program in participating communities; and
c. That the National Flood Insurance Program coverage contains separate content and structure coverage and that a policyholder should consult with the National Flood Insurance Program or his insurer or insurance producer as to whether the coverage selected is appropriate to the policyholder's needs.
##### **§ 17:36-5.32** Penalties {#sec-17-36-5.32 omnilex-key=us-nj-statutes--title-17--17:36-5.32}
3. If the commissioner determines that an insurer has committed or performed, with such frequency as to indicate a general business practice, violations of any provisions of this act, the commissioner may impose a civil penalty in an amount up to $2,500 for the first violation and up to $5,000 for each and every subsequent violation, collectible in an action brought in the name of the commissioner pursuant to the provisions of the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A violation is a general business practice of failing to provide notice to a policyholder, where the failure is not due to the commissioner's failure to prescribe the notices required pursuant to this act.
##### **§ 17:36-5.33** Definitions relative to homeowners insurance deductibles and premium rates. {#sec-17-36-5.33 omnilex-key=us-nj-statutes--title-17--17:36-5.33}
1. For purposes of this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Homeowners insurance" means personal lines insurance provided against loss to real and personal property as defined in the standard fire policy and extended coverage endorsement thereon, a dwelling policy, the homeowners multiple peril policy, insurance against the perils of vandalism, malicious mischief, burglary, or theft, or liability insurance or any combination thereof, or any other such policy delivered, issued or renewed or approved by the commissioner for issuance, delivery or renewal in this State.
##### **§ 17:36-5.34** Uniform policy language concerning hurricane deductible. {#sec-17-36-5.34 omnilex-key=us-nj-statutes--title-17--17:36-5.34}
2. The commissioner shall establish by regulation uniform policy language regarding the applicability of hurricane deductibles and the form of notice to be provided to an insured under a homeowners insurance policy by an insurer utilizing a hurricane deductible program or programs.
##### **§ 17:36-5.35** Expedited rate filing procedure, certain. {#sec-17-36-5.35 omnilex-key=us-nj-statutes--title-17--17:36-5.35}
3. a. A filer may use an expedited rate filing procedure to file for a proposed alteration to its homeowners insurance rating system when the filer requests an increase of no more than five percent in its Statewide rate for homeowners insurance at any time during a calendar year, with documentation supporting the increase no later than 30 days prior to the effective date of the rate change, provided that the increase shall not produce rates that are excessive, inadequate for the safety and soundness of the insurer, or unfairly discriminatory.
b. The commissioner shall establish by regulation the documentation which shall accompany the filing, which shall be reasonable and in accordance with the nature of the filing, and upon submission of the documentation required, the filing shall be deemed complete. The rate change shall be effective no sooner than the 30th day following the filing.
c. The commissioner may challenge a rate increase made pursuant to subsection a. of this section within 30 days of the date the filing is received, by notifying the filer in writing. The commissioner shall hear the matter on an expedited basis and shall render a final determination within four months of the date of the filing. The commissioner may, for good cause, extend this four-month period up to an additional three months.
d. Any increase in excess of the rate increases permitted by subsection a. of this section shall be subject to the provisions of P.L.1944, c.27 (C.17:29A-1 et seq.).
e. A filer shall not file more than one request in any 12-month period for an increase in its homeowners insurance rates pursuant to this section.
##### **§ 17:36-5.36** Customer information brochure for homeowners insurance consumers. {#sec-17-36-5.36 omnilex-key=us-nj-statutes--title-17--17:36-5.36}
4. a. No homeowners insurance policy shall be issued, delivered or renewed in this State on or after the 90th day following the effective date of this act unless the policy is accompanied by a consumer information brochure written in a simple, clear, understandable, and easily readable way which:
(1) explains the insurer's hurricane deductible program, if any;
(2) includes the information on flood insurance required to be provided pursuant to P.L.2000, c.84 (C.17:36-5.31 et al.); and
(3) provides a one page summary of the policy, including notable coverages and exclusions under the policy, as determined by the Commissioner of Banking and Insurance. The summary shall not be considered a replacement for the terms of the policy of insurance, shall not have the effect of altering the coverage afforded by the policy, and shall not confer new or additional rights beyond those expressly provided for in the policy. The summary shall expressly state that the summary is only provided as guidance to the homeowner in understanding the terms of the policy of insurance.
b. The board of directors of the New Jersey Insurance Underwriting Association established pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.) shall prepare and disseminate a consumer information brochure in accordance with the requirements of this section.
c. An insurer shall provide a consumer information brochure to an insured at least annually at the time of policy renewal, or as otherwise ordered by the commissioner.
##### **§ 17:36-5.37** Regulations. {#sec-17-36-5.37 omnilex-key=us-nj-statutes--title-17--17:36-5.37}
5. The commissioner shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
##### **§ 17:36-5.38** Earthquake damage endorsement, availability through homeowners' insurance policy. {#sec-17-36-5.38 omnilex-key=us-nj-statutes--title-17--17:36-5.38}
1. Every insurer that is authorized to transact the business of homeowners' insurance in this State and that offers coverage for earthquake damage by endorsement to those homeowners' insurance policies shall inform insureds at the time of renewal of a homeowners' insurance policy, and applicants at the time of application for a homeowners' insurance policy, of the availability of an endorsement to the policy covering earthquake damage.
##### **§ 17:36-5.39** Earthquake damage endorsement, availability through commercial fire, extended coverage insurance policy. {#sec-17-36-5.39 omnilex-key=us-nj-statutes--title-17--17:36-5.39}
2. Every insurer that is authorized to transact the business of commercial fire and extended coverage insurance in this State and that offers coverage for earthquake damage by endorsement to those commercial fire and extended coverage insurance policies shall inform insureds at the time of renewal of a commercial fire and extended coverage insurance policy, and applicants at the time of application for a commercial fire and extended coverage insurance policy, of the availability of an endorsement to the policy covering earthquake damage.
##### **§ 17:36-5.40** Immunity from liability for informing insureds of endorsement. {#sec-17-36-5.40 omnilex-key=us-nj-statutes--title-17--17:36-5.40}
3. Notwithstanding any other provision of law to the contrary, no person, including, but not limited to, an insurer and an insurance producer, as defined in section 3 of P.L.2001, c.210 (C.17:22A-28), shall be liable in an action for damages on account of the election or non-election by an applicant or insured of the earthquake endorsement as a result of the requirement to inform the applicant or insured of the availability of the earthquake endorsement pursuant to sections 1 and 2 of this act, unless the person causes damage by a willful, wanton or grossly negligent act of commission or omission.
##### **§ 17:36-5.41** Provision of notice to applicants, insureds. {#sec-17-36-5.41 omnilex-key=us-nj-statutes--title-17--17:36-5.41}
4. a. Every insurer, subject to the provisions of sections 1 and 2 of this act, shall provide a notice, prepared by the commissioner pursuant to subsection b. of this section, to applicants and insureds with the offer required to be made pursuant to sections 1 and 2 of this act.
b. The commissioner shall prepare a notice to be distributed pursuant to subsection a. of this section that sets forth the ratio of earthquake damage claims to the premiums written for such coverage over the preceding five calendar years in New Jersey and any other information regarding earthquake coverage that the commissioner deems relevant.
##### **§ 17:36-6** Furnishing proofs of loss {#sec-17-36-6 omnilex-key=us-nj-statutes--title-17--17:36-6}
The failure of any person, insured against loss or damage by fire in any insurance company doing business under the authority of the department, to furnish proofs of loss shall not be considered a waiver of any rights accruing under the policy of insurance, and shall not debar the person so holding insurance from a recovery under the policy or the collection of the sum which should be paid thereunder, unless after the loss sixty days' notice, in writing, that the company desires the proofs of loss is furnished the insured.
This section shall not be varied, altered, contradicted or affected by any agreement or contract, but shall remain in full force and effect notwithstanding any provision in any contract of insurance or other agreement to the contrary.
##### **§ 17:36-8** Official certificate of search required {#sec-17-36-8 omnilex-key=us-nj-statutes--title-17--17:36-8}
No insurer issuing fire insurance policies in this State shall pay any claims for fire damages in excess of $2,500.00 on any real property located within a municipality having adopted an ordinance pursuant to section 2 of this act, unless or until: the insured person submits an official certificate of search for municipal liens pursuant to R.S. 54:5-12, certifying that all taxes, assessments or other municipal liens or charges, levied and assessed and due and payable against said property have been paid and, if required by an ordinance adopted pursuant to paragraph (1) of subsection a. of that section, an official certificate, on a form prescribed and certified by the municipality, that demolition is not required or that the cost of demolition have been paid; or the municipality submits a certified copy of a resolution adopted pursuant to section 4 of this act. If the demolition has not yet occurred on the date of receipt by a municipality of a request for execution of the certificate required by this section, the insured shall provide on that certificate an estimate of the anticipated costs of demolition. The insurer on notice to the insured shall pay the anticipated cost of demolition to the municipality, which shall hold the funds in an interest bearing escrow account in a State or federally chartered bank, savings bank or savings and loan association in this State.
Any request, pursuant to this section, for an official certificate of search for municipal liens shall specify that the search concerns fire damaged property.
##### **§ 17:36-9** Municipal ordinances authorized {#sec-17-36-9 omnilex-key=us-nj-statutes--title-17--17:36-9}
Any municipality may, by ordinance, prohibit the payment to a claimant by any insurance company of any claim in excess of $2,500.00 for fire damages on any real property located within the municipality, pursuant to any fire insurance policy issued or renewed after the adoption of such ordinance and after the filing of such ordinance with the State Commissioner of Insurance, until such time as: a.(1) anticipated demolition costs and all taxes and assessments and all other municipal liens or charges due and payable, appearing on the official certificate of search; or (2) all taxes and assessments and all other municipal liens or charges due and payable, appearing on the official certificate of search, shall have been paid either by the owner of such real property or by the insurance company pursuant to the provisions of section 3 of this act; or b. the municipality submits to the insurance company a copy of a resolution adopted pursuant to section 4 of this act. No change in such an ordinance shall take effect until filed with the commissioner.
The State Commissioner of Insurance shall cause to have published in the New Jersey Register a list of all municipalities which have adopted ordinances pursuant to paragraph (1) or (2) of subsection a. of this section and said list shall designate by asterisk those municipalities which have adopted said ordinances since the previous date of publication of said list.
The official certificate of search may, from time to time, be altered, by the bonded official responsible for preparing such certificates, in order to correct any errors or omissions or to add any municipal liens or related charges due and payable subsequent to the preparation of the official certificate.
##### **§ 17:36-10** Payment of demolition costs, liens {#sec-17-36-10 omnilex-key=us-nj-statutes--title-17--17:36-10}
Unless a resolution is received in accordance with section 4 of this act by an insurance company writing fire insurance policies in any municipality having adopted an ordinance pursuant to section 2 of this act, such insurance company is hereby authorized and required, prior to the payment of any claims for fire damages in excess of $2,500.00, to pay the amount of the anticipated demolition costs, if so required by the municipal ordinance, to the municipality in the manner provided by section 1 of this act and to pay to the municipality the amount of the liens appearing on the official certificate and such other recorded liens or related charges as may be certified to the insurance company. If an appeal is taken on the amount of any lien or charge, other than an appeal on the assessed valuation of real property pursuant to R.S. 54:3-21, the insurance company shall issue a draft payable to the court of record, to be held by the court in an interest bearing escrow account in a State or federally chartered bank, savings bank, or savings and loan association in the State, in an amount totaling 75% of the full amount of the lien or charge being contested, but not to exceed the proceeds payable under its insurance policy, and the insurance company shall issue a draft payable to the municipality for the remaining 25% of the lien or charge being contested, with the full amount paid by the insurance company to the court and the municipality not to exceed the proceeds payable under its insurance policy, pending termination of all proceedings, at which time such moneys and all interest accruing thereon, at a rate paid on interest bearing accounts in State or federally chartered banks, savings banks or savings and loan associations in the State, shall be disbursed in accordance with the final order or judgment of the court.
##### **§ 17:36-11** Resolution of agreement with owner to pay liens or costs in installments; authorization for payment of claim in full {#sec-17-36-11 omnilex-key=us-nj-statutes--title-17--17:36-11}
The governing body of the municipality in which the fire damaged property is located may enter into agreement with the owner of any fire damaged property to pay in full all delinquent taxes, assessments or other municipal liens by installments pursuant to R.S. 54:5-19 or for the redemption of the tax sale lien by installment payments pursuant to Article 7 of chapter 5 of Title 54 of the Revised Statutes, or for the payment in full of any anticipated costs of demolition by installment, if the governing body of the municipality is satisfied that the claim for fire damages is to be used to restore or improve the fire damaged property. An insurance company receiving a certified copy of a resolution of agreement from the governing body of the municipality is authorized to make full payment on the claim to the insured person.
##### **§ 17:36-12** Priority of municipal claim; subordination to mortgage; limitation on liability of insurer; enforcement of lien under other law {#sec-17-36-12 omnilex-key=us-nj-statutes--title-17--17:36-12}
A municipal claim made in accordance with the provisions of this act shall be paramount to any other claims on the proceeds of the fire insurance policy, except the claim of the holder of a purchase money mortgage held as a first mortgage or an institutional lender which is a holder of a mortgage on the fire damaged property, where the fire insurance policy at the time of the loss listed the mortgagee as the holder of an insurable interest, in which event the claim of the mortgagee to the proceeds shall be paramount to the municipal lien under this act only to the extent of the amount due and payable to the mortgagee under the mortgage contract. As used in this paragraph, "institutional lender" means any State or federally chartered bank, savings bank, savings and loan association, or insurance company.
Nothing in this act shall be construed:
a. To obligate an insurance company for any amount in excess of the proceeds payable under its fire insurance policy;
b. Except as provided in the case of appeals under section 3 of this act, to obligate the insurance company for any liens not appearing on the official certificate or any certified changes submitted by the bonded official;
c. To affect the authority of a municipality to enforce a municipal lien under any other law of this State; or
d. To obligate an insurance company for the payment of demolition costs or anticipated costs, as the case may be, if those costs did not appear on an official certificate or a certified change submitted by the bonded official.
##### **§ 17:36-13** Fire insurance policies subject to act {#sec-17-36-13 omnilex-key=us-nj-statutes--title-17--17:36-13}
In addition to the standard provisions for fire insurance policies set forth in section 6 of P.L.1953, c. 268 (C. 17:36-5.20), every fire insurance policy issued on property situated in a municipality having adopted and filed an appropriate ordinance pursuant to section 2 of this act shall be subject to the provisions of this act.
##### **§ 17:36-14** Definitions {#sec-17-36-14 omnilex-key=us-nj-statutes--title-17--17:36-14}
For the purposes of this act:
a. "Authorized agency" means any law enforcement agency or agency or instrumentality of this State, county or municipality or of the Federal Government which is charged with the responsibility of investigating fires;
b. "Relevant information" means any information having any tendency in reason to prove any material fact;
c. "Insurer" means any domestic, foreign, or alien insurer or surplus lines insurer, and the New Jersey Insurance Underwriting Association created pursuant to P.L.1968, c. 129 (C. 17:37A-1 et seq.).
##### **§ 17:36-15** Release to and cooperation with authorized agency by insurer {#sec-17-36-15 omnilex-key=us-nj-statutes--title-17--17:36-15}
An authorized agency may request in writing that an insurer release to it any information which is relevant to a loss by fire of real or personal property which is under investigation by the agency. The insurer shall release the information to and cooperate with the authorized agency requesting the information as permitted by this act. Such information may include, but not be limited to:
a. Pertinent insurance policy information relevant to a fire loss under investigation and any application for such a policy;
b. Policy premium payment records;
c. History of previous claims made by the insured;
d. Material relating to the investigation of the loss, including statements of any person, proof of loss, and any other evidence relevant to the investigation.
##### **§ 17:36-16** Belief by insurer fire loss due to other than accidental cause; notice and provision of material to county prosecutor; disposition {#sec-17-36-16 omnilex-key=us-nj-statutes--title-17--17:36-16}
When an insurer has reason to believe that a fire loss in which it has an interest may be of other than accidental cause, the insurer shall, for the purpose of notification and for having such fire loss investigated, notify the county prosecutor of the county wherein the fire occurred and provide the county prosecutor with any or all material developed from the company's inquiry into the fire loss. The county prosecutor shall furnish the information requested to the authorized agency responsible for the investigation of the fire.
##### **§ 17:36-17** Immunity from liability of insurer {#sec-17-36-17 omnilex-key=us-nj-statutes--title-17--17:36-17}
An insurer, or a person acting on its behalf shall not be held liable in any civil proceeding for any statement made or action required by this act where actual malice on the part of the insurer or its representative is not present.
##### **§ 17:36-18** Disclosure of acquired information by authorized agency {#sec-17-36-18 omnilex-key=us-nj-statutes--title-17--17:36-18}
a. Any authorized agency which has obtained information from any insurer pursuant to this act may disclose such information to any authorized agency of this or another state, or of the United States to the extent that such disclosure or use is relevant to a loss by fire of real or personal property which is under investigation by the agency.
b. The information obtained may otherwise be disclosed only for use in a civil or criminal proceeding as ordered by the court.
##### **§ 17:36-19** Right of insurer to receive information from authorized agency with respect to civil action {#sec-17-36-19 omnilex-key=us-nj-statutes--title-17--17:36-19}
Any insurance company providing information to an authorized agency or agencies pursuant to this act shall, with respect to a civil action, have the right to request relevant information and receive, within a reasonable time, not to exceed 30 days, the information requested, provided that the information is not otherwise privileged by law.
##### **§ 17:36-20** Testimony in litigation by authorized agency or its personnel {#sec-17-36-20 omnilex-key=us-nj-statutes--title-17--17:36-20}
Any authorized agency or its personnel may be required to testify in any litigation in which the insurer at interest is named as a party.
##### **§ 17:36-21** Violations; penalty; collection {#sec-17-36-21 omnilex-key=us-nj-statutes--title-17--17:36-21}
A person who knowingly:
a. Refuses to release information,
b. Fails to notify the county prosecutor of a fire loss of which there is reason to believe that it was caused by other than accidental means, or
c. Fails to hold information in confidence, as required by this act,
is liable to a penalty of not more than $250.00, which may be collected or enforced in a summary manner under "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.). The proceedings may be brought by authorized agency which has not received information or has not been notified regarding a fire loss, or an insurer or person which has been injured by a failure to keep information confidential, or the State. If a money judgment is rendered against the defendant, it shall be paid to the plaintiff. A reasonable and good faith effort to comply with the provisions of this act shall be a defense to an alleged violation of this act.
## **Chapter 37** {#struct-chapter-37}
##### **§ 17:37-1** Property mutual company may insure {#sec-17-37-1 omnilex-key=us-nj-statutes--title-17--17:37-1}
Any mutual fire insurance company of this state may insure dwellings, schoolhouses, houses for religious worship, mechanic shops, barns, wagon houses and other farm buildings, with or without their contents, against loss or damage by lightning or fire, without regard to the distance which any one building stands from another building or whether it is connected with any other building, dwelling house, shop, barn or other building, and may insure buildings, farm produce and other personal property against loss or damage by lightning or fire, wherever the same is located.
##### **§ 17:37-2** Retirement or surrender of advance premium notes {#sec-17-37-2 omnilex-key=us-nj-statutes--title-17--17:37-2}
When any mutual fire insurance company formed under this subtitle shall have taken advantage of sections 17:26-4 and 17:26-5 of this title, and shall have created a capital stock and issued policies, not mutual, participating or assessable, all notes received by the company at the time of its commencement of business as advance premiums for insurance, as required by section 17:17-7 of this title, and which notes are by said section 17:17-7 considered the capital stock of the company, may, by a majority vote of the directors of the company, be retired and surrendered to the persons by whom the same were given, if the policies of insurance in connection with which the notes have been received, have matured, or have been surrendered or canceled.
##### **§ 17:37-3** Borrowing money {#sec-17-37-3 omnilex-key=us-nj-statutes--title-17--17:37-3}
The directors of any mutual fire insurance company of this State issuing assessable policies may borrow money to an amount not exceeding $25,000.00, for and on behalf of the company and in its name, to pay losses and expenses for which the company is liable, and may raise moneys by assessments to pay the sums so borrowed, in the same manner as they are authorized and directed to raise money to pay losses. This limit shall not apply to any mutual fire insurance company issuing nonassessable policies.
##### **§ 17:37-4** Rewards {#sec-17-37-4 omnilex-key=us-nj-statutes--title-17--17:37-4}
The directors of any mutual fire insurance company of this state may offer, in the company's name, such sum of money as in their judgment is proper as a reward for the apprehension and conviction of any person who burns or causes to be burned any property on which the company has a policy of insurance in force, and may raise the money necessary to pay the reward and pay the same in the same manner as they are authorized to raise and pay moneys for losses.
##### **§ 17:37-5** Issuance of policies to others than the insured {#sec-17-37-5 omnilex-key=us-nj-statutes--title-17--17:37-5}
Any mutual fire insurance company of this state, at the time of issuing a policy of insurance, may, with the assent of the insured, make the whole or any part of the loss which may occur under the policy payable to any person, other than the insured, who may have an interest in the property, and make indorsement thereof on the policy. Where the assent of the insured to the appropriation of the money to be paid in satisfaction of any loss that may occur under the policy is indorsed on the application for insurance or survey of the property insured, it shall constitute a part of the application or survey, and be sufficient authority to the company for the issuance of the policy in the manner therein prescribed.
##### **§ 17:37-6** Limited liability of insured in certain companies {#sec-17-37-6 omnilex-key=us-nj-statutes--title-17--17:37-6}
Any mutual fire insurance company organized by special act of the Legislature prior to the year 1875 may provide in the policy of insurance a limited liability of the insured to pay upon call during the existence of the policy any portion or all of the premium not paid in cash, notwithstanding, and in lieu of, any provision in the act incorporating the company for the deposit by the insured of a promissory note for the portion of premium not paid in cash and it shall not be necessary for any company to impose any limited liability to be paid upon call or to require the deposit of a promissory note when a policy is issued for a cash premium only, in pursuance of the authority of section 17:28-3.
##### **§ 17:37-7** Assessments {#sec-17-37-7 omnilex-key=us-nj-statutes--title-17--17:37-7}
When the directors of any mutual fire insurance company of this State make an assessment, they may assess over and above the amount of the losses and liabilities existing and unpaid at the time of making the assessment, any sum which they determine. The assessment shall be made against each member in proportion to the amount of insurance upon which he is liable to assessment by the rules and regulations of the company, not to exceed 1% of the amount of insurance, or in proportion to the original amount of his deposit note, which is assessable according to the constitution and by-laws of the company making the assessment, and in the latter case does not exceed 20% of the deposit note. The surplus, if any, collected upon the assessment, shall be placed in the company's treasury and be used only for the payment of losses and expenses, according to the provisions of its charter or certificate of incorporation. The same rights and remedies shall exist for the collection of the assessment as are given in and by the charter or certificate of incorporation of the company for the collection of the assessments therein provided for but no assessment shall be made against any member upon a policy issued for a cash premium only in pursuance of the authority of section 17:28-3 of this Title.
##### **§ 17:37-8** Assessments required when liabilities of mutual fire insurer exceed assets {#sec-17-37-8 omnilex-key=us-nj-statutes--title-17--17:37-8}
When the liabilities of any mutual fire insurance company organized under the laws of this State and now doing business shall exceed its assets, or hereafter organized shall exceed the net assets as provided in section 17:17-7 of this Title for the commencement of business, its board of directors shall raise money by assessment to restore such excess, and on neglect or refusal so to do, after 60 days' notice from the treasurer or the Commissioner of Banking and Insurance of such excess of liabilities over assets, the directors so neglecting or failing shall be personally liable to pay the liabilities to the persons to whom the same are due and the Commissioner of Banking and Insurance shall take possession of the property and business of the company as provided in section 17:30-1 of this Title.
This section shall not apply to stockholders of mutual companies having a capital stock or to any mutual insurance company issuing insurance policies in accordance with the provisions of section 17:28-3 of this Title for cash premiums and without additional contingent premiums.
##### **§ 17:37-9** Vice president; election; acting as president {#sec-17-37-9 omnilex-key=us-nj-statutes--title-17--17:37-9}
Any mutual fire insurance company, organized under the laws of this state, may choose from its board of directors, at the time of its annual election, in the same manner as its president is elected, one vice president, who may, in case of the death or disability of the president, sign policies and perform all other acts which devolve upon the office of president, during the continuance of the disability, or until the election of a new president by the company, or as provided by its by-laws.
##### **§ 17:37-10** Tenure of directors of certain companies; cash payments {#sec-17-37-10 omnilex-key=us-nj-statutes--title-17--17:37-10}
Any mutual fire insurance company of this state organized by special act prior to the year one thousand eight hundred and seventy-five may, if deemed for its best interests, elect its directors for three-year terms. The company may, also, accept cash payments for premiums, or any portion thereof.
## **Chapter 37A** {#struct-chapter-37a}
##### **§ 17:37A-1** Policy declaration for mandatory program of essential insurance {#sec-17-37a-1 omnilex-key=us-nj-statutes--title-17--17:37A-1}
1. It is hereby declared that an adequate market for fire and extended coverage insurance, including mine subsidence insurance, is necessary to attract and retain private capital in central city areas, and various other areas of the State; that without such insurance it is impossible to supply needed goods and services, and expand job opportunities; that orderly community development depends upon an adequate supply of such insurance to enable homeowners to obtain financing for the purchase and improvement of their property; that while the need for such insurance is growing there is reason to believe that the market for same is constricting, and likely to become more constricted in the future; that voluntary efforts to provide fire and extended coverage insurance, including mine subsidence insurance, in areas likely to be unprofitable deserve praise, but are insufficient to meet the needs of these areas; that the State has an obligation to require every insurance company writing fire and extended coverage insurance in New Jersey to meet its public responsibilities, instead of shifting the entire burden to a few public spirited companies; that it is the purpose of this act to accept this obligation; and that any mandatory program to provide fire and extended coverage insurance, including mine subsidence insurance, for all citizens of New Jersey should be supervised by the Commissioner of Insurance and periodically reviewed in the light of experience and intervening events by the Legislature.
##### **§ 17:37A-2** Definitions {#sec-17-37a-2 omnilex-key=us-nj-statutes--title-17--17:37A-2}
2. As used in this act, the following words and terms shall have the following meanings, unless the context indicates or requires another or different meaning or intent:
(a) "Essential property insurance" means insurance against direct loss to property as defined and limited in the standard fire policy and extended coverage endorsement thereon, as approved by the commissioner, and insurance for such types, classes, and locations of property against the perils of vandalism, malicious mischief, burglary, or theft, or mine subsidence, or such other classes of insurance as the commissioner may designate in order to comply with federal legislation and obtain federal reinsurance;
(b) "Basic property insurance" means insurance against loss to property as defined and limited in: the standard fire policy and extended coverage endorsement thereon, the allied line policy or endorsement, the homeowners' multiple peril policy, the commercial multiple peril policy, the burglary or theft coverage policy, the mine subsidence policy and other like policies;
(c) "Association" means the New Jersey Insurance Underwriting Association established pursuant to the provisions of this act;
(d) "Plan of operation" means the plan of operation of the association approved or promulgated by the commissioner pursuant to the provisions of this act;
(e) "Insurable property" means real property at fixed locations in urban areas in this State, or the tangible personal property located thereon, but shall not include insurance on automobile and farm risks, with an insurable value not in excess of the limits provided in the plan of operation of the association and in no event more than $1,500,000.00, which property is determined by the association, after inspection and pursuant to the criteria specified in the plan of operation to be in an insurable condition; provided, however, that neighborhood, area, location, environmental hazards beyond the control of the applicant or ownership of the property shall not be considered in determining insurable condition;
(f) "Commissioner" means the Commissioner of Insurance of New Jersey;
(g) "Net direct premiums" means gross direct premiums (excluding reinsurance assumed and ceded) written on property in this State for fire and extended coverage insurance, including the fire and extended coverage components of homeowners and commercial multiple peril package policies, as computed by the commissioner, less return premiums upon canceled contracts, dividends paid or credited to policyholders or the unused or unabsorbed portions of premium deposits;
(h) "Urban area" means any municipality or other political subdivision (1) which the Secretary of the United States Department of Housing and Urban Development has approved as eligible for an urban renewal project after a local public agency has been formed in that community to avail itself of a United States Housing and Urban Renewal Program or (2) designated by the association with the approval of the commissioner or (3) which the commissioner may designate;
(i) "Mine subsidence" means lateral or vertical ground movement resulting from the collapse of man-made underground mines, including, but not limited to, coal mines, clay mines, limestone mines, slate mines, iron ore mines, and other metal or ore mines, which directly damages structures. "Mine subsidence" does not include lateral or vertical ground movement caused by earthquake, landslide, volcanic eruption, soil conditions, soil erosion, soil freezing and thawing, improperly compacted soil, construction defects, roots of trees and shrubs or collapse of storm and sewer drains and rapid transit tunnels;
(j) "Mine subsidence insurance" means insurance against loss to an insured structure caused by mine subsidence;
(k) "Structure" means, for purposes of subsections (i) and (j) of this section, any dwelling, building or fixture permanently affixed to realty located in this State including driveways, sidewalks, parking lots, basements, footings, foundations, septic systems and underground pipes directly servicing the dwelling or building. "Structure" does not include land, trees, plants, crops or agricultural field drainage tile.
##### **§ 17:37A-3** Creation of association; membership {#sec-17-37a-3 omnilex-key=us-nj-statutes--title-17--17:37A-3}
There is hereby created the New Jersey Insurance Underwriting Association, consisting of all insurers authorized to write and engaged in writing within this State, on a direct basis, property insurance. Every such insurer shall be a member of the association and shall remain a member so long as the association is in existence as a condition of its authority to continue to transact such kinds of insurance in this State.
##### **§ 17:37A-4** Powers {#sec-17-37a-4 omnilex-key=us-nj-statutes--title-17--17:37A-4}
The association shall, pursuant to the provisions of this act and the plan of operation, and with respect to essential property insurance on insurable property, have the power, on behalf of its members:
a. To cause to be issued policies of insurance to applicants;
b. To assume reinsurance from its members;
c. To cede reinsurance.
##### **§ 17:37A-5** Board of directors; election or appointment {#sec-17-37a-5 omnilex-key=us-nj-statutes--title-17--17:37A-5}
The association shall be governed by a board of 21 directors, 10 of whom shall be elected annually by the members of the association, whose votes in such election shall be weighted in accordance with each member's participation in the association pursuant to section 6 of this act. One of whom shall be appointed annually by the commissioner from and among the officers of the various domestic mutual insurance companies, and one of whom shall be appointed annually by the commissioner from among the officers of the various domestic stock insurance companies. Six of whom shall be appointed annually by the commissioner from the public-at-large and who shall be individuals who are not employed by, or otherwise affiliated with, insurers, insurance agents, brokers, producers, or other entities of the insurance industry. In addition there will be three nonvoting members, one from the Independent Insurance Agents Association, one from the Professional Insurance Agents Association, and one from the Insurance Brokers' Association, or their successor organizations, each of whom shall be delegated by their respective associations to serve annually.
Each of the six public members appointed by the commissioner shall be entitled to a per diem stipend of $100.00 for each day of board business attended, to be paid by the association. In addition, all board members, both voting and nonvoting shall be reimbursed by the association for all reasonable travel expenses incurred in connection with attendance at board meetings.
##### **§ 17:37A-6** Writings, expenses, profits and losses; participation by members {#sec-17-37a-6 omnilex-key=us-nj-statutes--title-17--17:37A-6}
All members of the association shall participate in its writings, expenses, profits and losses in the proportion that the net direct premiums of each such member (but excluding that portion of premiums attributable to the operation of the association) written in this State during the preceding calendar year bear to the aggregate net direct premiums written in this State by all members of the association, as certified to the association by the commissioner after review of annual statements, other reports and any other statistics the commissioner shall deem necessary to provide the information herein required, and which the commissioner is hereby authorized and empowered to obtain from any member of the association. Each member's participation in the association shall be determined annually pursuant to the provisions of this section. No member shall be obligated in any 1 year to reimburse the association on account of its proportionate share in the deficit from operations of the association in that year in excess of 5% of its surplus to policyholders and the aggregate amount not so reimbursed shall be reallocated among the remaining members in accordance with the method of determining participation prescribed in this section, after excluding from the corporation the total net direct premiums of all members not sharing in such excess deficit. In the event that the deficit from operations allocated to all members of the association in any calendar year shall exceed 1% of their respective surplus to policyholders, the amount of such deficit shall be allocated to each member in accordance with the method of determining participation prescribed in this section. Any insurer authorized to write and engaged in writing any insurance, the writing of which requires such insurer to be a member of the association, pursuant to the provisions of section 3 of this act, who is authorized to write and engages in writing such insurance after the effective date of this act, shall become a member of the association on the January 1 immediately following such authorization, and the determination of any such insurer's participation in the association shall be made as of the date of such membership in the same manner as for all other members of the association.
##### **§ 17:37A-7** Proposed plan of operation; provisions; review and approval; amendments; annual review {#sec-17-37a-7 omnilex-key=us-nj-statutes--title-17--17:37A-7}
a. Within 90 days after the effective date of this act, the directors of the association shall submit to the commissioner, for his review and approval, a proposed plan of operation. Such proposed plan shall provide for economical, fair and non-discriminatory administration, and for the prompt and efficient provision of essential property insurance to promote orderly community development. Such proposed plan shall include: preliminary assessment of all members for initial expenses necessary to commence operations; establishment of necessary facilities; management of the association; assessment of members to defray losses and expenses; underwriting standards; procedures for acceptance and cession of reinsurance; procedures for determining amounts of insurance to be provided; time limits and procedures for processing applications for insurance; and such other provisions as may be deemed necessary by the commissioner to carry out the purposes of this act.
b. The proposed plan shall be reviewed by the commissioner and approved by him if he finds that such plan fulfills the purposes provided by section 1 of this act. In his review of the proposed plan the commissioner may, in his discretion, consult with the directors and other members of the association and any other individual or organization. If the commissioner approves the proposed plan he shall certify such approval to the directors and said plan shall take effect 10 days after such certification. If the commissioner disapproves all or any part of the proposed plan of operation he shall return same to the directors with a statement, in writing, of the reasons for his disapproval and any recommendations he may wish to make. The directors may accept the commissioner's recommendations, or may propose a new plan, which accepted recommendations or a new plan shall be submitted to the commissioner within 30 days after the return of a disapproved plan to the directors. If the directors do not submit a proposed plan of operation within 90 days after the effective date of this act, or a new plan which is acceptable to the commissioner, or accept the recommendations of the commissioner within 30 days after the disapproval of a proposed plan, the commissioner shall promulgate a plan of operation and certify same to the directors. Any such plan promulgated by the commissioner shall take effect 10 days after certification to the directors; provided, however, that until a plan of operation is in effect pursuant to the provisions of this act, any existing temporary placement facility shall be continued in effect on a mandatory basis on such terms as the commissioner shall determine.
c. The directors of the association may, on their own initiative, amend the plan of operation at any time, subject to the approval by the commissioner.
d. The commissioner may review the plan of operation whenever he deems expedient, and shall review same at least once a year, and may amend said plan after consultation with the directors and upon certification to the directors of such amendment.
##### **§ 17:37A-8** Essential property insurance; application; contents; denial; appeal {#sec-17-37a-8 omnilex-key=us-nj-statutes--title-17--17:37A-8}
a. Any person having an insurable interest in insurable property, who has failed to procure essential property insurance from an authorized insurer in the normal insurance market, shall, on or after the effective date of the plan of operation, be entitled to apply to the association for such coverage and for an inspection of the property. Such application may be made on behalf of an applicant by a broker or agent authorized by him. Every such application shall be submitted on forms prescribed by the commissioner after consultation with the directors of the association and shall contain information sufficient to indicate:
(1) Evidence of failure to procure essential property insurance from an authorized insurer in the normal insurance market;
(2) Whether or not the property is insurable;
(3) Whether or not there is any unpaid, uncontested premium due from the applicant for prior insurance on the property (as shown by the insured having failed to make written objection to charges within 30 days after billing). The term "insurable interest," as used in this section, shall be deemed to include any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage.
b. If the association determines that:
(1) The applicant has made a diligent effort to procure essential property insurance from an authorized insurer in the normal market at manual or tariff rates;
(2) The property is insurable; and
(3) There is no unpaid, uncontested premium due from the applicant for prior assurance on the property, the association, upon receipt of the premium, or such portion thereof, as is prescribed in the plan of operation, shall cause to be issued a policy of essential property insurance for a term of 1 year. Any policy issued pursuant to the provisions of this section shall be renewed annually, upon application therefor, so long as the information contained in the original application remains valid.
c. If the association, for any reason, denies an application and refuses to cause to be issued an insurance policy to any applicant, or takes no action on an application within the time prescribed in the plan of operation, any such applicant may appeal to the commissioner, and the commissioner, after a review of the facts may direct the association to cause to be issued an insurance policy to the applicant. In carrying out his duties pursuant to this section the commissioner may request, and the association shall provide, any information he deems necessary concerning the reasons for the denial or delay of an application.
##### **§ 17:37A-9** Ceding insurance to association {#sec-17-37a-9 omnilex-key=us-nj-statutes--title-17--17:37A-9}
Any member of the association may cede to the association essential property insurance written on insurable property, to the extent, if any, and on the terms and conditions set forth in the plan of operation.
##### **§ 17:37A-10** Rates, rating plans and rating rules {#sec-17-37a-10 omnilex-key=us-nj-statutes--title-17--17:37A-10}
a. The rates, rating plans and rating rules applicable to the insurance written by the association, shall be in accord with the manual or traffic rates in current usage.
##### **§ 17:37A-11** Appeal {#sec-17-37a-11 omnilex-key=us-nj-statutes--title-17--17:37A-11}
Any person insured pursuant to this act, or his representative, or any affected insurer, may appeal to the commissioner within 30 days after any ruling, action or decision by or on behalf of the association, with respect to those items of the plan of operation which the commissioner defines as appealable matters.
##### **§ 17:37A-12** Orders of commissioner; review {#sec-17-37a-12 omnilex-key=us-nj-statutes--title-17--17:37A-12}
All orders of the commissioner made pursuant to this act shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:37A-13** Reports of inspection {#sec-17-37a-13 omnilex-key=us-nj-statutes--title-17--17:37A-13}
All reports of inspection performed by or on behalf of the association shall be made available to members of the association, applicants and the commissioner.
##### **§ 17:37A-14** Liability for statements in reports or communications {#sec-17-37a-14 omnilex-key=us-nj-statutes--title-17--17:37A-14}
There shall be no liability on the part of, and no cause of action of any nature shall arise against, the association or its agents or employees, an insurer or the commissioner or his authorized deputies, for any statements made in good faith by them in any reports or communications concerning risks insured or to be insured by the association or at any administrative hearings conducted in connection therewith.
##### **§ 17:37A-15** Association's annual statement; contents, form {#sec-17-37a-15 omnilex-key=us-nj-statutes--title-17--17:37A-15}
15. The association shall file with the Governor, the commissioner and the New Jersey Senate and General Assembly, annually on or before March 1, a statement which shall contain information with respect to its transactions, condition, operations and affairs during the preceding year. Such statement shall contain such matters and information as are prescribed by the commissioner, and shall be in such form as is approved by him. The commissioner may at any time require the association to furnish him with additional information with respect to its transactions, condition or any matter connected therewith, which he considers to be material and which will assist him in evaluating the scope, operation and experience of the association.
##### **§ 17:37A-16** Examination into affairs; hearings; expenses {#sec-17-37a-16 omnilex-key=us-nj-statutes--title-17--17:37A-16}
The commissioner may make an examination into the affairs of the association whenever he deems it expedient, and in undertaking any examination he may hold a hearing or hearings pursuant to the procedures provided in chapter 1 of this Title. The expenses of every such examination shall be borne and paid by the association, but the commissioner may, in his discretion, for good cause shown, remit such charges.
##### **§ 17:37A-18** New Jersey insurance development fund; purpose; administration {#sec-17-37a-18 omnilex-key=us-nj-statutes--title-17--17:37A-18}
There is hereby created a fund to be known as the "New Jersey Insurance Development Fund," for the purpose of providing a financial backup for the plan of operation of the association as approved or issued by the commissioner pursuant to this act. The fund shall be used to reimburse any insurer or the association established pursuant to this act for losses sustained in excess of the amount of retention of such losses as shall be provided for by the commissioner; except that in any given calendar year the total amount of all such reimbursement shall not exceed 5% of the insurance premiums written on basic property insurance in this State in the most recent full calendar year. The fund shall consist of all payments made to the fund by insurers as hereinafter provided, of securities acquired by and through the use of moneys belonging to the fund, moneys appropriated to the fund as provided in this act, together with interest and accretions earned upon such payments or investments. The fund shall be administered by the commissioner and the State Treasurer in accordance with the provisions of this act.
##### **§ 17:37A-19** Privilege of doing business; surcharge upon premiums {#sec-17-37a-19 omnilex-key=us-nj-statutes--title-17--17:37A-19}
For the privilege of doing property insurance business in this State, and in addition to all other requirements of law, every insurer authorized to write such insurance in this State shall be obligated to collect from the insured under any policy of basic property insurance, a surcharge upon the premium paid for said policy in an amount which shall be annually determined by the commissioner as hereinafter provided. This surcharge shall be collected by each insurer and paid over to the fund semiannually as provided for by the commissioner.
##### **§ 17:37A-20** Establishment of fund; surcharge upon basic property insurance premiums; maximum {#sec-17-37a-20 omnilex-key=us-nj-statutes--title-17--17:37A-20}
For the purpose of providing the moneys necessary to establish the New Jersey Insurance Development Fund in an amount sufficient to meet the requirements of said fund pursuant to section 21 of this act, the commissioner shall establish a reasonable surcharge upon all basic property insurance premiums paid for policies of insurance written in this State; provided, however, that in any given calendar year the aggregate amount of such surcharges shall not exceed a sum equal to 5% of the insurance premiums written on basic property insurance in this State in the most recent full calendar year. The surcharge shall be a separate charge to the insured in addition to the premium to be paid and shall be reflected as such in the policy and commissions shall not be payable thereon. The insurer shall be prohibited from absorbing such surcharge as an inducement for insurance or for any other reason. In the event that pursuant to section 23 of this act the Legislature appropriates any moneys to the credit of such fund, the commissioner is hereby empowered to increase the surcharge so that the amount so appropriated may be returned to the State Treasury as provided by section 23 of this act.
##### **§ 17:37A-21** Net value of fund; determination; amount {#sec-17-37a-21 omnilex-key=us-nj-statutes--title-17--17:37A-21}
The commissioner, on or before April 1, shall ascertain and determine the net value of the fund as of the next preceding December 31. The net value of the fund shall be determined by deducting from the value of the assets of the fund, the aggregate, actual, and estimated liabilities of the fund as determined by the commissioner. When the net value of the fund, as thus determined, reaches an amount equal to 5% of the premiums written on basic property insurance in this State in the most recent full calendar year, no further surcharge on said premiums and no further payments to said fund shall be made; provided, however, that whenever, thereafter, the net value of said fund shall be reduced below the aforesaid amount, by reason of payments from and known and estimated liabilities of such fund, then such surcharge and payments to said fund shall be received in the manner provided in section 19 of this act, and shall continue in such manner until said fund, over and above its sum and estimated liabilities, shall reach the aforesaid amount.
##### **§ 17:37A-22** Custodian of fund; disbursements; investments {#sec-17-37a-22 omnilex-key=us-nj-statutes--title-17--17:37A-22}
The fund created by this act shall be separate and apart from any other fund and from all other State moneys. The State Treasurer shall be the custodian of said fund; and all disbursements from said fund shall be made by the treasurer upon vouchers signed by the commissioner, as in this act provided. The moneys of said fund shall be invested and reinvested by the Director of the Division of Investment as other trust funds in the custody of the State Treasurer in the manner provided by law.
##### **§ 17:37A-23** Insufficiency of fund to pay claims; appropriation {#sec-17-37a-23 omnilex-key=us-nj-statutes--title-17--17:37A-23}
If in any year or at any time the fund as hereinabove established is insufficient to pay claims chargeable to the fund to the extent of 5% of the most recent full calendar year basic property insurance premiums written by authorized insurers in this State, the commissioner shall certify to the Governor the amount of such insufficiency and such amount shall be appropriated and paid to the fund, which said amount so paid shall be returned to the treasury of this State from proceeds of the surcharge collected pursuant to this act.
##### **§ 17:37A-24** Entry upon lands for examination {#sec-17-37a-24 omnilex-key=us-nj-statutes--title-17--17:37A-24}
The agents and employees of any insurer of this State participating in a plan established pursuant to this act may enter upon any lands and premises in the State for the purpose of making such examination as is necessary or convenient for the purposes of this act and such entry shall not be deemed a trespass, except that the insurer shall make reimbursement for any actual damages resulting to such lands and premises as a result of such activity.
##### **§ 17:37A-25** Federal programs of reinsurance; participation {#sec-17-37a-25 omnilex-key=us-nj-statutes--title-17--17:37A-25}
In addition to any powers conferred upon him by this or any other law, the commissioner is authorized to do all things necessary to enable this State and any insurer participating in any plan approved or issued by the commissioner to fully participate in any Federal program of reinsurance which may be hereafter adopted for purposes similar to the purposes of this act.
##### **§ 17:37A-26** Rules and regulations {#sec-17-37a-26 omnilex-key=us-nj-statutes--title-17--17:37A-26}
The commissioner may make reasonable rules and regulations to carry out the purposes of this act.
##### **§ 17:37A-27** Reports from insurers concerning risks {#sec-17-37a-27 omnilex-key=us-nj-statutes--title-17--17:37A-27}
The commissioner may require such reports from insurers concerning risks insured under any plan approved or issued pursuant to this act as he shall deem necessary.
## **Chapter 37B** {#struct-chapter-37b}
##### **§ 17:37B-1** Findings, declarations {#sec-17-37b-1 omnilex-key=us-nj-statutes--title-17--17:37B-1}
The Legislature finds and declares:
a. That the present crisis in commercial insurance, which is characterized by the lack of availability and rapidly escalating insurance costs, has severely disrupted the economy of this State and has caused many of its small businesses to be without insurance protection entirely; and
b. While the crisis is due in part to significant increases in the frequency and severity of insurance claims and significant increases in the amount of personal injury litigation, it is also due to the cyclical nature of the insurance industry and the utilization by the industry of certain business practices which have proved to be detrimental to the financial condition of many insurers and to the functioning of the insurance system as a whole; and
c. While it is the duty of the several states to regulate the business of insurance, the present regulatory structure proved itself to be inadequate to detect the harmful business practices which were being pursued by the insurance industry, including imprudent cash-flow underwriting practices, the use of rates which were inadequate, and the use of reinsurers which were new entrants into the United States insurance market and unfamiliar with the operation of the American tort system; and
d. It is essential that the regulatory structure be modified in such a manner so that the State may be in a position to detect potential problems in the insurance system and to intervene to stop imprudent and harmful business practices before they have a catastrophic effect upon the market, similar to the present crisis.
##### **§ 17:37B-2** Division of Property-Casualty Examination {#sec-17-37b-2 omnilex-key=us-nj-statutes--title-17--17:37B-2}
There is created in the Department of Insurance a Division of Property-Casualty Examination. The division shall perform all financial examinations of property and casualty insurers, as provided in this act and as otherwise provided by law.
b. The commissioner shall appoint at least the following full-time personnel to the division:
(1) Six certified public accountants or other qualified individuals;
(2) Two persons holding the degree of Master of Business Administration in fields related to the analysis of the financial condition of insurance companies;
(3) One economist, who shall hold a doctoral degree.
c. When requested by the commissioner, the Attorney General shall assign one or more deputy attorneys general to represent the Department of Insurance in proceedings related to the financial examination of insurance companies or other functions performed by the division pursuant to the provisions of this act.
d. The commissioner shall appoint clerical and other staff necessary for the division to carry out its responsibilities. These personnel shall be employed subject to the provisions of Title 11A of the New Jersey Statutes.
##### **§ 17:37B-3** Additional duties of division {#sec-17-37b-3 omnilex-key=us-nj-statutes--title-17--17:37B-3}
a. In addition to any other duties otherwise prescribed by law, the division shall analyze the general business practices being followed by insurers writing the class or classes of insurance provided for in R.S. 17:17-1, including, but not limited to:
(1) The policies being followed by the insurer in procuring reinsurance; and
(2) The general pricing policies being utilized by the insurer, and the effect of those pricing policies upon the insurer's overall operations; and
(3) The investment policies being utilized by the insurer, and the effect of these policies upon the insurer's overall operations.
b. In addition to the duties prescribed by this act or otherwise prescribed by law, the division established pursuant to section 2 of this act shall, from time to time, examine the overall operation of the insurance market, with respect to commercial lines insurance and personal lines insurance. If the division finds that any business practice or practices being followed by any insurer or insurers will result in market instability, the lack of the availability of coverage, or will result in premiums which are excessive, inadequate or unfairly discriminatory, the division shall so report to the commissioner.
##### **§ 17:37B-4** Definitions {#sec-17-37b-4 omnilex-key=us-nj-statutes--title-17--17:37B-4}
For the purposes of this act:
a. "Commissioner" shall mean the Commissioner of Insurance;
b. "Division" shall mean the Division of Property-Casualty Examination established by section 2 of this act.
##### **§ 17:37B-5** Rules, regulations {#sec-17-37b-5 omnilex-key=us-nj-statutes--title-17--17:37B-5}
The commissioner shall promulgate rules and regulations as are necessary to carry out the purposes of this act.
## **Chapter 38** {#struct-chapter-38}
##### **§ 17:38-1.1** Fraternal benefit society contracts; conformity with health insurance provisions {#sec-17-38-1.1 omnilex-key=us-nj-statutes--title-17--17:38-1.1}
One year after the effective date of this supplementary act, and thereafter, no domestic, foreign or alien fraternal benefit society authorized to do business in this State shall issue or deliver in this State any certificate or other evidence of any contract of insurance or endorsement thereto against loss or damage from the sickness, or the bodily injury or death of the insured by accident, except in conformity with the provisions of chapter 26 of Title 17B of the New Jersey Statutes.
##### **§ 17:38-1.2** Law applicable {#sec-17-38-1.2 omnilex-key=us-nj-statutes--title-17--17:38-1.2}
Section 17B:26-2 of Title 17B shall not apply to fraternal benefit societies nor shall that part of section 17B:26-4 apply which requires that the policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. The word "policy" as used in chapter 26 of Title 17B shall mean "certificate" as applied to fraternal benefit societies.
##### **§ 17:38-13.12** Effective date of act {#sec-17-38-13.12 omnilex-key=us-nj-statutes--title-17--17:38-13.12}
This act shall take effect on January first, one thousand nine hundred and fifty-two.
## **Chapter 44B** {#struct-chapter-44b}
##### **§ 17:44B-1** Definitions relative to fraternal benefit societies {#sec-17-44b-1 omnilex-key=us-nj-statutes--title-17--17:44B-1}
1. As used in this act:
"Benefit contract" means an agreement for provision of benefits authorized by section 16 of this act, as that agreement is described in subsection a. of section 18 of this act.
"Benefit member" means an adult member who is designated by the laws or rules of the society to be a benefit member under a benefit contract.
"Certificate" means the document issued as written evidence of a benefit contract.
"Commissioner" means the Commissioner of Banking and Insurance.
"Department" means the Department of Banking and Insurance.
"Laws" means the society's articles of incorporation, constitution and bylaws, however designated.
"Lodge" means a subordinate member unit of the society, known as a camp, court, council, branch or by any other designation.
"Premiums" means premiums, rates, dues or other required contributions by whatever name known, which are payable under the certificate.
"Rules" means all rules, regulations or resolutions adopted by the assembly or board of directors which are intended to have general application to the members of the society.
"Society" means fraternal benefit society, unless otherwise indicated.
##### **§ 17:44B-2** Fraternal benefit society {#sec-17-44b-2 omnilex-key=us-nj-statutes--title-17--17:44B-2}
2. Any incorporated society, order or supreme lodge, without capital stock, including one exempted under the provisions of section 35 of this act, whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not-for-profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which provides benefits in accordance with this act, is declared to be a fraternal benefit society.
##### **§ 17:44B-3** Lodge system {#sec-17-44b-3 omnilex-key=us-nj-statutes--title-17--17:44B-3}
3. a. A society is operating on the lodge system if it has a supreme governing body and subordinate lodges into which members are elected, initiated or admitted in accordance with its laws, rules and ritual. Subordinate lodges shall be required by the laws of the society to hold regular meetings at least once in each month in furtherance of the purposes of the society.
b. A society may, at its option, organize and operate lodges for minors under the minimum age for adult membership. Membership and initiation in local lodges shall not be required of children, nor shall they have a voice or vote in the management of the society.
##### **§ 17:44B-4** Representative form of government for society {#sec-17-44b-4 omnilex-key=us-nj-statutes--title-17--17:44B-4}
4. A society has a representative form of government when:
a. It has a supreme governing body constituted in one of the following ways:
(1) Assembly. The supreme governing body is an assembly composed of delegates elected directly by the members or at intermediate assemblies or conventions of members or their representatives, together with other delegates as may be prescribed in the society's laws. A society may provide for election of delegates by mail. The elected delegates shall constitute a majority in number and shall not have less than 2/3 of the votes and not less than the number of votes required to amend the society's laws. The assembly shall be elected and shall meet at least once every four years and shall elect a board of directors to conduct the business of the society between meetings of the assembly. Vacancies on the board of directors between elections may be filled in the manner prescribed by the society's laws.
(2) Direct Election. The supreme governing body is a board composed of persons elected by the members, either directly or by their representatives in intermediate assemblies, and any other persons prescribed in the society's laws. A society may provide for election of the board by mail. Each term of a board member may not exceed four years. Vacancies on the board between elections may be filled in the manner prescribed by the society's laws. Those persons elected to the board shall constitute a majority in number and not less than the number of votes required to amend the society's laws. A person filling the unexpired term of an elected board member shall be considered to be an elected member. The board shall meet at least quarterly to conduct the business of the society.
b. The officers of the society are elected either by the assembly or board of directors;
c. Only benefit members are eligible for election to the assembly or board of directors; and
d. Each voting member shall have one vote; no vote may be cast by proxy.
##### **§ 17:44B-5** Purposes of society {#sec-17-44b-5 omnilex-key=us-nj-statutes--title-17--17:44B-5}
5. a. A society shall operate for the benefit of members and their beneficiaries by:
(1) providing benefits as specified in section 16 of this act; and
(2) operating for one or more social, intellectual, educational, charitable, benevolent, moral, fraternal or religious purposes for the benefit of its members, which may also be extended to others.
These purposes may be carried out directly by the society, or indirectly through subsidiary corporations or affiliated organizations.
b. Every society shall have the power to adopt laws and rules for the government of the society, the admission of its members, and the management of its affairs. It shall have the power to change, alter, add to or amend those laws and rules and shall have those other powers as are necessary and incidental to carrying into effect the objects and purposes of the society.
##### **§ 17:44B-6** Specification of eligibility, admission, rights, etc. {#sec-17-44b-6 omnilex-key=us-nj-statutes--title-17--17:44B-6}
6. a. A society shall specify in its laws or rules:
(1) eligibility standards for each and every class of membership, provided that if benefits are provided on the lives of minors, the minimum age for adult membership shall be set at not less than age 15 and not greater than age 21;
(2) the process for admission to membership for each membership class; and
(3) the rights and privileges of each membership class, provided that only benefit members shall have the right to vote on the management of the insurance affairs of the society.
b. A society may also admit social members who shall have no voice or vote in the management of the insurance affairs of the society.
c. Membership rights in the society are personal to the member and are not assignable.
##### **§ 17:44B-7** Location of principal office; reports {#sec-17-44b-7 omnilex-key=us-nj-statutes--title-17--17:44B-7}
7. a. The principal office of any domestic society shall be located in this State. The meetings of its supreme governing body may be held in any state, district, province or territory wherein such society has at least one subordinate lodge, or in such other location as determined by the supreme governing body, and all business transacted at those meetings shall be as valid in all respects as if those meetings were held in this State. The minutes of the proceedings of the assembly or board of directors shall be in the English language.
b. (1) A society may provide in its laws for an official publication in which any notice, report or statement required by law to be given to members, including notice of election, may be published. These required reports, notices and statements shall be printed conspicuously in the publication. If the records of a society show that two or more members have the same mailing address, an official publication mailed to one member is deemed to be mailed to all members at the same address unless a member requests a separate copy.
(2) Not later than June 1 of each year, a synopsis of the society's annual statement providing an explanation of the facts concerning the condition of the society disclosed in the statement shall be printed and mailed to each benefit member of the society or, in lieu thereof, the synopsis may be published in the society's official publication.
c. A society may provide in its laws or rules for grievance or complaint procedures for members.
##### **§ 17:44B-8** Immunity of officers, members from personal liability {#sec-17-44b-8 omnilex-key=us-nj-statutes--title-17--17:44B-8}
8. a. The officers and members of the supreme governing body or any subordinate body of a society shall not be personally liable for any benefits provided by a society.
b. Any person may be indemnified and reimbursed by any society for expenses reasonably incurred by, and liabilities imposed upon, that person in connection with or arising out of any action, suit or proceeding, whether civil, criminal, administrative or investigative, or threat thereof, in which the person may be involved by reason of the fact that he is or was a commissioner, officer, employee or agent of the society or of any firm, corporation or organization which he served in any capacity at the request of the society. A person shall not be indemnified or reimbursed: (1) in relation to any matter in an action, suit or proceeding which he is finally adjudged to be or have been guilty of breach of a duty as a director, officer, employee or agent of the society or (2) in relation to any matter in an action, suit or proceeding, or threat thereof, which results in a compromise settlement; unless in either case the person acted in good faith for a purpose the person reasonably believed to be in or not opposed to the best interests of the society and, in a criminal action or proceeding, in addition, had no reasonable cause to believe that his conduct was unlawful. The determination whether the conduct of that person met the standard required in order to justify indemnification and reimbursement in relation to any matter described in paragraph (1) or (2) of this subsection may only be made by the assembly or board of directors by a majority vote of a quorum consisting of persons who were not parties to that action, suit or proceeding or by a court of competent jurisdiction. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, as to that person shall not in itself create a conclusive presumption that the person did not meet the standard of conduct required in order to justify indemnification and reimbursement. The right of indemnification and reimbursement shall not be exclusive of other rights to which that person may be entitled as a matter of law and shall inure to the benefit of his heirs, executors and administrators.
c. A society shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the society, or who is or was serving at the request of the society as a director, officer, employee or agent of any other firm, corporation or organization against any liability asserted against that person and incurred by him in that capacity or arising out of his status in that capacity whether or not the society would have the power to indemnify the person against that liability under this section.
d. No director, officer, employee, member or volunteer of a society serving without compensation, shall be liable, and no cause of action may be brought, for damages resulting from the exercise of judgment or discretion in connection with the duties or responsibilities of that person for the society unless the act or omission involved willful or wanton misconduct.
##### **§ 17:44B-9** Waiver of society's laws by subordinates prohibited {#sec-17-44b-9 omnilex-key=us-nj-statutes--title-17--17:44B-9}
9. The laws of the society may provide that no subordinate body, nor any of its subordinate officers or members, shall have the power or authority to waive any of the provisions of the laws of the society. This provision shall be binding on the society and every member and beneficiary of a member.
##### **§ 17:44B-10** Formation of domestic society {#sec-17-44b-10 omnilex-key=us-nj-statutes--title-17--17:44B-10}
10. A domestic society organized on or after the effective date of this act shall be formed as follows:
a. Seven or more citizens of the United States, a majority of whom are citizens of this State, who desire to form a fraternal benefit society, may make, sign and acknowledge, before some officer competent to take acknowledgment of deeds, articles of incorporation, in which shall be stated:
(1) the proposed corporate name of the society, which shall not so closely resemble the name of any society or insurance company as to be misleading or confusing;
(2) the purposes for which it is being formed and the mode in which its corporate powers are to be exercised. Those purposes shall not include more liberal powers than are granted by this act;
(3) the names and residences of the incorporators and the names, residences and official titles of all the officers, trustees, directors and other persons who are to have and exercise the general control of the management of the affairs and funds of the society for the first year or until the ensuing election at which all the officers are elected by the supreme governing body, which election shall be held not later than one year from the date of issuance of the permanent certificate of authority.
b. The articles of incorporation, duly certified copies of the society's bylaws and rules, copies of all proposed forms of certificates, applications therefor, and circulars to be issued by the society and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within one year shall be filed with the commissioner, who may require further information that he deems necessary. The bond with sureties approved by the commissioner shall be in an amount, not less than $300,000, as required by the commissioner. All documents filed are to be in the English language. If the purposes of the society conform to the requirements of this act and all provisions of the law have been complied with, the commissioner shall certify, retain and file the articles of incorporation and furnish the incorporators a preliminary certificate of authority authorizing the society to solicit members pursuant to this act.
c. No preliminary certificate of authority granted under the provisions of this section shall be valid after one year from its date or after a further period, not exceeding one year, authorized by the commissioner upon cause shown, unless the 500 applicants required pursuant to paragraph (4) of subsection d. of this section have been secured and the organization has been completed pursuant to this section. The articles of incorporation and all other proceedings thereunder shall become null and void in one year from the date of the preliminary certificate of authority, or at the expiration of the extended period, unless the society has completed its organization and received a certificate of authority to do business pursuant to this section.
d. Upon receipt of a preliminary certificate of authority from the commissioner, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than one regular monthly premium in accordance with its table of rates, and shall issue to each applicant a receipt for the amount of premium collected. No society shall incur any liability other than for the return of an advance premium, nor issue any certificate, nor pay, allow, or offer or promise to pay or allow, any benefit to any person until:
(1) actual bona fide applications for benefits have been secured on 500 applicants and any necessary evidence of insurability has been furnished to and approved by the society;
(2) at least 10 subordinate lodges have been established into which the 500 applicants have been admitted;
(3) there has been submitted to the commissioner, under oath of the president or secretary, or corresponding officer of the society, a list of applicants, giving their names, addresses, date each was admitted, name and number of the subordinate lodge of which each applicant is a member, amount of benefits to be granted and premiums therefor; and
(4) it shall have been shown to the commissioner, by sworn statement of the treasurer, or corresponding officer of the society, that 500 applicants have each paid in cash at least one regular monthly premium, which premiums in the aggregate shall amount to at least $150,000 for each kind of business specified in N.J.S. 17B:17-3, N.J.S. 17B:17-4 or N.J.S. 17B:17-5 that the society is authorized to transact. The advance premiums shall be held in trust during the period of organization and if the society does not qualify for a certificate of authority within one year, the premiums shall be returned to the applicants.
e. The commissioner may examine, and require further information of, a society as the commissioner deems advisable. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, the commissioner shall issue to the society a certificate of authority to that effect and the society is authorized to transact business pursuant to the provisions of this act. The certificate of authority shall be prima facie evidence of the existence of the society at the date of the certificate. The commissioner shall cause a record of the certificate of authority to be made. A certified copy of that record may be given in evidence with like effect as the original certificate of authority.
f. Any incorporated society authorized to transact business in this State at the time this act becomes effective shall not be required to reincorporate.
g. No unincorporated or voluntary association shall be permitted to transact business in this State as a society.
##### **§ 17:44B-11** Amendment of laws of domestic society {#sec-17-44b-11 omnilex-key=us-nj-statutes--title-17--17:44B-11}
11. a. A domestic society may amend its laws in accordance with the provisions of those laws by action of its supreme governing body at any regular or special meeting thereof or, if its laws so provide, by referendum. The referendum may be held in accordance with the provisions of its laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members or by the vote of local lodges. A society may provide for voting by mail. No amendment submitted for adoption by referendum shall be adopted unless, within six months from the date of its submission, 2/3 of the members voting shall have signified their consent to an amendment by one of the methods specified in this section.
b. No amendment to the laws of any domestic society shall take effect unless approved by the commissioner who shall approve the amendment if the commissioner finds that it has been duly adopted and is not inconsistent with any requirement of the laws of this State or with the character, objects and purposes of the society. If the commissioner does not disapprove an amendment within 60 days after filing it, the amendment shall be considered approved. The approval or disapproval of the commissioner shall be in writing and mailed to the secretary or corresponding officer of the society at its principal office. If the commissioner disapproves an amendment, the reasons for the disapproval shall be stated in the written notice.
c. Within 90 days after the approval of an amendment by the commissioner, the amendment, or a synopsis thereof, shall be furnished to all members of the society either by mail or publication in full in the official publication of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendment or synopsis of the amendment, stating facts which show that the amendment has been duly addressed and mailed, shall be prima facie evidence that the amendment or synopsis thereof, has been furnished the addressee.
d. Every foreign or alien society authorized to do business in this State shall file with the commissioner a duly certified copy of all amendments of, or additions to, its laws within 90 days after the enactment of same.
e. Printed copies of the laws as amended, certified by the secretary or corresponding officer of the society, shall be prima facie evidence of the legal adoption thereof.
##### **§ 17:44B-12** Establishment of not-for-profit institutions {#sec-17-44b-12 omnilex-key=us-nj-statutes--title-17--17:44B-12}
12. a. A society may create, maintain and operate, or may establish organizations to operate, not-for-profit institutions to further the purposes permitted by paragraph (2) of subsection a. of section 5 of this act. These institutions may furnish services free or at a reasonable charge. Any real or personal property owned, held or leased by the society for this purpose shall be reported in every annual statement but may not be allowed as an admitted asset of the society.
b. No society shall own or operate funeral homes or undertaking establishments.
##### **§ 17:44B-13** Reinsurance agreement to cede risks {#sec-17-44b-13 omnilex-key=us-nj-statutes--title-17--17:44B-13}
13. a. A domestic society may, by a reinsurance agreement, cede any individual risk or risks in whole or in part to an insurer, other than another fraternal benefit society, having the power to reinsure and authorized to do business in this State, or if not so authorized, an insurer which is approved by the commissioner, but no domestic society may reinsure substantially all of its insurance in force without the written permission of the commissioner. Credit for reinsurance shall be allowed a domestic ceding society as either an asset or a reduction from liability in accordance with P.L.1993, c.243 (C.17:51B-1 et seq.). A domestic society shall also comply with all requirements of law generally applicable to reinsurance ceded or assumed by life and health insurers of this State.
b. Notwithstanding the limitation of subsection a. of this section, a society may reinsure the risks of another society in a consolidation or merger approved by the commissioner under section 14 of this act.
##### **§ 17:44B-14** Consolidation, merger {#sec-17-44b-14 omnilex-key=us-nj-statutes--title-17--17:44B-14}
14. a. A domestic society may consolidate or merge with any other society by complying with the provisions of this section. It shall file with the commissioner:
(1) a certified copy of the written contract containing in full the terms and conditions of the consolidation or merger;
(2) a sworn statement by the president and secretary, or corresponding officers of each society, showing the financial condition of the domestic society on a date fixed by the commissioner but not earlier than December 31, next preceding the date of the contract;
(3) a certificate of the officers of the societies, duly verified by their respective oaths, that the consolidation or merger has been approved by a 2/3 vote of the supreme governing body of each society, the vote being conducted at a regular or special meeting of each supreme governing body, or, if the society's laws so permit, by mail; and
(4) evidence that at least 60 days prior to the action of the supreme governing body of each society, the text of the contract has been furnished to all members of each society either by mail or by publication in full in the official publication of each society.
b. If the commissioner finds that the contract is in conformity with the provisions of this section, that the financial statements are correct and that the consolidation or merger is just and equitable to the members of each society, the commissioner shall approve the contract and issue a certificate to that effect. Upon approval, the contract shall be in full force and effect unless any society which is a party to the contract is incorporated under the laws of any other state or territory. In that event the consolidation or merger shall not become effective unless and until it has been approved as provided by the laws of that other state or territory and a certificate of approval from that other state is filed with the commissioner of this State or, if the laws of that other state or territory contain no like provision, then the consolidation or merger shall not become effective unless and until it has been approved by the commissioner of that other state or territory and a certificate of approval from the commissioner of that other state is filed with the commissioner of this State.
c. Upon the consolidation or merger becoming effective, all the rights, franchises and interests of the consolidated or merged societies in and to every species of property, real, personal or mixed, and things in action thereunto belonging shall be vested in the society resulting from or remaining after the consolidation or merger without any other instrument, except that conveyances of real property may be evidenced by proper deeds, and the title to any real estate or interest therein, vested under the laws of this State in any of the societies consolidated or merged, shall not revert or be in any way impaired by reason of the consolidation or merger, but shall vest absolutely in the society resulting from or remaining after the consolidation or merger.
d. The affidavit of any officer of the society or anyone authorized by it to mail any notice or document stating that the notice or document has been duly addressed and mailed, shall be prima facie evidence that the notice or document has been furnished the addressees.
##### **§ 17:44B-15** Conversion to domestic mutual insurer {#sec-17-44b-15 omnilex-key=us-nj-statutes--title-17--17:44B-15}
15. a. A domestic fraternal benefit society which is organized pursuant to the provisions of this act may convert to a domestic mutual insurer by complying with the provisions of this section.
b. A written plan of conversion setting forth in full the terms and conditions of conversion shall be prepared by the assembly or board of directors of the society. The plan shall include:
(1) the purpose of the conversion;
(2) the effect of conversion on existing benefit contracts issued by the society;
(3) a business plan;
(4) a provision that each holder of a benefit contract of the society shall receive any rights with respect to the domestic mutual insurer as may be prescribed by the commissioner, provided that those rights shall not exceed the rights provided to policyholders of other domestic mutual insurers authorized to transact the kind or kinds of business specified in N.J.S.17B:17-3, N.J.S.17B:17-4 and N.J.S.17B:17-5; and
(5) a provision that each member of the society shall be notified of the conversion, which notification process shall be approved by the commissioner.
c. The written plan of conversion provided for in subsection b. of this section shall be approved by an affirmative vote of 2/3 of all members of the supreme governing body at a regular or special meeting and then filed with the commissioner.
d. The commissioner shall approve or disapprove the plan. The commissioner shall approve the plan unless he finds the plan:
(1) is contrary to law;
(2) would be detrimental to the safety or soundness of the proposed domestic mutual insurer;
(3) prejudices the interests of the holders of benefit contracts of the society or treats them inequitably.
The commissioner shall set forth his decision in writing and shall state the reasons therefor. A disapproval shall be subject to judicial review.
e. Upon approval of the plan by the commissioner and the issuance of a certificate of authority to transact the business of insurance as a domestic mutual insurer, the society shall be deemed to be a domestic mutual insurer subject to the provisions of Title 17B of the New Jersey Statutes, including surplus requirements, and all other applicable law.
f. On and after the date of issuance of the certificate of authority, the society shall be a domestic mutual insurer, vested with all the powers and privileges of a domestic mutual insurer, and subject to all provisions of law applicable to those insurers, including surplus requirements, in the same manner and with the same effect as if the converted society had originally been incorporated as a domestic mutual insurer on the date of issuance of the certificate of authority, and the members of the society shall become and be members of the domestic mutual insurer.
g. The conversion of a society into a domestic mutual insurer shall not affect the right of any creditor or member of the society, but all rights of all persons against the society before its conversion shall continue unaffected and shall be enforced against the domestic mutual insurer in the same manner they could have been enforced against the society had its conversion not taken place; except that all rights of assessment or reduction in benefits in lieu of assessment, prescribed in the certificate of incorporation or bylaws of the society, or provided in any certificate, policy or contract of the society, shall be canceled. As used in this section, "assessment" means the right to require the payment of a sum in addition to the weekly or other periodical dues, contributions, premiums and fees required under the terms of any certificate, policy or contract; and "domestic mutual insurer" shall only include a domestic mutual insurer authorized to transact the kind or kinds of business specified in N.J.S.17B:17-3, N.J.S.17B:17-4 and N.J.S.17B:17-5.
##### **§ 17:44B-16** Provision of contractual benefits {#sec-17-44b-16 omnilex-key=us-nj-statutes--title-17--17:44B-16}
16. a. A society may provide the following contractual benefits in any form, except in the form of group insurance:
(1) death benefits;
(2) endowment benefits;
(3) annuity benefits;
(4) temporary or permanent disability benefits;
(5) hospital, medical or nursing benefits;
(6) monument or tombstone benefits to the memory of deceased members; and
(7) other benefits as authorized for life and health insurers and which are not inconsistent with this act.
b. A society shall specify in its rules those persons who may be issued, or covered by, the contractual benefits in subsection a. of this section, consistent with providing benefits to members and their dependents. A society may provide benefits on the lives of minors under the minimum age for adult membership upon application of an adult person.
##### **§ 17:44B-17** Right to change beneficiary {#sec-17-44b-17 omnilex-key=us-nj-statutes--title-17--17:44B-17}
17. a. The owner of a benefit contract shall have the right at all times to change the beneficiary or beneficiaries in accordance with the laws or rules of the society unless the owner waives this right by specifically requesting in writing that the beneficiary designation be irrevocable. A society may, through its laws or rules, limit the scope of beneficiary designations and shall provide that no revocable beneficiary shall have or obtain any vested interest in the proceeds of any certificate until the certificate has become due and payable in conformity with the provisions of the benefit contract.
b. A society may make provision for the payment of funeral benefits to the extent of that portion of any payment under a certificate as reasonably appears to be due to any person equitably entitled thereto by reason of having incurred expense occasioned by the burial of the member, provided the amount paid shall not exceed the sum of $5,000.
c. If, at the death of any person insured under a benefit contract, there is no lawful beneficiary to whom the proceeds shall be payable, the amount of the benefit, except to the extent that funeral benefits may be paid as provided in subsection b. of this section, shall be payable to the estate of the deceased insured, provided that if the owner of the certificate is other than the insured, the proceeds shall be payable to the owner.
##### **§ 17:44B-18** Issuance of certificate specifying amount of benefits {#sec-17-44b-18 omnilex-key=us-nj-statutes--title-17--17:44B-18}
18. a. Every society authorized to do business in this State shall issue to each owner of a benefit contract a certificate specifying the amount of benefits provided by the contract. The certificate, together with any riders or endorsements attached thereto, the laws of the society, the application for membership, the application for insurance and declaration of insurability, if any, signed by the applicant, and all amendments to each document shall constitute the benefit contract, as of the date of issuance, between the society and the owner, and the certificate shall state this requirement. A copy of the application for insurance and declaration of insurability, if any, shall be endorsed upon or attached to the certificate. All statements on the application shall be representations and not warranties. Any waiver of the provisions of the subsection shall be void.
b. Any changes, additions or amendments to the laws of the society duly made or enacted subsequent to the issuance of the certificate, shall bind the owner and the beneficiaries, and shall govern and control the benefit contract in all respects the same as though the changes, additions or amendments had been made prior to and were in force at the time of the application for insurance, except that no change, addition or amendment shall destroy or diminish benefits which the society contracted to give the owner as of the date of issuance.
c. Any person upon whose life a benefit contract is issued prior to attaining the age of majority shall be bound by the terms of the application and certificate and by all the laws and rules of the society to the same extent as though the age of majority had been attained at the time of application.
d. A society shall provide in its laws that if its reserves as to all or any class of certificates become impaired its board of directors or assembly may require that there shall be paid by the owner to the society the amount of the owner's equitable proportion of the deficiency ascertained by its board or assembly, and that if the payment is not made either: (1) it shall stand as an indebtedness against the certificate and draw interest not to exceed the rate specified for certificate loans under the certificates; or (2) in lieu of or in combination with paragraph (1), the owner may accept a proportionate reduction in benefits under benefits under the certificate. The society may specify the manner of the election and which alternative is to be presumed if no election is made.
e. Copies of any of the documents mentioned in this section, certified by the secretary or corresponding officer of the society, shall be received in evidence of the terms and conditions of the contract.
f. No certificate shall be delivered or issued for delivery in this State unless a copy of the form has been filed with the commissioner for approval in the manner provided for like policies issued by life and health insurers in this State. Every life, accident, health, or disability insurance certificate and every annuity certificate issued on or after one year from the effective date of this act shall meet the standard contract provision requirements, not inconsistent with this act, for like policies issued by life and health insurers in this State. Any non-complying certificate shall be deemed withdrawn one year from the effective date of this act, except that the commissioner may, for good cause shown, allow the continued use of a non-conforming certificate for an additional period not to exceed one year. The certificate shall also contain a provision stating the amount of premiums which are payable under the certificate and a provision reciting or setting forth the substance of any section of the society's laws or rules in force at the time of issuance of the certificate which, if violated, will result in the termination or reduction of benefits payable under the certificate. If the laws of the society provide for expulsion or suspension of a member, the certificate shall also contain a provision that any member expelled or suspended, except for nonpayment of a premium or within the contestable period for material misrepresentation in the application for membership or insurance, shall have the privilege of maintaining the certificate in force by continuing payment of the required premium.
g. Benefit contracts issued on the lives of persons below the society's minimum age for adult membership may provide for transfer of control of ownership to the insured at an age specified in the certificate. A society may require approval of an application for membership in order to effect this transfer, and may provide in all other respects for the regulation, government and control of those certificates and all rights, obligations and liabilities incident thereto and connected therewith. Ownership rights prior to the transfer shall be specified in the certificate.
h. A society may specify the terms and conditions on which benefit contracts may be assigned.
##### **§ 17:44B-19** Certificates issued in 1998, compliance with prior law; after 1998 requirements {#sec-17-44b-19 omnilex-key=us-nj-statutes--title-17--17:44B-19}
19. a. For certificates issued prior to one year after the effective date of this act, the value of every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan or other option granted shall comply with the provisions of law applicable immediately prior to the effective date of this act.
b. For certificates issued on or after one year after the effective date of this act, every paid-up nonforfeiture benefits and the amount of any cash surrender value, loan or other option granted shall not be less than the corresponding amount based on the interest rate and mortality tables authorized by the laws of this State for the calculation of those benefits by life and health insurers issuing policies containing like benefits.
##### **§ 17:44B-20** Investment of funds of society {#sec-17-44b-20 omnilex-key=us-nj-statutes--title-17--17:44B-20}
20. A society shall invest its funds only in investments that are authorized by the laws of this State for the investment of assets of domestic life insurers and subject to the limitations thereon. Any foreign or alien society permitted or seeking to do business in this State which invests its funds in accordance with the laws of the state, district, territory, country or province in which it is incorporated, shall be held to meet the requirements of this section for the investment of funds.
##### **§ 17:44B-21** Holding, investment, disbursement of assets {#sec-17-44b-21 omnilex-key=us-nj-statutes--title-17--17:44B-21}
21. a. All assets shall be held, invested and disbursed for the use and benefit of the society and no member or beneficiary shall have or acquire individual rights therein or become entitled to any apportionment on the surrender of any part of the assets, except as provided in the benefit contract.
b. A society may create, maintain, invest, disburse and apply any special fund or funds necessary to carry out any purpose permitted by the laws of the society.
c. A society may, pursuant to resolution of its supreme governing body, establish and operate one or more separate accounts and issue separate account contracts, whether or not contracts on a variable basis, subject to the provisions of law regulating life and health insurers establishing those accounts and issuing those contracts. To the extent the society deems it necessary in order to comply with any applicable federal or State laws, or any rules or regulations issued thereunder, the society may adopt special procedures for the conduct of the business and affairs of a separate account; may, for persons having beneficial interests in an account, provide special voting and other rights, including special rights and procedures relating to investment policy, investment advisory services, selection of certified public accountants, and selection of a committee to manage the business and affairs of the account, and may issue contracts on a variable basis to which subsections b. and d. of section 18 of this act shall not apply.
d. Separate accounts of foreign or alien societies are subject to approval by the department, unless the society's place of domicile has adopted a substantially similar act.
##### **§ 17:44B-22** Societies governed by act {#sec-17-44b-22 omnilex-key=us-nj-statutes--title-17--17:44B-22}
22. Except as otherwise provided in this act, societies shall be governed by this act and shall be exempt from all other provisions of the insurance laws of this State, not only in governmental relations with the State, but for every other purpose. No law enacted on or after the effective date of this act shall apply to societies unless they be expressly designated. No corporation or association which purports to be a fraternal organization but which does not meet the requirements in this act with respect to a fraternal benefit society shall be exempt from the other provisions of the insurance laws of this State.
##### **§ 17:44B-23** Society declared charitable, benevolent institution {#sec-17-44b-23 omnilex-key=us-nj-statutes--title-17--17:44B-23}
23. Every society organized or licensed under this act is declared to be a charitable and benevolent institution, and all of its funds shall be exempt from all and every State, county, district, municipal and school tax, other than taxes on real estate and office equipment. Every society organized or licensed under this act shall be subject to the assessment provided pursuant to section 8 of P.L.1983, c.320 (C.17:33A-8) and the apportionment provided pursuant to section 2 of P.L.1995, c.156 (C.17:1C-20).
##### **§ 17:44B-24** Standards of valuation for certificates {#sec-17-44b-24 omnilex-key=us-nj-statutes--title-17--17:44B-24}
24. a. Standards of valuation for certificates issued prior to one year after the effective date of this act shall be those provided by the laws applicable immediately prior to the effective date of this act.
b. The minimum standards of valuation for certificates issued on or after one year after the effective date of this act shall be the same as those for life and health insurers specified in N.J.S.17B:19-5 and N.J.S.17B:19-8.
##### **§ 17:44B-25** Filing of annual statement {#sec-17-44b-25 omnilex-key=us-nj-statutes--title-17--17:44B-25}
25. a. Every society transacting business in this State shall annually, on or before March 1, unless for cause shown the time has been extended by the commissioner, file with the commissioner a true statement of its financial condition, transactions and affairs for the preceding calendar year and pay a filing fee established by the commissioner by regulation. The statement shall be in general form and content as approved by the National Association of Insurance Commissioners for fraternal benefit societies and as supplemented by additional information required by the commissioner;
b. As a part of the annual statement required by subsection a. of this section, each society shall, on or before March 1, file with the commissioner a valuation of its certificates in force on December 31 last preceding, provided the commissioner may, in his discretion for cause shown, extend the time for filing the valuation for not more than two calendar months. The valuation shall be done in accordance with the standards specified in section 24 of this act. The valuation and underlying data shall be certified by a qualified actuary or, at the expense of the society, verified by the actuary of the insurance regulatory agency of the state of domicile of the society;
c. A society failing to file the annual statement in the form and within the time provided by this section shall forfeit $100 for each day during which the failure continues, and, upon notice by the commissioner to that effect, its authority to do business in this State shall cease while the failure continues.
##### **§ 17:44B-26** Authority to transact business, compliance with requirements of this act {#sec-17-44b-26 omnilex-key=us-nj-statutes--title-17--17:44B-26}
26. Societies which are now authorized to transact business in this State, and all societies licensed on or after the effective date of this act, may continue in business until June 1 next succeeding the effective date of this act. The authority of these domestic societies may thereafter be continued by satisfying the requirements set forth in this act. The authority of existing foreign or alien societies and all foreign and alien societies licensed on or after the effective date of this act, may thereafter be renewed annually, but in all cases terminate on the first day of the succeeding June. However, a license that has been issued shall continue in full force and effect until the new license is issued or specifically refused. A duly certified copy or duplicate of the license shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this act.
##### **§ 17:44B-27** Societies subject to examination {#sec-17-44b-27 omnilex-key=us-nj-statutes--title-17--17:44B-27}
27. a. All societies shall be subject to examination by the commissioner in the same manner and subject to the same procedures as set forth in P.L.1993, c.236 (C.17:23-20 et seq.).
b. A summary of the report of the commissioner and the recommendations or statements of the commissioner as may accompany the report, shall be read at the first meeting of the board of directors or corresponding body of the society following their receipt, and if directed by the commissioner, shall also be read at the first meeting of the supreme governing body of the society following their receipt. A copy of the report, recommendations and statements of the commissioner shall be furnished by the society to each member of the board of directors or assembly.
##### **§ 17:44B-28** Licensing of foreign, alien society {#sec-17-44b-28 omnilex-key=us-nj-statutes--title-17--17:44B-28}
28. No foreign or alien society shall transact business in this State without a license issued by the commissioner. Any foreign or alien society desiring admission to this State shall comply substantially with the requirements and limitations of this act applicable to domestic societies. Any foreign or alien society may be licensed to transact business in this State upon filing with the commissioner:
a. A duly certified copy of its articles of incorporation;
b. A copy of its bylaws, certified by its secretary or corresponding officer;
c. A power of attorney to the commissioner as prescribed in section 34 of this act;
d. A statement of its business under oath of its president and secretary or corresponding officers in a form prescribed by the commissioner, duly verified by an examination made by the supervising insurance official of its home state, territory, province or country, satisfactory to the commissioner;
e. Certification from the proper official of its home state, territory, province or country that the society is legally incorporated and licensed to transact business therein;
f. Copies of its certificate forms;
g. A showing that its assets are invested in accordance with the provisions of this act;
h. Any other information the commissioner may deem necessary; and
i. Upon payment of a filing fee established by the commissioner by regulation.
##### **§ 17:44B-29** Domestic societies subject to C.17B:32-31 et seq. {#sec-17-44b-29 omnilex-key=us-nj-statutes--title-17--17:44B-29}
29. Domestic societies shall be subject to the provisions of P.L.1992, c.65 (C.17B:32-31 et seq.).
##### **§ 17:44B-30** Deficiencies, notice of; corrections; remedies {#sec-17-44b-30 omnilex-key=us-nj-statutes--title-17--17:44B-30}
30. a. When the commissioner upon investigation finds that a foreign or alien society transacting or applying to transact business in this State:
(1) has exceeded its powers;
(2) has failed to comply with any of the provisions of this act;
(3) is not fulfilling its contract in good faith; or
(4) is conducting its business fraudulently or in a manner hazardous to its members or creditors or the public:
the commissioner shall notify the society in writing of the deficiency or deficiencies and state in writing the reasons for his dissatisfaction. The commissioner shall at once issue a written order to the society requiring that the deficiency or deficiencies which exist be corrected. After that order the society shall have 30 days in which to comply with the commissioner's order for correction, and if the society fails to comply, the commissioner shall notify the society of his findings of noncompliance and require the society to show cause on a date to be named why its license should not be suspended, revoked or refused. If on that date the society does not present good and sufficient reason why its authority to do business in this State should not be suspended, revoked or refused, the commissioner may suspend or refuse the license of the society to do business in this State until satisfactory evidence is furnished to the commissioner that the suspension or refusal should be withdrawn, or the commissioner may revoke the authority of the society to do business in this State.
b. Nothing contained in this section shall be taken or construed as preventing any foreign or alien society from continuing in good faith all contracts made in this State during the time the society was legally authorized to transact business.
##### **§ 17:44B-31** Application, petition for injunction by State {#sec-17-44b-31 omnilex-key=us-nj-statutes--title-17--17:44B-31}
31. No application or petition for injunction against any domestic, foreign or alien society, or lodge thereof, shall be recognized in any court of this State unless made by the Attorney General upon request of the commissioner.
##### **§ 17:44B-32** Licensure of individual insurance producers; exemption for certain agents, member of fraternal benefits societies, conditions. {#sec-17-44b-32 omnilex-key=us-nj-statutes--title-17--17:44B-32}
32. Individuals acting as insurance producers with respect to societies shall be licensed in accordance with the provisions of the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et al.). Notwithstanding the provisions of this section or of any other law to the contrary, a license as an insurance producer shall not be required of any agent, representative or member of a fraternal benefit society who devotes, or intends to devote, less than 50 percent of his time to the solicitation and procurement of insurance contracts for that fraternal benefit society and who receives, or intends to receive, any commission or other compensation directly dependent on the amount of insurance. Any person who in the preceding calendar year has solicited or procured any of the following contracts of insurance on behalf of a fraternal benefit society shall be presumed to have devoted, or intended to devote, 50 percent of his time to the solicitation or procurement of insurance contracts:
a. Life insurance contracts that, in the aggregate, exceed $200,000 of coverage for all lives insured for the preceding calendar year;
b. A permanent life insurance contract offering more than $10,000 of coverage on an individual life;
c. A term life insurance contract offering more than $50,000 of coverage on an individual life;
d. An insurance contract, other than a life insurance contract, that the fraternal benefit society may write that insures the individual lives of more than 25 persons;
e. Any variable life insurance or variable annuity contract; or
f. Any "funeral insurance policy" as defined in section 24 of P.L.1993, c.147 (C.17B:17-5.1).
##### **§ 17:44B-33** Societies, agents subject to N.J.S.17B:30-1 et seq. {#sec-17-44b-33 omnilex-key=us-nj-statutes--title-17--17:44B-33}
33. Every society and agent authorized to do business in this State shall be subject to the provisions of N.J.S.17B:30-1 et seq., relating to trade practices; provided, however, that nothing in those provisions shall be construed as applying to or affecting the right of any society to determine its eligibility requirements for membership, or be construed as applying to or affecting the offering of benefits exclusively to members or persons eligible for membership in the society by a subsidiary corporation or affiliated organization of the society.
##### **§ 17:44B-34** Appointment of commissioner as attorney for foreign society {#sec-17-44b-34 omnilex-key=us-nj-statutes--title-17--17:44B-34}
34. a. Every foreign and alien society authorized to do business in this State shall appoint in writing the commissioner and each successor in office to be its true and lawful attorney upon whom all lawful process in any action or proceeding against it shall be served, and shall agree in writing that any lawful process against it which is served shall be of the same legal force and validity as if served upon the society, and that the authority shall continue in force as long as any liability remains outstanding in this State. Copies of the appointment, certified by the commissioner, shall be deemed sufficient evidence of its existence and shall be admitted in evidence with the same force and effect as the original written appointment would be admitted.
b. Service shall only be made upon the commissioner, or if absent, upon the person in charge of the commissioner's office. It shall be made in duplicate and shall constitute sufficient service upon the society. When legal process against a society is served upon the commissioner, the commissioner shall forward one of the duplicate copies by registered mail, prepaid, directed to the secretary or corresponding officer. No service shall require a society to file its answer, pleading or defense in less than 30 days from the date of mailing the copy of the service to a society.
##### **§ 17:44B-35** Nonapplicability of act {#sec-17-44b-35 omnilex-key=us-nj-statutes--title-17--17:44B-35}
35. a. Nothing contained in this act shall be construed to affect or apply to:
(1) societies which do not provide benefits by contract;
(2) orders, societies or associations which admit to membership only persons engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, insuring only their own members and their families, and the ladies' societies or ladies' auxiliaries to those orders, societies or associations;
(3) domestic societies which limit their membership to employees of a particular city or town, designated firm, business or corporation which provide for a death benefit of not more than $400 or disability benefits of not more than $350 to any person in any one year, or both; or
(4) domestic societies or associations of a purely religious, charitable or benevolent description, which provide for a death benefit of not more than $400 or a disability benefit of not more than $350 to any one person in any one year, or both.
b. Any society or association described in paragraph (3) or (4) of subsection a. of this section which provides for death or disability benefits for which benefit certificates are issued, and a society or association included in paragraph (4) of subsection a. of this section which has more than 1,000 members, shall not be exempted from the provisions of this act but shall comply with all requirements of this act.
c. No society which, by the provisions of this section, is exempt from the requirements of this act, except any society described in paragraph (2) of subsection a. of this section, shall give or allow, or promise to give or allow to any person any compensation for procuring new members.
d. Every society which provides for benefits in case of death or disability resulting solely from accident, and which does not obligate itself to pay natural death or sick benefits shall have all of the privileges and be subject to all the applicable provisions and regulations of this act, except that the provisions of this act relating to medical examinations, valuations of benefit certificates, and incontestability, shall not apply to that society.
e. The commissioner may require from any society or association, by examination or otherwise, information that will enable the commissioner to determine whether the society or association is exempt from the provisions of this act.
f. Societies, exempted under the provisions of this section, shall also be exempt from all other provisions of the insurance laws of this State.
##### **§ 17:44B-36** Violations, penalties {#sec-17-44b-36 omnilex-key=us-nj-statutes--title-17--17:44B-36}
36. a. Any person who:
(1) makes a false or fraudulent statement to the commissioner, or the department, in any report or declaration required or authorized by this act, or
(2) solicits membership for, or in any manner, assists in procuring membership in any fraternal benefit society which by the terms of this act is required to be but is not licensed, or
(3) violates any of the provisions of this act, shall be liable to a penalty not exceeding $1,000 for the first offense and not exceeding $2,000 for each succeeding offense.
b. The penalties provided in this section shall be enforced and collected in a summary manner pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq.
##### **§ 17:44B-37** Decisions, findings subject to review {#sec-17-44b-37 omnilex-key=us-nj-statutes--title-17--17:44B-37}
37. All decisions and findings of the commissioner made under the provisions of this act shall be subject to review by proper proceedings in any court of competent jurisdiction in this State.
## **Chapter 45** {#struct-chapter-45}
##### **§ 17:45-1** Mutual benefit association defined {#sec-17-45-1 omnilex-key=us-nj-statutes--title-17--17:45-1}
For the purpose of this chapter a mutual benefit association is hereby declared to be a corporation, society or voluntary association, other than a fraternal beneficiary society, order, or association and other than an insurance corporation, organized without capital stock, and carried on for the sole benefit of its members who shall be residents of this State and their beneficiaries and not for profit, and making provision for the payment of benefits in case of sickness, disability or death of its members, the fund from which the payment of such benefits shall be made and the fund from which the expenses of such association shall be defrayed being derived from fees, dues, assessments or other contributions collected from its members.
##### **§ 17:45-2** Certificate of authority prerequisite to transacting business {#sec-17-45-2 omnilex-key=us-nj-statutes--title-17--17:45-2}
No mutual benefit association shall hereafter undertake to provide any specified benefit in the event of disablement by accident or sickness to any member, or to any other person, or contract with any of its members to pay death benefits until such association shall have complied with the requirements of this chapter and shall have received a certificate of authority setting forth that such association has complied with the provisions of this chapter and that it is authorized to provide benefits in the event of disablement by sickness or accident or to contract with members to pay death benefits, or both of them, within the limitations established by the act under which it is organized and by this chapter.
##### **§ 17:45-3** Prerequisites to issuance of certificate; time for qualifying {#sec-17-45-3 omnilex-key=us-nj-statutes--title-17--17:45-3}
The commissioner may issue such certificate of authority to any such incorporated association of this state when it shall have filed in the department a certified copy of its charter or certificate of incorporation, a copy of its constitution or by-laws, a statement of its financial condition in such form and detail as the commissioner shall require, signed and sworn to by its president and secretary or other proper officers, copies of all forms of benefit certificates which the association proposes to issue and the commissioner is satisfied, on the basis of examination or otherwise, that the association has complied with the requirements of this chapter and that its condition or methods of operation are not such as would render its operations hazardous to the public or to its members. No change in, amendment to, alteration in, addition to, or substitution for any document, instrument or other paper so filed shall become operative or effective until the same shall also have been filed in a similar manner. No such certificate of authority shall be issued to any mutual benefit association not incorporated under the laws of this state nor shall any such certificate be granted to any such association of this state after January first, one thousand nine hundred thirty-eight, which shall not have qualified therefor within one year after its date of incorporation.
##### **§ 17:45-4** Certificates; limitations; age limits; exceptions {#sec-17-45-4 omnilex-key=us-nj-statutes--title-17--17:45-4}
Every mutual benefit association to which a certificate of authority has been issued under the provisions of this chapter shall issue to each of its members a certificate setting forth the benefits to which he is entitled by reason of his membership, except that if application is made by an adult for a family certificate providing for hospital expenses, the association may issue one benefit certificate to include the member, spouse and unmarried children under the age of eighteen years. Notwithstanding any provisions or limitations established by the act under which any such mutual benefit association has been incorporated, no such association shall contract with any member to pay a death benefit exceeding one thousand dollars ($1,000.00), nor shall such association undertake to provide sickness or accident disability benefits in excess of forty dollars ($40.00) weekly to any member except that where part or all of these disability benefits are for payment of hospital or medical expenses, or both, incurred by such member such association may undertake to provide sickness or accident disability benefits of not more than fifty dollars ($50.00) weekly to any member, nor shall such association provide for the payment of cash benefits to any member, or other person, except in the event of death or disability. Any certificate which provides disability benefits only for payment of hospital or medical expenses, or both, incurred by a member may also provide that the weekly benefit payable will be doubled for the first week of hospital confinement. Every such association shall be permitted to issue more than one certificate providing benefits at death of any member and more than one certificate providing for sickness and accident disability benefits; provided, that the aggregate amount of the benefits in said certificates does not exceed the limitations in this act. Certificates providing for sickness or accident disability benefits may provide for a special accidental death benefit not exceeding one thousand dollars ($1,000.00). No persons under the age of sixteen years nor over the age of sixty-five years shall be admitted to membership, but a benefit certificate may be issued to any child on application of an adult member liable for such child's support and who shall exercise the privileges of membership of such child until he or she shall have attained age sixteen years after which such child shall exercise all privileges of membership, but the amounts of death benefits provided for shall not exceed the limitations now provided by law for insurance on the lives of children.
##### **§ 17:45-5** Provisions required in death benefit certificates {#sec-17-45-5 omnilex-key=us-nj-statutes--title-17--17:45-5}
No certificate, contracting to pay a death benefit, other than a cash benefit on accidental death only, shall be issued, by any association authorized to transact business under the provisions of this chapter unless the same shall contain the following provisions:
a. A provision setting forth the amounts of all fees, dues or other contributions on such certificate and the time and place where payment of such fees, dues or other contributions shall be made.
b. A provision that when claim for the death benefit is made thereunder, settlement shall be made immediately upon or within a specified period not more than two months after satisfactory proof of death of the member is received by the association.
c. A provision that if the age of the member has been understated the amount payable under the certificate shall be such as the contributions paid would have provided for at the correct age.
d. A provision that the benefit certificate and the application therefor, if any, provided that a copy thereof is attached to the certificate when issued, together with the by-laws of the association as they then exist, shall constitute the entire contract between the association and the member.
e. A provision specifying the basis of a reserve to be maintained by the association on the certificate, the legal minimum standard for which shall be the standard industrial table of mortality with interest at the rate of three and one-half per cent per annum calculated according to the modified preliminary term method permitted by law for the valuation of industrial life insurance policies.
f. A provision, which, in the event of default in payment of contributions or assessments after such certificate shall have been in force for a period of not less than three years, will secure to the member a stipulated form of benefit, the net value of which shall be not less than the entire reserve held by the association on the certificate, less a specified percentage, not more than three per cent of the face amount of the certificate.
g. A provision for four weeks' grace for the payment of all fees, dues, contributions and assessments, except initial membership contributions or fees, during which time benefits will continue in force, provided that overdue contributions may be deducted from any benefit which may be payable.
h. A provision that in the event that the assets of the association become less than its liabilities including all guarantee, benefit and reserve funds provided for and required by this act, the deficiency shall be made good and the trustees may levy an assessment on the members.
i. A provision that all statements of the member in his application or on his behalf shall constitute representations and not warranties and that the membership and benefit certificate shall be incontestable after the certificate shall have been in force for two years, except for nonpayment of dues, contributions or assessments.
j. A provision specifying the basis on which the certificate may be reinstated after lapse, but all reinstatements shall be for full benefits if the certificate shall previously have been in force for at least two years, and the reinstatement may be contested for misrepresentation or fraud for a period of not more than two years thereafter.
##### **§ 17:45-6** Provisions required in accident and sick benefit certificates {#sec-17-45-6 omnilex-key=us-nj-statutes--title-17--17:45-6}
No certificate providing for specified benefits in the event of sickness or accident disability, or for a cash benefit on accidental death only, shall hereafter be issued to any member by any such association unless it shall contain the following provisions:
a. A provision for two weeks' grace in the payment of fees, dues and contributions and assessments, except initial membership contributions or fees, during which time benefits will continue in force, provided the overdue contributions may be deducted from any benefits which may be payable to such member.
b. A provision that the benefit certificate and the application therefor, if any, provided that a copy thereof is attached to the certificate of membership when issued, together with the by-laws of the association as they then exist shall constitute the entire contract between the association and the member.
c. A provision that in the event that the assets of the association become less than its liabilities including all guarantee, benefit and reserve funds provided for and required by this chapter, the deficiency shall be made good and the trustees may levy an assessment on the members.
d. A provision specifying the time within which notice of accident or disability shall be given, which shall be not less than twenty days from the date of the accident nor less than ten days from the date of the beginning of disability from sickness upon which claim is based, but in case of accidental death immediate notice thereof may be required.
e. A provision that such notice given on behalf of the member or beneficiary, as the case may be, to the association at its home office, or to an agent of the association, with particulars sufficient to identify the member, shall be deemed notice to the association and that failure to give notice of accident or disability within the time provided in the certificate shall not invalidate any claim if it shall be shown not to have been reasonably possible to give such notice and that notice was given as soon as was reasonably possible.
f. A provision that the association may terminate the certificate and benefits provided for therein on the due date of any contribution thereon, provided that the association shall have notified the member, by written notice delivered to him or directed to him by registered mail at his last known address, of its intention to terminate such certificate, at least ten days prior to the date of such termination, but such termination shall be without prejudice to any benefit or claim arising out of disability or sickness beginning or death occurring prior to the date of such termination.
##### **§ 17:45-7** Certain provisions prohibited; fees {#sec-17-45-7 omnilex-key=us-nj-statutes--title-17--17:45-7}
No certificate contracting to pay a death benefit or providing sickness or accident benefits which contain any of the following provisions shall be issued by any association authorized under this chapter:
a. A provision which limits the time within which any action at law of in equity may be commenced to less than five years after the cause of action shall accrue in the case of a certificate making provision for a death benefit only or less than one year in the case of a certificate providing for sickness or accident disability benefits.
b. A provision by which maximum benefits provided in the certificate become effective after the lapse of more than one year from the effective date of the certificate.
c. A provision which restricts or reduces benefits payable in the event of death from diseases specified in such certificate where such death occurs more than two years after the effective date of the certificate.
d. Any provision for the payment of an initial membership fee in excess of three dollars, a registration fee of more than one dollar or a reinstatement fee of more than one dollar. No initial membership fee shall be collected from any member whose previous membership, if any, lapsed less than one year prior to the date of issue of his new certificate, nor shall a registration fee be collected more than once from any member.
##### **§ 17:45-8** Minimum guarantee fund; investment or deposit; replenishment {#sec-17-45-8 omnilex-key=us-nj-statutes--title-17--17:45-8}
Every such association shall establish a minimum guarantee fund of twelve thousand dollars ($12,000.00). Such fund, if not accumulated prior to January second, one thousand nine hundred and thirty-seven, shall be accumulated by equal cash contributions from all members of the association, who shall number not less than one hundred, before the association may undertake to grant death, sickness or accident disability benefits. Such fund may be held in cash or may be invested in bonds issued by or guaranteed by the government of the United States. The guarantee fund shall be deposited in trust with a bank of this State and funds therefrom shall be disbursed only for the payment of claims for benefits under its outstanding certificates, but only on certification of the president and secretary of the association, after notice to the Commissioner of Banking and Insurance, that the benefit fund hereinafter provided for is insufficient to meet existing claims payable therefrom or that payment of such claims would result in the impairment of the reserve fund hereinafter provided for. In the event that the guarantee fund is reduced by such disbursements to less than the amount required by this chapter, the deficiency therein shall be made good by an assessment on all members within six months after the notice above provided for and the by-laws of the association shall establish the procedure to be adopted in making such assessment.
##### **§ 17:45-9** Benefit fund; use; additions; transfer of excess {#sec-17-45-9 omnilex-key=us-nj-statutes--title-17--17:45-9}
Every such association shall establish a benefit fund into which shall be placed a specified percentage, not less than fifty per centum (50%), of all dues and contributions collected by the association or by an agent thereof on sickness and accident disability benefit certificates hereafter issued, except dues and contributions for the first year following issue of such certificates.
There shall also be placed into such fund a similar percentage of all dues and contributions hereafter collected on all death benefit certificates and sickness and accident disability benefit certificates issued prior to January second, one thousand nine hundred and thirty-seven, except dues and contributions for the first year following issue of such certificates. Into such fund shall be placed all investment accretions thereon and from such fund shall be paid all benefits except benefits incurred during the first year following issue of such certificates and costs of prosecuting or defending suits under such benefit certificates specified above in this section. When the association shall have accumulated the minimum guarantee fund required by this chapter it shall place into the benefit fund a specified percentage, not less than five per centum (5%), of all dues and contributions thereafter collected on death benefit certificates issued after the aforementioned date. Whenever the benefit fund shall equal or exceed in amount one-half of one annual contribution on all its outstanding sickness and accident disability benefits together with a reserve on death benefits issued prior to the aforementioned date according to the reserve basis described in section 17:45-5 of this Title, the association may transfer to the reserve fund hereinafter referred to the amount of reserve applicable to the death benefit certificates issued prior to the aforementioned date; provided, it shall have first received the consent of the commissioner to such transfer. Thereafter, no contribution to the benefit fund will be required on account of death benefit certificates and the benefit fund shall be maintained as above provided but only for certificates providing for sickness and accident disability benefits; provided, however, whenever the amount in the benefit fund shall exceed one-half of one annual contribution on all outstanding sickness and accident certificates, such excess or any part thereof may be transferred with the consent of the commissioner to the minimum guarantee fund or to the reserve fund or to the expense fund but in no event shall any such association be required to maintain in the benefit fund an amount in excess of three-fourths of one annual contribution on all outstanding sickness and accident certificates.
##### **§ 17:45-10** Reserve fund; increases; amount annually certified to commissioner {#sec-17-45-10 omnilex-key=us-nj-statutes--title-17--17:45-10}
Every such association shall maintain a reserve fund which shall consist of the net reserve on all death benefit certificates issued after January second, one thousand nine hundred and thirty-seven, according to the table of mortality and rate of interest specified therein. When an association has completed the transfer of funds provided for in section 17:45-9 of this title and all contributions to the benefit fund on account of death benefit certificates have ceased, the reserve fund of such association shall be increased by the amount of the net reserve on death benefit certificates, issued prior to January second, one thousand nine hundred and thirty-seven, according to the reserve standard specified in section 17:45-5 of this title. Each year every such association shall file in the department of banking and insurance with its annual statement, as required by section 17:45-12 of this title, the certification of a competent actuary as to the amount of the reserve fund required by this chapter.
##### **§ 17:45-11** Expense fund; contracts for payment of fees; certain contracts prohibited; investments {#sec-17-45-11 omnilex-key=us-nj-statutes--title-17--17:45-11}
Any such association may maintain expense funds or surplus funds out of which the expenses of the association shall be defrayed, but no assessment on the members for the purpose of providing expense moneys will be valid without having received the approval of the commissioner. No contract or agreement, written or implied, shall be made by any association whereby any person or organization shall receive any specified portion of the fees, dues, contributions or assessments collected from members, for management of the association or otherwise, except bona fide commissions to members for the procurement of new members, or for the collection of fees, dues or contributions from members and no contract of employment shall be made with any individual or firm for a period of more than one year nor except at a stated salary or fee, and any such contract made is void. All funds of such associations may be held in cash or may be invested only in accordance with the requirements of law for the investment of funds of life insurance companies, but the guarantee fund shall be invested only in accordance with the provisions of section 17:45-8 of this title.
##### **§ 17:45-12** Annual statement; time for filing; extension; inquiries by commissioner {#sec-17-45-12 omnilex-key=us-nj-statutes--title-17--17:45-12}
Every such association transacting business in this state shall annually on or before March first file in the department a statement, subscribed and sworn to by its president and secretary, or in their absence, by two of its principal officers, showing its financial condition at the close of business on December thirty-first of the year last preceding, and its business for that year, which statement shall be in such form and contain such matters as the commissioner shall prescribe. The commissioner may also address inquiries to any such association or its officers in relation to its condition or affairs, or any matter connected with its transactions, and the officers of such association shall promptly reply in writing to all such inquiries. For good cause shown the commissioner may extend the time within which any such statement may be filed.
##### **§ 17:45-13** Failure to file annual statement or answer inquiries; penalty; authority to cease on notice {#sec-17-45-13 omnilex-key=us-nj-statutes--title-17--17:45-13}
Any such association which neglects to make and file its annual statement in the form and within the time provided by section 17:45-12 of this Title or to reply in writing to inquiries of the commissioner within such reasonable time as may be specified by him shall forfeit twenty-five dollars ($25.00) for each day's neglect, to be recovered in a civil action, and upon notice by the commissioner to that effect its authority to do new business in this State shall cease while such default continues.
##### **§ 17:45-14** Examination of companies; expenses; expenses when association insolvent; gifts to authorities prohibited {#sec-17-45-14 omnilex-key=us-nj-statutes--title-17--17:45-14}
The commissioner may, whenever he deems it expedient, make or cause to be made an examination of the assets and liabilities, method of conducting business and all other affairs of every such association authorized or which has made application for authority to transact business under the provisions of this chapter. For the purpose of such examination the commissioner may authorize and employ such persons to conduct the same or to assist therein as he may deem advisable, which examination may be conducted in any State in which the association examined has an office, agent or place of business. The reasonable expense of such examination shall be fixed and determined by the commissioner, and he shall collect the same from the association examined, which shall pay same on presentation of a detailed account of such expense. If any association, after such examination, shall be adjudged by the Superior Court to be insolvent, the expense of such examination, if unpaid, shall be ordered paid out of the assets of the association. No association shall, either directly or indirectly, pay, by way of gift, credit or otherwise, any other or further sum to the commissioner or to any person in the employ of the department, for extra service or for purposes of legislation, or for any other purpose whatsoever.
##### **§ 17:45-16** Fees to be paid by association {#sec-17-45-16 omnilex-key=us-nj-statutes--title-17--17:45-16}
Every association to which this chapter shall be applicable shall pay the following fee to the commissioner for enforcement of the provisions of this chapter, viz.: for filing its application and charter, ten dollars; for filing each annual statement, five dollars; for each copy of any paper filed in the department, twenty cents a sheet or folio of one hundred words and one dollar for certifying the same.
##### **§ 17:45-17** Penalty for violation; recovery; misrepresentation by employee or agent a misdemeanor {#sec-17-45-17 omnilex-key=us-nj-statutes--title-17--17:45-17}
Any mutual benefit association of this or any other State, country or province which shall have violated any of the provisions of, or shall have neglected, failed or refused to comply with any of the requirements of this chapter, except the failure to file an annual statement, shall be liable to a penalty of five hundred dollars ($500.00), to be sued for and collected by the commissioner in a civil action in the name of the State. Each such penalty when recovered shall be paid by the commissioner into the State treasury for the use of the State.
Any officer, agent, employee or member of any such association doing business in this State who shall issue, circulate or cause or permit to be circulated, any estimate, illustration, circular of any sort misrepresenting the terms of any certificate issued by such association or any other association authorized to transact business under this chapter, misrepresent the benefits or advantages promised thereby, use any name or title of any certificate or class of certificates misrepresenting the true nature thereof, solicit, negotiate or effect the sale of any benefit contract or membership certificate of any mutual benefit association which shall have neglected, failed or refused to procure a certificate of authority as provided for by the provisions of this chapter, or accept any dues, contributions, fees, assessments or thing of value of any kind in consideration for such benefit contract or membership certificate on behalf of such association, shall be guilty of a misdemeanor.
##### **§ 17:45-18** Chapter inapplicable to certain associations and companies {#sec-17-45-18 omnilex-key=us-nj-statutes--title-17--17:45-18}
The provisions of this chapter shall not apply to any corporation, society, or association carrying on the business of life, health or accident insurance for profit or gain or to fraternal beneficiary associations as defined in section 17:39-1 of this Title, nor shall it affect or apply to any supreme, grand or subordinate body of the Ancient Order of Free and Accepted Masons, Independent Order of Odd Fellows, Improved Order of Red Men, Junior Order of United American Mechanics, Knights of Pythias, Patriotic Order Sons of America, Patriotic Order of America, Foresters of America, Companions of the Forest of America, Fraternal Order of Beavers, Ladies' Auxiliary, Ancient Order of Hibernians, Fraternal Order of Eagles, Italian American War Veterans of the United States, Incorporated, Ordine Figli d'Italia of America, Daughters of America, Sons and Daughters of Liberty, Knights of Columbus, nor to similar orders, nor to any mutual association which admits to membership only members of such exempted societies, orders, or associations, nor to associations formed exclusively of employees of one or more counties, cities, boroughs, towns, townships, villages, or school districts of the State, firemen's relief and patrolmen's benevolent associations, any firemen's or policemen's organization, employees of a designated firm, business house or corporation, nor to plans operated by any hospital or group of hospitals approved by the department of institutions and agencies which offer to subscribers free hospital service when needed. The provisions of this chapter shall not apply to any mutual benefit association of this State, which admits to membership only persons residing within this State, which restricts membership to persons meeting a test as to religion or nationality established in its constitution and by-laws, which grants no pecuniary remuneration to any person, firm or corporation for the procurement of new members, which pays no commissions for the collection of contributions from members, which holds regular meetings of its members at least 6 times annually, at which members may vote only in person, and all of whose trustees and officers serve without substantial pecuniary remuneration, except that any such association may allow annual stipends aggregating not more than $1,000.00 to its officers who shall be charged with the maintenance of the records of the association and may allow to its officers and trustees such reasonable expenses as may be incurred by them in the discharge of their duties. The provisions of this chapter shall not be construed to confer on the commissioner any right of supervision, any right of investigation or any jurisdiction or authority whatever, with respect to any corporation, society or association exempt therefrom as provided in this section or any subordinate, affiliate, or auxiliary body thereof now in existence or which shall hereafter be created. Nothing in this chapter shall be construed to give any department of the State the right to pass upon alleged defects and alleged illegalities in the charters of such exempt corporations, societies or associations, or any subordinate, affiliate or auxiliary body thereof.
##### **§ 17:45-19** Certificates issued under prior law continued; conditions {#sec-17-45-19 omnilex-key=us-nj-statutes--title-17--17:45-19}
All certificates of authority issued by the commissioner pursuant to the provisions of the act entitled "A supplement to an act entitled "An act to incorporate associations not for pecuniary profit,' approved April twenty-first, one thousand eight hundred and ninety-eight," approved June seventh, one thousand nine hundred and thirty-five, shall be deemed to have been issued pursuant to the provisions of this chapter and shall be of equal force as though issued pursuant thereto, but the possession of such certificate of authority shall not relieve any association from compliance with the provisions of this chapter, except that the minimum guarantee fund provided for in this chapter, with respect to associations holding such certificates, shall be one thousand dollars increased by five per cent of all the dues, contributions and assessments collected after September first, one thousand nine hundred thirty-five, but such fund shall not be required to exceed the minimum established by section 17:45-8 of this title.
##### **§ 17:45-20** Partial unconstitutionality; chapter void if section 17:45-18 invalid {#sec-17-45-20 omnilex-key=us-nj-statutes--title-17--17:45-20}
If section 17:45-18 of this title shall be held unconstitutional or invalid in whole or in part this entire chapter shall be null and void and of no further force or effect, but if any other section, clause or provision of this chapter shall be held unconstitutional or invalid, such determination shall not be held to affect any other clause, section or provision hereof.
##### **§ 17:45-21** Chapter inapplicable to certain associations {#sec-17-45-21 omnilex-key=us-nj-statutes--title-17--17:45-21}
The provisions of chapter forty-five of Title 17 of the Revised Statutes shall not apply to any mutual benefit association incorporated under the laws of this State, which admits to membership only persons living in this State, which limits death benefits to two hundred and fifty dollars ($250.00), which has and maintains assets of a market value in an amount equal to the reserve required by the standard industrial table of mortality, with interest at the rate of three and one-half per centum (3 1/2 %) per annum, calculated according to the modified preliminary term method for valuation of industrial life insurance policies, on all certificates in force contracting to pay death benefits, and which association shall have additional assets of a market value equal to the total amount of disability benefits paid to members during the last preceding calendar year; provided, that every such association shall have assets of a market value, in the opinion of the Commissioner of Banking and Insurance of this State, of not less than two hundred and fifty thousand dollars ($250,000.00); provided, further, that every such association shall annually, on or before the first day of March, file with the Department of Banking and Insurance of this State, a statement, subscribed and sworn to by its president and secretary, showing the market value of its assets and the amount of disability benefits paid to its members during the last preceding calendar year, together with a certified statement by a competent actuary of reserve required by the standard industrial table of mortality, computed as above set forth.
##### **§ 17:45-22** Death benefits payable notwithstanding section 17:45-21 or other laws {#sec-17-45-22 omnilex-key=us-nj-statutes--title-17--17:45-22}
Any mutual benefit association incorporated under the laws of this State and to which the provisions of chapter forty-five of Title 17 of the Revised Statutes do not, or shall not, apply pursuant to the provisions of the act to which this act is a supplement, may provide for, and pay, death benefits to five hundred dollars ($500.00) notwithstanding the provisions of the act to which this act is a supplement, or of any other law applicable to any such mutual benefit association.
##### **§ 17:45-23** Minimum assets {#sec-17-45-23 omnilex-key=us-nj-statutes--title-17--17:45-23}
Every such mutual benefit association shall have, and maintain, assets of a market value, in the opinion of the Commissioner of Banking and Insurance of this State, of not less than three hundred thousand dollars ($300,000.00).
## **Chapter 45A** {#struct-chapter-45a}
##### **§ 17:45A-1** Mutual benefit association defined {#sec-17-45a-1 omnilex-key=us-nj-statutes--title-17--17:45A-1}
As used herein, "mutual benefit association" means a mutual benefit association heretofore or hereafter organized under any law of this State which (a) has transacted business in this State for not less than 10 years; (b) is subject to the provisions of chapter 45 of Title 17 of the Revised Statutes as amended and supplemented; and (c) possesses a subsisting certificate of authority to transact business as a mutual benefit association issued by the Commissioner of Banking and Insurance.
##### **§ 17:45A-2** Authorization to convert {#sec-17-45a-2 omnilex-key=us-nj-statutes--title-17--17:45A-2}
Any mutual benefit association may become and be a mutual life insurance company upon complying with the provisions of this act.
##### **§ 17:45A-3** Method of conversion; contents of resolution {#sec-17-45a-3 omnilex-key=us-nj-statutes--title-17--17:45A-3}
Any such mutual benefit association may effect its conversion into a mutual life insurance company as follows: Its board of directors or board of trustees shall approve a plan for the conversion of the association into a mutual life insurance company, and shall adopt a resolution declaring that the conversion is in the best interests of such association, and fixing the time and place for a meeting of the members of the association to take action thereon. Not less than 10 days' written notice of such meeting shall be given to each of the members of the association by mail, postage prepaid, addressed to the members at their addresses appearing upon the books of the association. The notice shall contain a copy of the plan and resolution so adopted, or a summary thereof. The resolution so adopted shall also state
(a) the name by which the association shall be known after its conversion, which may be different from the name by which the association was theretofore known, but which shall comply with the provisions of law governing the names of mutual life insurance companies;
(b) the place in this State where the principal office of the association will be maintained after its conversion into a mutual life insurance company;
(c) the name and address of the registered agent upon whom process against the association may be served after its conversion;
(d) the kind or kinds of insurance proposed to be transacted, which shall be limited to the purpose expressed in paragraph b of section 17:17-3 of the Revised Statutes as amended;
(e) the names and addresses of the persons who will constitute the board of directors or board of trustees of the mutual life insurance company until their successors are elected and qualify as provided by law applicable to mutual life insurance companies;
(f) such other provisions as may be necessary or convenient for the management of the mutual life insurance company, and which may lawfully be included in an original certificate of incorporation pursuant to 17:17-4 of the Revised Statutes as amended.
##### **§ 17:45A-4** Vote percentage required for approval; certificate to Commissioner of Banking and Insurance {#sec-17-45a-4 omnilex-key=us-nj-statutes--title-17--17:45A-4}
If, at the meeting held pursuant to the notice required by section 3 of this act, or at any adjournment thereof, 2/3 of the members present vote in favor of the plan and resolution so adopted by the board of directors or board of trustees, or in favor of an amendment thereof or a substitute therefor, a certificate thereof signed by the secretary, and acknowledged or proved as in the case of deeds to real property, shall be submitted to the Commissioner of Banking and Insurance. The certificate shall set forth the plan and resolution adopted, and the approval thereof in the manner herein provided.
##### **§ 17:45A-5** Issuance of certificate of authority upon certain findings by commissioner {#sec-17-45a-5 omnilex-key=us-nj-statutes--title-17--17:45A-5}
If the commissioner shall find
(a) that the association is possessed of unencumbered assets of at least $100,000.00 over and above all required reserves and other liabilities including the minimum guarantee fund and the benefit fund required to be established pursuant to chapter 45 of Title 17 of the Revised Statutes as amended and supplemented; and
(b) that in the next fiscal year preceding the submission of the application for charter, the association's income from dues and contributions of its members as payments on certificates theretofore issued by the association amounted to not less than $100,000.00; and
(c) that the plan of conversion is not contrary to the best interest of the members, certificate holders and policyholders of the association; and
(d) that the association has complied with all the requirements of this act to entitle it to convert into a mutual life insurance company, and that the proposed methods of operation of the association after its conversion are not such as would render its operation hazardous to the public or its policyholders, the commissioner shall file the certificate in the department, and shall issue a certificate of authority to the association to conduct business as a mutual life insurance company.
##### **§ 17:45A-6** Date of existence as mutual life insurance company; effect {#sec-17-45a-6 omnilex-key=us-nj-statutes--title-17--17:45A-6}
From and after the date of the issuance of the certificate of authority, the association shall be a mutual life insurance company, vested with all the powers and privileges of a mutual life insurance company, and subject to all provisions of law applicable to such companies, in the same manner and with the same effect as if the converted association had originally been incorporated as a mutual life insurance company on the date of the issuance of the certificate of authority, and the members of such association shall become and be members of the mutual life insurance company.
##### **§ 17:45A-7** Rights against association not affected by conversion; exception {#sec-17-45a-7 omnilex-key=us-nj-statutes--title-17--17:45A-7}
The conversion of an association into a mutual life insurance company shall not affect the right of any creditor or member of any such association, but all rights of all persons against such association before its conversion shall continue unaffected and shall be enforced against the mutual life insurance company in the same manner they could have been enforced against the association had its conversion not taken place; except that all rights of assessment, or reduction in benefits in lieu of assessment, prescribed in the certificate of incorporation or by-laws of the mutual benefit association, or provided for in any certificate, policy or contract of such association, shall be canceled. "Assessment," as used herein, means the right to require the payment of a sum in addition to the weekly or other periodical dues, contributions, premiums and fees required under the terms of any certificate, policy or contract.
## **Chapter 46A** {#struct-chapter-46a}
##### **§ 17:46A-1** Short title {#sec-17-46a-1 omnilex-key=us-nj-statutes--title-17--17:46A-1}
This act may be cited as the Mortgage Guaranty Insurance Act.
##### **§ 17:46A-2** Definitions. {#sec-17-46a-2 omnilex-key=us-nj-statutes--title-17--17:46A-2}
2. Definitions. The definitions set forth in this section shall govern the construction of the terms used in this act.
(a) "Mortgage guaranty insurance" means:
(1) Insurance against financial loss by reason of nonpayment of principal, interest and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate, provided the improvement on such real estate is a residential building or a condominium unit or buildings designed for occupancy by not more than four families;
(2) Insurance against financial loss by reason of nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a lien or charge on real estate, provided the improvement on such real estate is a building or buildings designed for occupancy by five or more families or designed to be occupied for industrial or commercial purposes;
(3) Insurance against financial loss by reason of nonpayment of rent or other sums agreed to be paid under the terms of a written lease for the possession, use or occupancy of real estate, provided the improvement on such real estate is a building or buildings designed to be occupied for industrial or commercial purposes.
(b) "Authorized real estate security" means a note, bond or other evidence of indebtedness not exceeding 103 percent of the fair market value of the real estate, secured by a mortgage, deed of trust, or other instrument constituting a first lien or charge on real estate; provided:
(1) The real estate loan secured in such manner is one which a bank, savings and loan association, or an insurance company, which is supervised and regulated by a department of this State or an agency of the federal government, is authorized to make.
(2) The improvement on such real estate is a building or buildings designed for occupancy as specified by subsections (a)(1) and (a)(2) of this section.
(3) The lien on such real estate may be subject and subordinate to the following:
(i) The lien of any public bond, assessment, or tax, when no installment, call or payment of or under such bond, assessment or tax is delinquent.
(ii) Outstanding mineral, oil or timber rights, rights-of-way, easements or rights-of-way or support, sewer rights, building restrictions or other restrictions or covenants, conditions or regulations of use, or outstanding leases upon such real property under which rents or profits are reserved to the owner thereof.
(c) "Contingency reserve" means an additional premium reserve established for the protection of policyholders against the effect of adverse economic cycles.
(d) "Policyholders' surplus" means the aggregate of capital, surplus and contingency reserve.
##### **§ 17:46A-3** Capital, surplus and contingency reserve requirements. {#sec-17-46a-3 omnilex-key=us-nj-statutes--title-17--17:46A-3}
3. Capital, surplus and contingency reserve requirements.
(a) An insurance company shall not transact the business of mortgage guaranty insurance unless it has paid-in capital of at least $1,000,000.00 and paid-in surplus of at least $1,000,000.00.
(b) In addition to the paid-in capital and surplus provided in subsection (a), each mortgage guaranty insurance company shall establish a contingency reserve out of net premiums remaining (gross premiums less premiums returned to policyholders) after establishment of the unearned premium reserve. To the contingency reserve the insurance company shall contribute an amount equal to 50% of such remaining premiums. The yearly contributions to the contingency reserve made during each calendar year shall be maintained for a period of 180 months, except that withdrawals may be made by the insurance company in any given year in which the actual losses exceed the expected losses. The commissioner shall, by regulation, determine when an insurance company may make withdrawals from its contingency reserve.
(c) (1) Except as provided in paragraph (2) of this subsection, a mortgage guaranty insurance company shall not at any time have outstanding a total liability under its aggregate insurance policies exceeding 25 times its policyholders' surplus, such liability to be computed on the basis of the insurance company's liability under its election as provided in subsection (c) of section 4 of P.L.1968, c.248 (C.17:46A-4). In the event that any insurance company has outstanding total liability exceeding 25 times its policyholders' surplus, it shall cease transacting new business until such time as its total liability no longer exceeds 25 times its policyholders' surplus.
(2) On and after the first day of the third month following enactment of P.L.2010, c.93 and continuing for the 72 months thereafter, the commissioner may waive the limit on liability exposure set forth under paragraph (1) of this subsection at the written request of a mortgage guaranty insurance company. The commissioner may approve the request of the mortgage guaranty insurance company upon a finding that the company's financial position is reasonable in relation to the company's outstanding total liability under its aggregate insurance policies, as well as adequate to its financial needs. A company granted a waiver pursuant to this paragraph shall submit quarterly reports to the commissioner concerning the company's financial condition. The commissioner shall promulgate regulations concerning the process for a mortgage guaranty insurance company to submit a written request pursuant to this paragraph, and concerning the information to be indicated in the quarterly reports. The regulations shall specify the information deemed necessary by the commissioner to review the request and any factors to be considered in approving or disapproving the request. The commissioner shall provide an annual briefing to the Assembly Financial Institutions and Insurance Committee and the Senate Commerce Committee, or their successors, on the financial condition of the mortgage guaranty insurance industry.
(d) A mortgage guaranty insurance company shall not declare any dividends except from undivided profits remaining on hand over and above the aggregate of its paid-in capital, paid-in surplus and contingency reserve.
##### **§ 17:46A-4** Limitations and restrictions for transacting business. {#sec-17-46a-4 omnilex-key=us-nj-statutes--title-17--17:46A-4}
4. Limitations and restrictions for transacting business.
(a) Mortgage guaranty insurance may be transacted in this State only by a stock insurance company holding a certificate of authority for the transaction of such insurance, and shall be written only to insure loans secured by authorized real estate securities as defined in section 2 of this act.
(b) A mortgage guaranty insurance company shall not insure loans secured by properties in a single housing tract or a contiguous tract in excess of 10% of the insurance company's policyholders' surplus. In determining the amount of such risk, applicable reinsurance in any assuming insurance company authorized to transact mortgage guaranty insurance in this State shall be deducted from the total direct risk insured. "Contiguous," for the purposes of this section, means not separated by more than 1/2 mile.
(c) The liability of a mortgage guaranty insurance company for an insured loan shall in no event exceed the actual loss. In lieu of paying the percentage of the insured loan as specified in the policy, a mortgage guaranty insurance company may elect to pay the entire indebtedness to the insured and acquire title to the authorized real estate security.
(d) (Deleted by amendment; P.L.1975, c.122, s.2.)
(e) (1) A mortgage guaranty insurance company which anywhere transacts any class of insurance other than mortgage guaranty insurance is not eligible for the issuance of a certificate of authority to transact mortgage guaranty insurance in this State nor for the renewal thereof.
(2) A mortgage guaranty insurance company which anywhere transacts the classes of insurance defined in paragraph (a) (2) or (a) (3) of section 2 of this act is not eligible for a certificate of authority to transact in this State the class of mortgage guaranty insurance defined in paragraph (a) (1) of section 2 of this act.
(f) Nothing in this act shall be construed as limiting the right of any mortgage guaranty insurance company to impose reasonable requirements upon the lender with regard to the terms of any note or bond or other evidence of indebtedness secured by a mortgage or deed of trust, such as requiring a stipulated down payment by the borrower.
##### **§ 17:46A-5** Rebates and commissions {#sec-17-46a-5 omnilex-key=us-nj-statutes--title-17--17:46A-5}
(a) Every mortgage guaranty insurance company shall adopt, print and make available a schedule of premium charges for mortgage guaranty insurance policies. Premium charges made in conformity with the provisions of this act shall not be deemed to be interest or other charges under any other provision of law limiting interest or other charges in connection with mortgage loans. The schedule shall show the entire amount of premium charge for each type of mortgage guaranty insurance policy issued by the insurance company.
(b) No mortgage guaranty insurance company shall pay to any person who is acting as agent, representative, attorney or employee of the owner, mortgagee of the prospective owner, or mortgagee of the real property or any interest therein, either directly or indirectly, any commission, or any part of its premium charges or any other consideration as an inducement for or as compensation on any mortgage guaranty insurance business.
(c) No mortgage guaranty insurance company shall make any rebate of any portion of the premium charge shown by the schedule required by subsection (a). No mortgage guaranty insurance company shall quote any premium charge to any person which is less than that currently available to others for the same type of mortgage guaranty insurance policy. The amount by which any premium charge is less than that called for by the current schedule of premium charges is an unlawful rebate.
(d) No mortgage guaranty insurance company shall pay any compensation to any person for transacting insurance for or with it based in whole or in part upon a commission basis unless such person is licensed pursuant to section 6 of this act, subject to all the other provisions of and restrictions in chapter 22 of Title 17. This subsection shall not be construed so as to affect the meaning of any other provisions of this section.
(e) The commissioner may after a hearing suspend or revoke the certificate of authority of any mortgage guaranty insurance company which, after 10 days written notice from the commissioner requiring it to cease and desist, continues to pay any commission or to make any unlawful rebate in willful violation of the provisions of this act.
##### **§ 17:46A-7** Financial statements {#sec-17-46a-7 omnilex-key=us-nj-statutes--title-17--17:46A-7}
(a) The provisions of chapter 23 of Title 17 shall apply to mortgage guaranty insurance companies.
(b) The unearned premium reserve shall be computed as required by the annual statement form, except that on all policies covering a risk period of more than 1 year the unearned premium reserve shall be computed in accordance with standards promulgated by the commissioner.
(c) In addition to the contingency reserve required under subsection (b) of section 3, the case basis method shall be used to determine the loss reserve, which shall include a reserve for claims reported and unpaid and claims incurred but not reported, including:
(i) Estimated losses on insured loans which have resulted in the conveyance of property which remains unsold.
(ii) Insured loans in the process of foreclosure.
(iii) Insured loans in default for 4 or more months.
##### **§ 17:46A-8** Applicability of other laws {#sec-17-46a-8 omnilex-key=us-nj-statutes--title-17--17:46A-8}
All the applicable provisions of Title 17 and Title 54 of the Revised Statutes, chapter 227 (C. 54:16A-1 et seq.) of the laws of 1952, and chapter 132 (C. 54:18A-1 et seq.) of the laws of 1945, except as may be in conflict with this act, shall apply to mortgage guaranty insurance companies licensed under this act.
##### **§ 17:46A-9** Additional powers of commissioner {#sec-17-46a-9 omnilex-key=us-nj-statutes--title-17--17:46A-9}
The commissioner may adopt, pursuant to the provisions of chapters 66 (C. 17:1-8.1 et seq.) and 68 (C. 17:1-8.5 et seq.) of the laws of 1958, such reasonable rules and regulations as may be necessary to carry out the provisions of this act, including, but not limited to, appropriate restrictions as to investments, giving full consideration to the desirability of high liquidity.
##### **§ 17:46A-10** Advertising {#sec-17-46a-10 omnilex-key=us-nj-statutes--title-17--17:46A-10}
No bank, savings and loan association or insurance company, any of whose authorized real estate securities are insured by mortgage guaranty insurance pursuant to this act may state in any brochure, pamphlet, report or any form of advertising that the real estate loans of the bank, savings and loan association or insurance company are "insured loans" unless the brochure, pamphlet, report or advertising also clearly states that the loans are insured by private insurers and the names of the private insurers are given and shall not make any such statement at all unless such insurance is by an insurance company authorized to transact business in this State pursuant to this act.
##### **§ 17:46A-11** Repeal {#sec-17-46a-11 omnilex-key=us-nj-statutes--title-17--17:46A-11}
Chapter 46 of Title 17 of the Revised Statutes is repealed.
## **Chapter 46B** {#struct-chapter-46b}
##### **§ 17:46B-1** Certain words defined {#sec-17-46b-1 omnilex-key=us-nj-statutes--title-17--17:46B-1}
Certain words defined. As used in this act:
a. "Title insurance" means insuring, guaranteeing or indemnifying owners of real property or others interested therein against loss or damage suffered by reason of liens, encumbrances upon, defects in or the unmarketability of the title to said property, guaranteeing, warranting, or otherwise insuring by a title insurance company the correctness of searches relating to the title to real property, or doing any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this act.
b. The "business of title insurance" shall be deemed to be (1) the making as insurer, guarantor or surety, or proposing to make as insurer, guarantor or surety, of any contract or policy of title insurance; (2) the transacting or proposing to transact, any phase of the title insurance, including abstracting, examination of title, solicitation, negotiation preliminary to execution of a contract of title insurance, and execution of a contract of title insurance, insuring and transacting matters subsequent to the execution of the contract and arising out of it, including reinsurance; or (3) the doing, or proposing to do, any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this act.
c. "Title insurance company" means any domestic company organized under the provisions of this act for the purpose of insuring titles to real estate, any title insurance company organized under the laws of another state or foreign government and licensed to insure titles to real estate within this State pursuant to section 25 of this act, and any domestic or foreign company having the power and authorized to insure title to real estate within this State as of the effective date of this act and which meets the requirements of this act.
d. "Applicants for insurance" shall be deemed to include all those, whether or not a prospective insured, who from time to time apply to a title insurance company, or to its agent, for title insurance, and who at the time of such application are not agents for a title insurance company.
e. "Premium" for title insurance means that portion of the fee charged by a title insurance company, agent of a title insurance company or approved attorney of a title insurance company, or any of them, to an insured or to an applicant for insurance, for the assumption by the title insurance company of the risk created by the issuance of the title insurance policy.
f. "Fee" for title insurance means and includes the premium for the assumption of the insurance risk, charges for abstracting or searching, examination, determining insurability, and every other charge, whether denominated premium or otherwise, made by any title insurance company or title insurance agent.
g. "Commissioner" means the Commissioner of Insurance of the State of New Jersey.
h. "Approved attorney" means an attorney at law admitted to practice in the State of New Jersey, who is not an employee of a title insurance company or of a title insurance agent, upon whose examination of title and report thereon a title insurance company may issue a policy of title insurance.
i. "Title insurance agent" means a person, firm, partnership, association, corporation, cooperative or joint-stock company authorized in writing by a title insurance company to solicit insurance risks and collect fees in its behalf and who in the regular course of business as such agent shall perform all of the following functions: examine title to real estate, determine insurability in accordance with underwriting rules and standards prescribed by such title insurance company, and issue a title report, binder, or commitment to insure, and policy based upon the examination performed by such agent and determination of insurability as aforesaid. Provided, however, the term "title insurance agent" shall not include officers and salaried employees of any title insurance company authorized to do a title insurance business within this State.
j. "Single insurance risk" means the insured amount of any policy or contract of title insurance issued by a title insurance company unless two or more policies or contracts are simultaneously issued on different estates in identical real property, in which event, it means the sum of the insured amounts of all such policies or contracts. However, any such policy or contract that insures a mortgage interest that is excepted in a fee or leasehold policy or contract, and which does not exceed the insured amount of such fee or leasehold policy or contract, shall be excluded in computing the amount of a single insurance risk.
k. "Net retained liability" means the total liability retained by a title insurance company under any policy or contract of insurance, or under a single insurance risk as defined in or computed in accordance with subsection j. of this section, after the purchase of reinsurance.
l. "Foreign title insurance company" means a title insurance company organized under the laws of any other state of the United States.
m. "Alien title insurance company" means any title insurance company incorporated or organized under the laws of any foreign nation or of any province or territory thereof, not included under the definition of "foreign title insurance company."
n. "Personal or controlled insurance" means a policy of title insurance where the source or origination of the application for insurance or where the insured or one of the insureds under such policy is, or the loss thereunder is payable to:
(1) The title insurance company issuing such policy, or (a) any person or corporation directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such title insurance company, or (b) any corporation which is directly or indirectly controlled by a person or corporation which also controls the title insurance company as described in paragraph (1)(a) of this subsection, or (c) any corporation making consolidated returns for United States income tax purposes with such title insurance company or any corporation described in paragraphs (1)(a) and (1)(b) of this subsection; or
(2) The title insurance agent issuing such policy, or
(a) If such title insurance agent is a natural person:
(i) his spouse, his employer or his employer's spouse; or
(ii) any person related to him or the persons mentioned in subparagraph (i) of paragraph (2)(a) of this subsection within the second degree by blood or marriage; or
(iii) if his employer is a corporation, any person directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such corporation; or
(iv) if his employer is a partnership or association, any person owning an interest in such partnership or association.
(b) If such title insurance agent is a corporation,
(i) any person directly or indirectly owning or controlling a majority of the voting stock or controlling interest in such corporation; or
(ii) any corporation which is directly or indirectly controlled by a person who also controls the title insurance agent as described in subparagraph (i) of paragraph (2)(b) of this subsection; or
(iii) any corporation making consolidated returns for United States income tax purposes with any corporation described in subparagraph (i) or (ii) of paragraph (2)(b) of this subsection.
o. "Source" as used in this act means and includes clients and customers of attorneys at law and real estate brokers, where such attorney or broker acts as a title insurance agent in an individual, partnership or corporate capacity.
p. "Person" as used in this act means a firm, partnership, association, corporation, cooperative or joint-stock company as well as individuals, unless restricted by the context to an individual as distinguished from some other entity.
##### **§ 17:46B-1.1** Definitions. {#sec-17-46b-1.1 omnilex-key=us-nj-statutes--title-17--17:46B-1.1}
4. a. As used in this section:
"Title search business entity" means any person or entity organized under the laws of this State or another state for the primary purpose of determining the existence of any lien, lawsuit, lease, easement, mortgage or other encumbrance or restriction, or ownership interest, on any property and regularly conducts business with any title insurance company or title insurance agent as defined in section 1 of P.L.1975, c.106 (C.17:46B-1).
b. A title search business entity conducting business in this State shall register with and be subject to regulation by the Department of Banking and Insurance. The business entities shall also register with the Division of Revenue and Enterprise Services in the Department of the Treasury, or the county clerk, as appropriate.
c. The Commissioner of Banking and Insurance may issue rules and regulations necessary to effectuate the purposes of this section. The rules and regulations shall be effective immediately upon filing with the Office of Administrative Law for a period not to exceed 18 months and may, thereafter, be amended, adopted, or readopted in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
##### **§ 17:46B-2** Short title. {#sec-17-46b-2 omnilex-key=us-nj-statutes--title-17--17:46B-2}
2. Short title. This act shall be known and may be cited as "The Title Insurance Act of 1974."
##### **§ 17:46B-3** Application of act {#sec-17-46b-3 omnilex-key=us-nj-statutes--title-17--17:46B-3}
The provisions of this act shall apply to all title insurance companies, title insurance rating organizations, title insurance agents, applicants for title insurance, policyholders and to all persons and business entities engaged in the business of title insurance.
##### **§ 17:46B-4** Severability {#sec-17-46b-4 omnilex-key=us-nj-statutes--title-17--17:46B-4}
The provisions of this act shall be severable, and, if any of its provisions shall be held to be unconstitutional, the decision of the court shall not affect the validity of the remaining provisions of this act.
##### **§ 17:46B-5** Compliance with act required {#sec-17-46b-5 omnilex-key=us-nj-statutes--title-17--17:46B-5}
On and after the effective date of this act, only a title insurance company shall underwrite or issue a policy of title insurance. No person, firm, partnership, association, corporation, cooperative, joint-stock company or trust shall engage in the business of title insurance in this State unless authorized to transact such a business by the provisions of this act.
##### **§ 17:46B-6** Corporate form required {#sec-17-46b-6 omnilex-key=us-nj-statutes--title-17--17:46B-6}
A title insurance company shall be organized as a stock corporation as provided in R.S. 17:17-2 except as hereinafter specified in this act.
##### **§ 17:46B-7** Financial requirement {#sec-17-46b-7 omnilex-key=us-nj-statutes--title-17--17:46B-7}
Financial requirement.
a. Every title insurance company shall have a minimum capital, which shall be paid in and maintained, of not less than $500,000.00 and, in addition, paid-in surplus of at least $250,000.00.
b. Every title insurance company shall, prior to the issuance of any policy of title insurance in this State, have on deposit with the Commissioner of Insurance of the state of its domicile or in segregated funds if permitted by the company's state of domicile the sum of $100,000.00 as a fund for the security and protection of its policyholders wherever situated, or beneficiaries under such policies. The amount of such deposit shall be increased by the sum of $50,000.00 for each state or territorial subdivision of the United States, other than the state of its domicile, in which it shall be or become qualified to engage in the business of title insurance, less the amount required by and deposited in such other states or territorial subdivisions. When the aggregate of amounts so deposited in this or such other states or territorial subdivisions has reached the sum of $250,000.00 no further deposit shall be required of such title insurance company as a condition of its qualification to engage in the business of title insurance in this State.
In the event any company is unable to make the deposits herein required in the state of its domicile by reason of a lack of statutory authority for such deposits, then such deposits may be made with the commissioner of this State.
c. The deposit required to be made by subsection b. of this section may be made in lawful money of the United States or in the classes of securities authorized by the provisions of R.S.17:20-1.
d. Assets deposited pursuant to subsection b. of this section may, with the approval of the commissioner, be exchanged from time to time for other assets of like value.
e. As long as the capital of the depositing title insurance company remains unimpaired, it shall receive the income, interest and dividends on any assets deposited.
f. Any title insurance company which has deposited assets pursuant to subsection b. of this section may, with the approval of the commissioner, withdraw any part of the assets so deposited; provided, however, that should said title insurance company continue to engage in the business of title insurance, it shall not be permitted to withdraw assets that would reduce the amount of its deposit below the amount required by subsection b. of this section.
g. Deposits made pursuant to subsection b. of this section shall be used solely for the security and protection of the insureds under the policies and contracts of insurance issued or reinsurance assumed by such title insurance company. In the event of insolvency or dissolution of such title insurance company, such deposits shall continue to be retained by the commissioner until such time as all outstanding liabilities created by such policies, contracts, or reinsurance agreements have been discharged by reinsurance or otherwise. Such deposits, or so much thereof as shall be necessary, may be used by or with the written approval of the commissioner in the payment of claims arising under such policies, contracts or reinsurance agreements or to purchase reinsurance thereof. Any amounts then remaining with the commissioner shall be applied first to the payment of other obligations of such title insurance company, and second shall be distributed to the stockholders of such title insurance company. The actions of the commissioner shall be subject to judicial review as provided in section 58 of P.L.1975, c.106 (C.17:46B-58).
h. If, with respect to any title insurance company as defined in subsection c. of section 1 of P.L.1975, c.106 (C.17:46B-1), this section 7 requires a greater amount of capital or surplus or deposit than required of such title insurance company immediately prior to the effective date of this act, such title insurance company shall have the period ending July 1, five years after the effective date of this act within which to comply with any such increase requirement.
##### **§ 17:46B-8** Procedure when capital impaired {#sec-17-46b-8 omnilex-key=us-nj-statutes--title-17--17:46B-8}
a. If, for any reason, the capital of a domestic title insurance company becomes impaired and such impairment shall not be eliminated within 30 days from its inception, the company shall forthwith give written notice thereof to the commissioner. The commissioner, upon receipt of such notice or upon otherwise discovering an impairment of capital, shall determine the amount of such impairment and issue a written requisition to the company to eliminate the impairment within such period as he shall designate not more than 60 days from the service of the requisition. He may also by official order prohibit the company from issuing any policies or contracts of title insurance while such impairment exists.
b. Such title insurance company, with the consent and approval of the commissioner, may authorize new or additional shares of stock, and issue certificates therefor, and dispose of the same at not less than their par value for an amount sufficient, at least, to make up the capital impairment, or the commissioner may, in his discretion permit such company to reduce its capital and the par value of its shares, but the capital shall at no time be reduced to an amount less than that required by law for the organization of any such company, after making due allowance for the number of states or territorial subdivisions of the United States in which said company shall retain its qualification to engage in the business of title insurance. In fixing such reduced capital, not less than $250,000.00 nor more than 33 1/3 % of the net assets existing at the time of such capital reduction shall be designated as surplus; nor shall any part of such assets be distributed to stockholders. When the amount of capital prescribed by the commissioner has been established, such title insurance company shall so notify the commissioner, who, upon being satisfied that the impairment no longer exists and is not likely to recur, shall give written approval authorizing such title insurance company to resume issuance of policies or contracts of title insurance, in the state of its domicile, and reinsurance agreements with respect thereto.
c. If the capital of any title insurance company other than a domestic company authorized to do business in this State is found so impaired, the commissioner, may after notice and hearing, revoke its license to transact business in this State.
##### **§ 17:46B-9** Determination of insurability required {#sec-17-46b-9 omnilex-key=us-nj-statutes--title-17--17:46B-9}
No policy or contract of title insurance shall be written unless and until the title insurance company has caused to be conducted a reasonable examination of the title and has caused to be made a determination of insurability of title in accordance with sound underwriting practices for title insurance companies. Evidence thereof shall be preserved and retained in the files of the title insurance company or its agent for a period of not less than 15 years after the policy or contract of title insurance has been issued. In lieu of retaining the original copy, the title insurance company or the agent of the title insurance company may, in the regular course of business, establish a system whereby all or part of these writings are recorded, copied or reproduced by any photographic, photostatic, microfilm, microcard, miniature photographic, or other process which accurately reproduces or forms a durable medium for reproducing the original. On every application for a commitment for title insurance the name and address of the applicant and the proposed insured shall be set forth in full. Except where the applicant is an attorney at law of the State of New Jersey representing the proposed insured, or where the proposed insured is the United States of America or the State of New Jersey, or any political subdivision thereof, or other governmental authority, the title company shall mail a notice, either separate from or as part of the commitment to insure, to the address of the insured, notifying the insured that there may be conditions, exceptions, and limitations of the insurance liability of the title company, contained in the commitment to insure, and that the proposed insured is entitled to review the commitment to insure, before transfer of title, with an attorney at law of the insured's own choosing. Such notice shall be sent at least 5 days before the closing of title. This section shall not apply to a company assuming no primary liability in a contract of reinsurance, or a company acting as a coinsurer if one of the other coinsuring companies has complied with this section.
##### **§ 17:46B-10** Power to insure titles to real estate {#sec-17-46b-10 omnilex-key=us-nj-statutes--title-17--17:46B-10}
Every title insurance company shall have the power to do the kinds of business defined in subsections a. and b. of section 1 of this act, and to make searches, abstracts, examine titles to real property and chattels, procure and furnish information in relation thereto, and to provide any other services related to the land title business.
##### **§ 17:46B-10.1** Maintenance of separate record of receipts, disbursements representing proceeds of real estate transactions. {#sec-17-46b-10.1 omnilex-key=us-nj-statutes--title-17--17:46B-10.1}
2. a. Every title insurance producer licensed pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.) or P.L.2001, c.210 (C.17:22A-26 et seq.), and every title insurance company shall maintain a separate record of all receipts and disbursements as a depository for funds representing closing or settlement proceeds of a real estate transaction, which funds shall be deposited in a separate trust or escrow account, and which shall not be commingled with a producer's or company's own funds or with funds held by a producer or company in any other capacity.
b. No title insurance producer or company shall disburse funds representing closing or settlement proceeds of a real estate transaction unless those funds shall have been deposited in a separate trust or escrow account by cash, electronic wire transfer, or certified, cashier's, teller's or bank check, or other collected funds; provided nevertheless, that nothing contained herein shall be construed to prohibit a title insurance producer or company from disbursing against funds deposited in a separate trust or escrow account other than by cash, electronic wire transfer, or certified, cashier's, teller's or bank check, or other collected funds in an amount not to exceed $1,000. A "bank check" means a negotiable instrument drawn by a state or federally chartered bank, savings bank or savings and loan association on itself or on its account in another state or federally chartered bank, savings bank or savings and loan association doing business in this State. A "teller's check" means a draft drawn by a bank on another bank, or payable at or through a bank. A New Jersey licensed attorney's trust account check and a trust or escrow account check from a New Jersey licensed insurance producer shall be considered "collected funds" for the purposes of this section.
c. The Commissioner of Banking and Insurance shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this section.
##### **§ 17:46B-11** Prohibition upon guaranteeing mortgages and completion {#sec-17-46b-11 omnilex-key=us-nj-statutes--title-17--17:46B-11}
A title insurance company shall not, in any manner whatsoever, guarantee the payment of the principal or the interest of bonds or other obligations secured by mortgages upon real property; nor shall a title insurance company, in any manner whatsoever guarantee the completion of any building, structure or project.
##### **§ 17:46B-12** Prohibition against transacting other kinds of insurance; prohibition against other kinds of insurance companies transacting title insurance {#sec-17-46b-12 omnilex-key=us-nj-statutes--title-17--17:46B-12}
A title insurance company shall not transact, underwrite or issue any kind of insurance other than title insurance; nor shall title insurance be transacted, underwritten or issued by any company transacting any other kinds of insurance.
##### **§ 17:46B-13** Prohibition against the practice of law {#sec-17-46b-13 omnilex-key=us-nj-statutes--title-17--17:46B-13}
No title insurance company and no title insurance agent shall engage in the practice of law or render legal services, legal advice or legal opinions.
Nothing in this act shall be construed to permit or authorize acts by a title insurance company or title insurance agent which may now or hereafter be prohibited by the Supreme Court of the State of New Jersey.
##### **§ 17:46B-14** Statutory premium reserve {#sec-17-46b-14 omnilex-key=us-nj-statutes--title-17--17:46B-14}
a. Every domestic insurance company shall, in addition to other reserves, establish and maintain a reserve to be known as the "statutory premium reserve" for title insurance, which shall, at all times for all purposes, be deemed and shall constitute the unearned portions of premiums due or received and shall be charged as a reserve liability of such title insurance company in determining its financial condition.
b. The statutory premium reserve shall be retained and held by such title insurance company for the protection of the policyholders' interest until released as prescribed in section 15 f. of this act in policies which have not expired. Except as provided in section 17 of this act, assets equal to the amount of such reserve shall not be subject to distribution among creditors or stockholders of such title insurance company until all claims of policyholders or holders of other title insurance contracts or agreements of such title insurance company have been paid in full and all liability on the policies or other title insurance contracts or agreements, whether contingent or actual, has been discharged or lawfully reinsured.
##### **§ 17:46B-15** Amount of statutory premium reserve; release thereof {#sec-17-46b-15 omnilex-key=us-nj-statutes--title-17--17:46B-15}
a. The statutory premium reserve of every domestic title insurance company shall consist of:
(1) The amount of the reserve held as of the effective date of this act, pursuant to or under permission granted by P.L.1938, c. 289, s. 6, as amended by P.L.1949, c. 180, s. 1 (C. 17:18-13); and
(2) The amount of all additions required to be made to such reserve by this section, less the withdrawals therefrom as required by this section.
b. After the effective date of this act, every domestic title insurance company shall add to its statutory premium reserve, in respect to each policy or reinsurance agreement issued by it, a sum of money out of the fees due or received for such title insurance made by it and deemed to be unearned portions of such fees, a sum equal to $1.50 for each such policy or contract or agreement, plus $0.12 1/2 for each $1,000.00 face amount of net retained liability, as defined in subparagraph k. of section 1, of this act, and shall separately record the aggregate amounts so set aside and reserved in respect to such policies, contracts or agreements written in each calendar year.
c. No such reserves shall be required for a policy or contract that insures a mortgage interest which is excepted in a simultaneously issued owner's policy or contract covering the same estate in land and which does not exceed the insured amount of such owner's policy or contract.
d. The amounts set aside initially to establish the statutory premium reserve as referred to in subparagraph a. (1) of section 15 of this act, and additions to the statutory reserve as referred to in paragraph b. of section 15 of this act shall be deducted in determining net profits of any title insurance company.
e. For the purpose of determining the amounts of the statutory premium reserve that shall be withdrawn pursuant to paragraph f. of this section, and the interest of the policyholders therein under section 17 of this act, all policies, contracts of title insurance or reinsurance agreements of title insurance shall be considered as dated on July 1 of the year of issue.
f. The aggregate of the amounts set aside in statutory premium reserve in any calendar year pursuant to subparagraph b. of this section shall be released from said reserve and restored to net income in years of release pursuant to the following formula:
one-twentieth of such aggregate sum on July 1 of each of the years next succeeding the year of addition to the reserve for a period of 20 years until the entire sum shall have been so released and restored to net profits.
The reserve held at the effective date of this act referred to in subsection a. (1) of this section shall also be released according to the foregoing formula.
g. If substantially the entire outstanding liability under all policies, contracts of title insurance or reinsurance agreements of any title insurance company shall be reinsured, the value of the consideration received by a reinsuring title insurance company authorized to transact the business of title insurance in this State, shall constitute, in its entirety, unearned portions of original premiums and be added to its statutory reserve and deemed, for recovery purposes, to have been provided for liabilities assumed during the year of such reinsurance. The amount of such addition to the statutory premium reserve of such assuming title insurance company shall be equal to the statutory premium reserve required to be maintained by the ceding title insurance company at the time of such reinsurance.
##### **§ 17:46B-16** Maintenance of the statutory premium reserve {#sec-17-46b-16 omnilex-key=us-nj-statutes--title-17--17:46B-16}
If by reason of any cause, other than depreciation in the market value of investments, the amount of the assets of a title insurance company held as investments of its statutory premium reserve should on any date be less than the amount required to be maintained by law in such reserve, and the deficiency shall not be promptly cured, such title insurance company shall forthwith give written notice thereof to the commissioner and shall make no further policies, contracts of title insurance or reinsurance agreements of title insurance until the deficiency shall have been eliminated and until it shall have received written approval from the commissioner authorizing it to again issue such policies, contracts of title insurance or agreements.
##### **§ 17:46B-17** Use of the statutory premium reserve on liquidation, dissolution or insolvency {#sec-17-46b-17 omnilex-key=us-nj-statutes--title-17--17:46B-17}
a. If a title insurance company becomes insolvent, or is in the process of liquidation or dissolution, or in the possession of the commissioner:
(1) Such amount of the assets of such title insurance company equal to the statutory premium reserve then remaining as is necessary may be used by or with the written approval of the commissioner, to pay for reinsurance of the liability of such title insurance company upon all outstanding policies or contracts or reinsurance agreements of title insurance, as to which claims for losses by the holders are not then pending, the balance, if any, of assets equal to the statutory premium reserve fund then remaining, then to be transferred to the general assets of the title insurance company;
(2) The assets other than the statutory premium reserve shall be available to pay claims for losses sustained by holders of policies then pending or arising up to the time reinsurance is effected. In the event that claims for losses are in excess of such other assets of the title insurance company, such claims, when established, shall be paid pro rata out of the surplus assets attributable to the statutory premium reserve, to the extent of such surplus, if any.
b. In the event that reinsurance is not obtained, the statutory premium reserve and assets constituting minimum capital, or so much as remains thereof after outstanding claims have been paid, shall constitute a trust fund to be held by the commissioner for 20 years, out of which claims of policyholders shall be paid as they arise. The balance, if any, of such fund shall, at expiration of 20 years, revert to the general assets of the title insurance company.
##### **§ 17:46B-18** Reserve for unpaid losses and loss expense {#sec-17-46b-18 omnilex-key=us-nj-statutes--title-17--17:46B-18}
a. Each domestic title insurance company shall at all times establish and maintain, in addition to other reserves, a reserve:
(1) Against unpaid losses, and (2) against loss expense, and shall calculate such reserves by making a careful estimate in each case of the loss and loss expense likely to be incurred, by reason of every claim presented, pursuant to notice from or on behalf of the insured, of a title defect in or lien or adverse claim against the title insured, that may result in a loss or cause expense to be incurred for the proper disposition of the claim. The sums of the items so estimated shall be the total amounts of the reserves against unpaid losses and loss expenses of such title insurance company.
b. The amounts so estimated may be revised from time to time as circumstances warrant, but shall be redetermined at least once each year.
c. The amounts set aside in such reserves in any year shall be deducted in determining the net profits for such year of any title insurance company.
##### **§ 17:46B-19** Net retained liability {#sec-17-46b-19 omnilex-key=us-nj-statutes--title-17--17:46B-19}
The net retained liability of any title insurance company under any single insurance risk as defined in subsections j. and k. of section 1 of this act shall not exceed the net amount remaining after deducting from the sum of its capital, surplus, statutory premium reserve and voluntary reserves, the value, if any, assigned in such summation to its title plants, all as shown in its most recent report on file with the commissioner. The same limitation shall apply to any secondary risk assumed by means of reinsurance or to any policy of excess coinsurance.
Nothing in this section is intended to limit the amount of a single insurance risk, as defined in subsection j. of section 1 of this act, that may be written or assumed by a title insurance company, provided it shall cede to one or more other title insurance companies, on or before the effective date of such writing or assumption, such portion, or portions, of the said risk as shall be sufficient to bring its net retained liability thereunder within the limits hereinabove set forth; and provided, further, that each such cession of risk shall also be within the limits of this section as applied to the sum of the capital, surplus, statutory premium reserve and voluntary reserves, less the value, if any, assigned in such summation to the title plants of the assuming and reinsuring title insurance company, as shown by its most recent report on file with the supervisory agency in the state of its domicile.
##### **§ 17:46B-20** Power to reinsure {#sec-17-46b-20 omnilex-key=us-nj-statutes--title-17--17:46B-20}
Any title insurance company authorized to engage in the business of title insurance in this State may cede reinsurance of all or any part of its liability under one or more of its policies or contracts or reinsurance agreements to any title insurance company authorized to engage in the business of title insurance in this or any other state, if such reinsuring company is and remains of the same standard of solvency and complies with all other requirements fixed by the laws of this State for title insurance companies authorized to insure titles to real estate within the State; provided, however, that no larger amount of reinsurance shall be ceded to any title insurance company on a single policy, or contract of title insurance, or on any single title insurance risk as defined in subsection j. of section 1 of this act, than such title insurance company would be permitted to retain if authorized to engage in the business of title insurance in this State. It may also reinsure policies of title insurance issued by other companies on risks whether located in this State or elsewhere. Issuance of contracts of reinsurance by a title insurance company not authorized to engage in the business of title insurance in this State, but authorized to engage in the business of title insurance in any of the United States, reinsuring a title insurance company authorized to engage in the business of title insurance in this State on real property located in this State, shall not of itself constitute the doing of business in this State for the purpose of this act by such reinsuring company; provided, however, that the issuance of such a contract or reinsurance is equivalent to and shall constitute an appointment by such reinsurer of the Commissioner of Insurance to be its true and lawful agent, upon whom may be served all lawful process and complaints in any actions or proceedings arising out of contracts of reinsurance with a title insurance company authorized to engage in the business of title insurance in this State on real property located in this State, and the issuance of any such reinsurance contract shall be signification of its agreement that such service of process and complaints is of the same legal force and validity as personal service of the same upon the insurer.
##### **§ 17:46B-21** Minimum capital {#sec-17-46b-21 omnilex-key=us-nj-statutes--title-17--17:46B-21}
An amount equivalent to the minimum capital requirements as defined in subsection a. of section 7 shall be retained as cash on hand or on deposit in banks, or shall be invested in the following classes of investments; provided, however, that the aggregate invested at any time in those classes of investments set forth in subsections g., h., i. and p. of this section shall not, without written approval of the commissioner, exceed 50% of the sum of the capital and surplus of such title insurance company as shown by its most recent statement on file with said commissioner:
a. Government obligations. Bonds, notes or obligations issued, assumed or guaranteed by the United States, or by any state, district or territory of the United States, or the Commonwealth of Puerto Rico.
b. Governmental subdivisions or public instrumentality obligations. Valid and legally authorized bonds, notes or obligations issued, assumed or guaranteed by:
(1) Any city, town, county, borough, township, municipality, school district, poor district, water, sewer, drainage, road or other governmental district or division located in the United States or any state, district or territory thereof and the Commonwealth of Puerto Rico; or by
(2) Any public instrumentality other than a municipal authority of one or more of the foregoing, if, by statutory or other legal requirements applicable thereto, such bonds or other evidences of indebtedness of such instrumentality are payable, as to principal and interest, from taxes levied or by law required to be levied, upon all taxable property or all taxable income within the jurisdiction of the governmental unit or units of which it is an instrumentality, or from revenue pledged or otherwise appropriated or by law required to be provided for the purpose of such payment;
(3) Any municipal authority issued pursuant to the laws of the State relating to the creation or operation of municipal authorities, if the obligations are not in default as to principal or interest and if the project for which the obligations were issued is under lease to a school district or school districts or if the obligations are not in default as to principal or interest and if the project for which the obligations were issued is under lease to a municipality or municipalities or subject to a service contract with a municipality or municipalities, pursuant to which the municipal authority will receive lease rentals or service charges available for fixed charges on the obligations, which will average not less than one and one-fifth times the average annual fixed charges of such obligations over the life thereof, or if the obligations are not in default as to principal or interest and if for a period of 5 fiscal years next preceding the date of acquisition, the income of such authority available for fixed charges has averaged not less than one and one-fifth times average annual fixed charges of such obligations over the life of such obligations. As used in this clause, the term "income available for fixed charges" shall mean income after deducting operating and maintenance expenses, and, unless the obligations are payable in serial, annual maturities, or are supported by annual sinking fund payments, depreciation, but excluding extraordinary nonrecurring items of income or expenses; and the term "fixed charges" shall include principal, both maturity and sinking fund, and interest on bonded debt. In computing such income available for fixed charges for the purposes of this section, the income so available of any corporation acquired by any municipal authority may be included, such income to be calculated as though such corporation had been operated by a municipal authority and an equivalent amount of bonded debt were outstanding.
The eligibility for investment purposes of obligations of each project of a municipal authority shall be separately considered hereunder.
c. Public utility obligations. Bonds, notes or obligations issued, assumed or guaranteed by any solvent public utility corporation or public utility business trust, incorporated or existing under the laws of the United States or of any state, district or territory thereof.
d. Other corporate obligations. Bonds, notes or obligations issued, assumed or guaranteed by any other corporation, including railroads, or business trust, incorporated or existing under the laws of the United States, or of any state, district or territory thereof, whose income available for fixed charges for the period of 5 fiscal years next preceding the date of investment shall have averaged not less than one and one-half times its average annual fixed charges applicable to such period. As used in this subsection, the term "income available for fixed charges" shall mean income, after deducting operating and maintenance expenses, depreciation and depletion, and taxes other than Federal or State income taxes, but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of the corporation or business trust, and the term "fixed charges" shall include interest on funded or unfunded debt and amortization of debt discount and expense. If income is determined in reliance upon consolidated income statements of parent and subsidiary corporations or business trusts, such income shall be determined after provision for Federal and State income taxes of subsidiaries, and after proper allowance for minority stock interest, if any, and the required coverage of fixed charges, shall be computed on a basis including fixed charges and preferred dividends of subsidiaries, other than those payable by subsidiaries to the parent corporation or business trust, or to any other such subsidiaries. In applying an income test under this section to any issuing, assuming or guaranteeing corporation or business trust, whether or not in legal existence during the whole or the 5-year period next preceding the date of the investment, which has at any time or times after the beginning of such period acquired the assets or the outstanding shares of capital stock of any other corporation or business trust by purchase, merger, consolidation or otherwise, substantially as an entirety, or has been reorganized pursuant to the bankruptcy law, the income of such other predecessor or constituent corporation or business trust or of the corporation or business trust so reorganized, available for interest and dividends for such portion of such period as shall have preceded acquisition or reorganization may be included in the income of such issuing, assuming or guaranteeing corporation or business trust for such portion of such period as may be determined in accordance with adjusted or pro forma consolidated income statements covering such portion of such period, and giving effect to all stock or shares outstanding and all fixed charges existing immediately after acquisition or reorganization.
e. Trustees', receivers' or equipment trust obligations.
(1) Certificates, notes or obligations issued by trustees or receivers of any corporation or business trust created or existing under the laws of the United States or of any state, district or territory thereof which, or the assets of which, are being administered under the direction of any court having jurisdiction, if such obligation is adequately secured as to principal and interest.
(2) Equipment trust obligations or certificates, which are adequately secured, or other adequately secured instruments, evidencing an interest in transportation equipment, wholly or in part within the United States, and a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such transportation equipment.
f. Acceptances and bills of exchange. Bank and bankers acceptances, and other bills of exchange of the kind and maturities made eligible pursuant to law for purchase in the open market by Federal Reserve Banks.
g. Real estate loans. Ground rents and bonds, notes or other evidences of indebtedness, secured by first mortgages or trust deeds upon unencumbered and improved real property located in any state, district or territory of the United States, and in investments in the equity of the seller under contracts for deeds covering the entire balance due on bona fide sales of such real property; provided that a loan guaranteed or insured in full by the Administrator of Veterans' Affairs pursuant to the provisions of the Servicemen's Readjustment Act of 1944, c. 268, Title II, 58 Stat. 284, as heretofore or hereafter amended may be subject to a prior encumbrance. Real property shall not be considered to be encumbered within the meaning of this section by reason of the existence of instruments reserving mineral, oil, water or timber rights, rights-of-way, sewer rights, rights in walls or driveways, by reason of liens inferior to the lien securing the loan of the insurance company, or liens for taxes or assessments not yet delinquent, or by reason of building restrictions or other restrictive covenants or by reason of any lease under which rents or profits are reserved to the owner, if, in any event, the security for such loan is a first lien upon such real property, and if there is no condition or right of reentry or forfeiture under which such lien can be cut off, subordinated or otherwise disturbed. No mortgage or trust deed, loan or investment in a seller's equity under a contract for deed made or acquired by the insurance company on any one property shall at the date of investment exceed two-thirds of the value of the real property securing the loan, or subject to such contract; provided that such limitation in respect to value shall not apply to a loan which is:
(1) Insured by, or for which a commitment to insure has been made by, the Federal Housing Administrator or commissioner pursuant to the provisions of the National Housing Act, 12 U.S.C. s. 1702 et seq. (1934), as heretofore or hereafter amended;
(2) Guaranteed by the Administrator of Veterans' Affairs pursuant to the provisions of the Servicemen's Readjustment Act of 1944, c. 288, Title II, 58 Stat. 284, as heretofore or hereafter amended, except, that if only a portion of a loan is so guaranteed, such limitation shall apply to the portion not so guaranteed;
(3) Insured by the administrator pursuant to the provisions of the Servicemen's Readjustment Act, c. 288, Title II, 58 Stat. 284, of 1944, as heretofore or hereafter amended;
(4) Upon real estate under lease to a corporation or business trust, incorporated or existing under the laws of the United States or any state, district or territory thereof, whose income available for fixed charges for the period of 5 fiscal years next preceding the date of investment, shall have averaged not less than one and one-half times its average annual fixed charges applicable to such period, if there is pledged and assigned, as additional security for the loan, and for application thereon, sufficient of the rentals payable under the lease to provide for repayment of the loan within the unexpired term of the lease;
(5) Upon such terms that the principal thereof will be amortized by repayments of principal at least once in each year in amounts sufficient to repay the loan within a period of not more than 30 years, and such loan is upon improved real estate, and at the date of investment does not exceed three-fourths of the value of the real estate securing the loan.
h. Purchase money securities. Purchase money mortgages or like securities received by it upon the sale or exchange of real property, acquired pursuant to subsection p. of this section.
i. Federal Housing Administrators debentures. Debentures issued by the Federal Housing Administrator or commissioner in settlement of claims pursuant to the National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended.
j. National mortgage association securities. Securities of national mortgage associations or similar national mortgage credit institutions organized under the Federal Housing Act, as heretofore or hereafter amended.
k. Federal Land Bank, Federal Intermediate Credit Bank and Bank for Cooperatives Securities. Bonds, debentures and other obligations of Federal Land Banks or Federal Intermediate Credit Banks issued pursuant to the Federal Farm Loan Act, 12 U.S.C. s. 642 et seq. (1916), as heretofore or hereafter amended, or of Banks for Cooperatives issued pursuant to the Farm Credit Act of 1933, c. 98, Title VIII, 48 Stat. 257, as heretofore or hereafter amended.
l . Loans upon leaseholds. Loans upon leasehold estates on unencumbered real estate located in any state, district or territory of the United States; provided that no such loan shall exceed two-thirds of the value of the leasehold at the date of investment, unless:
(1) Such loan is guaranteed or insured by, or for which a commitment to guarantee or insure such loan has been made by, the Federal Housing Administrator or commissioner, pursuant to the provisions of the Federal National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended; or
(2) Such leasehold is of improved real estate and such loan provides for amortization by repayments of principal at least once in each year in amounts sufficient to repay the loan within a period of four-fifths of the unexpired term of the leasehold, but within a period of not more than 30 years, and does not exceed three-fourths of the value of the leasehold at the date of investment; or
(3) Such real estate is under lease to a corporation or business trust, incorporated or existing under the laws of the United States or any state, district or territory thereof, whose income available for the fixed charges for the period of 5 fiscal years next preceding the date of investment shall have averaged not less than one and one-half times its average annual fixed charges applicable to such period, if there is pledged and assigned as additional security for the loan and for application thereon sufficient of the rentals payable under such lease to provide for repayment of the loan within the unexpired term of the lease. Provided further, that the term of any such loan shall require repayments of principal at least once in each year in amounts sufficient to repay the loan within the term of the leasehold, unexpired at the date of investment, unless a shorter period is required under subparagraph (2).
m. Savings and loan shares. Shares of any Federal savings and loan association, or of any building and loan or savings and loan association, to the extent that the withdrawal or repurchasable value of such shares is insured by the Federal Savings and Loan Insurance Corporation, under the National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended, and shares of any building and loan or savings association to the extent that the withdrawal or repurchasable value of such shares is insured by a State regulated and supervised savings and loan insurance corporation.
n. Federal Savings and Loan Insurance Corporation obligations. Bonds, notes or obligations issued, assumed or guaranteed by the Federal Savings and Loan Insurance Corporation, under the provisions of the National Housing Act, 12 U.S.C. s. 1701 et seq. (1934), as heretofore or hereafter amended.
o . Federal Home Loan Bank obligations. Bonds, notes or obligations issued, assumed or guaranteed by the Federal Home Loan Bank or issued, assumed or guaranteed by the Federal Home Loan Bank Board under the provisions of the Federal Home Loan Bank Act, 12 U.S.C. s. 1421 et seq. (1932), as heretofore or hereafter amended.
p. Real estate; right to acquire. It shall be lawful for any title insurance company organized under the laws of this State to purchase, receive, hold and convey real estate or any interest therein:
(1) Required for its convenient accommodation in the transaction of its business with reasonable regard to future needs;
(2) Acquired in connection with a claim under a policy of title insurance;
(3) Acquired in satisfaction or on account of loans, mortgages, liens, judgments or decrees, previously owing to it in the course of its business;
(4) Acquired in part payment of the consideration of the sale of real property owned by it if the transaction shall result in a net reduction in the company's investment in real estate;
(5) Reasonably necessary for the purpose of maintaining or enhancing the sale value of real property previously acquired or held by it under subparagraphs (1), (2), (3), or (4) of this subsection.
Provided, however, that no title insurance company shall continue to hold any real estate acquired by it under subparagraph (2), (3), or (4) for more than 5 years from the date of acquisition thereof, unless it shall obtain the written approval of the commissioner to hold such real estate for a longer period of time.
##### **§ 17:46B-22** Funds in excess of minimum capital, other than statutory premium reserve {#sec-17-46b-22 omnilex-key=us-nj-statutes--title-17--17:46B-22}
Funds over and above minimum capital, other than the statutory premium reserve, may be retained as cash on hand or on deposit in banks, or may be invested in the following classes of investments:
a. Any of the classes of investments authorized in section 21 of this act; provided, however, that the amount invested at any time in those classes of investments set forth in subsections g., h., l . and p. of section 21, when valued at cost, shall not, without written approval of the commissioner, exceed 50% of the sum of the capital and surplus of such title insurance company as shown by its most recent statement on file with said commissioner.
b. Corporate stock or shares of any solvent corporation incorporated under the laws of the United States or any state, district or territory thereof, the Commonwealth of Puerto Rico, or of the Dominion of Canada or any province thereof, including the stock of another title insurance company.
c. Corporation obligations. Bonds, notes or obligations issued, assumed or guaranteed by any solvent corporation or business trust, incorporated or existing under the laws of the United States or any state, district or territory thereof, the Commonwealth of Puerto Rico, or of the Dominion of Canada or any province thereof.
d. Canadian governmental subdivision obligations. Valid and legally authorized bonds, notes or obligations issued, assumed or guaranteed by any province, county, city, town, village, municipality or political subdivision of the Dominion of Canada.
e. Other loans and investments. Loans or investments not qualifying or permitted under the preceding subsections of this section to an amount not exceeding 25% of the amount of the surplus of a title insurance company as shown by its most recent statement on file with the commissioner.
f. Title plant. Provided it shall at all times comply with the minimum capital investment requirements of section 21, a title insurance company may invest in title plants. The title plants shall be considered assets at the fair value thereof. In determining the fair value of a title plant, no value shall be attributed to furniture and fixtures, and the real estate in which the title plant is housed shall be carried as real estate. The value of title abstracts, title briefs, copies of conveyances or other documents, indices and other records comprising the title plant shall be determined by considering the expenses incurring in obtaining them, the age thereof, the cost of replacements, and all other relevant factors. Once the value of a title plant shall have been determined, hereunder, such value may be increased only by the acquisition of another title plant by purchase, consolidation or merger; in no event shall the value of the title plant be increased by additions made thereto as part of the normal course of abstracting and insuring titles to real estate. Subject to the above limitations and with the approval of the commissioner, a title insurance company may enter into agreements with one or more title insurance companies authorized to do business in this State, whereby such companies shall participate in the ownership, management and control of a title plant to service the needs of all such companies or such companies may hold stock of a corporation owning and operating a title plant for such purposes.
##### **§ 17:46B-22.1** Valuation of securities held by title insurance company; violations; penalties {#sec-17-46b-22.1 omnilex-key=us-nj-statutes--title-17--17:46B-22.1}
6. Except as otherwise required by the commissioner, securities held by a title insurance company transacting business in this State in accordance with P.L.1975, c.106 (C.17:46B-1 et seq.), shall be valued in accordance with the published valuation standards of the Securities Valuation Office of the National Association of Insurance Commissioners. Every title insurance company licensed to transact business in this State shall comply with the filing and valuation requirements of the Securities Valuation Office of the National Association of Insurance Commissioners or requirements established by the commissioner, as applicable, with respect to the valuation of securities. Any title insurance company that fails to comply with the provisions of this section shall be subject to a penalty of not less than $1,000 nor more than $5,000 for a first violation, and not less than $2,000 nor more than $10,000 for each subsequent violation.
##### **§ 17:46B-23** Statutory premium reserve {#sec-17-46b-23 omnilex-key=us-nj-statutes--title-17--17:46B-23}
The statutory premium reserve of a title insurance company may be held as cash on hand or on deposit in banks, or shall be invested only in those classes of investments authorized by subsections a. through f., i., j., k., m., n. and o. , of section 21 of this act, except that not more than 25% of such reserve may be invested in preferred or guaranteed stock or shares of any solvent corporation or business trust, incorporated or existing under the laws of the United States, or of any state, district or territory thereof, whose net earnings available for its fixed charges during each of the 2 years next preceding the date of such investment have been, and during the 5 years next preceding such date shall have averaged, not less than one and one-half times the sum of its average annual fixed charges, if any, as such fixed charges are defined in subsection d. of section 21 of this act and its average annual preferred dividend requirements. For the purpose of this section such computation shall refer to the calendar or other fiscal year or years of such solvent corporation and the term "preferred dividend requirements" shall include cumulative and noncumulative dividends.
##### **§ 17:46B-24** Investments acquired before effective date {#sec-17-46b-24 omnilex-key=us-nj-statutes--title-17--17:46B-24}
Any investment of a title insurance company lawfully acquired before the effective date of this act and which but for this section would be considered ineligible as an investment on such effective date shall be disposed of within 5 years from such effective date. The commissioner, upon application and proof that forced sale of any such investment would be contrary to the best interests of the title insurance company and its policyholders, may extend the period for sale or disposal of such investment for a further reasonable time, in no event to exceed 3 years.
##### **§ 17:46B-25** Requisites for foreign and alien title insurance companies to do business {#sec-17-46b-25 omnilex-key=us-nj-statutes--title-17--17:46B-25}
Any title insurance company organized under the laws of another state or foreign government shall be licensed to transact a title insurance business within this State only if such company is and remains of the same standard of solvency and complies with other requirements fixed by the laws of this State for domestic title insurance companies organized and authorized to transact the business of title insurance pursuant to the laws of this State. No title insurance company shall be admitted and authorized to do business until:
a. It has filed with the commissioner a certified copy of its charter, a statement of its financial condition and business, signed and sworn to by its proper officers, and copies of forms of all policies it proposes to issue in this State, with such other information as the commissioner may require; and
b. It has satisfied the commissioner that it is fully and legally organized under the laws of its state or government to do the business it proposes to transact. That it has the requisite amount of capital, fully paid up and unimpaired; and
c. It shall, by a duly executed instrument filed in his office, constitute and appoint the commissioner or his successor its true lawful attorney, upon whom all lawful processes in any action, rule, order or legal proceeding against it may be served; and therein shall agree that any lawful process against it which may be served upon him as its said attorney shall be of the same force and validity as if served on the company, and that the authority thereof shall continue in force irrevocably so long as any liability of the company remains outstanding in this State.
##### **§ 17:46B-26** Foreign and alien title insurance companies {#sec-17-46b-26 omnilex-key=us-nj-statutes--title-17--17:46B-26}
No title insurance company not incorporated or organized under the laws of this State, but authorized to transact business herein, shall make, write, place or cause to be made, written or placed any policy or contract of insurance covering real property in this State except:
a. Through a title insurance agent as defined in section 1 of this act who or which is a resident of this State or maintains his, her or its principal place of business in this State; or
b. Through a bona fide branch office located in this State and under the direction and control of such title insurance company, all expenses of which branch office, including compensation of all employees, are paid by such title insurance company; or
c. Through a subsidiary title insurance company having its principal place of business in this State. This section shall not be applicable to contracts of reinsurance, or to policies of excess coinsurance.
##### **§ 17:46B-27** Mergers and consolidations of title insurance companies {#sec-17-46b-27 omnilex-key=us-nj-statutes--title-17--17:46B-27}
a. A title insurance company organized and incorporated under the laws of this State may merge, be merged by or consolidated with, one or more title insurance companies whether or not so incorporated, by complying with chapter 27 of Title 17 of the Revised Statutes as amended and supplemented but subject to the following:
(1) No such merger or consolidation shall be effectuated unless in advance thereof, the plans and agreement therefor have been filed with the commissioner. The commissioner shall examine the terms and conditions of such merger or consolidation, and of any exchange of shares or securities pursuant thereto, after holding a hearing at which all persons or parties to whom it is proposed to issue shares or securities in such exchange shall have the right to appear. After such hearing, the commissioner shall either approve or disapprove the fairness of such terms and conditions of exchange. The commissioner shall give such approval within a reasonable time after filing of a plan or agreement unless he finds such plan or agreement:
(a) Is contrary to law; or
(b) Inequitable to the stockholders of such title insurance company; or
(c) Would substantially reduce the security of and services to be rendered to policyholders of the domestic title insurance company in this State or elsewhere.
(2) Where such merger or consolidation involves a parent company absorbing a wholly-owned subsidiary, the commissioner may, in his discretion, dispense with the holding of a hearing.
b. No director, officer, agent or employee of any title insurance company party to such acquisition shall receive any fee, commission, compensation or other valuable consideration whatsoever for in any manner aiding, promoting or assisting therein except as set forth in such plan or agreement.
c. If the commissioner does not approve any such plan or agreement he shall notify the title insurance company in writing specifying in detail his reasons therefor.
##### **§ 17:46B-30.1** Licensure as insurance producers for a title insurance agency. {#sec-17-46b-30.1 omnilex-key=us-nj-statutes--title-17--17:46B-30.1}
1. Except for a State or federally chartered bank, savings bank, savings and loan association or its subsidiary or any officer or employee of any of the foregoing, no other lending institution, mortgage service, mortgage brokerage or mortgage guaranty company or service company or any person licensed pursuant to the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17C:11C-89) shall be licensed as or permitted to act as an insurance producer for a title insurance company. No bank, trust company, bank and trust company, or other lending institution, mortgage service, mortgage brokerage or mortgage guaranty company, or any service company of or for any lending institution shall make the selection of a particular title insurance company or insurance producer a condition precedent to the granting of any mortgage loan.
##### **§ 17:46B-34** Commissions; no right to pay {#sec-17-46b-34 omnilex-key=us-nj-statutes--title-17--17:46B-34}
No title insurance company and no title insurance agent shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, any commission or part of its fee or charge or any other consideration as an inducement or compensation for the placing or procuring of any order for title insurance; provided, however, that nothing herein contained shall be construed to prohibit the payment of a commission or other compensation to a regular full-time employee of a title insurance company or agent of a title insurance company as part of the regular compensation of such employee or agent.
##### **§ 17:46B-35** Rebates or reduced fees {#sec-17-46b-35 omnilex-key=us-nj-statutes--title-17--17:46B-35}
a. No title insurance company and no title insurance agent shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to insure, or after insurance has been affected, any rebate, discount, abatement, credit or reduction of premium or special favor, advantage, or other benefit to accrue thereon or any valuable consideration or inducement whatever, not specified or provided for in the policy, except to the extent provided for in an applicable filing with the commissioner as provided by this act.
b. No title insurance company and no title insurance agent shall quote any fee or make any charge to any person which is less than that currently available to others in a like amount and involving the same factors as set forth in the schedule of fees and charges established pursuant to section 41 of this act, or otherwise make or permit any unfair discrimination in the premium or rates charged for insurance or in other fees and charges or in other benefits, or in any other of the terms and conditions of the insurance policy, except to the extent provided for in an applicable filing with the commissioner as provided by this act. The amount by which any fee or charge is less than that prescribed by the schedule of fees and charges established pursuant to section 41 of this act is an unlawful rebate.
c. No applicant for insurance, nor any insured, nor any owner, lessee, mortgagee, existing or prospective, of the real property or interest therein which is the subject matter of the application for insurance, nor any person acting as agent, representative, attorney, broker or employee of such applicant, insured, or such owner, lessee or mortgagee, shall knowingly receive or accept, directly or indirectly, any commission, rebate, discount, abatement, credit or reduction of premium, or any special favor or advantage or valuable consideration or inducement prohibited by this act.
##### **§ 17:46B-36** Examination of records {#sec-17-46b-36 omnilex-key=us-nj-statutes--title-17--17:46B-36}
The commissioner, if he has reason to believe that any title insurance agent has violated or is violating any of the provisions of sections 34 and 35 of this act, shall forthwith examine said title insurance agent's books of account and record and vouchers pertaining to the business of title insurance, and any said title insurance agent so examined shall pay to the commissioner the cost of such examination on demand.
##### **§ 17:46B-37** Additional penalty {#sec-17-46b-37 omnilex-key=us-nj-statutes--title-17--17:46B-37}
Any person who pays, allows or gives, or offers to pay, allow or give, or who receives or offers to receive any commission, rebate, discount, abatement, credit or reduction of premium or any special favor or advantage or valuable consideration or inducement whatever in violation of sections 34 and 35 of this act shall be liable to the State of New Jersey for a penalty not exceeding five times the amount of such commission, or unlawful rebate, discount, abatement, credit or reduction of premium or any special favor or advantage or valuable consideration or inducement whatever in addition to any other penalty imposed by law.
##### **§ 17:46B-38** Permitted division of fees {#sec-17-46b-38 omnilex-key=us-nj-statutes--title-17--17:46B-38}
Nothing in this act prohibits the division of fees and charges between or among two or more title insurance companies or between or among one or more title insurance companies and one or more title insurance agents representing the same title insurance company, or between or among two or more title insurance agents representing the same title insurance company.
##### **§ 17:46B-40** Enforcement {#sec-17-46b-40 omnilex-key=us-nj-statutes--title-17--17:46B-40}
The commissioner shall have the full authority, and it shall be his duty, to enforce the provisions of sections 34 through 39 of this act ^1^ and to carry out the full intent thereof through the adoption of appropriate rules and regulations and the issuance of orders.
##### **§ 17:46B-41** General provisions {#sec-17-46b-41 omnilex-key=us-nj-statutes--title-17--17:46B-41}
The purposes of sections 41 to 52, inclusive, of this act are to promote the public welfare by regulating title insurance rates to the end that they shall not be excessive, inadequate or unfairly discriminatory and to authorize cooperative action between or among title insurance companies in rate making and other matters within the scope of said sections. Nothing herein is intended to prohibit or discourage reasonable competition, or to require, prohibit or discourage, except to the extent necessary to accomplish the purposes stated above, uniformity in title insurance rates, rating systems and rating plans and practices. The provisions of sections 41 to 52, inclusive, shall be liberally interpreted to make effective the purposes thereof as outlined in this section.
##### **§ 17:46B-42** Rate filing {#sec-17-46b-42 omnilex-key=us-nj-statutes--title-17--17:46B-42}
a. Every title insurance company shall file with the commissioner its schedule of fees, every manual of classifications, rules and plans pertaining thereto, and every modification of any of the foregoing which it proposes to use in this State. Every such filing shall state the proposed effective date thereof, and shall indicate the character and extent of the coverage contemplated.
b. A title insurance company may satisfy its obligations to make such filings by becoming a member of, or a subscriber to, a licensed title insurance rating organization which makes such filings, and by authorizing the commissioner to accept such filings on its behalf.
c. The commissioner shall make such review of the filing as may be necessary to carry out the provisions of this act.
d. Beginning 90 days after the effective date of this act, no title insurance company or agent of a title insurance company shall charge any fee for any policy or contract of title insurance except in accordance with filings or rates which are in effect for said title insurance company as provided in this act.
e. The commissioner shall not require the filing of rates or fees for reinsurance contracts or agreements, or policies of excess coinsurance.
##### **§ 17:46B-43** Justification for rates {#sec-17-46b-43 omnilex-key=us-nj-statutes--title-17--17:46B-43}
A rate filing shall be accompanied by a statement of the title insurance company or title insurance rating organization making the filing, setting forth the basis upon which the rate was fixed and the fees are to be computed. Any filing may be justified by:
(1) The experience or judgment of the title insurance company or title insurance rating organization making the filing;
(2) Its interpretation of any statistical data relied upon;
(3) The experience of other title insurance companies or title insurance rating organizations; or
(4) Any other factors which the title insurance company or title insurance rating organization or the commissioner deem relevant.
##### **§ 17:46B-44** Proposing of rates {#sec-17-46b-44 omnilex-key=us-nj-statutes--title-17--17:46B-44}
a. Every title insurance company that shall propose its own rates, and every title insurance rating organization, shall propose rates that are not excessive nor inadequate for the safety and soundness of any title insurer, which do not unfairly discriminate between risks in this State which involve essentially the same exposure to loss and expense elements, and which shall give due consideration to the following matters:
(1) The desirability for stability and responsiveness of rate structures;
(2) The necessity of assuring the financial solvency of title insurance companies in periods of economic depression;
(3) The necessity for paying dividends on the capital stock of title insurance companies sufficient to induce capital to be invested therein; and
(4) A reasonable level of profit for the insurer.
b. Every title insurance company that shall propose its own rates, and every title insurance rating organization, may adopt basic classifications of policies or contracts of title insurance which shall be used as the basis for rates.
##### **§ 17:46B-45** Approval or disapproval of filings {#sec-17-46b-45 omnilex-key=us-nj-statutes--title-17--17:46B-45}
a. If the commissioner shall find in his review of rate filings that said filings provide for, result in, or produce rates that are not unreasonably high, and are not inadequate for the safeness and soundness of the insurer, and are not unfairly discriminatory between risks in this State involving essentially the same hazards and expense elements, he shall approve such rates. Prior to such approval the commissioner may conduct a public hearing with respect to a rate filing. An approval shall continue in effect until the commissioner shall issue an order of disapproval pursuant to the requirements and procedure provided for in subsections b. and c. of this section.
b. Upon the review at any time by the commissioner of a rate filing, he shall, before issuing an order of disapproval, hold a hearing upon not less than 10 days' written notice, specifying in reasonable detail the matters to be considered at such hearing, to every title insurance company and title insurance rating organization which made such filing, and if, after such hearing, he finds that such filing or a part thereof does not meet the requirements of this act, he shall issue an order specifying in what respects he finds that it so fails, and stating when, within a reasonable period thereafter, such filing or a part thereof shall be deemed no longer effective. A title insurance company or title insurance rating organization shall have the right at any time to withdraw a filing or a part thereof, subject to the provisions of section 46 of this act in the case of deviation filing. Copies of said order shall be sent to every title insurance company and title insurance rating organization affected. Said order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in said order.
c. Any person or organization aggrieved with respect to any filing which is in effect, may make written application to the commissioner for a hearing thereon. The title insurance company or title insurance rating organization that made the filing shall not be authorized to proceed under this subsection. Such application shall specify in reasonable detail the grounds to be relied upon by the applicant. If the commissioner shall find that the application is made in good faith, that the applicant would be so aggrieved if his grounds are established, and that such grounds otherwise justify holding such a hearing, he shall, within 30 days after receipt of such application, hold a hearing upon not less than 10 days written notice to the applicant and to every title insurance company and title insurance rating organization which made such a filing. If, after such hearing, the commissioner finds that the filing or a part thereof does not meet the requirements of this act, he shall issue an order specifying in what respects he finds that such filing or a part thereof fails to meet the requirements of this act, stating when within a reasonable period thereafter, such filing or a part thereof shall be deemed no longer effective. Copies of said order shall be sent to the applicant and to every such title insurance company and title insurance rating organization. Said order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in said order.
##### **§ 17:46B-46** Title insurance rating organizations {#sec-17-46b-46 omnilex-key=us-nj-statutes--title-17--17:46B-46}
a. A corporation, an unincorporated association, a partnership or an individual, whether located within or outside this State, may make application to the commissioner for license as a rating organization for title insurance companies, and shall file therewith:
(1) A copy of its constitution, its articles of agreement or association or its certificate of incorporation, and of its bylaws, rules and regulations governing the conduct of its business;
(2) A list of its members and subscribers;
(3) The name and address of a resident of this State upon whom notices or orders of the commissioner or process affecting such rating organization may be served; and
(4) A statement of its qualifications as a title insurance rating organization.
If the commissioner finds that the applicant is competent, trustworthy and otherwise qualified to act as a rating organization, and that its constitution, articles of agreement or association or certificate of incorporation, and its bylaws, rules and regulations governing the conduct of its business, conform to the requirements of law, he shall issue a license authorizing the applicant to act as a rating organization for title insurance. Licenses issued pursuant to this section shall remain in effect for 3 years unless sooner suspended or revoked by the commissioner or withdrawn by the licensee. The fee for said license shall be $1,500.00. Licenses issued pursuant to this section may be suspended or revoked by the commissioner, after hearing upon notice, in the event the rating organization ceases to meet the requirement of this subsection. Every rating organization shall notify the commissioner promptly of every change in:
(1) Its constitution, its articles of agreement or association or its certificate of incorporation, and its bylaws, rules and regulations governing the conduct of its business;
(2) Its list of members and subscribers; and
(3) The name and address of the resident of this State designated by it upon whom notices or orders of the commissioner or process affecting such rating organization may be served.
b. Subject to rules and regulations which have been approved by the commissioner as reasonable, each title insurance rating organization shall permit any title insurance company not a member to be a subscriber to its rating services. Notices of proposed changes in such rules and regulations shall be given to subscribers. Each such rating organization shall furnish its rating services without discrimination to its members and subscribers. The reasonableness of any rule or regulation in its application to subscribers, or the refusal of any such rating organization to admit a title insurance company as a subscriber, shall at the request of any subscriber or any such title insurance company, be reviewed by the commissioner at a hearing held upon at least 10 days written notice to such rating organization and to such subscriber. If the commissioner finds that such rule or regulation is unreasonable in its application to subscribers, he shall order that such rule or regulation shall not be applicable to subscribers. If the rating organization fails to grant or reject an application of a title insurance company for subscribership within 30 days after it was made, the title insurance company may request a review by the commissioner as if the application had been rejected. If the commissioner finds that the title insurance company has been refused admittance to the title insurance rating organization as a subscriber without justification, he shall order said rating organization to admit the title insurance company as a subscriber. If he finds that the action of the title insurance rating organization was justified, he shall make an order affirming its action.
##### **§ 17:46B-47** Deviations {#sec-17-46b-47 omnilex-key=us-nj-statutes--title-17--17:46B-47}
Every member of or subscriber to a title insurance rating organization shall adhere to the filings made on its behalf by such organization, except that any title insurance company which is a member of or subscriber to such a rating organization may file with the commissioner a uniform percentage of decrease or increase to be applied to any or all elements of the fees produced by the rating system so filed for a class of title insurance which is found by the commissioner to be a proper rating unit for the application of such uniform decrease or increase, or to be applied to the rates for a particular area, or otherwise deviate from the rating plans, policy, forms or other matters which are the subject of filings under this act. Such deviation filing shall specify the basis for the modification and shall be accompanied by the data or historical pattern upon which the applicant relies. A copy of the deviation filing and data shall be sent simultaneously to such rating organization. Deviation filings shall be subject to the provisions of section 44 of this act.
##### **§ 17:46B-48** Appeal by minority {#sec-17-46b-48 omnilex-key=us-nj-statutes--title-17--17:46B-48}
Any member of or subscriber to a title insurance rating organization may appeal to the commissioner from any action or decision of such rating organization in approving or rejecting any proposed change in or addition to the filings of such rating organization, and the commissioner shall, after a hearing held upon not less than 10 days' written notice to the appellant and to such rating organization, issue an order approving the action or decision of such rating organization or directing it to give further consideration to such proposal and to take action or make a decision upon it within 30 days. If such appeal is from the action or decision of the title insurance rating organization in rejecting a proposed addition to its filings, he may, in the event he finds that such action or decision was unreasonable, issue an order directing said rating organization to make an addition to its filings, on behalf of its members and subscribers, in a manner consistent with his findings, within a reasonable time after the issuance of such order. If the appeal is from the action of the title insurance rating organization with regard to a rate or a proposed change in or addition to its filings relating to the character and extent of coverage, he shall approve the action of said rating organization or such modification thereof as shall have been suggested by the appellant if either be made in accordance with this act.
The failure of a title insurance rating organization to take action or make a decision within 30 days after submission to it of a proposal under this section shall constitute a rejection of such proposal within the meaning of this section. If such appeal is based upon the failure of said rating organization to make a filing on behalf of such member or subscriber which is based on a system of expense allocation which differs from the system of expense allocation included in a filing made by said rating organization, the commissioner shall, if he grants the appeal, order the rating organization to make the requested filing for use by the appellant. In deciding such appeal, the commissioner shall apply the standards set forth in section 43 of this act.
##### **§ 17:46B-49** Rate administration; authority and duties of commissioner; rules and regulations {#sec-17-46b-49 omnilex-key=us-nj-statutes--title-17--17:46B-49}
a. The commissioner shall promulgate reasonable rules and statistical plans, reasonably adapted to each of the rating systems on file with him, which may be modified from time to time, and which shall be used thereafter by each title insurance company, in the recording and reporting of the composition of its business, its loss and countrywide expense experience and those of its title insurance underwriters in order that the experience of all title insurance companies may be made available, at least annually, in such form and detail as may be necessary to aid him in determining whether rating systems comply with the standards set forth in this article. Such rules and plans may also provide for the recording of expense experience items which are specially applicable to this State and are not susceptible of determination by a prorating of countrywide expense experience. In promulgating such rules and plans, the commissioner shall give due consideration to the rating systems on file with him, and in order that such rules and plans may be as uniform as is practicable among the several states, to the rules and to the form of the plans used for such rating systems in other states. Such rules and plans shall not place an unreasonable burden of expense on any title insurance company. No title insurance company shall be required to record or report its expense and loss experience on a classification basis that is inconsistent with the rating system filed by it, nor shall any title insurance company be required to report its experience to any agency of which it is not a member or subscriber. The commissioner may designate one or more rating organizations or other agencies to assist him in gathering such experience and making compilations thereof, and such compilations shall be made available, subject to reasonable rules promulgated by the commissioner, to title insurance companies and rating organizations. The commissioner shall give preference in such designation to entities organized by and functioning on behalf of title insurance companies operating in this State. If the commissioner, in his judgment, determines that one or more of such organizations designated as statistical agent is unable or unwilling to perform its statistical functions according to reasonable requirements established from time to time by him, he may, after consultation with such statistical agent and upon 20 days notice to any affected companies, designate another person to act on his behalf in the gathering of statistical experience. The commissioner shall in such case establish the fee to be paid to such designated person by the affected companies in order to pay the total cost of gathering and compiling such experience. Agencies designated by the commissioner shall assist him in making compilations of the reported data and such compilations shall be made available, subject to reasonable rules and regulations promulgated by the commissioner, to insurers, rating organizations and any other interested parties.
b. Reasonable rules and plans may be promulgated by the commissioner for the interchange of data necessary for the application of rating plans.
c. In order to further uniform administration of rate regulatory laws, the commissioner and every title insurance company and rating organization may exchange information and experience data with insurance supervisory officials, title insurance companies and rating organizations in other states, and may consult with them with respect to rate making and the application of rating systems.
d. In addition to any powers hereinbefore expressly enumerated in this act, the commissioner shall have full power and authority, and it shall be his duty, to enforce and carry out by regulations, orders or otherwise, all and singular the provisions of this article and the full intent thereof. The commissioner may make such reasonable rules and regulations not inconsistent with this act, as may be necessary or proper in the exercise of his powers or for the performance of his duties under this article.
##### **§ 17:46B-50** False or misleading information {#sec-17-46b-50 omnilex-key=us-nj-statutes--title-17--17:46B-50}
No title insurance company or title insurance agent shall willfully withhold information from, or knowingly give false or misleading information to the commissioner, or to any title insurance rating organization, of which the title insurance company is a member or subscriber, which will affect the rates or fees chargeable under this act.
##### **§ 17:46B-51** Penalties {#sec-17-46b-51 omnilex-key=us-nj-statutes--title-17--17:46B-51}
The commissioner may, if he finds that any title insurance rating organization, title insurance company or title insurance agent has violated any provision of this act, impose a penalty of not more than $1,000.00 for each such violation, but if he finds such violation to be willful, he may impose a penalty of not more than $5,000.00 for each such violation. Such penalties may be in addition to any other penalty provided by law.
The commissioner may suspend the license of any title insurance rating organization, title insurance company, or title insurance agent that fails to comply with an order of the commissioner within the time limited by such order, or any extension thereof, which the commissioner may grant. The commissioner shall not suspend the license of any such rating organization, company or agent for failure to comply with an order until the time prescribed for an appeal therefrom has expired, or, if an appeal has been taken, until such order has been affirmed.
The commissioner may determine when a suspension of license shall become effective, and it shall remain in effect for the period fixed by him unless he modifies or rescinds such suspension, or until the order upon which such suspension is based is modified, reversed. No penalty shall be imposed and no license shall be suspended or revoked except upon a written order of the commissioner, stating his findings, made after a hearing held upon not less than 10 days' written notice to such person or organization, specifying the alleged violation.
##### **§ 17:46B-52** Hearing procedure {#sec-17-46b-52 omnilex-key=us-nj-statutes--title-17--17:46B-52}
a. Any title insurance company, title insurance rating organization or person aggrieved by any action of the commissioner, or by any rule or regulation adopted and promulgated by the commissioner, shall have the right to file a complaint with the commissioner and to have a hearing thereon before the commissioner. Pending such hearing and the decision thereon, the commissioner may suspend or postpone the effective date of such action, rule or regulation.
b. All hearings provided for in this act shall be conducted, and the decision of the commissioner on the issue or filing involved shall be rendered, in accordance with the provisions of P.L.1958, c. 68 (C. 17:1-8.5 et seq.).
##### **§ 17:46B-53** Existing filings and hearings continued {#sec-17-46b-53 omnilex-key=us-nj-statutes--title-17--17:46B-53}
All title insurance manuals of classifications, rules and rates, rating plans and modifications thereof filed under any repealed act shall be deemed to have been filed under this act, and all title insurance rating organizations licensed under such repealed act shall be deemed to have been licensed under this act. All hearings and investigations pending under such repealed act shall be deemed to have been initiated under and shall be continued under this act.
##### **§ 17:46B-54** Forms of policies and other contracts of title insurance {#sec-17-46b-54 omnilex-key=us-nj-statutes--title-17--17:46B-54}
Every title insurance company shall file with the commissioner all forms of title policies and other contracts of title insurance before the same shall be issued. Any such filing may be made by a title insurance rating organization in behalf of all of its members or subscribers; provided, however, that members or subscribers of a rating organization may file specific deviations to forms of policies and other contracts of title insurance in the manner provided in section 46 of this act. In no event shall any title insurance company issue any such form of policy or contract until 30 days after it shall have been filed with the commissioner unless it shall have received earlier approval by the commissioner. Forms subject to filing hereunder shall include preliminary reports of title, binders for insurance and policies of insurance or guaranty, together with all the terms and conditions of insurance coverage or guaranty that relate to title to any interest in real property and which shall be offered by a title insurance company, but shall specifically exclude reinsurance contracts or agreements, all specific defects in title that may be ascertained from an examination of the risk and excepted in such reports, binders or policies, together with any affirmative assurances of the title insurance company with respect to such defects, and such further exception from coverage by reason of limitations upon the examination of the risk imposed by an applicant for insurance or through failure of an applicant for insurance to provide the data requisite to a judgment of insurability. Nothing herein contained shall authorize a title insurance company to delete or insure over an exception to or exclusion from coverage contained in forms of title policies or other approved contracts of title insurance filed hereunder except by endorsement specifically approved by the commissioner.
##### **§ 17:46B-55** Annual statements of title insurance companies; form and content {#sec-17-46b-55 omnilex-key=us-nj-statutes--title-17--17:46B-55}
54. Annual statements of title insurance companies; form and content.
a. Every title insurance company which is authorized to do a title insurance business in this State, shall file in the office of the commissioner annually, on or before March 1, a statement, to be known as its annual statement, executed in duplicate, verified by the oath of at least two of its principal officers, showing its condition on December 31 then next preceding in the format adopted by the National Association of Insurance Commissioners and in use at the time the statement is due. The annual statement shall be prepared in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners, and all applicable provisions of law. Additionally, every title insurance company shall file quarterly statements in the format adopted by the National Association of Insurance Commissioners covering the periods ending on March 31, June 30 and September 30, which shall be filed within 45 days after each such date. Quarterly statements shall be confidential and shall not be subject to public inspection or copying pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.). All statements shall be submitted in the form and contain any additional matters the commissioner prescribes.
b. If a title insurance company domiciled in this State makes a request in writing no more than 60 days prior to December 1, the commissioner shall annually, in the month of December, furnish to that company one or more blanks in the form of the statement adopted by the National Association of Insurance Commissioners, and in use at the time furnished.
##### **§ 17:46B-56** Records {#sec-17-46b-56 omnilex-key=us-nj-statutes--title-17--17:46B-56}
Every domestic title insurance company shall, except as hereinafter provided, keep and maintain at its principal office in this State: a. Its charter and bylaws, b. its books of account, c. a record containing the names and addresses of its stockholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof, and d. the minutes of any meetings of its stockholders, board of directors and committees thereof.
A domestic title insurance company may keep and maintain its books of account without this State if, in accordance with a plan adopted by its board of directors or trustees and approved by the commissioner, it maintains in this State suitable records in lieu thereof; provided, however, that the commissioner may after notice and hearing direct such title insurance company to return all or any of its books of account to this State if such return is reasonably necessary to protect the interest of the people of this State or to permit their inspection in this State by a director or stockholder who has shown to the satisfaction of the commissioner that he has made an application to such title insurance company for inspection of such books in good faith and for a necessary and legitimate purpose, and that such title insurance company has either declined to permit such inspection or to agree to pay any additional expenses reasonably to be incurred by the applicant, or his agent or attorney, in connection with the inspection of such books as a result of their maintenance without this State. If in the judgment of the commissioner delay in the return of any or all books of account of such title insurance company may be hazardous, or may cause irreparable injury, to the people of this State or to the policyholders of such title insurance company, he may direct the return thereof without notice and hearing.
##### **§ 17:46B-58** Examination of title insurance companies; when authorized or required {#sec-17-46b-58 omnilex-key=us-nj-statutes--title-17--17:46B-58}
a. The commissioner may make an examination into the affairs of any title insurance company authorized to do a title insurance business in this State as often as he deems it expedient for the protection of the interest of the people of this State.
b. The commissioner shall make an examination into the affairs of every authorized domestic title insurance company at least once in every 3 years and every title insurance rating organization at least once in every 5 years.
##### **§ 17:46B-59** Judicial review of commissioner's action {#sec-17-46b-59 omnilex-key=us-nj-statutes--title-17--17:46B-59}
If any title insurance company, title insurance agent, or title insurance rating organization be dissatisfied with any decision, regulation, order, rate, rule, act or administrative ruling adopted by the commissioner, such title insurance company, title insurance agent or title insurance rating organization, may appeal therefrom to the Superior Court, Appellate Division.
##### **§ 17:46B-60** Other sections applicable {#sec-17-46b-60 omnilex-key=us-nj-statutes--title-17--17:46B-60}
59. Other sections applicable. In addition to the provisions of this act, only the following provisions of the laws governing insurance companies and insurance agents as presently enacted and hereinafter amended, except as they are inconsistent with the provisions of this act, shall apply to the business of title insurance to title insurance companies, which shall be considered as within the class of insurance companies regulated by such provisions solely for the limited purpose of being subject to such provisions:
P.L.1970, c.12 (C.17:1C-1 to 17:1C-18)
P.L.1948, c.266 (C.17:3A-1 to 17:3A-7)
R.S.17:17-1,17:17-4, 17:17-5, 17:17-8 and 17:17-10
P.L.1948, c.157 (C.17:17A-1 to 17:17A-4)
P.L.1965, c.57 (C.17:17B-1 to 17:17B-8)
R.S.17:18-1, 17:18-2, 17:18-4 and 17:18-10
R.S.17:19-1 to 17:19-7
R.S.17:20-4 and 17:20-5
P.L.1966, c.85 (C.17:20-6)
R.S.17:21-1 to 17:21-3
P.L.1960, c.32, ss. 3, 4, and 5 (C.17:22-6.37 to 17:22-6.39)
P.L.1993, c.237 (C.17:22C-1 et seq.)
P.L.1993, c.239 (C.17:22D-1 et seq.)
P.L.1993, c.244 (C.17:22E-1 et seq.)
R.S.17:23-2, 17:23-4 and 17:23-5
P.L.1958, c.15 (C.17:23-6, 17:23-7)
P.L.1993, c.236 (C.17:23-20 et seq.)
P.L.1993, c.238 (C. 17:23B-1 et seq.)
R.S.17:24-5, 17:24-12
P.L.1949, c.248 (C.17:24-13 to 17:24-16)
R.S.17:25-7
R.S.17:26-1 to 17:26-3
R.S.17:27-1 to 17:27-5
P.L.1970, c.22 (C.17:27A-1 et seq.)
P.L.1993, c.241, ss. 7, 8, 9 (C.17:27A-4.1 et al.)
R.S.17:32-1, 17:32-2, 17:32-4, 17:32-8 to 17:32-10
R.S.17:32-13 and 17:32-14
P.L.1950, c.231 (C.17:32-15)
P.L.1968, c.234, ss.1 to 5 (C.17:32-16 to 17:32-20).
P.L.1993, c.245 (C.17:51A-1 et seq.)
P.L.1993, c.243 (C.17:51B-1 et al.)
##### **§ 17:46B-61** Repealer {#sec-17-46b-61 omnilex-key=us-nj-statutes--title-17--17:46B-61}
All laws and parts of laws in conflict with the provisions of this act are hereby repealed insofar as they may be or have been applicable to the business of title insurance, title insurance companies, title insurance agents, or title insurance rating organizations; and, in case conflict should develop, the provisions of this act shall control and be effective.
##### **§ 17:46B-62** Effect of this act {#sec-17-46b-62 omnilex-key=us-nj-statutes--title-17--17:46B-62}
The repeal by this act of any provision of law shall not revive any law heretofore repealed or superseded, nor shall this act affect any act done, liability incurred, or any right accrued or established, or any suit or prosecution, civil or criminal, pending or to be instituted to enforce any right or penalty or punish any offense under the authority of the repealed laws.
No provision of the insurance laws of this State, except as contained or referred to in this act, shall be applicable to title insurance companies, title insurance agents, title insurance rating organizations or the business of title insurance, and no law hereafter enacted shall apply to title insurance companies, title insurance agents, title insurance rating organizations or the business of title insurance unless specified to be or become so applicable.
##### **§ 17:46B-63** Consumer rights; title, settlement service company. {#sec-17-46b-63 omnilex-key=us-nj-statutes--title-17--17:46B-63}
2. a. Notwithstanding the provisions of this act nothing herein shall prevent a consumer from exercising their free choice in the selection of the title or settlement services company of their choosing. Any agreement by a consumer to use the services of a title or settlement service company shall be subject to the attorney review, if any, which is part of the contract for sale of real estate and may be revoked in the same manner as provided in the contract for the sale of real estate.
b. A person who violates the provisions of this section shall be:
(1) for a first violation, subject to a 90-day business license suspension;
(2) for a second violation:
(a) subject to a 180-day business license suspension; and
(b) liable to a penalty of not more than $1,000 for each violation; and
(3) for a third and any subsequent violation:
(a) subject to a one-year business license suspension; and
(b) liable to a penalty of not more than $2,500 for each violation.
## **Chapter 46C** {#struct-chapter-46c}
##### **§ 17:46C-1** Short title {#sec-17-46c-1 omnilex-key=us-nj-statutes--title-17--17:46C-1}
This act shall be known and may be cited as the "New Jersey Legal Services Insurance Act."
##### **§ 17:46C-2** Legislative declarations {#sec-17-46c-2 omnilex-key=us-nj-statutes--title-17--17:46C-2}
It is declared that there is a need to encourage the development of effective and economically sound methods for making legal services more readily available at reasonable cost to the citizens of New Jersey; that there is a need to protect the interest of the users of legal services and of the public of this State with a minimum of restrictions on experimentation with new forms of organization, administration, or benefits; that the risks inherent in experimentation with legal services plans should be borne by the promoters of new plans rather than by the customers; that persons other than professional insurers should be permitted and encouraged to provide legal services, subject to practical and reasonable financial and regulatory requirements; that effective competition between the various systems of financing legal services should be permitted and encouraged; and that it is the purpose of this act to meet the aforementioned needs and accomplish the aforementioned objectives.
##### **§ 17:46C-3** Definitions {#sec-17-46c-3 omnilex-key=us-nj-statutes--title-17--17:46C-3}
As used in this act:
a. "Commissioner" means the Commissioner of Insurance.
b. "Insurer" means any person who obtains a certificate of authority in accordance with the provisions of section 4 of this act and any person authorized to transact the business of insurance under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes.
c. "Legal insurance" means the assumption of a contractual obligation to provide specified legal services or reimbursement for legal expenses in consideration of a specified payment for an interval of time, regardless of whether the payment is made by the beneficiaries individually or by a third person for them, in such a manner that the total cost incurred by assuming the obligation is to be spread directly or individually among a group of persons. Legal insurance shall not include the provision of or reimbursement for legal services incidental to other insurance coverages such as the duty to defend, nor shall the following be considered legal insurance under the laws of this State:
(1) Retainer contracts made with individual clients with the fees based on estimates of the nature and the amount of services that will be provided to the specific client, and similar contracts made with a group of clients involved in the same or closely related legal matters such as class actions.
(2) Plans providing no benefits other than a limited amount of consultation and advice on simple matters either alone or in combination with referral services or the promise of fee discounts for other matters.
(3) Plans providing limited benefits on simple legal matters on an informal basis not involving a legally binding promise, in the context of an employment or educational or similar relationship.
(4) Legal services provided by unions or employee associations to their members in matters relating to employment or occupation.
(5) Employee benefit plans regulated by the "Employee Retirement Income Security Act of 1974," (P.L. 93-406, 29 U.S.C. 1001 et seq.).
(6) Plans or legal services provided by a legal aid office or public defender office, a military legal assistance office, a lawyer referral service operated, sponsored or approved by a bar association representative of the general bar of the geographical area in which the association exists, or any other nonprofit organization that recommends, furnishes or pays for legal services to its members or beneficiaries in a manner incidental and reasonably related to a primary purpose of such organization to promote a public interest, including, without limitation, defense of human and civil rights, elimination of prejudice and discrimination as to race, religion, sex and national origin, lessening neighborhood tensions, preservation of scenic beauty, combatting or preventing pollution, preservation of natural resources, protection of consumer interest, promotion of cultural, historical or other educational activities, and prevention of cruelty to animals.
As used herein, "contractual obligation" includes any arrangement in which those persons for whom services are to be provided under the arrangement have reasonable expectations of enforceable rights.
##### **§ 17:46C-4** Certificate of authority; persons entitled to transact business without; necessity for other persons; application; fee; exemptions {#sec-17-46c-4 omnilex-key=us-nj-statutes--title-17--17:46C-4}
a. (1) A person entitled to transact the business of insurance under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes may transact the business of legal insurance in this State without having to obtain a certificate of authority under this act. This paragraph shall not by itself enlarge the powers of any corporation entitled to transact the business of insurance under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes given by its articles of incorporation or charter, but shall authorize such a corporation formed under Title 14A of the New Jersey Statutes, Subtitle 3 of Title 17 of the Revised Statutes, Subtitle 3 of Title 17B of the New Jersey Statutes, Title 15 of the Revised Statutes or Title 16 of the Revised Statutes, including a hospital service corporation organized pursuant to P.L. 1938, c. 366 (C. 17:48-1 et seq.) to include in its powers the authority to transact the business of legal insurance.
(2) No other person may transact the business of legal insurance unless he applies for and obtains a certificate of authority to transact the business of legal insurance in compliance with this act.
(3) An application for a certificate of authority to transact the business of legal insurance shall be in a form prescribed by the commissioner and shall be accompanied by a fee of $250.00. If the applicant is not domiciled in this State, the application shall be accompanied by a power of attorney duly executed by the applicant appointing the commissioner and his successors in office, and duly authorized deputies, as the true and lawful attorney of the applicant in and for this State, upon whom all lawful process in any legal action or proceeding against the applicant on a cause of action arising in this State shall be served.
b. Except for section 26 of this act, this act shall not apply to any person issuing group or blanket policies if fewer than 5% of the certificate holders of insureds reside in this State and the person is regulated to a comparable extent by another state in which a larger number of certificate holders or insureds reside. Any person exempt under this subsection shall file an annual report with the commissioner in accordance with the rules and regulations promulgated by the commissioner.
##### **§ 17:46C-5** Conditions for issuance; order stating person provides legal insurance {#sec-17-46c-5 omnilex-key=us-nj-statutes--title-17--17:46C-5}
a. A certificate of authority shall be issued if the commissioner is satisfied that the following conditions are met:
(1) The persons responsible for the conduct of the affairs of the applicant are competent, trustworthy, and of good reputation;
(2) The applicant demonstrates the willingness and ability to assure that the promised benefits can be provided.
In making this determination the commissioner shall consider so far as applicable:
(a) The adequacy of capital and surplus considered in relation to the other items in subsection a. (2) of this section;
(b) The financial soundness of the applicant's arrangements for legal services and the rating system proposed to be used in connection therewith;
(c) Any agreement with another person authorized to do business under this act, an insurer licensed under the general insurance law to do business in this State, a reinsurer eligible under the laws or regulations of this State to provide reinsurance, or an agency of the Federal or State Government for insuring the payment of the cost of legal services or the provision for automatic applicability of an alternative coverage in the event the insurer is unable to perform its obligations;
(d) Any surety bond or deposit of cash or securities as a guarantee that the obligation will be duly performed; and
(e) If the applicant is licensed as an insurer under insurance laws of other states, whether the applicant has complied with the requirements of those laws.
b. At the request of an applicant, the commissioner shall issue an order stating whether a person is providing legal insurance as defined in section 3c. of this act.
##### **§ 17:46C-6** Policy or master policy; certificate of coverage; forms; rating system; approval; hearings {#sec-17-46c-6 omnilex-key=us-nj-statutes--title-17--17:46C-6}
a. (1) Each contractual obligation for legal insurance shall be evidenced by a policy or master policy. Legal insurance may be written on an individual basis or on a group or blanket basis in accordance with the provisions of chapter 27 of Title 17B of the New Jersey Statutes. Each person insured under a group policy shall be issued a certificate of coverage. No legal insurance policy or certificate of any kind may be issued or delivered in this State unless and until a copy of the form thereof has been approved by the commissioner.
(2) The forms shall meet the following requirements:
(a) Policies shall contain a detailed list and description of the legal services promised or the legal matters for which expenses are to be reimbursed and the amount or method of reimbursement;
(b) Policies and certificates shall indicate prominently the name of the insurer and the full address of its principal place of business;
(c) Certificates issued under group policies may summarize the terms of the master contract but shall contain a full and clear statement of the benefits provided; and
(d) Such other requirements as the commissioner shall determine.
(3) The commissioner shall disapprove a form if it is found that it:
(a) Does not meet the requirements of subsection a. (2) of this section;
(b) Is unfair, unfairly discriminatory, misleading, obscure or encourages misrepresentation or misunderstanding of the contract, including cases where the form:
(i) Provides coverage or benefits that are too restricted to achieve the purposes for which the policy is designed;
(ii) Fails to attain a reasonable degree of readability, simplicity and conciseness; or
(iii) Is misleading, deceptive or obscure because of its physical aspects such as format, typography, style, color, material or organization;
(c) Provides coverage or benefits or contains other provisions that would endanger the solvency of the insurer;
(d) Is contrary to law; or
(e) Provides coverage or benefits for legal services rendered in connection with defending criminal charges in which the victim of the crime or a member of his immediate family or any corporation or partnership in which the victim has a substantial interest contributed to the plan on behalf of the insured.
b. (1) Every person shall, before using or applying any rate to legal insurance, file with the commissioner for approval a copy of the rating system upon which such rate is based, or by which such rate is fixed or determined. From and after the date of the approval of its rating system, every insurer shall charge and receive rates fixed or determined in strict conformity therewith. The commissioner may permit an insurer to file and use a rate for a 3-year period before approving or disapproving the rate so that appropriate expense and claims experience can be obtained through a statistical plan for use in his determination of the rate.
(2) The rates produced from such rating system shall meet the following requirements:
(a) They shall be established and justified in accordance with generally accepted insurance principles including but not limited to the experience or judgment of the insurer making the rate filing or actuarial computations; and
(b) They shall not be excessive, inadequate or unfairly discriminatory. Rates shall not be deemed unfairly discriminatory because they are averaged broadly among persons insured under group or blanket policies.
(3) The commissioner may, by written order, suspend or modify the requirement for filing and approval for any risk, group or class of risk the rates for which cannot practically be filed before they are used.
c. If the commissioner disapproves a filing he shall notify the person making it in writing specifying therein the reasons for disapproval. A hearing shall be granted after a request in writing by any such person aggrieved by the disapproval. The commissioner may, after notice and hearing, disapprove any rating system that has been previously approved; provided that such disapproval shall apply only to rating systems used on and after the date of said disapproval.
d. The commissioner may require the submission of whatever relevant information is reasonably necessary in determining whether to approve or disapprove a filing made pursuant to subsection a. or b. of this section.
##### **§ 17:46C-7** Transaction of business of legal insurance along with any other business; segregated accounts {#sec-17-46c-7 omnilex-key=us-nj-statutes--title-17--17:46C-7}
Except for employee welfare benefit plans regulated by the "Employee Retirement Income Security Act of 1974" (P.L. 93-406, 29 U.S.C. 1001 et seq.), a person who obtains a certificate of authority under this act and who transacts the business of legal insurance along with any other business shall transact legal insurance wholly within a segregated account in accordance with the following requirements:
a. The segregated account shall satisfy the financial requirements for issuance of a certificate of authority;
b. Except under subsections f. and g. of this section the income and assets attributable to a segregated account shall always remain identifiable with the account but, unless the commissioner so orders, the assets need not be kept physically separate from other assets of said person. The income, gains and losses, whether or not realized, from assets attributable to a segregated account shall be credited to or charged against the account without regard to other income, gains or losses of said person;
c. Except under subsection d. of this section, the assets attributable to a segregated account shall not be chargeable with any liabilities arising out of any other business of the person, nor shall any assets not attributable to the account be chargeable with any liabilities arising out of the segregated account;
d. The segregated account shall be deemed an insurer within the meaning of P.L.1975, c. 113 (C. 17:30C-1 et seq.). Claims remaining unpaid after completion of the liquidation under P.L.1975, c. 113 (C. 17:30C-1 et seq.) shall be liens against the interests of shareholders, if any, in all of said person's assets that are not liquidated;
e. Assets allocated to segregated accounts shall be the property of said person, which person shall not be nor hold himself out to be a trustee of the assets;
f. Said person may allocate a portion or part of a particular asset to the segregated account;
g. Said person may by an identifiable act transfer assets to or from the segregated account if:
(1) The terms are fair and reasonable; and
(2) The books, accounts and records of each party having an interest in the account are so maintained as to clearly and accurately disclose the precise nature and details of the transaction.
##### **§ 17:46C-8** Management contract; approval {#sec-17-46c-8 omnilex-key=us-nj-statutes--title-17--17:46C-8}
a. An insurer who obtains a certificate of authority in accordance with the provisions of section 4 of this act may not enter into any management contract, unless the contract is first filed with the commissioner and not disapproved under this section.
b. The commissioner shall disapprove a contract under subsection a. of this section if he finds that:
(1) It subjects the insurer to excessive charges; or
(2) The contract extends for an unreasonable period of time; or
(3) The contract does not contain fair and adequate standards of performance; or
(4) The persons empowered under the contract to manage the insurer are not sufficiently trustworthy, competent, experienced and free from conflict of interest to manage the insurer with due regard for the interests of its insureds, creditors or the public; or
(5) The contract contains provisions which impair the interests of the insurer's insureds or creditors or the public.
##### **§ 17:46C-8.1** Legal insurance, prepaid, defined, certain related services differentiated. {#sec-17-46c-8.1 omnilex-key=us-nj-statutes--title-17--17:46C-8.1}
1. a. A prepaid legal insurance plan shall be considered “legal insurance” subject to all provisions of the “New Jersey Legal Services Insurance Act” except as provided in this section. Notwithstanding the provisions of any other law to the contrary, a person shall not sell, or offer to sell, coverage under a prepaid legal insurance plan unless licensed as a limited lines prepaid legal insurance plan producer pursuant to the provisions of the “New Jersey Insurance Producer Licensing Act of 2001,” P.L.2001, c.210 (C.17:22A-26 et seq.) or as authorized under this section. Notwithstanding the provisions of section 14 of P.L.1981, c.160 (C.17:46C-14) or any law to the contrary, a person authorized to sell or offer to sell prepaid legal insurance plans to consumers under this section may be paid commissions through an entity or a designated representative of the entity that obtains a limited lines prepaid legal insurance producer plan license.
b. The employees and authorized representatives of an entity that obtains a certificate of authority under the “New Jersey Legal Services Insurance Act,” P.L.1981, c.160 (C.17:46C-1 et seq.), may sell or offer to sell prepaid legal insurance plans to consumers as permitted by this section and shall not be subject to individual licensure as an insurance producer under P.L. 2001, c.210 (C.17:22A-26 et seq.) as a condition of selling or offering to sell prepaid legal insurance plans to consumers, provided that:
(1) The entity or a designated representative of the entity obtains a limited lines prepaid legal insurance producer plan license to authorize its employees or authorized representatives to sell or offer prepaid legal insurance plans pursuant to this section;
(2) The entity possessing the certificate of authority and issuing the prepaid legal insurance plan either directly supervises, or appoints a supervising entity that is a licensed limited lines prepaid legal insurance plan producer to supervise, the employees and authorized representatives selling or offering to sell prepaid legal insurance plans pursuant to this section; and
(3) The entity possessing the certificate of authority and issuing the prepaid legal insurance plans develops a training program for employees selling or offering to sell prepaid legal insurance plans. The training required by this paragraph shall:
(a) be delivered to every employee and authorized representative who is directly engaged in the activity of selling or offering prepaid legal insurance plans; and
(b) include basic instruction about the prepaid legal insurance plans offered to consumers, including the provisions of the prepaid legal insurance plan and the requirements of the “New Jersey Legal Services Insurance Act,” P.L.1981, c.160 (C.17:46C-1 et seq.).
c. Consistent with the provisions of the “New Jersey Insurance Producer Licensing Act of 2001,” P.L.2001, c.210 (C.17:22A-26 et seq.), an application for a limited lines insurance producer license under this section shall be made to and filed with the Department of Banking and Insurance on forms prescribed and furnished by the commissioner.
d. Limited lines prepaid legal insurance plan producer licenses issued pursuant to this section shall renew biennially in accordance with regulations promulgated by the commissioner.
e. Each entity shall pay to the commissioner a fee as prescribed by the commissioner for an initial limited lines prepaid legal insurance plan producer license and for each renewal thereof.
f. For purposes of this section, “prepaid legal insurance plan” means legal insurance that consists of an arrangement through which members prepay for specified legal services, which are available to the members, or their dependents, through an organization that contracts directly with attorneys for the provision of the specified legal services and the organization pays the attorneys fixed, pre-arranged payments and the attorneys receive no additional payment or reimbursement from the organization for the specified legal services or the specified legal expenses.
##### **§ 17:46C-9** Annual report by insurers; exceptions {#sec-17-46c-9 omnilex-key=us-nj-statutes--title-17--17:46C-9}
An insurer other than an insurer authorized to transact the business of insurance under subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes shall annually, on or before the first day of March, file with the commissioner a report covering the preceding calendar year verified by at least two principal officers. The report shall be on forms prescribed by the commissioner and shall include:
a. A financial statement of the insurer's legal insurance business on December 31 of the year last preceding, including:
(1) Its balance sheet, and
(2) Its receipts and disbursements for the preceding year;
b. Any material changes in the information submitted pursuant to section 5 of this act;
c. Such information about the number of persons insured and terminated as may be prescribed by the commissioner;
d. Such other information relating to the performance of the insurer as is necessary to enable the commissioner to carry out his duties under this act.
##### **§ 17:46C-10** Reserves {#sec-17-46c-10 omnilex-key=us-nj-statutes--title-17--17:46C-10}
An insurer shall maintain the reserves necessary for the sound operation of the business including unearned premium reserves in a manner to be determined by the commissioner.
##### **§ 17:46C-11** Investments {#sec-17-46c-11 omnilex-key=us-nj-statutes--title-17--17:46C-11}
The investable funds generated through the transaction of the business of legal insurance by a person who obtains a certificate of authority under this act shall be invested in securities or other investments permitted by the laws of this State for the investment of assets of life insurers or in such other securities or investments as the commissioner shall permit.
##### **§ 17:46C-12** Regulation of trade practices {#sec-17-46c-12 omnilex-key=us-nj-statutes--title-17--17:46C-12}
Except where inconsistent with this act, P.L.1947, c. 379 (C. 17:29B-1 to 17:29B-14) shall apply to persons obtaining a certificate of authority under this act.
##### **§ 17:46C-13** Rules and regulations {#sec-17-46c-13 omnilex-key=us-nj-statutes--title-17--17:46C-13}
The commissioner shall promulgate rules and regulations to provide for the licensing of agents and brokers under this act, including the establishment of examination and licensing fees, and such other rules and regulations as are necessary or proper to carry out the provisions of this act, which rules and regulations are consistent with licensing requirements and standards in Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes.
##### **§ 17:46C-14** Commissions to nonlicensees and rebates; prohibition {#sec-17-46c-14 omnilex-key=us-nj-statutes--title-17--17:46C-14}
Commissions may not be paid to nonlicensees. Rebates are prohibited to the same extent as under Titles 17 of the Revised Statutes and 17B of the New Jersey Statutes. Penalties for noncompliance with this section shall be consistent with the licensing provisions of Titles 17 of the Revised Statutes and 17B of the New Jersey Statutes.
##### **§ 17:46C-15** Examination of insurers; expenses; payment {#sec-17-46c-15 omnilex-key=us-nj-statutes--title-17--17:46C-15}
The commissioner, in accordance with the procedures set forth in R.S. 17:23-4 et seq., shall make an examination of the affairs of any insurer obtaining a certificate of authority under this act as often as he deems it necessary for the protection of the interest of the people of this State. The commissioner shall have the power to charge the expenses of examination to the insurer in the manner in which they are charged under Titles 17 of the Revised Statutes and 17B of the New Jersey Statutes.
##### **§ 17:46C-16** Report of violations of Code of Professional Responsibility {#sec-17-46c-16 omnilex-key=us-nj-statutes--title-17--17:46C-16}
The commissioner shall report to the New Jersey Supreme Court any information which he considers to be indicative of possible violations of the Code of Professional Responsibility of the American Bar Association as amended by the New Jersey Supreme Court.
##### **§ 17:46C-17** Suspension or revocation {#sec-17-46c-17 omnilex-key=us-nj-statutes--title-17--17:46C-17}
The commissioner may suspend or revoke any certificate of authority issued to a person transacting the business of legal insurance under this act, after notice and hearing, for violation of any provision of the act.
##### **§ 17:46C-18** Liquidation or dissolution {#sec-17-46c-18 omnilex-key=us-nj-statutes--title-17--17:46C-18}
Any liquidation or dissolution of a person transacting the business of legal insurance shall be accomplished in accordance with the provisions of P.L.1975, c. 113 (C. 17:30C-1 et seq.).
##### **§ 17:46C-19** Fees; payment {#sec-17-46c-19 omnilex-key=us-nj-statutes--title-17--17:46C-19}
Every person subject to this act shall pay to the commissioner fees required by R.S. 17:33-1.
##### **§ 17:46C-20** Retaliatory tax provisions; application {#sec-17-46c-20 omnilex-key=us-nj-statutes--title-17--17:46C-20}
The provisions of P.L.1950, c. 231 (C. 17:32-15) relating to retaliatory tax provisions shall apply to insurers under this act.
##### **§ 17:46C-21** Applications, filings and reports as public documents; application of attorney-client privilege; validity of independent judgment of attorney {#sec-17-46c-21 omnilex-key=us-nj-statutes--title-17--17:46C-21}
All applications, filings, and reports required under this act shall be treated as public documents. Nothing contained in this act shall require the filing, reporting or disclosure of information or material which is subject to an attorney-client privilege or confidence, and no insurer shall question the independent judgment of an attorney providing legal services hereunder.
##### **§ 17:46C-22** Unauthorized insurers; submission to jurisdiction of state {#sec-17-46c-22 omnilex-key=us-nj-statutes--title-17--17:46C-22}
Subject to the provisions of this act, P.L.1952, c. 330 (C. 17:51-1 to 17:51-5), relating to unauthorized insurers, shall apply to persons transacting the business of legal insurance.
##### **§ 17:46C-23** Application of Titles 17 and 17B to insurers authorized to transact business under Subtitle 3 {#sec-17-46c-23 omnilex-key=us-nj-statutes--title-17--17:46C-23}
The provisions of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes shall apply generally to legal insurance offered by insurers authorized to transact the business of insurance and regulated under Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes; provided, however, that legal insurance sold by such insurers shall be subject to sections 2, 3, 4b., 6, 8, 13, 14, 18 and 20 of this act rather than to the corresponding sections of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes; and further provided that the provisions of P.L.1974, c. 17 (C. 17:30A-1 et seq.) shall not apply to legal insurance offered by such insurers.
##### **§ 17:46C-24** Titles 17 and 17B; application to orders or rules and regulations; inapplicability to insurer authorized under this act {#sec-17-46c-24 omnilex-key=us-nj-statutes--title-17--17:46C-24}
a. Orders or rules and regulations issued under the provisions of this act shall be issued in accordance with the provisions of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes. The provisions of N.J.S. 17B-34:11 shall apply in matters not specifically provided for herein.
b. Except as otherwise provided in this act, the provisions of Title 17 of the Revised Statutes and Title 17B of the New Jersey Statutes shall not apply to insurers authorized under this act.
##### **§ 17:46C-25** Violations; penalty; enforcement; expenses for enforcement of act; payment {#sec-17-46c-25 omnilex-key=us-nj-statutes--title-17--17:46C-25}
The penalty for each violation of any section of this act or any supplement thereto, shall be a penalty not exceeding $1,000.00 for the first offense and not exceeding $2,000.00 for each succeeding offense. Any penalty provided for herein shall be enforced and collected by the commissioner in the name of the State in a summary proceeding in accordance with "the penalty enforcement law" (N.J.S. 2A:58-1 et seq.). A warrant may issue in lieu of a summons. Upon the failure of the defendant to pay forthwith the amount of any money judgment rendered against him, such defendant shall be committed to the county jail as provided in said penalty enforcement law until the penalty and costs are paid. Penalties shall be paid to the commissioner for the use of the State. The necessary expenses for enforcing the provisions of this act when not otherwise provided for, shall be paid out of the penalties so collected and the fees and taxes paid by insurance companies of other States and foreign countries.
##### **§ 17:46C-26** Person transacting business prior to effective date; application; continuance of operation {#sec-17-46c-26 omnilex-key=us-nj-statutes--title-17--17:46C-26}
Any person who has been transacting the business of legal insurance for more than 90 days prior to the effective date of this act shall submit an application for a certificate of authority under section 4 of this act within 90 days of the effective date of this act and that applicant may continue to operate until the commissioner acts upon the application. In the event that an application is denied under section 5 of this act, the applicant shall be treated as a legal insurer whose certificate of authority has been revoked.
##### **§ 17:46C-29** Nonapplicability of authority of commissioner to discipline or regulation of attorneys {#sec-17-46c-29 omnilex-key=us-nj-statutes--title-17--17:46C-29}
Nothing contained in this act shall give the commissioner authority concerning regulation or suspension of attorneys admitted to practice in this State, or authority over attorneys' agreements or fees with individual clients or organizations.
##### **§ 17:46C-30** Severability {#sec-17-46c-30 omnilex-key=us-nj-statutes--title-17--17:46C-30}
If any section in this act or any part of any section is declared invalid or unconstitutional, such declaration of invalidity shall not affect the validity of the remaining portions thereof.
##### **§ 17:46C-31** Liberal construction of act {#sec-17-46c-31 omnilex-key=us-nj-statutes--title-17--17:46C-31}
This act shall be liberally construed to effectuate the purposes set forth in section 2.
## **Chapter 46D** {#struct-chapter-46d}
##### **§ 17:46D-1** Hospital, medical benefits for pets {#sec-17-46d-1 omnilex-key=us-nj-statutes--title-17--17:46D-1}
Any insurer writing any coverage to which the provisions of R.S.17:17-1 apply may offer group or individual policies or contracts which provide benefits for hospital and medical services for pets, provided that these services are provided by a veterinarian licensed pursuant to chapter 16 of Title 45 of the Revised Statutes or by the laws of any other state. The policy or contract may provide for exclusions or deductibles, or both. As used in this section, "pet" means any domesticated animal normally maintained in or near the household of the owner thereof.
##### **§ 17:46D-3** Short title. {#sec-17-46d-3 omnilex-key=us-nj-statutes--title-17--17:46D-3}
1. This act shall be known and may be cited as the “Pet Insurance Act.”
##### **§ 17:46D-4** Findings, declarations. {#sec-17-46d-4 omnilex-key=us-nj-statutes--title-17--17:46D-4}
2. The Legislature finds and declares that:
a. The purpose of this act is to promote the public welfare by creating a comprehensive legal framework within which pet insurance may be sold in this State.
b. The requirements of this act shall apply to pet insurance policies that are issued to any resident of this State, and are sold, solicited, negotiated, or offered in this State, and policies or certificates that are delivered or issued for delivery in this State.
c. All other applicable provisions of this State’s insurance laws shall continue to apply to pet insurance except that the specific provisions of this act shall supersede any general provisions of law that would otherwise be applicable to pet insurance.
##### **§ 17:46D-5** Definitions. {#sec-17-46d-5 omnilex-key=us-nj-statutes--title-17--17:46D-5}
3. As used in this act:
“Chronic condition” means a condition that can be treated or managed, but not cured.
“Congenital anomaly or disorder” means a condition that is present from birth, whether inherited or caused by the environment, which may cause or contribute to illness or disease.
“Department” means the Department of Banking and Insurance.
“Hereditary disorder” means an abnormality that is genetically transmitted from parent to offspring and may cause illness or disease.
“Insured” means the owner of the pet listed in the policy.
“Orthopedic” refers to conditions affecting the bones, skeletal muscle, cartilage, tendons, ligaments, and joints. It includes, but is not limited to, elbow dysplasia, hip dysplasia, intervertebral disc degeneration, patellar luxation, and ruptured cranial cruciate ligaments. It does not include cancers or metabolic, hemopoietic, or autoimmune diseases.
"Pet" means a member of the kingdom of living beings, commonly known as a domestic animal, that has the capacity for spontaneous movement and rapid motor response to stimulation, yet is not human, and which has been adapted or tamed to live in intimate association with, and for the pleasure or advantage of, the human species.
“Pet insurance” means a property insurance policy that provides coverage for accidents and illnesses of pets.
“Preexisting condition” means any condition for which any of the following are true prior to the effective date of a pet insurance policy or during any waiting period:
veterinarian provided medical advice;
The pet received previous treatment; or
Based on information from verifiable sources, the pet had signs or symptoms directly related to the condition for which a claim is being made.
A condition for which coverage is afforded on a policy cannot be considered a preexisting condition on any renewal of the policy.
“Renewal” means to issue and deliver at the end of an insurance policy period a policy which supersedes a policy previously issued and delivered by the same pet insurer or affiliated pet insurer and which provides types and limits of coverage substantially similar to those contained in the policy being superseded.
“Veterinarian” means an individual who holds a valid license to practice veterinary medicine pursuant to P.L.1938, c.277 (C.45:16-1 et seq.).
“Veterinary expenses” means the costs associated with medical advice, diagnosis, care, or treatment provided by a veterinarian, including, but not limited to, the cost of drugs prescribed by a veterinarian.
“Waiting period” means the period of time specified in a pet insurance policy that is required to transpire before some or all of the coverage in the policy can begin. Waiting periods shall not be applied to renewals of existing coverage.
“Wellness program” means a subscription- or reimbursement-based program that is separate from an insurance policy that provides goods and services to promote the general health, safety, or well-being of the pet. If any wellness program undertakes to indemnify another, or provides coverage for a fortuitous event, it is transacting in the business of insurance and is subject to the insurance code. This definition is not intended to classify a contract directly between a service provider and a pet owner that only involves the two parties as being “the business of insurance,” unless other indications of insurance also exist.
##### **§ 17:46D-6** Use of terms, pet insurers. {#sec-17-46d-6 omnilex-key=us-nj-statutes--title-17--17:46D-6}
4. a. If a pet insurer uses any of the terms in section 3 of this act in a policy of pet insurance, the pet insurer shall use the definition of each of those terms as set forth herein and include the definition of the term in the policy. The pet insurer shall also make the definition available through a clear and conspicuous link on the main page of the internet website of the pet insurer or pet insurer’s program administrator.
b. Nothing in this act shall in any way prohibit or limit the types of exclusions pet insurers may use in their policies or require pet insurers to have any of the limitations or exclusions defined in section 3 of this act.
##### **§ 17:46D-7** Information disclosure, pet insurance. {#sec-17-46d-7 omnilex-key=us-nj-statutes--title-17--17:46D-7}
5. a. A pet insurer transacting pet insurance shall disclose to insureds:
(1) if the policy excludes coverage due to:
(a) a preexisting condition;
(b) a hereditary disorder;
(c) a congenital anomaly or disorder; or
(d) a chronic condition;
(2) if the policy includes any other exclusions, using the following statement: “Other exclusions may apply. Please refer to the exclusions section of the policy for more information”;
(3) any policy provision that limits coverage through a waiting or affiliation period, a deductible, coinsurance, or an annual or lifetime policy limit;
(4) whether the pet insurer reduces coverage or increases premiums based on the insured’s claim history, the age of the covered pet, or a change in the geographic location of the insured; and
(5) if the underwriting company differs from the brand name used to market and sell the product.
b. (1) Unless the insured has filed a claim under the pet insurance policy, the insured shall have the right to examine and return the policy, certificate, or rider to the company or an agent or insurance producer of the company within 30 business days of its receipt and to have the premium refunded if, after examination of the policy, certificate, or rider, the insured is not satisfied for any reason.
(2) Pet insurance policies, certificates, and riders shall have a notice prominently printed on the first page, or attached thereto, including specific instructions to accomplish a return. The following free look statement or language substantially similar shall be included:
“YOU HAVE 30 BUSINESS DAYS FROM THE DAY YOU RECEIVE THIS POLICY, CERTIFICATE, OR RIDER TO REVIEW IT AND RETURN IT TO THE COMPANY IF YOU DECIDE NOT TO KEEP IT. YOU DO NOT HAVE TO TELL THE COMPANY WHY YOU ARE RETURNING IT. IF YOU DECIDE NOT TO KEEP IT, SIMPLY RETURN IT TO THE COMPANY AT ITS ADMINISTRATIVE OFFICE OR YOU MAY RETURN IT TO THE AGENT OR INSURANCE PRODUCER THAT YOU BOUGHT IT FROM AS LONG AS YOU HAVE NOT FILED A CLAIM. YOU MUST RETURN IT WITHIN 30 BUSINESS DAYS OF THE DAY YOU FIRST RECEIVED IT. THE COMPANY WILL REFUND THE FULL AMOUNT OF ANY PREMIUM PAID WITHIN 30 DAYS AFTER IT RECEIVES THE RETURNED POLICY, CERTIFICATE, OR RIDER. THE PREMIUM REFUND WILL BE SENT DIRECTLY TO THE PERSON WHO PAID IT. THE POLICY, CERTIFICATE, OR RIDER WILL BE VOID AS IF IT HAD NEVER BEEN ISSUED.”
c. A pet insurer shall clearly disclose a summary description of the basis or formula on which the pet insurer determines claim payments under a pet insurance policy within the policy prior to policy issuance and through a clear and conspicuous link on the main page of the internet website of the pet insurer or pet insurer’s program administrator.
d. A pet insurer that uses a benefit schedule to determine claim payment under a pet insurance policy shall:
(1) clearly disclose the applicable benefit schedule in the policy; and
(2) disclose all benefit schedules used by the pet insurer under its pet insurance policies through a clear and conspicuous link on the main page of the internet website of the pet insurer or pet insurer’s program administrator.
e. A pet insurer that determines claim payments under a pet insurance policy based on usual and customary fees, or any other reimbursement limitation based on prevailing veterinary service provider charges, shall:
(1) include a usual and customary fee limitation provision in the policy that clearly describes the pet insurer’s basis for determining usual and customary fees and how that basis is applied in calculating claim payments; and
(2) disclose the pet insurer’s basis for determining usual and customary fees through a clear and conspicuous link on the main page of the internet website of the pet insurer or pet insurer’s program administrator.
f. If any medical examination by a licensed veterinarian is required to effectuate coverage, the pet insurer shall clearly and conspicuously disclose the required aspects of the examination prior to purchase and disclose that examination documentation may result in a preexisting condition exclusion.
g. Waiting periods and the requirements applicable to them shall be clearly and prominently disclosed to consumers prior to the policy purchase.
h. (1) The pet insurer shall include a summary of all policy provisions required in subsections a. through g. of this section in a separate document titled “Insurer Disclosure of Important Policy Provisions.”
(2) The “Insurer Disclosure of Important Policy Provisions” document shall be made available through a clear and conspicuous link on the main page of the internet website of the pet insurer or pet insurer’s program administrator.
(3) In connection with the issuance of a new pet insurance policy, the pet insurer shall provide the consumer with a copy of the “Insurer Disclosure of Important Policy Provisions” document in at least 12-point type when it delivers the policy.
i. At the time a pet insurance policy is issued or delivered to a policyholder, the pet insurer shall include the following information, printed in 12-point boldface type:
(1) the department’s mailing address, toll-free telephone number, and website address;
(2) the address and customer service telephone number of the pet insurer or the agent or broker of record; and
(3) if the policy was issued or delivered by an agent or broker, a statement advising the policyholder to contact the broker or agent for assistance.
j. The disclosures required pursuant to this section shall be in addition to any other disclosure requirements required by law or regulation.
##### **§ 17:46D-8** Preexisting conditions, exclusion, eligibility, pet insurance. {#sec-17-46d-8 omnilex-key=us-nj-statutes--title-17--17:46D-8}
6. a. A pet insurer may issue policies that exclude coverage on the basis of one or more preexisting conditions with appropriate disclosure to the consumer. The pet insurer has the burden of proving that the preexisting condition exclusion applies to the condition for which a claim is being made.
b. A pet insurer may issue policies that impose waiting periods upon effectuation of the policy that do not exceed 30 days for illnesses or orthopedic conditions not resulting from an accident. Waiting periods for accidents are prohibited. An insurer shall issue coverage to be effective by 12:01 a.m. on the second calendar day after purchase, subject to the following exceptions:
(1) if an insurer elects to conduct individualized underwriting on a specific pet, then coverage shall be effective by 12:01 a.m. on the second calendar day after the insurer has determined the pet is eligible for coverage;
(2) an insurer may delay coverage from becoming effective to establish a method for the consumer or group administrator to pay the premium;
(3) for pet insurance coverage acquired by an individual through an employer or organization, the coverage effective date may be delayed to align with the eligibility and effective date requirements of the employer or organization’s benefit plan; or
(4) if a policy does not include a waiting period for an illness or orthopedic condition, an insurer may set a policy effectuation date that is up to 15 calendar days after purchase, if the policy effectuation date is clearly disclosed and no premium is charged before the policy becomes effective.
c. A pet insurer shall not require a veterinary examination of the covered pet for the insured to have their policy renewed.
d. If a pet insurer includes any prescriptive, wellness, or non-insurance benefits in the policy form, then it shall be made part of the policy contract and shall follow all applicable laws and regulations.
e. An insured’s eligibility to purchase a pet insurance policy shall not be based on participation, or lack of participation, in a separate wellness program.
##### **§ 17:46D-9** Wellness programs separate from pet insurance. {#sec-17-46d-9 omnilex-key=us-nj-statutes--title-17--17:46D-9}
7. a. A pet insurer or insurance producer shall not market a wellness program as pet insurance.
b. If a wellness program is sold by a pet insurer or insurance producer:
(1) the purchase of the wellness program shall not be a requirement to the purchase of pet insurance;
(2) the costs of the wellness program shall be separate and identifiable from any pet insurance policy sold by a pet insurer or insurance producer;
(3) a payment transaction for pet insurance shall be separate from a payment transaction for a wellness program;
(4)the terms and conditions for the wellness program shall be separate from any pet insurance policy sold by a pet insurer or insurance producer;
(5)the products or coverages available through the wellness program shall not duplicate products or coverages available through the pet insurance policy; and
(6) the advertising of the wellness program shall not be misleading and shall be in accordance with this subsection.
c. A pet insurer or insurance producer shall clearly disclose to consumers, printed in 12-point boldface type:
(1) that wellness programs are not insurance;
(2) the address and customer service telephone number of the pet insurer or insurance producer, or broker of record; and
(3) the department’s mailing address, toll-free telephone number, and website address.
d. Coverages included in the pet insurance policy contract described as “wellness” benefits are insurance.
##### **§ 17:46D-10** Licensure, training required for pet insurance producer. {#sec-17-46d-10 omnilex-key=us-nj-statutes--title-17--17:46D-10}
8. a. An insurance producer shall not sell, solicit, or negotiate a pet insurance product until after the producer is appropriately licensed and has completed the required training pursuant to subsection c. of this section.
b. Insurers shall ensure that its producers are trained pursuant to subsection c. of this section and that its producers have been appropriately trained on the coverages and conditions of its pet insurance products.
c. The training required pursuant to this subsection shall include information on:
(1) preexisting conditions and waiting periods;
(2) the differences between pet insurance and noninsurance wellness programs;
(3) hereditary disorders, congenital anomalies or disorders, and chronic conditions and how pet insurance policies interact with those conditions or disorders; and
(4) rating, underwriting, renewal, and other related administrative topics.
d. The satisfaction of the training requirements of another state that are substantially similar to the provisions of subsection c. of this section shall be deemed to satisfy the training requirements in this State.
e. Notwithstanding the requirements contained in this section, an insurance producer shall only be licensed to sell pet insurance if the producer holds an active life, health, personal lines, or property and casualty line of authority and is in good standing at the time the producer submits an application for licensure.
##### **§ 17:46D-11** Penalties enforceable, pet insurance. {#sec-17-46d-11 omnilex-key=us-nj-statutes--title-17--17:46D-11}
9. The commissioner of the department shall be authorized to establish and enforce penalties for violations of this act, pursuant to section 6 of P.L.1996, c.45 (C.17:1-15).
## **Chapter 46E** {#struct-chapter-46e}
##### **§ 17:46E-1** Short title. {#sec-17-46e-1 omnilex-key=us-nj-statutes--title-17--17:46E-1}
1. This act shall be known and may be cited as the “Travel Insurance Act.”
##### **§ 17:46E-2** Findings, declarations. {#sec-17-46e-2 omnilex-key=us-nj-statutes--title-17--17:46E-2}
2. The Legislature finds and declares that:
a. The purpose of this act is to promote the public welfare by creating a comprehensive legal framework within which travel insurance may be sold in this State.
b. The requirements of P.L.2025, c.153 (C.17:46E-1 et seq.) shall apply to travel insurance policies that cover any resident of this State, and are sold, solicited, negotiated, or offered in this State, and policies and certificates are delivered or issued for delivery in this State. P.L.2025, c.153 (C.17:46E-1 et seq.) shall not apply to cancellation fee waivers or travel assistance services, except as expressly provided herein.
c. All other applicable provisions of this State’s insurance laws shall continue to apply to travel insurance except that the specific provisions of P.L.2025, c.153 (C.17:46E-1 et seq.) shall supersede any general provisions of law that would otherwise be applicable to travel insurance.
##### **§ 17:46E-3** Definitions. {#sec-17-46e-3 omnilex-key=us-nj-statutes--title-17--17:46E-3}
3. As used in this act:
“Aggregator site” means a website that provides access to information regarding insurance products from more than one insurer, including product and insurer information, for use in comparison shopping.
“Blanket travel insurance” means a policy of travel insurance issued to any eligible group providing coverage for specific classes of persons defined in the policy with coverage provided to all members of the eligible group without a separate charge to individual members of the eligible group.
“Cancellation fee waiver” means a contractual agreement between a supplier of travel services and its customer to waive some or all of the non-refundable cancellation fee provisions of the supplier’s underlying travel contract with or without regard to the reason for the cancellation or form of reimbursement. A cancellation fee waiver is not insurance.
"Commissioner" means the Commissioner of Banking and Insurance.
“Eligible group” means two or more persons who are engaged in a common enterprise or have an economic, educational, or social affinity or relationship, including, but not limited to:
(1) any entity engaged in the business of providing travel or travel services, including, but not limited to: tour operators, lodging providers, vacation property owners, hotels and resorts, travel clubs, travel agencies, property managers, cultural exchange programs, and common carriers or the operator, owner, or lessor of a means of transportation of passengers, including, but not limited to, airlines, cruise lines, railroads, steamship companies, and public bus carriers, wherein with regard to any particular travel or type of travel or travelers, all members or customers of the group have a common exposure to risk attendant to the travel;
(2) any college, school, or other institution of learning covering students, teachers, employees, or volunteers;
(3) any employer covering any group of employees, volunteers, contractors, board of directors, dependents, or guests;
(4) any sports team, camp, or sponsor thereof covering participants, members, campers, employees, officials, supervisors, or volunteers;
(5) any religious, charitable, recreational, educational, or civic organization, or branch thereof covering any group of members, participants, or volunteers;
(6) any financial institution, financial institution vendor, or parent holding company, trustee, or agent of or designated by one or more financial institutions or financial institution vendors, including accountholders, credit card holders, debtors, guarantors, or purchasers;
(7) any incorporated or unincorporated association, including labor unions, having a common interest, constitution, and bylaws and organized and maintained in good faith for purposes other than obtaining insurance for members or participants of the association covering its members;
(8) any trust or the trustees of a fund established, created, or maintained for the benefit of and covering members, employees, or customers, subject to the commissioner permitting the use of a trust and the State’s premium tax provisions in section 5 of P.L.2025, c.153 (C.17:46E-5) of an association meeting the requirements of paragraph (7) of this section;
(9) any entertainment production company covering any group of participants, volunteers, audience members, contestants, or workers;
(10) any volunteer fire department, ambulance, rescue, police, court, or any first aid, civil defense, or other such volunteer group;
(11) preschools, daycare institutions for children or adults, and senior citizen clubs;
(12) any automobile or truck rental or leasing company covering a group of individuals who may become renters, lessees, or passengers defined by their travel status on the rented or leased vehicles. The common carrier; the operator, owner, or lessor of a means of transportation; or the automobile or truck rental or leasing company is the policyholder under a policy to which this section applies; or
(13) any other group where the commissioner has determined that the members are engaged in a common enterprise, or have an economic, educational, or social affinity or relationship, and that issuance of the policy would not be contrary to the public interest.
“Fulfillment materials” means documentation sent to the purchaser of a travel protection plan confirming the purchase and providing the travel protection plan’s coverage and assistance details.
“Group travel insurance” means travel insurance issued to any eligible group.
“Limited lines travel insurance producer” means a:
licensed managing general agent;
licensed insurance producer, including a limited lines producer; or
travel administrator.
“Offer and disseminate” means providing general information, including a description of the coverage and price, as well as processing the application and collecting premiums.
“Primary certificate holder” means an individual person who elects and purchases travel insurance under a group policy pursuant to section 5 of P.L.2025, c.153 (C.17:46E-5).
“Primary policyholder” means an individual person who elects and purchases individual travel insurance pursuant to section 5 of P.L.2025, c.153 (C.17:46E-5).
“Travel administrator” means a person who directly or indirectly underwrites, collects charges, collateral, or premiums from or adjusts or settles claims on residents of this State in connection with travel insurance, except that a person shall not be considered a travel administrator if that person’s only actions that would otherwise cause it to be considered a travel administrator are among the following:
a person working for a travel administrator to the extent that the person’s activities are subject to the supervision and control of the travel administrator;
an insurance producer selling insurance or engaged in administrative and claims-related activities within the scope of the producer’s license;
a travel retailer offering and disseminating travel insurance and registered under the license of a limited lines travel insurance producer in accordance with P.L.2025, c.153 (C.17:46E-1 et seq.);
an individual adjusting or settling claims in the normal course of that individual’s practice or employment as an attorney-at-law and who does not collect charges or premiums in connection with insurance coverage; or
a business entity that is affiliated with a licensed insurer while acting as a travel administrator for the direct and assumed insurance business of an affiliated insurer.
“Travel assistance services” means non-insurance services for which the consumer is not indemnified based on a fortuitous event and where providing the service does not result in transfer or shifting of risk that would constitute the business of insurance. Travel assistance services include, but are not limited to: security advisories, destination information, vaccination and immunization information services, travel reservation services, entertainment, activity and event planning, translation assistance, emergency messaging, international legal and medical referrals, medical case monitoring, coordination of transportation arrangements, emergency cash transfer assistance, medical prescription replacement assistance, passport and travel document replacement assistance, lost luggage assistance, concierge services, and any other service that is furnished in connection with planned travel. Travel assistance services are not insurance and not related to insurance.
“Travel insurance” means insurance coverage for personal risks incident to planned travel, including:
interruption or cancellation of trip or event;
loss of baggage or personal effects;
damages to accommodations or rental vehicles;
sickness, accident, disability or death occurring during travel;
emergency evacuation;
repatriation of remains; or
any other contractual obligations to indemnify or pay a specified amount to the traveler upon determinable contingencies related to travel as approved by the commissioner. Travel insurance does not include major medical plans that provide comprehensive medical protection for travelers with trips lasting longer than six months, including, for example, those working or residing overseas as an expatriate or any other product that requires a specific insurance producer license.
Arrangements for repatriation of remains which are made as part of a preneed funeral arrangement or other preneed consultation through a State registered mortuary, pursuant to the “Mortuary Science Act,” P.L.1952, c.340 (C.45:7-32 et seq.), that do not include any other coverages listed under this section shall not be considered travel insurance.
“Travel protection plans” means plans that provide one or more of the following: travel insurance, travel assistance services, and cancellation fee waivers.
“Travel retailer” means a business entity that makes, arranges, or offers planned travel and may offer and disseminate travel insurance as a service to its customers on behalf of and under the direction of a limited lines travel insurance producer.
##### **§ 17:46E-4** Limited lines travel insurance producer license. {#sec-17-46e-4 omnilex-key=us-nj-statutes--title-17--17:46E-4}
4. a. The commissioner may issue a limited lines travel insurance producer license to an individual or business entity that has filed with the commissioner an application for a limited lines travel insurance producer license in a form and manner prescribed by the commissioner. A limited lines travel insurance producer shall be licensed to sell, solicit, or negotiate travel insurance through a licensed insurer. No person may act as a limited lines travel insurance producer or travel insurance retailer unless properly licensed or registered.
b. A travel retailer may offer and disseminate travel insurance under a limited lines travel insurance producer business entity license only if:
(1) the limited lines travel insurance producer or travel retailer provides to purchasers of travel insurance:
(a) a description of the material terms or the actual material terms of the insurance coverage;
(b) a description of the process for filing a claim;
(c) a description of the review or cancellation process for the travel insurance policy; and
(d) the identity and contact information of the insurer and limited lines travel insurance producer;
(2) at the time of licensure, the limited lines travel insurance producer shall establish and maintain a register, on a form prescribed by the commissioner, of each travel retailer that offers travel insurance on the limited lines travel insurance producer’s behalf. The register shall be maintained and updated by the limited lines travel insurance producer and shall include the name, address, and contact information of the travel retailer and an officer or person who directs or controls the travel retailer’s operations and the travel retailer’s federal tax identification number. The limited lines travel insurance producer shall submit the register to the Department of Banking and Insurance upon reasonable request. The limited lines travel insurance producer shall also certify that the travel retailer registered complies with section 1033 of Title 18 of the United States Code (18 U.S.C. s.1033). The grounds for the suspension, revocation, and the penalties applicable to resident insurance producers pursuant to section 40 of P.L.2001, c.210 (C.17:22A-40), shall be applicable to the limited lines travel insurance producers and travel retailers;
(3) the limited lines travel insurance producer has designated one of its employees who is a licensed individual producer as the person, referred to as a “designated responsible producer,” responsible for the compliance with the travel insurance laws and regulations applicable to the limited lines travel insurance producer and its registrants;
(4) the designated responsible producer, president, secretary, treasurer, and any other officer or person who directs or controls the limited lines travel insurance producer’s insurance operations complies with the fingerprinting requirements applicable to insurance producers in the resident state of the limited lines travel insurance producer;
(5) the limited lines travel insurance producer has paid all applicable licensing fees; and
(6) the limited lines travel insurance producer requires each employee and authorized representative of the travel retailer whose duties include offering and disseminating travel insurance to receive a program of instruction or training, which is subject, at the discretion of the commissioner, to review and approval. The training material shall, at a minimum, contain adequate instructions on the types of insurance offered, ethical sales practices, and required disclosures to prospective customers.
c. Any travel retailer offering or disseminating travel insurance shall make available to prospective purchasers brochures or other written materials that have been approved by the travel insurer. The materials shall include information which, at a minimum:
(1) provides the identity and contact information of the insurer and the limited lines travel insurance producer;
(2) explains that the purchase of travel insurance is not required in order to purchase any other product or service from the travel retailer; and
(3) explains that an unlicensed travel retailer is permitted to provide only general information about the insurance offered by the travel retailer, including a description of the coverage and price, but is not qualified or authorized to answer technical questions about the terms and conditions of the insurance offered by the travel retailer or to evaluate the adequacy of the customer’s existing insurance coverage.
d. A travel retailer employee or authorized representative, who is not licensed as an insurance producer shall not:
(1) evaluate or interpret the technical terms, benefits, and conditions of the offered travel insurance coverage;
(2) evaluate or provide advice concerning a prospective purchaser’s existing insurance coverage; or
(3) hold itself out as a licensed insurer, licensed producer, or insurance expert.
e. Notwithstanding any law, rule, or regulation to the contrary, a travel retailer whose insurance-related activities, and those of its employees and authorized representatives, are limited to offering and disseminating travel insurance on behalf of and under the direction of a limited lines travel insurance producer meeting the conditions stated in P.L.2025, c.153 (C.17:46E-1 et seq.), is authorized to receive related compensation, upon registration by the limited lines travel insurance producer as described in paragraph (2) of subsection b. of this section.
f. As the insurer’s designee, the limited lines travel insurance producer is responsible for the acts of the travel retailer and shall use reasonable means to ensure compliance by the travel retailer with P.L.2025, c.153 (C.17:46E-1 et seq.).
g. Any person licensed in property or casualty authority as an insurance producer is authorized to sell, solicit and negotiate travel insurance.
##### **§ 17:46E-5** Travel insurer, premium tax. {#sec-17-46e-5 omnilex-key=us-nj-statutes--title-17--17:46E-5}
5. a. A travel insurer shall pay a premium tax, as provided pursuant to section 2 of P.L.1945, c.132 (C.54:18A-2), on travel insurance premiums paid by any of the following:
(1) an individual primary policyholder who is a resident of this State;
(2) a primary certificate-holder who is a resident of this State who elects coverage under a group travel insurance policy; or
(3) a blanket travel insurance policyholder that is a resident in or has its principal place of business or the principal place of business of an affiliate or subsidiary that has purchased blanket travel insurance in this State for eligible blanket group members, subject to any apportionment rules which apply to the insurer across multiple taxing jurisdictions or that permit the insurer to allocate premium on an apportioned basis in a reasonable and equitable manner in those jurisdictions.
b. A travel insurer shall:
(1) document the state of residence or principal place of business of the policyholder or certificate holder, as required in subsection a. of this section; and,
(2) report as premium only the amount allocable to travel insurance and not any amounts received for travel assistance services or cancellation fee waivers.
##### **§ 17:46E-6** Travel protection plans, one price for combined features, conditions. {#sec-17-46e-6 omnilex-key=us-nj-statutes--title-17--17:46E-6}
6. Travel protection plans may be offered for one price for the combined features that the travel protection plan offers in this State if:
a. the travel protection plan clearly discloses to the consumer, at or prior to the time of purchase, that it includes travel insurance, travel assistance services, and cancellation fee waivers as applicable and provides information and an opportunity, at or prior to the time of purchase, for the consumer to obtain additional information regarding the features and pricing of each; and
b. the fulfillment materials:
(1) describe and delineate the travel insurance, travel assistance services, and cancellation fee waivers in the travel protection plan, and
(2) include the travel insurance disclosures and the contact information for persons providing travel assistance services, and cancellation fee waivers, as applicable.
##### **§ 17:46E-7** Persons offering travel insurance subject to prohibition of unfair, deceptive practices. {#sec-17-46e-7 omnilex-key=us-nj-statutes--title-17--17:46E-7}
7. a. All persons offering travel insurance to residents of this State are subject to section 3 of P.L.1947, c.379 (C.17:29B-3), except as otherwise provided in this section. In the event of a conflict between P.L.2025, c.153 (C.17:46E-1 et seq.) and other provisions of Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes regarding the sale and marketing of travel insurance and travel protection plans, the provisions of P.L.2025, c.153 (C.17:46E-1 et seq.) shall control.
b. Offering or selling a travel insurance policy that could never result in payment of any claims for any insured under the policy is an unfair trade practice pursuant to section 3 of P.L.1947, c.379 (C.17:29B-3).
c. (1) All documents provided to consumers prior to the purchase of travel insurance, including, but not limited to, sales materials, advertising materials, and marketing materials, shall be consistent with the travel insurance policy itself, including, but not limited to, forms, endorsements, policies, rate filings, and certificates of insurance.
(2) For travel insurance policies or certificates that contain pre-existing condition exclusions, information and an opportunity to learn more about the pre-existing condition exclusions shall be provided any time prior to the time of purchase and in the coverage’s fulfillment materials.
(3) The fulfillment materials and the information described in subparagraphs (a) through (d) of paragraph (1) of subsection b. of section 4 of P.L.2025, c.153 (C.17:46E-4) shall be provided to a policyholder or certificate holder as soon as practicable, following the purchase of a travel protection plan. Unless the insured has either started a covered trip or filed a claim under the travel insurance coverage, a policyholder or certificate holder may cancel a policy or certificate for a full refund of the travel protection plan price from the date of purchase of a travel protection plan until at least:
(a) 15 days following the date of delivery of the travel protection plan’s fulfillment materials by postal mail; or
(b) 10 days following the date of delivery of the travel protection plan’s fulfillment materials by means other than postal mail.
For the purposes of this section, delivery means handing fulfillment materials to the policyholder or certificate holder or sending fulfillment materials by postal mail or electronic means to the policyholder or certificate holder.
(4) The company shall disclose in the policy documentation and fulfillment materials whether the travel insurance is primary or secondary to other applicable coverage.
(5) Where travel insurance is marketed directly to a consumer through an insurer’s website or by others through an aggregator site, it shall not be an unfair trade practice or other violation of law where an accurate summary or short description of coverage is provided on the web page that includes policy limits and exclusions or the ability to opt out of the coverage, so long as the consumer has access to the full provisions of the policy through electronic means.
d. No person offering, soliciting, or negotiating travel insurance or travel protection plans on an individual or group basis shall use a negative option or opt out, which would require a consumer to take an affirmative action to deselect coverage, such as unchecking a box on an electronic form, when the consumer purchases a trip.
e. It shall be an unfair trade practice, pursuant to section 3 of P.L.1947, c.379 (C.17:29B-3), to market blanket travel insurance coverage as free.
f. Where a consumer’s destination jurisdiction requires insurance coverage, it shall not be an unfair trade practice to require that a consumer choose between the following options as a condition of purchasing a trip or travel package:
(1) purchasing the coverage required by the destination jurisdiction through the travel retailer or limited lines travel insurance producer supplying the trip or travel package; or
(2) agreeing to obtain and provide proof of coverage that meets the destination jurisdiction’s requirements prior to departure.
##### **§ 17:46E-8** Prohibition against representing, acting as travel administrator for travel insurance without licensure. {#sec-17-46e-8 omnilex-key=us-nj-statutes--title-17--17:46E-8}
8. a. Notwithstanding any other provisions of Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes, no person shall act or represent itself as a travel administrator for travel insurance in this State unless that person:
(1) is a licensed property and casualty insurance producer in this state for activities permitted under that producer license; or
(2) holds a valid managing general agent license in this State.
b. An insurer is responsible for the acts of a travel administrator administering travel insurance underwritten by the insurer and is responsible for ensuring that the travel administrator maintains all books and records relevant to the insurer to be made available by the travel administrator to the commissioner upon request.
##### **§ 17:46E-9** Travel insurance classified, filed under certain lines of insurance. {#sec-17-46e-9 omnilex-key=us-nj-statutes--title-17--17:46E-9}
9. a. Notwithstanding any other provision of Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes, travel insurance shall be classified and filed for purposes of rates and forms under an inland marine line of insurance, provided, however, that travel insurance that provides coverage for sickness, accident, disability, or death occurring during travel, either exclusively or in conjunction with related coverages of emergency evacuation or repatriation of remains, or incidental limited property and casualty benefits such as baggage or trip cancellation, may be filed under either an accident and health line of insurance or an inland marine line of insurance.
b. Travel insurance may be in the form of an individual, group, or blanket policy.
c. Eligibility and underwriting standards for travel insurance may be developed and provided based on travel protection plans designed for individual or identified marketing or distribution channels, provided those standards also meet the State’s underwriting standards for inland marine.
## **Chapter 47** {#struct-chapter-47}
##### **§ 17:47-1** Insurance on Lloyds plan authorized {#sec-17-47-1 omnilex-key=us-nj-statutes--title-17--17:47-1}
Individuals, partnerships or associations of individuals, hereinafter designated "underwriters" , may engage in the business of insurance in this state as insurers on the Lloyds plan, whereby each associate underwriter becomes liable for a proportionate amount insured by a policy, in accordance with the provisions of this chapter, and not otherwise.
##### **§ 17:47-2** Classes of risks {#sec-17-47-2 omnilex-key=us-nj-statutes--title-17--17:47-2}
The underwriters when authorized as hereinafter provided may insure classes of risks as follows:
a. Against loss or damage to property by fire, lightning or tempest on land.
b. Upon vessels, freight, goods, money, effects, bottomry and respondentia interests and every insurance appertaining to or connected with marine and inland risks of navigation and transportation, including insurance against loss or damage to automobiles or other vehicles, whether stationary or being operated under their own power, by any of the hazards of fire, lightning, tempest, explosion, transportation by land or water, collision, burglary and theft, and against legal liability for damage to property of others resulting from their maintenance and operation.
c. Against loss or damage by water to any goods or premises arising from the breakage or leakage of sprinklers, pumps or other apparatus erected for extinguishing fires, and of water pipes, and against accidental injury to the sprinklers and other apparatus.
##### **§ 17:47-3** Declaration filed with commissioner {#sec-17-47-3 omnilex-key=us-nj-statutes--title-17--17:47-3}
The underwriters shall file with the commissioner a declaration, signed and sworn to by their duly authorized attorney or attorneys in fact, setting forth:
a. The name or title under which the business is to be conducted, which shall not be so similar to that of any existing corporation, association of insurers on the Lloyds plan or interinsurance association as in the opinion of the commissioner is calculated to deceive;
b. The location of the principal office at which the business is to be conducted;
c. A copy of the form of power of attorney, agreement or other authority of the attorney or attorneys in fact, setting forth the character of their representatives and authority and the agreement between the underwriters;
d. Copies of the forms of policy contracts or agreements under or by which insurance is to be effected;
e. The names and addresses of all the underwriters proposing to engage in the business;
f. The designation and appointment of the commissioner as attorney for service of legal process;
g. The kind or kinds of insurance to be transacted;
h. That a fund for the protection of policyholders is in the possession, within the United States, of the attorney or attorneys in fact or the committee for the underwriters, and is either in cash or invested as required by the laws of the state in which the principal office of the underwriters is located in respect to securities deposited by insurance corporations authorized to transact similar kinds of insurance, the fund to be in excess of all liabilities and to amount to one hundred thousand dollars if the applicants desire to be authorized to transact the kind of insurance specified in any one of the paragraphs "a" , "b" , or "c" , of section 17:47-2 of this title and the additional sum of fifty thousand dollars for each additional paragraph if the applicants desire to be authorized to transact the kinds of insurance specified in more than one of the paragraphs "a" , "b" , or "c" , of said section 17:47-2;
i. The number of underwriters, which shall not be less than fifteen, and that each underwriter is worth in his own right not less than twenty thousand dollars over and above all his debts and liabilities;
j. A statement showing a list of all cash and invested assets owned by the associate underwriters as such and their estimated value, and of all liabilities including unearned premiums on risks in force.
##### **§ 17:47-4** Certificate of authority; examination of underwriters; renewal {#sec-17-47-4 omnilex-key=us-nj-statutes--title-17--17:47-4}
Upon the filing of the declaration, the commissioner shall examine it, and if it appears to him that all the statements made therein are true and that the rights of the policyholders will be protected thereunder, he may issue a certificate of authority to the underwriters under the name chosen and approved, stating that they are authorized to transact business in this state and specifying the particular kind or kinds of insurance they are authorized to transact. Prior to the issuance of the certificate of authority the commissioner may cause an examination to be made of the affairs and financial condition of the underwriters applying for the certificate.
The certificate of authority shall be renewed annually, and no person shall transact the business of insurance in this state for the underwriters until the certificate has been issued or during its suspension or revocation.
##### **§ 17:47-5** Additional or substituted underwriters {#sec-17-47-5 omnilex-key=us-nj-statutes--title-17--17:47-5}
The underwriters applying for a certificate of authority hereunder may, after the issuance of the certificate, be joined by other underwriters, additional or substituted. The other underwriters shall comply with the provisions of this chapter and shall be held to be bound by the documents on file with the commissioner concerning the authorized underwriters, in the same manner and to the same extent as though they had been original applicants for the certificate of authority.
##### **§ 17:47-6** Deposit by alien underwriters; exceptions {#sec-17-47-6 omnilex-key=us-nj-statutes--title-17--17:47-6}
If any of the underwriters applying for the certificate of authority hereunder is not a citizen of the United States, each such alien underwriter shall at the time of the making of the application for a certificate of authority, deposit with the commissioner the sum of five thousand dollars in cash or in such securities as are required by law for the investment of the capital of insurance companies authorized to do similar kinds of insurance business in this state, or in the kinds of securities the commissioner approves. The provisions of this section as to deposits shall not apply if the alien underwriter is one of an association of underwriters (1) having on deposit with an insurance department of any state of the United States or in the hands of a bank or trust company therein as trustee, cash or approved securities worth not less than one hundred thousand dollars, held in trust for the benefit of all their policyholders in the United States; or (2) nine-tenths of the association of underwriters are at all times citizens of the United States and who have complied with all other provisions of this chapter.
##### **§ 17:47-7** Return of deposits {#sec-17-47-7 omnilex-key=us-nj-statutes--title-17--17:47-7}
After the conditions of any deposits made under this chapter have been fulfilled and the certificate of authority granted to the underwriters has been canceled or they have voluntarily withdrawn from and have ceased doing business in this state, the commissioner shall return to the underwriters or their duly authorized representatives for this purpose specifically designated by them, or their principal attorney or attorneys in fact, all securities and cash so deposited in this state.
##### **§ 17:47-8** Exposure to loss limited {#sec-17-47-8 omnilex-key=us-nj-statutes--title-17--17:47-8}
No association of underwriters authorized hereunder to do business in this state shall expose themselves to loss on any one risk in excess of ten per cent of their net cash and invested assets and of the underwriting liability of the individual underwriters. So much, however, of any risk as shall be reinsured in an association of underwriters or insurance corporation lawfully transacting business in this state, shall not be considered part of the risk.
##### **§ 17:47-9** Certain other laws applicable {#sec-17-47-9 omnilex-key=us-nj-statutes--title-17--17:47-9}
All associations of underwriters authorized hereunder and their representatives and agents shall be subject to the same supervision, required to make the same reports and pay the same taxes and fees, and in other respects subject to the same obligations and penalties as are imposed by the laws of this state on foreign insurance corporations transacting the same or similar kinds of business and the agents thereof, except as herein otherwise expressly provided.
##### **§ 17:47-10** Certain information furnished commissioner {#sec-17-47-10 omnilex-key=us-nj-statutes--title-17--17:47-10}
Any association of underwriters authorized hereunder shall from time to time furnish to the commissioner, under oath of their attorney or attorneys in fact, such information as the commissioner requires respecting the conduct of their affairs, changes in the name under which the business is done, the establishment of branch offices and their location, and any change in the membership of the underwriters and their attorney or attorneys in fact, including any amendment to the power of attorney, agreements or articles of association of underwriters.
##### **§ 17:47-11** Revocation or suspension of certificate of authority {#sec-17-47-11 omnilex-key=us-nj-statutes--title-17--17:47-11}
The certificate of authority issued hereunder to any association of underwriters may be revoked or suspended if it violates or neglects to comply with any provision of law obligatory upon it, or when its net cash or invested funds are reduced below the minimum specified in paragraph "h" of section 17:47-3 of this title.
##### **§ 17:47-12** Penalty for violations {#sec-17-47-12 omnilex-key=us-nj-statutes--title-17--17:47-12}
Any person who as principal, attorney, agent, broker or other representative, engages in the business contemplated by this chapter, or any variety or portion thereof, without complying with the requirements hereof, or who violates any provisions of this chapter, shall be guilty of a misdemeanor and sentenced to pay a fine of not less than fifty nor more than five hundred dollars.
##### **§ 17:47-13** Exception to application of chapter {#sec-17-47-13 omnilex-key=us-nj-statutes--title-17--17:47-13}
Nothing contained in this chapter shall apply to interinsurers or reciprocal underwriters.
## **Chapter 47A** {#struct-chapter-47a}
##### **§ 17:47A-1** Short title {#sec-17-47a-1 omnilex-key=us-nj-statutes--title-17--17:47A-1}
1. This act shall be known and may be cited as the "New Jersey Risk Retention Act."
##### **§ 17:47A-2** Definitions. {#sec-17-47a-2 omnilex-key=us-nj-statutes--title-17--17:47A-2}
2. As used in this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Completed operations liability" means liability arising out of the installation, maintenance or repair of any product at a site which is not owned or controlled by any person who performs that work or any person who hires an independent contractor to perform that work, and includes liability for activities which are completed or abandoned before the date of the occurrence which gives rise to the liability.
"Deductible" means any arrangement under which an insurer pays claims and then seeks reimbursement from the insured, except that the insurer's obligation to pay claims is not contingent upon reimbursement from the insured.
"Doing business in this State" means solicitation in this State, having group members in this State, or having an office in this State.
"Domicile" means, with respect to a purchasing group: for a corporation, the state in which the purchasing group is incorporated; for an unincorporated entity, the state of its principal place of business.
"Hazardous financial condition" means that, based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able to meet obligations to policyholders with respect to known claims and reasonably anticipated claims or to pay other obligations in the normal course of business.
"Insurance" means primary insurance, excess insurance, reinsurance, surplus lines insurance and any other arrangement for shifting and distributing risk which is determined to be insurance pursuant to the laws of this State.
"Liability" means legal liability for damages, including the cost of defense, legal costs and fees, and other claims expenses, because of injuries to other persons, damage to their property, or other damage or loss to such other persons resulting from or arising out of: any profit or non-profit business, trade, product, services, including professional services, premises, or operations; or any activity of any state or local government or any agency or political subdivision thereof, but does not include personal risk liability or an employer's liability with respect to its employees other than legal liability under the federal "Employers' Liability Act," 45 U.S.C. s.51 et seq.
"Personal risk liability" means liability for damages because of injury to any person, damage to property or other loss or damage resulting from any personal, familial or household responsibilities or activities, rather than from the responsibilities or activities referred to under the definition of "liability" in this section.
"Plan of operation" or a "feasibility study" means an analysis which presents the expected activities and results of the risk retention group, including: information sufficient to verify that its members are engaged in business or activities similar or related with respect to the liability to which such members are exposed by virtue of any related, similar or common business, trade, product, services, premises or operations; for each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer; historical and expected loss experience of the proposed members and national experience of similar exposures to the extent that this experience is reasonably available; pro forma financial statements and projections; appropriate opinions by a qualified actuary, including the determination of minimum premium or participation levels and capitalization required to commence operations and to prevent a hazardous financial condition, which shall be in the format and otherwise satisfy all requirements established by the commissioner for loss reserve actuarial opinions required to be submitted by licensed property and casualty insurers in this State; identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, investment policies and reinsurance agreements; identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each such state; and such other matters as may be prescribed by the commissioner of the state in which the risk retention group is chartered for liability insurance companies authorized by the insurance laws of that state.
"Product liability" means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease or sale of a product. "Product liability" does not include the liability of any person for those damages if the product involved was in the possession of that person when the incident giving rise to the claim occurred.
"Purchasing group" means any group which: has as one of its purposes the purchase of liability insurance on a group basis; purchases such insurance only for its group members and only to cover their similar or related liability exposure; is composed of members whose businesses or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar or common business, trade, product, services, premises or operations; and is domiciled in this or any other state.
"Retrospectively rated" means a rating plan or system, whereby the premium payable by an insured is subject to a contractual adjustment after the expiration of the policy based upon actual incurred experience.
"Risk retention group" means any corporation or other limited liability association: which is organized for the primary purpose of, and whose primary activity consists of, assuming and spreading all, or any portion, of the liability exposure of its group members; which is chartered and licensed as a liability insurance company and is authorized to engage in the business of insurance under the laws of any state, or prior to January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands, and before that date, certified to the commissioner of insurance, or other appropriate official, of at least one state that it satisfied the capitalization requirements of that state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since that date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability, as defined in the federal "Product Liability Risk Retention Act of 1981," Pub.L.97-45 (15 U.S.C. s.3901 et seq.), before October 27, 1986; which does not exclude any person from membership in the group solely to provide for members of that group a competitive advantage over such a person; which has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group, or has as its sole owner an organization which has as its members only persons who comprise the membership of the risk retention group and its owners are the only persons who comprise the membership of the risk retention group and who are provided insurance by such group; whose members are engaged in businesses or activities similar or related with respect to the liability to which those members are exposed by virtue of any related, similar or common business, trade, product, services, premises or operations; whose activities do not include the provision of insurance, other than liability insurance for assuming and spreading all or any portion of the liability of its group members, and reinsurance with respect to the similar or related liability exposure of any other risk retention group, or any member of any other group, which is engaged in businesses or activities so that this group or member meets the requirement that members are engaged in businesses or activities similar or related with respect to the liability to which those members are exposed by virtue of any related, similar or common business, trade, product, services, premises or operations for membership in the risk retention group which provides the reinsurance; and the name of which includes the phrase "risk retention group."
"Self-insured retention" means any fund or other arrangement to pay claims other than by an insurer, or any arrangement under which an insurer has no obligation to pay claims on behalf of an insured if it is not reimbursed by the insured.
"Similar insurance source" means an insurer authorized or admitted to do business in this State or a non-authorized surplus lines insurer eligible to do business in this State.
"Special risk" means a commercial lines insurance risk as specified on a list promulgated by the commissioner, which is of an unusual nature or high loss hazard or is difficult to place or rate, or which is excess or umbrella, or which is eligible for export; or a commercial lines insurance risk, other than a medical malpractice liability insurance risk as set forth under P.L.1982, c.114 (C.17:29AA-1 et seq.), which produces a minimum annual premium in excess of $10,000. Additions or deletions to the list promulgated may be made by the commissioner without a hearing upon notice to all licensed insurers.
"State" means this State, any other state of the United States or the District of Columbia.
##### **§ 17:47A-3** Requirements for establishment of risk retention group {#sec-17-47a-3 omnilex-key=us-nj-statutes--title-17--17:47A-3}
3. a. Any person wishing to establish a risk retention group chartered and licensed to write only liability insurance in this State shall, in addition to meeting the requirements pursuant to R.S.17:17-1 et seq., submit to the commissioner, on a form prescribed by the commissioner, a plan of operation or feasibility study. The risk retention group shall submit an appropriate revision in the event of any subsequent material change in any item of the plan of operation or feasibility study, within 10 days of any such change. The group shall not offer any additional kinds of liability insurance in this State, or in any other state, until a revision of such plan or study is approved by the commissioner.
b. At the time of filing its application for charter, the risk retention group shall provide to the commissioner in summary form the following information, upon receipt of which the commissioner shall forward this information to the National Association of Insurance Commissioners:
(1) the identity of the initial members of the group;
(2) the identity of those individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group;
(3) the amount and nature of initial capitalization;
(4) the coverages to be afforded; and
(5) the states in which the group intends to operate.
Providing this information to the National Association of Insurance Commissioners is in addition to, and shall not be deemed to satisfy, the requirements of this act.
c. Each risk retention group chartered in this State pursuant to this act shall be chartered and licensed to write only liability insurance in this State as provided in R.S.17:17-1 et seq., and is subject to the provisions of R.S.17:17-1 et seq. to the extent it is applied to insurers chartered and licensed in this State.
d. Notwithstanding any other provision of law to the contrary, all risk retention groups chartered in this State shall file an annual statement in the form adopted by the National Association of Insurance Commissioners and completed in accordance with its instructions and the National Association of Insurance Commissioners Accounting Practices and Procedures Manual and all applicable statutes and administrative rules. Additionally, all risk retention groups chartered in this State shall file quarterly statements covering the periods ending on March 31, June 30, and September 30, which statements shall be filed within 45 days after the end of each quarterly period. Quarterly statements shall be confidential and shall not be subject to public inspection or copying pursuant to the provisions of P.L.1963, c.73 (C.47:1A-1 et seq.).
e. Every risk retention group chartered in this State shall provide the following notice in 10-point, boldface type, in every policy of insurance issued by the group:
"NOTICE
This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state.
State insolvency guaranty funds are not available for your risk retention group."
##### **§ 17:47A-4** Required submissions by foreign risk retention group {#sec-17-47a-4 omnilex-key=us-nj-statutes--title-17--17:47A-4}
4. a. Each risk retention group which is licensed under the laws of any other state and which seeks to do business as a risk retention group in this State shall, before doing business in this State, submit to the commissioner:
(1) A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, the date of its charter and admission as a licensed insurer and its principal place of business;
(2) A copy of its plan of operation or feasibility study and revisions of such plan or study submitted to the state or states in which the risk retention group is chartered and licensed, except that the provision relating to a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which:
(a) was defined in the "Product Liability Risk Retention Act of 1981," Pub.L.97-45 (15 U.S.C. s.3901 et seq.), before October 27, 1986; and
(b) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date.
The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by this subsection at the same time such revision is submitted to the commissioner of its chartering state;
(3) A statement of registration, for which a filing fee shall be established by the commissioner, which designates the commissioner as its agent for the purpose of receiving service of legal documents or process; and
(4) Any other information, including information regarding membership, which may be required by the commissioner to verify that the risk retention group is qualified under the definition of "risk retention group" pursuant to section 2 of this act.
b. No risk retention group may offer any kind of liability insurance in this State until it is notified by the commissioner that the risk retention group is qualified under the definition of "risk retention group" pursuant to section 2 of this act.
c. Each risk retention group which has received notice of qualification from the commissioner to do business in this State shall submit to the commissioner on a reasonable and timely basis:
(1) A copy of the group's annual financial statement submitted to the state in which the risk retention group is chartered and licensed as an insurance company, which shall be certified by an independent certified public accountant, and contain an opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a qualified loss reserve specialist acceptable to the commissioner;
(2) A copy of each examination of the risk retention group as certified by the chartering state's commissioner or public official conducting the examination;
(3) Upon request of the commissioner, a copy of any information or document pertaining to any outside audit performed with respect to the risk retention group;
(4) An annual financial statement filing fee in an amount established by the commissioner; and
(5) Such additional information as may be required to verify its continuing qualification as a risk retention group pursuant to the definition of "risk retention group" in section 2 of this act.
d. To the extent that licensed insurance producers are utilized by a risk retention group pursuant to this act, those producers shall keep a complete and separate record of all policies procured from each such risk retention group, which records shall be open to examination by the commissioner, as provided in Title 17 of the Revised Statutes. These records shall, for each policy and for each kind of insurance provided thereunder, include the following:
(1) the limit of liability;
(2) the time period covered;
(3) the effective date;
(4) the name of the risk retention group which issued the policy;
(5) the gross premium charged; and
(6) the amount of return premiums if any.
e. Each risk retention group, its agents and representatives shall comply with the requirements governing the settlement of claims set forth in section 4 of P.L.1947, c.379 (C.17:29B-4), and any other State law regarding deceptive, false or fraudulent acts or practices.
f. Each risk retention group shall submit to an examination by the commissioner to determine its financial condition, if the commissioner or other appropriate official of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within 60 days after a request by the commissioner of this State. Any such examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the National Association of Insurance Commissioners' Examiner Handbook. The risk retention group shall pay the reasonable expenses of an examination upon presentation by the commissioner of a detailed account of the expenses.
g. Every application form for insurance from a risk retention group, and every policy issued by a risk retention group, on its front and declaration pages, shall contain in 10-point, boldface type the following notice:
"NOTICE
This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state.
State insolvency guaranty funds are not available for your risk retention group."
h. Each risk retention group shall comply with any lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by the commissioner pursuant to the laws governing the rehabilitation, liquidation, or conservation of assets of insurers, if there has been a finding of financial impairment after an examination pursuant to this section.
i. Each risk retention group shall comply with an injunction issued by a court of competent jurisdiction upon a petition by the commissioner alleging that the group is in a hazardous financial condition or is financially impaired.
##### **§ 17:47A-5** Prohibitions for risk retention groups; taxation of premiums {#sec-17-47a-5 omnilex-key=us-nj-statutes--title-17--17:47A-5}
5. a. No risk retention group, whether chartered in this State or another state, shall:
(1) Solicit the sale of or sell insurance to any person who is not eligible for membership in the group;
(2) Solicit the sale of or sell insurance if it is deemed to be in a hazardous condition or financially impaired;
(3) Sell or offer for sale any insurance coverage which is not permitted by the provisions of Title 17 of the Revised Statutes or which is declared unlawful by the highest court of this State; or
(4) Be owned by or controlled directly or indirectly by an insurer, or have an insurer as a member, except that this shall not apply in the case of a risk retention group in which all the members are insurers.
b. Notwithstanding the provisions of any other law to the contrary, no policy of insurance issued by a risk retention group, whether chartered in this State or otherwise, shall be required to be countersigned by an insurance producer residing in this State.
c. All premiums paid to risk retention groups not chartered in this State for coverage on risks within this State are subject to taxation at the same rate and are subject to the same interest, fines and penalties for nonpayment as that taxation which is applicable to surplus lines insurers. All premiums paid to risk retention groups chartered in this State for coverage on risks within this State are subject to taxation at the same rate and shall be subject to the same interest, fines, and penalties for nonpayment as that taxation which is applicable to foreign admitted insurers.
d. Each risk retention group, whether chartered in this State or otherwise, shall report all premiums paid to it which are attributable to risks insured within this State and shall remit the taxes owed on such premiums to, and on a form and in a manner required by, the Director of the Division of Taxation, in consultation with the commissioner.
##### **§ 17:47A-6** Additional information required {#sec-17-47a-6 omnilex-key=us-nj-statutes--title-17--17:47A-6}
6. In addition to complying with the applicable provisions of this act, any risk retention group doing business in this State prior to the effective date of this act shall, within 90 days of that date, submit to the commissioner the information set forth in subsection a. of section 4 of this act.
##### **§ 17:47A-7** Formation of purchasing group {#sec-17-47a-7 omnilex-key=us-nj-statutes--title-17--17:47A-7}
7. a. Only a group of persons with similar exposure to risk may form a purchasing group for the purpose of purchasing liability insurance. A purchasing group and its insurer or insurers shall be subject to all applicable laws of this State, except that a purchasing group and its insurer or insurers shall be exempt, in regard to liability insurance for the purchasing group, from any law that would:
(1) Prohibit the establishment of a purchasing group;
(2) Make it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages or other matters;
(3) Prohibit a purchasing group or its members from purchasing insurance on a group basis described in paragraph (2) of this subsection;
(4) Prohibit a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time;
(5) Require that a purchasing group have a minimum number of members, common ownership or affiliation, or certain legal forms;
(6) Require that a certain percentage of a purchasing group obtain insurance on a group basis;
(7) Otherwise discriminate against a purchasing group or any of its members; or
(8) Require that any insurance policy issued to a purchasing group or to any of its members be countersigned by an insurance producer residing in this State.
b. Each purchasing group with members located in this State shall, before doing business in this State, register with the commissioner, on a form prescribed by the commissioner, which form shall:
(1) Identify the state in which the group is domiciled;
(2) Identify all other states in which the group intends to do business;
(3) Specify the lines and classifications of liability insurance which the purchasing group intends to purchase;
(4) Identify the insurer or insurers from which the group intends to purchase its insurance and the domicile of that insurer;
(5) Specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this State;
(6) Identify the principal place of business of the group; and
(7) Provide any other information as may be required by the commissioner to verify that the purchasing group is qualified according to the definition of "purchasing group" under section 2 of this act.
A purchasing group shall, within 10 days, notify the commissioner of any changes in any of the items set forth in this subsection.
c. The application for registration shall be accompanied by a registration fee in an amount established by the commissioner.
d. Each purchasing group registered pursuant to this section shall submit to the commissioner from time to time, as he may require, reports relative to the group's operations, including, but not limited to, information required by the commissioner to:
(1) verify that the entity qualifies as a purchasing group;
(2) determine where the purchasing group is located; and
(3) determine the appropriate tax treatment.
e. Each purchasing group registered pursuant to this section shall be subject to audits or examinations as the commissioner may deem necessary.
f. No purchasing group with members located in this State shall solicit business in this State, nor shall any person solicit, negotiate or effect a contract of insurance or accept any fee or commission on a risk located in this State which is to be effected through a purchasing group unless the purchasing group is notified by the commissioner that it is registered pursuant to the provisions of this section.
g. Each purchasing group with members located in this State shall file a statement with the commissioner which designates the commissioner as agent of the purchasing group for service of legal documents or service of process, except that this shall not apply in the case of any purchasing group which only purchases insurance that was authorized under the federal "Product Liability Risk Retention Act of 1981," Pub.L.97-45 (15 U.S.C. s.3901 et seq.), which:
(1) Was domiciled prior to April 1, 1986 and is domiciled on or after October 27, 1986 in any state of the United States;
(2) Prior to October 27, 1986, purchased insurance from an insurance carrier licensed in any state and since October 27, 1986, purchased its insurance from an insurance carrier licensed in any state; or
(3) Was a purchasing group pursuant to the provisions of the "Product Liability Risk Retention Act of 1981," Pub.L.97-45 (15 U.S.C. s.3901 et seq.), before October 27, 1986.
h. Any purchasing group which was doing business in this State prior to the enactment of this act shall, within 90 days after the effective date of this act, register with the commissioner pursuant to the provisions of subsection b. of this section and comply with the requirements of subsection g. of this section.
##### **§ 17:47A-8** Prohibitions for purchasing group; taxation of premiums {#sec-17-47a-8 omnilex-key=us-nj-statutes--title-17--17:47A-8}
8. a. No purchasing group doing business in this State shall purchase or maintain insurance covering its members located in this State from a risk retention group that is not chartered in this State, or from an insurer that is not authorized or admitted pursuant to Title 17 of the Revised Statutes to write insurance in this State, unless the purchase is from a risk retention group registered pursuant to section 4 of this act or a surplus lines insurer deemed eligible and placed pursuant to "the surplus lines law," P.L.1960, c.32 (C.17:22-6.40 et seq.).
b. No purchasing group doing business in this State shall purchase or maintain any insurance covering its members located in this State which provides for a deductible or a self-insured retention applicable to the group as a whole, unless the deductible or self-insured retention is the sole responsibility of the individual members of the purchasing group.
c. No purchasing group doing business in this State shall purchase or maintain a policy of insurance covering its members located in this State which is retrospectively rated unless either:
(1) The retrospective premium is charged to each member based solely on that member's claims; or
(2) The retrospective premium payable by the group is subject to a provision which provides for a maximum premium payable by the group. The maximum premium shall be established so that there is at least a 10% actuarial probability that the premium otherwise payable will exceed the maximum premium.
d. No purchasing group doing business in this State may purchase or maintain a policy of insurance covering its members located in this State unless the policy form or contract complies with P.L.1982, c.114 (C.17:29AA-1 et al.) if the insurer is an authorized or admitted insurer, or section 9 of P.L.1960 c.32 (C.17:22-6.43) if the insurer is an eligible surplus lines insurer.
e. No purchasing group doing business in this State shall purchase insurance coverage with rates in this State which are less than the lowest rate approved by the commissioner for use by any authorized or admitted insurer for similar risks, except that this provision does not apply to special risks as defined in section 3 of P.L.1982, c.114 (C.17:29AA-3). The purchasing group may purchase insurance coverage with any premium modification plan on file and in actual use by an authorized or admitted insurer for similar risks. The commissioner may authorize the purchasing group to purchase insurance coverage with a lower rate or different premium modification plan if the group demonstrates to the commissioner's satisfaction that the exposure and experience of the group's members in this State justify a lower rate or different premium modification plan.
f. Each purchasing group doing business in this State shall report all premiums paid to it which are attributable to risks within the State, on a form and in a manner provided by the commissioner. Premium taxes and taxes on premiums paid for coverage of risks resident or located in this State by a purchasing group or any members of the purchasing group are imposed upon the group's insurer at the same rate and subject to the same interest, fines and penalties as that applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds.
g. A purchasing group which obtains liability insurance from a risk retention group shall inform each of the members of the group which have a risk resident or located in this State that the risk is not protected by an insurance insolvency guaranty fund in this State, and that the risk retention group may not be subject to all insurance laws and regulations of this State.
##### **§ 17:47A-9** Noneligibility for membership {#sec-17-47a-9 omnilex-key=us-nj-statutes--title-17--17:47A-9}
9. No risk retention group, whether domiciled in this State or otherwise, shall be eligible to become a member of, contribute to, or derive any benefit from, the New Jersey Property-Liability Insurance Guaranty Association established pursuant to the provisions of P.L.1974, c.17 (C.17:30A-1 et seq.) or the New Jersey Surplus Lines Insurance Guaranty Fund established pursuant to the provisions of P.L.1984, c.101 (C.17:22-6.70 et al.).
##### **§ 17:47A-10** License as insurance producer required {#sec-17-47a-10 omnilex-key=us-nj-statutes--title-17--17:47A-10}
10. a. No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating, procuring or effecting liability insurance in this State from a risk retention group unless that person, firm, association or corporation is licensed as an insurance producer in accordance with the provisions of P.L.1987, c.293 (C.17:22A-1 et seq.) and all rules and regulations promulgated thereunder.
b. No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating, procuring or effecting liability insurance in this State for a purchasing group from an authorized insurer or risk retention group chartered in a state unless that person, firm, association or corporation is licensed as an insurance producer in accordance with P.L.1987, c.293 (C.17:22A-1 et seq.) and all rules and regulations promulgated thereunder.
c. No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating, procuring or effecting liability insurance coverage in this State for any member of a purchasing group under a purchasing group's policy unless that person, firm, association or corporation is licensed as an insurance producer in accordance with P.L.1987, c.293 (C.17:22A-1 et seq.) and all rules and regulations promulgated thereunder.
d. No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating, procuring or effecting liability insurance from an insurer not authorized to do business in this State on behalf of a purchasing group with members located in this State unless that person, firm, association or corporation is licensed as a surplus lines agent in accordance with P.L.1987, c.293 (C.17:22A-1 et seq.) and "the surplus lines law," P.L. 1960, c.32 (C.17:22-6.40 et seq.) and all rules and regulations promulgated thereunder.
e. For purposes of acting as an insurance producer for a risk retention group or purchasing group pursuant to this section, the requirement of residence or maintenance of an office in this State shall not apply, except in the case of a licensed surplus lines agent.
f. Every person, firm, association or corporation licensed pursuant to the provisions of P.L.1987, c.293 (C.17:22A-1 et seq.), on business placed with risk retention groups or written through a purchasing group, shall inform each prospective insured of the provisions of the notice required by subsection e. of section 3 and subsection g. of section 4 of this act.
##### **§ 17:47A-11** Fines, penalties {#sec-17-47a-11 omnilex-key=us-nj-statutes--title-17--17:47A-11}
11. a. Each risk retention group, whether chartered in this State or otherwise, is subject to the same fines and penalties to which insurers licensed in this State are subject for any violation of this act or any other applicable law.
b. Failure of a purchasing group doing business in this State to comply with the provisions of this act may, after notice and an opportunity for a hearing, result in the revocation or suspension of its registration in this State. As an alternative or in addition to any other penalty, the commissioner may impose a fine of up to $5,000 for the first violation, and for each subsequent violation, a fine not to exceed $10,000, and in appropriate circumstances may order the restitution of moneys owed to any person and reimbursement of the costs of investigation and prosecution.
##### **§ 17:47A-12** Rules, regulations {#sec-17-47a-12 omnilex-key=us-nj-statutes--title-17--17:47A-12}
12. The commissioner may, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate rules and regulations necessary to effectuate the purposes of this act.
## **Chapter 47B** {#struct-chapter-47b}
##### **§ 17:47B-1** Definitions relative to captive insurers. {#sec-17-47b-1 omnilex-key=us-nj-statutes--title-17--17:47B-1}
1. As used in this act:
"Affiliated company" means a company in the same corporate system as a parent, an industrial insured or a member organization by virtue of common ownership, control, operation or management.
"Alien captive insurance company" means an insurance company formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of a jurisdiction other than this State which imposes statutory or regulatory standards in a form acceptable to the commissioner on companies transacting the business of insurance in that jurisdiction.
"Association" means a legal association of individuals, corporations, limited liability companies, partnerships, associations or other entities that has been in continuous existence for at least one year, the member organizations of which or which does itself, whether or not in conjunction with some or all of the member organizations:
(1) own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer;
(2) have complete voting control over an association captive insurance company incorporated as a mutual insurer; or
(3) constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer.
"Association captive insurance company" means a company that insures risks of the member organizations of the association and their affiliated companies.
"Branch business" means any insurance business transacted by a branch captive insurance company in this State.
"Branch captive insurance company" means an alien captive insurance company licensed by the commissioner to transact the business of insurance in this State through a business unit with a principal place of business in this State.
"Branch operations" means any business operations of a branch captive insurance company in this State.
"Captive insurance company" means any pure captive insurance company, association captive insurance company, sponsored captive insurance company, or industrial insured captive insurance company formed or licensed under the provisions of this act. For purposes of this act, a branch captive insurance company shall be a pure captive insurance company with respect to operations in the State, unless otherwise permitted by the commissioner.
"Commissioner" means the Commissioner of Banking and Insurance.
"Controlled unaffiliated business" means a company:
(1) that is not in the corporate system of a parent and any affiliated companies;
(2) that has an existing contractual relationship with a parent or affiliated company; and
(3) whose risks are managed by a pure captive insurance company in accordance with section 15 of this act.
"Excess workers' compensation insurance" means, in the case of an employer that has insured or self-insured its workers' compensation risks in accordance with applicable State or federal law, insurance in excess of a specified per incident or aggregate limit established by the commissioner.
"Industrial insured" means an insured:
(1) who procures the insurance of a risk by use of the services of a full time employee acting as an insurance manager or buyer;
(2) who has at least 25 full time employees; and
(3) whose aggregate annual premiums for insurance on all risks total at least $25,000.
"Industrial insured captive insurance company" means a company that insures risks of the industrial insureds that comprise the industrial insured group, and their affiliated companies.
"Industrial insured group" means a group of industrial insureds that collectively:
(1) own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer;
(2) have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer; or
(3) constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer.
"Member organization" means an individual, corporation, limited liability company, partnership, association or other entity that belongs to an association.
"Mutual corporation" means a corporation organized without stockholders and includes a nonprofit corporation with members.
"Parent" means a corporation, limited liability company, partnership, other entity or individual that directly or indirectly owns, controls or holds with power to vote more than 50 percent of the outstanding voting:
(1) securities of a pure captive insurance company organized as a stock corporation; or
(2) membership interests of a pure captive insurance company organized as a nonprofit corporation.
"Protected cell" means a separate account established and maintained by a sponsored captive insurance company for one participant.
"Pure captive insurance company" means a company that insures risks of its parent and affiliated companies or controlled unaffiliated businesses.
"Sponsor" means an entity that meets the requirements of sections 17 and 18 of this act and that the commissioner has approved to provide all or part of the capital and surplus required by applicable law to operate a sponsored captive insurance company.
"Sponsored captive insurance company" means a captive insurance company:
(1) in which the minimum capital and surplus required by applicable law is provided by one or more sponsors;
(2) that is formed or licensed under this act;
(3) that insures the risks of separate participants through the contract; and
(4) that segregates each participant's liability through one or more protected cells.
##### **§ 17:47B-2** Application by captive insurance company for license. {#sec-17-47b-2 omnilex-key=us-nj-statutes--title-17--17:47B-2}
2. a. A captive insurance company, if permitted by its articles of association, charter or other organizational document, may apply to the commissioner for a license to do business in any of the lines of insurance in subtitle 3 of Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes, including contracts or policies of life insurance, health insurance, annuities, indemnity, property and casualty, fidelity, guaranty and title insurance; provided, however, that:
(1) a pure captive insurance company shall not insure risks other than those of its parent and affiliated companies or controlled unaffiliated businesses;
(2) an association captive insurance company shall not insure risks other than those of the member organizations of its association, and their affiliated companies;
(3) an industrial insured captive insurance company shall not insure risks other than those of the industrial insureds that comprise the industrial insured group and their affiliated companies;
(4) a captive insurance company shall not provide private passenger automobile insurance or homeowner's insurance coverage or any component thereof;
(5) a captive insurance company shall not accept or cede reinsurance except as provided in section 10 of this act;
(6) a captive insurance company may provide excess workers' compensation insurance to its parent and affiliated companies, unless prohibited by the federal law or laws of the state having jurisdiction over the transaction. A captive insurance company, unless prohibited by federal law, may reinsure workers' compensation of a qualified self-insured plan of its parent and affiliated companies; and
(7) a captive insurance company shall comply with all applicable State and federal laws.
b. A captive insurance company shall not write any insurance business in this State unless:
(1) it first obtains from the commissioner a license authorizing it to write insurance business in this State;
(2) its board of directors or committee of managers or, in the case of a reciprocal insurer, its subscribers' advisory committee, holds at least one meeting each year in this State;
(3) it maintains its principal place of business in this State with the appropriate number of in-State professional services provider staff to carry out the business of the captive, including but not limited to, attorneys, accountants, managers, actuaries, brokers, and third party administrators; and
(4) it appoints a registered agent to accept service of process and to otherwise act on its behalf in this State; provided that whenever that registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Secretary of State shall be an agent of the captive insurance company upon whom any process, notice or demand may be served.
c. (1) Before receiving a license, a captive insurance company shall:
(a) file with the commissioner a certified copy of its organization documents, a statement under oath of its president and secretary showing its financial condition, and any other statements or documents required by the commissioner; and
(b) submit to the commissioner for approval a description of the coverage limits and rates, together with any additional information as the commissioner may reasonably require. In the event of any subsequent material change in an item in the description, the captive insurance company shall submit to the commissioner for approval an appropriate revision and shall not offer any additional lines of insurance until a revision of the description is approved by the commissioner. The captive insurance company shall inform the commissioner of any material change in rates within 30 days of the adoption of any change.
(2) Each captive insurance company shall also file with the commissioner evidence of the following:
(a) the amount and liquidity of its assets relative to the risks to be assumed;
(b) the adequacy of the expertise, experience and character of the person who will manage it;
(c) the overall soundness of its plan of operation;
(d) the adequacy of the loss prevention programs of its insureds; and
(e) those other factors deemed relevant by the commissioner in determining whether the proposed captive insurance company will be able to meet its policy obligations.
(3) Information submitted pursuant to this subsection shall remain confidential and shall not be made public by the commissioner without the written consent of the company except that:
(a) the information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted the information is a party, upon a showing by the party seeking to discover the information that:
(i) the information sought is relevant to and necessary for the furtherance of that action or case;
(ii) the information sought is unavailable from other nonconfidential sources; and
(iii) a subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner; and
(b) the commissioner may, in the commissioner's discretion, disclose the information to a public official having jurisdiction over the regulation of insurance in another state, if:
(i) the public official agrees in writing to maintain the confidentiality of the information; and
(ii) the laws of the state in which the public official serves require the information to remain confidential.
d. A captive insurance company shall pay to the commissioner a nonrefundable fee for examining, investigating and processing its application for license and the commissioner is authorized to retain legal, financial and examination services from outside the department, the reasonable cost of which may be charged against the applicant. In addition, each captive insurance company shall pay a license fee for the year of registration and a renewal fee for each year thereafter. The commissioner shall establish by regulation fees necessary for the administration of this act.
e. If the commissioner is satisfied that the documents and statements filed by a captive insurance company comply with the provisions of this act, the commissioner may grant a license authorizing it to write insurance business in this State until April 1 thereafter, which license may be renewed.
f. A captive insurance company shall not adopt a name that is the same, deceptively similar, or likely to be confused with or mistaken for any other existing business name registered in the State.
g. The commissioner may establish by regulation an expedited licensing process for a captive insurance company currently formed or licensed pursuant to the laws of a jurisdiction other than this State that applies for license to do business in this State.
##### **§ 17:47B-3** Conditions for issuance of license. {#sec-17-47b-3 omnilex-key=us-nj-statutes--title-17--17:47B-3}
3. a. A captive insurance company shall not be issued a license unless it maintains unimpaired paid-in capital and surplus of:
(1) in the case of a pure captive insurance company, not less than $250,000;
(2) in the case of an association captive insurance company, not less than $750,000;
(3) in the case of an industrial insured captive insurance company, not less than $500,000; and
(4) in the case of a sponsored captive insurance company, not less than $500,000.
b. The commissioner may prescribe additional capital and surplus requirements based upon the type, volume and nature of insurance business transacted.
c. Capital and surplus may be in the form of cash or an irrevocable letter of credit issued by a bank chartered by the State of New Jersey or a member bank of the Federal Reserve System located in this State and approved by the commissioner.
##### **§ 17:47B-4** Approval required for payment of dividend. {#sec-17-47b-4 omnilex-key=us-nj-statutes--title-17--17:47B-4}
4. A captive insurance company shall not pay a dividend out of, or other distribution with respect to, capital or surplus without the prior approval of the commissioner. Approval of an ongoing plan for the payment of dividends or other distributions shall be conditioned upon the retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by, the commissioner. Notwithstanding any provisions of the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq. to the contrary, a captive insurance company organized under the provisions of the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq. may make distributions as are in conformity with its purposes and approved by the commissioner.
##### **§ 17:47B-5** Incorporation, organization of captive insurance company. {#sec-17-47b-5 omnilex-key=us-nj-statutes--title-17--17:47B-5}
5. a. A pure captive insurance company may be incorporated or organized as:
(1) a stock insurer with its capital divided into shares and held by the stockholders;
(2) a nonprofit corporation with one or more members; or
(3) a manager-managed limited liability company.
b. An association captive insurance company or an industrial insured captive insurance company may be:
(1) incorporated as a stock insurer with its capital divided into shares and held by the stockholders;
(2) incorporated as a mutual corporation;
(3) organized as a reciprocal insurer in accordance with the provisions of P.L.1945, c.161 (C.17:50-1 et seq.); or
(4) organized as a manager-managed limited liability company.
c. A captive insurance company incorporated or organized in this State shall have not less than three incorporators or three organizers of whom at least one shall be a resident of this State.
d. In the case of a captive insurance company:
(1) formed as a corporation: (a) before the articles of incorporation are transmitted to the Secretary of State, the incorporators shall petition the commissioner to issue a certificate setting forth the commissioner's finding that the establishment and maintenance of the proposed corporation will promote the general good of the State. In arriving at a finding the commissioner shall consider:
(i) the character, reputation, financial standing and purposes of the incorporators or organizers;
(ii) the character, reputation, financial responsibility, insurance experience and business qualifications of the officers and directors; and
(iii) any other aspects of the proposed corporation as the commissioner deems advisable.
(b) the articles of incorporation, certificate and organization fee shall be transmitted to the Secretary of State, who shall record both the articles of incorporation and the certificate.
(2) formed as a reciprocal insurer, the organizers shall petition the commissioner to issue a certificate setting forth the commissioner's finding that the establishment and maintenance of the proposed association will promote the general good of the State. In arriving at a finding the commissioner shall consider the items set forth in sub-subparagraphs (i), (ii) and (iii) of subparagraph (a) of paragraph (1) of this subsection as applicable to a reciprocal insurer.
(3) formed as a limited liability company, before the articles of organization are transmitted to the Secretary of State, the organizers shall petition the commissioner to issue a certificate setting forth the commissioner's finding that the establishment and maintenance of the proposed company will promote the general good of the State. In arriving at a finding, the commissioner shall consider the items set forth in subsubparagraphs (i), (ii) and (iii) of subparagraph (a) of paragraph (1) of this subsection as applicable to a limited liability company.
e. The capital stock of a captive insurance company incorporated as a stock insurer may be authorized with no par value.
f. In the case of a captive insurance company:
(1) formed as a corporation, at least one of the members of the board of directors shall be a resident of this State;
(2) formed as a reciprocal insurer, at least one of the members of the subscribers' advisory committee shall be a resident of this State;
(3) formed as a limited liability company, at least one of the managers shall be a resident of this State.
g. Other than a captive insurance company formed as a limited liability company pursuant to the "New Jersey Limited Liability Company Act," P.L.1993, c.210 (C.42:2B-1 et seq.) or as a nonprofit corporation pursuant to the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., a captive insurance company formed as a corporation under the provisions of this act shall have the privileges and be subject to the provisions of the "New Jersey Business Corporation Act," N.J.S.14A:1-1 et seq., as well as the applicable provisions contained in this act. In the event of a conflict between the provisions of the "New Jersey Business Corporation Act," N.J.S.14A:1-1 et seq., and the provisions of this act, this act shall control.
h. A captive insurance company formed under the provisions of this act:
(1) as a limited liability company shall have the privileges and be subject to the provisions of the "New Jersey Limited Liability Company Act," P.L.1993, c.210 (C.42:2B-1 et seq.) as well as the applicable provisions contained in this act. In the event of a conflict between the provisions of the "New Jersey Limited Liability Company Act," P.L.1993, c.210 (C.42:2B-1 et seq.) and the provisions of this act, this act shall control; or
(2) as a nonprofit corporation shall have the privileges and be subject to the provisions of the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., as well as the applicable provisions contained in this act. In the event of a conflict between the provisions of the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., and the provisions of this act, this act shall control.
i. The procedures to be followed by a captive insurance company in carrying out a merger, consolidation, conversion, mutualization or redomestication shall be prescribed by the commissioner by regulation.
j. A captive insurance company formed as a reciprocal insurer under the provisions of this act shall have the privileges and be subject to the provisions of P.L.1945, c.161 (C.17:50-1 et seq.) in addition to the applicable provisions of this act. In the event of a conflict between the provisions of P.L.1945, c.161 (C.17:50-1 et seq.) and the provisions of this act, this act shall control.
k. The articles of incorporation or bylaws of a captive insurance company formed as a corporation may authorize a quorum of its board of directors to consist of not less than one-third of the fixed or prescribed number of directors determined under applicable provisions of the "New Jersey Business Corporation Act," N.J.S.14A:1-1 et seq., or the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq.
l. The subscribers' agreement or other organizing document of a captive insurance company formed as a reciprocal insurer may authorize a quorum of its subscribers' advisory committee to consist of not less than one-third of the number of its members.
m. With the commissioner's approval, a captive insurance company organized as a stock insurer may convert to a nonprofit corporation with one or more members by filing with the Secretary of State an irrevocable election for a conversion, provided that:
(1) the irrevocable election certifies that, at the time of the company's organization and at all times thereafter, the company conducted its business in a manner consistent with a nonprofit purpose; and
(2) at the time of the filing of its irrevocable election, the company files with both the commissioner and the Secretary of State amended and restated articles of incorporation consistent with the provisions of this act and the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., duly authorized by the corporation.
##### **§ 17:47B-6** Report of financial condition of captive insurance company. {#sec-17-47b-6 omnilex-key=us-nj-statutes--title-17--17:47B-6}
6. a. Prior to March 1 of each year, a captive insurance company shall submit to the commissioner a report of its financial condition, verified by oath of two of its executive officers. A captive insurance company shall report using generally accepted accounting principles, unless the commissioner approves the use of regulatory accounting principles, with any appropriate or necessary modifications or adaptations as may be required, approved or accepted by the commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the commissioner. Except as otherwise provided, an association captive insurance company shall file its report in the form required by R.S.17:23-1. The commissioner shall by rule prescribe the forms in which a pure captive insurance company and an industrial insured captive insurance company shall report. The confidentiality requirements of paragraph (3) of subsection c. of section 2 of this act shall apply to each report filed pursuant to this section.
b. A pure captive insurance company or an industrial insured captive insurance company may make written application for filing the required report on a fiscal year-end. If an alternative reporting date is granted, the annual report is due 60 days after the fiscal year-end.
##### **§ 17:47B-7** Visit, inspection, examination. {#sec-17-47b-7 omnilex-key=us-nj-statutes--title-17--17:47B-7}
7. a. At least once in every three years, and whenever the commissioner determines it to be prudent, the commissioner shall personally, or by some competent person appointed by the commissioner, visit each captive insurance company and thoroughly inspect and examine its affairs to determine its financial condition, its ability to fulfill its obligations and whether it has complied with the provisions of this act. The commissioner may increase the three-year period to five years, if the captive insurance company is subject to a comprehensive annual audit during that period of a scope satisfactory to the commissioner by independent auditors approved by the commissioner. The expenses and charges of the examination shall be paid to the State by the company examined.
b. All examination reports, preliminary examination reports or results, working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and shall not be made public by the commissioner without the written consent of the company, except to the extent provided in this subsection. Nothing in this subsection shall prevent the commissioner from using the information in furtherance of the commissioner's regulatory authority under this act. The commissioner may, in the commissioner's discretion, grant access to the information to public officers having jurisdiction over the regulation of insurance in any other state or country, or to law enforcement officers of this State or any other state or agency of the federal government at any time, so long as the officers receiving the information agree in writing to hold it in a manner consistent with this section.
c. As to a branch captive insurance company, the commissioner shall only examine the branch operations and branch business of the branch captive insurance company, in a manner to be prescribed by the commissioner by regulation.
##### **§ 17:47B-8** Suspension, revocation of license. {#sec-17-47b-8 omnilex-key=us-nj-statutes--title-17--17:47B-8}
8. a. Pursuant to subsection b. of this section, the commissioner may suspend or revoke the license of a captive insurance company for any of the following reasons:
(1) Insolvency or impairment of capital or surplus;
(2) Failure to meet the capital surplus requirements of section 3 of this act;
(3) Refusal or failure to submit an annual report, as required by this act, or any other report or statement required by law or by lawful order of the commissioner;
(4) Failure to comply with the provisions of its own charter, bylaws or other organizational document;
(5) Failure to submit to or pay the cost of examination or any legal obligation relative to an examination, as required by this act;
(6) Use methods that, although not otherwise specifically prohibited by law, nevertheless render its operation detrimental or its condition unsound with respect to the public or to its policyholders; or
(7) Failure to otherwise comply with the laws of this State.
b. If the commissioner finds, upon examination, hearing or other evidence, that a captive insurance company has violated any provision of subsection a. of this section, the commissioner may suspend or revoke the company's license if the commissioner deems it in the best interest of the public and the policyholders of the captive insurance company, notwithstanding any other provision of this act.
##### **§ 17:47B-9** Compliance with investment requirements. {#sec-17-47b-9 omnilex-key=us-nj-statutes--title-17--17:47B-9}
9. a. A captive insurance company shall comply with investment requirements to be prescribed by the commissioner by regulation.
b. A pure captive insurance company shall not make a loan to, or an investment in, its parent company or affiliates without prior written approval of the commissioner, and a loan or investment shall be evidenced by documentation approved by the commissioner. A pure captive insurance company shall not make a loan using the minimum capital and surplus funds required by section 3 of this act.
##### **§ 17:47B-10** Provision of reinsurance on risks ceded by other insurers. {#sec-17-47b-10 omnilex-key=us-nj-statutes--title-17--17:47B-10}
10. a. A captive insurance company may provide reinsurance on risks ceded by any other insurer.
b. A captive insurance company may take credit for the reinsurance of risks or portions of risks ceded to reinsurers complying with the provisions of P.L.1993, c.243 (C.17:51B-1 et seq.). A captive insurance company shall not take credit for the reinsurance of risks or portions of risks ceded to reinsurers not complying with P.L.1993, c.243 (C.17:51B-1 et seq.).
c. For purposes of this act, insurance by a captive insurance company of any workers' compensation qualified self-insured plan of its parent and affiliates shall be deemed to be reinsurance.
##### **§ 17:47B-11** Regulations relative to captive insurance company. {#sec-17-47b-11 omnilex-key=us-nj-statutes--title-17--17:47B-11}
11. a. A captive insurance company shall not be required to join a rating organization.
b. A captive insurance company shall not be permitted to join or contribute financially to a plan, pool, association, or guaranty or insolvency fund in this State, including the New Jersey Life and Health Insurance Guaranty Association, P.L.1991, c.208 (C.17B:32A-1 et seq.), the New Jersey Property-Liability Insurance Guaranty Association, P.L.1974, c.17 (C.17:30A-1 et seq.), the New Jersey Surplus Lines Insurance Guaranty Fund, P.L.1984, c.101 (C.17:22-6.70 et seq.), or "the workers' compensation security fund" created pursuant to R.S.34:15-105, nor shall a captive insurance company, or an insured or affiliate thereof, or a claimant thereof, receive a benefit from a plan, pool, association, or guaranty or insolvency fund, including the New Jersey Life and Health Insurance Guaranty Association, P.L.1991, c.208 (C.17B:32A-1 et seq.), the New Jersey Property-Liability Insurance Guaranty Association, P.L.1974, c.17 (C.17:30A-1 et seq.), the New Jersey Surplus Lines Insurance Guaranty Fund, P.L.1984, c.101 (C.17:22-6.70 et seq.), or "the workers' compensation security fund" created pursuant to R.S.34:15-105, for claims arising out of the operations of a captive insurance company.
##### **§ 17:47B-12** Taxes paid by captive insurance company. {#sec-17-47b-12 omnilex-key=us-nj-statutes--title-17--17:47B-12}
12. a. Each captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) shall pay to the Director of the Division of Taxation in the Department of the Treasury, on or before March 1 of each year, a tax at the rate of .38 of one percent on the first $20,000,000 and .285 of one percent on the next $20,000,000 and .19 of one percent on the next $20,000,000 and .072 of one percent on each dollar thereafter on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December 31 next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums, which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders; except that no tax shall be due or payable as to considerations received for annuity contracts.
b. Each captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) shall pay to the Director of the Division of Taxation in the Department of the Treasury, on or before March 1 of each year, a tax at the rate of .214 of one percent on the first $20,000,000 of assumed reinsurance premium, and .143 of one percent on the next $20,000,000 and .048 of one percent on the next $20,000,000 and .024 of one percent of each dollar thereafter. However, no tax under this subsection applies to premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection a. of this section. No tax under this subsection shall apply in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of another insurer under common ownership and control if the transaction is part of a plan to discontinue the operations of the other insurer, and if the intent of the parties to the transaction is to renew or maintain the business with the captive insurance company.
c. The annual minimum aggregate tax to be paid by a captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) calculated under subsections a. and b. of this section shall be $7,500, and the annual maximum aggregate tax shall be $200,000. The maximum aggregate tax to be paid by a sponsored captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) shall apply to each protected cell only and not to the sponsored captive insurance company as a whole.
d. (1) A captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) shall, on or before March 1 of each year, file with the commissioner an annual tax return, signed and sworn to by an officer of the company, or by its United States manager, if a company of a foreign country, in the form and containing matters as may be necessary for carrying out the provisions of this section.
(2) A captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) shall pay the balance of any tax due under this section based on the company's business during the preceding calendar year and make an installment payment in an amount equal to one-half of the tax payable under this section on the company's business done during the preceding calendar year.
(3) The examination of returns and the assessment of additional taxes, penalties and interest shall be as provided by the State Uniform Tax Procedure Law, R.S.54:48-1 et seq.
e. Two or more captive insurance companies that are not combinable captive insurance companies as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) under common ownership and control shall be taxed as though they were a single captive insurance company.
f. For the purposes of this section, "common ownership and control" shall mean:
(1) in the case of stock corporations, the direct or indirect ownership of 80 percent or more of the outstanding voting stock of two or more corporations by the same shareholder or shareholders; and
(2) in the case of mutual or nonprofit corporations, the direct or indirect ownership of 80 percent or more of the surplus and the voting power of two or more corporations by the same member or members.
g. The tax provided for in this section shall constitute all taxes collectible under the laws of this State from any captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6), and a captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6) shall not pay taxes pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.).
h. The tax provided for by this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a multiyear basis. In the case of multiyear policies or contracts, the premium shall be prorated for purposes of determining the tax under this section.
i. The tax provided for by this section shall only apply to the branch business of a branch captive insurance company that is not a combinable captive insurance company as defined by section 18 of P.L.2018, c.48 (C.54:10A-4.6).
##### **§ 17:47B-13** "Captive Insurance Regulation and Supervision Fund." {#sec-17-47b-13 omnilex-key=us-nj-statutes--title-17--17:47B-13}
13. There is created within the Department of Banking and Insurance a fund to be known as the "Captive Insurance Regulation and Supervision Fund," for the purpose of providing the financial means for the commissioner to administer this act and for reasonable expenses incurred in promoting the captive insurance industry in this State. The commissioner may establish by regulation, fees necessary for the administration of this act. All fees and assessments received by the department pursuant to the administration of this act shall be credited to this fund. All fees received by the department from reinsurers who assume risk solely from captive insurance companies and are subject to the provisions of P.L.1993, c.243 (C.17:51B-1 et seq.), shall be deposited into the Captive Insurance Regulation and Supervision Fund.
##### **§ 17:47B-14** Applicability of C.17:30C-1 et seq. {#sec-17-47b-14 omnilex-key=us-nj-statutes--title-17--17:47B-14}
14. Except as otherwise provided in this act, the terms and conditions set forth in P.L.1975, c.113 (C.17:30C-1 et seq.), pertaining to insurance reorganizations, receiverships and injunctions, shall apply to captive insurance companies formed or licensed under this act.
##### **§ 17:47B-15** Rules. {#sec-17-47b-15 omnilex-key=us-nj-statutes--title-17--17:47B-15}
15. The commissioner may adopt rules establishing standards to ensure that a parent or affiliated company is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by a pure captive insurance company, except that until such time as rules under this section are adopted, the commissioner may approve the coverage of the risk by a pure captive insurance company.
##### **§ 17:47B-16** Conversion, merger into reciprocal insurer. {#sec-17-47b-16 omnilex-key=us-nj-statutes--title-17--17:47B-16}
16. a. An association captive insurance company or industrial insured captive insurance company formed as a stock or mutual corporation may be converted to or merged with and into a reciprocal insurer in accordance with a plan of conversion or merger and the provisions of this section.
b. A plan for conversion or merger shall provide a fair and equitable plan for purchasing, retiring or otherwise extinguishing the interests of the stockholders and policyholders of a stock insurer, and the members and policyholders of a mutual insurer, including a fair and equitable provision for the rights and remedies of dissenting stockholders, members or policyholders.
c. In the case of a conversion authorized under subsection a. of this section:
(1) the conversion shall be accomplished under a reasonable plan and procedure as approved by the commissioner, except that the commissioner shall not approve a plan of conversion unless the plan:
(a) satisfies the provisions of subsection b. of this section;
(b) provides for a hearing, of which notice is given to the captive insurance company, its directors, officers and policyholders, and, in the case of a stock insurer, its stockholders, and in the case of a mutual insurer, its members, all of which persons shall be entitled to attend and appear at the hearing if notice of a hearing is given and no director, officer, policyholder, member or stockholder requests a hearing, the commissioner may cancel the hearing;
(c) provides a fair and equitable plan for the conversion of stockholder, member or policyholder interests into subscriber interests in the resulting reciprocal insurer, substantially proportionate to the corresponding interests in the stock or mutual insurer. This requirement shall not preclude the resulting reciprocal insurer from applying underwriting criteria that could affect ongoing ownership interests; and
(d) is approved:
(i) in the case of a stock insurer, by a majority of the shareholders entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present; and
(ii) in the case of a mutual insurer, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting thereof at which a quorum is present;
(2) the commissioner shall approve the plan of conversion if the commissioner finds that the conversion will promote the general good of the State in conformity with those standards set forth in paragraph (2) of subsection d. of section 5 of this act;
(3) if the commissioner approves the plan, the commissioner shall amend the converting insurer's certificate of authority to reflect conversion to a reciprocal insurer and issue the amended certificate of authority to the company's attorney-in-fact;
(4) the conversion shall be effective upon the issuance of an amended certificate of authority of a reciprocal insurer by the commissioner; and
(5) the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary of State of the conversion upon the conversion becoming effective.
d. A merger authorized under subsection a. of this section shall be accomplished substantially in accordance with the procedures to be prescribed by the commissioner, except that, solely for purposes of the merger:
(1) the plan of merger shall satisfy the provisions of subsection b. of this section;
(2) the subscribers' advisory committee of a reciprocal insurer shall be equivalent to the board of directors of a stock or mutual insurance company;
(3) the subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual insurance company;
(4) if a subscribers' advisory committee does not have a president or secretary, the officers of the committee having substantially equivalent duties shall be deemed the president or secretary of the committee;
(5) the commissioner shall approve the articles of merger if the commissioner finds that the merger will promote the general good of the State in conformity with those standards set forth in paragraph (2) of subsection d. of section 5 of this act. If the commissioner approves the articles of merger, the commissioner shall indorse the commissioner's approval thereon and the surviving insurer shall present the same to the Secretary of State;
(6) notwithstanding section 3 of this act, the commissioner may permit the formation, without surplus, of a captive insurance company organized as a reciprocal insurer, into which an existing captive insurance company may be merged for the purpose of facilitating a transaction under this section, except that there shall be no more than one authorized insurance company surviving the merger; and
(7) an alien captive insurance company may be a party to a merger authorized under subsection a. of this section in accordance with procedures to be prescribed by the commissioner by regulation.
##### **§ 17:47B-17** Sponsored captive insurance company. {#sec-17-47b-17 omnilex-key=us-nj-statutes--title-17--17:47B-17}
17. a. One or more sponsors may form a sponsored captive insurance company as prescribed in this act.
b. A sponsored captive insurance company may establish and maintain one or more protected cells to insure the risks of one or more participants, subject to the following conditions:
(1) A sponsored captive insurance company shall not have any stockholders other than its participants and sponsors.
(2) A sponsored captive insurance company shall separately account for each protected cell in its books and records to reflect the financial condition and results of operations of each protected cell, net income or loss of each protected cell, dividends or other distributions to participants of each protected cell and any other factors prescribed in the participant contract or required by the commissioner.
(3) The assets of a sponsored captive insurance company are not chargeable with liabilities arising out of any other insurance business the sponsored captive insurance company may conduct.
(4) A sponsored captive insurance company shall not sell, exchange or transfer assets, issue a dividend or make a distribution between or among any of its protected cells without the written consent of all its protected cells.
(5) A sponsored captive insurance company shall not sell, exchange or transfer assets, issue a dividend or make a distribution to a sponsor or participant unless the commissioner approves the transaction and determines that the transaction will not cause insolvency or impairment of any protected cell.
(6) At the time of filing its annual report pursuant to section 6 of this act, a sponsored captive insurance company shall also file with the department:
(a) an accounting statement detailing the financial experience of each protected cell, in a form to be prescribed by the commissioner; and
(b) any other financial report prescribed by the commissioner.
(7) A sponsored captive insurance company shall notify the commissioner in writing within 10 days after learning of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations.
(8) A sponsored captive insurance company shall obtain the commissioner's written approval of any participant contract before the contract becomes effective.
(9) The addition of a new participant or the withdrawal of a participant from an existing sponsored captive insurance company shall be considered a change in the captive insurer's business plan and shall require the commissioner's approval.
(10) With respect to each protected cell, the insurance business written by a sponsored captive insurance company may be:
(a) assumed from an insurance company licensed under the laws of any state;
(b) reinsured by a reinsurer authorized or accredited by the State; or
(c) secured by a trust fund or an irrevocable letter of credit.
##### **§ 17:47B-18** Regulations relative to risk retention group. {#sec-17-47b-18 omnilex-key=us-nj-statutes--title-17--17:47B-18}
18. a. A risk retention group shall not be either a sponsor or participant in a sponsored captive insurance company.
b. An association, corporation, limited liability company, partnership, trust or any another business entity may be a participant in any sponsored captive insurance company formed or licensed under this act.
c. A sponsor may be a participant in a sponsored captive insurance company.
d. A participant need not be a shareholder of a sponsored captive insurance company or any affiliate of a sponsored captive insurance company.
e. A participant shall insure only its own risks through a sponsored captive insurance company.
##### **§ 17:47B-19** No cause of action, imposition of liability against the commissioner. {#sec-17-47b-19 omnilex-key=us-nj-statutes--title-17--17:47B-19}
19. a. No cause of action shall arise nor shall any liability be imposed against the commissioner, the commissioner's authorized agent or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this act. This section does not abrogate or modify in any way any common law or other statutory privilege or immunity available to any person identified in this subsection. A person identified in this subsection shall be entitled to an award of attorney's fees and costs if he is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this act and the party bringing the action was not substantially justified in doing so. For purposes of this subsection, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.
b. No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under this act, if the communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.
## **Chapter 48** {#struct-chapter-48}
##### **§ 17:48-1** Definitions {#sec-17-48-1 omnilex-key=us-nj-statutes--title-17--17:48-1}
A hospital service corporation is hereby declared to be any corporation organized, without capital stock and not for profit, for the purpose of establishing, maintaining and operating a nonprofit hospital service plan. A hospital service plan is hereby defined as a plan whereunder service benefit contracts are issued providing complete prepayment or postpayment of eligible health care services and supplies for a given period to persons covered under such contracts, and arrangements are made for payment for such health care services and supplies directly to the provider thereof, including but not limited to, health care facilities and other suppliers of health care services; in addition, hospital service corporations may issue contracts providing for whole or partial payment for health care services and supplies furnished to persons covered under such contracts; provided, however, that not more than 20% of persons covered by other than service benefit contracts may be covered by contracts which include deductible options exceeding $1,000.00 or such higher amount as the Commissioner of Insurance may permit by regulation, or co-insurance exceeding 30% of the total amount billed for covered health care services or supplies. Arrangements may be made for payment for such health care services and supplies directly to the provider thereof, including but not limited to, health care facilities and other suppliers of health care services, or to the subscribers under such contracts. Such providers or suppliers may include but are not limited to:
(a) A hospital service corporation; (b) a health care facility with which the corporation has a contract for such health care services or supplies to persons who become subscribers under contracts with the corporation; (c) a health care facility which is maintained by a State or any of its political subdivisions; (d) a health care facility licensed by the Department of Health; (e) such other health care facilities as shall have been designated by the Department of Health for health care services; (f) health care facilities located in other States, which are subject to the supervision of such other States provided that such last mentioned health care facilities, if they were to be located in this State, would be eligible to be licensed or designated by the Department of Health; or (g) nonprofit hospital service plans of other states approved by the Commissioner of Insurance.
##### **§ 17:48-1.1** Hospital services for dental services {#sec-17-48-1.1 omnilex-key=us-nj-statutes--title-17--17:48-1.1}
Any contract made by a corporation subject to the provisions of the act to which this act is a supplement, may provide for the furnishing of hospital services where the services of licensed dentists are required.
##### **§ 17:48-1.2** Application {#sec-17-48-1.2 omnilex-key=us-nj-statutes--title-17--17:48-1.2}
The provisions of this act shall be applicable to contracts heretofore made under the authority of the act to which this act is a supplement, as well as to such contracts as may be hereafter made and, in the case of existing contracts, supplementary contracts may be made to include provisions authorized by this act.
##### **§ 17:48-1.3** Convalescent in registered nursing homes {#sec-17-48-1.3 omnilex-key=us-nj-statutes--title-17--17:48-1.3}
Any contract made by a corporation subject to the provisions of the act to which this act is a supplement, may provide for the furnishing of convalescent care in registered nursing homes.
##### **§ 17:48-1.4** Application {#sec-17-48-1.4 omnilex-key=us-nj-statutes--title-17--17:48-1.4}
The provisions of this act shall be applicable to contracts heretofore made under the authority of the act to which this act is a supplement, as well as to such contracts as may be hereafter made and, in the case of existing contracts, supplementary contracts may be made to include provisions authorized by this act.
##### **§ 17:48-1.5** Health care services by voluntary visiting nurse organizations {#sec-17-48-1.5 omnilex-key=us-nj-statutes--title-17--17:48-1.5}
Any contract made by a corporation subject to the provisions of the act to which this act is a supplement, may provide for the furnishing of health care services elsewhere than in a hospital by voluntary nonprofit visiting nurse organizations.
##### **§ 17:48-1.6** Application {#sec-17-48-1.6 omnilex-key=us-nj-statutes--title-17--17:48-1.6}
The provisions of this act shall be applicable to contracts heretofore made under the authority of the act to which this act is a supplement, as well as to such contracts as may be hereafter made and, in the case of existing contracts, supplementary contracts may be made to include provisions authorized by this act.
##### **§ 17:48-1.7** Additional powers; contract benefits; disapproval by commissioner; review {#sec-17-48-1.7 omnilex-key=us-nj-statutes--title-17--17:48-1.7}
Any hospital service corporation organized pursuant to the laws of this State, in addition to other powers conferred upon it, shall be authorized and empowered to include in its contracts benefits not only for hospital services but also benefits for such other similar health care services and supplies or health care services or supplies other than the services of persons licensed to practice medicine or surgery as are approved for such inclusion by the Commissioner of Banking and Insurance. The commissioner may disapprove any contract which makes provision for such health care services and supplies or health care services or supplies if it provides for a type of coverage or contains other provisions which he determines to be dissimilar health care services or unjust, unfair, inequitable, misleading, or contrary to law. All determinations of the commissioner under this section shall be subject to review by the Superior Court in a proceeding in lieu of a prerogative writ.
##### **§ 17:48-2** Operation as non-profit corporation; who may operate hospital service plan; certificate of authority {#sec-17-48-2 omnilex-key=us-nj-statutes--title-17--17:48-2}
No hospital service corporation shall be converted into a corporation organized for pecuniary profit. Every such corporation shall be operated for the benefit of the subscribers with whom it has contracted to provide hospital service. No person, firm, association or corporation, other than a hospital service corporation, or an insurance company authorized to transact the kinds of insurance specified in subdivisions c or d of section 17:17-1 of the Revised Statutes shall establish, maintain or operate a hospital service plan or otherwise contract in this State with persons to furnish hospital service. No hospital service corporation shall solicit subscribers or enter into any contract with any subscriber until it has received from the Commissioner of Banking and Insurance a certificate of authority to do so.
##### **§ 17:48-2.1** Hospital service corporation merger procedure {#sec-17-48-2.1 omnilex-key=us-nj-statutes--title-17--17:48-2.1}
A hospital service corporation established pursuant to the provisions of P.L. 1938, c. 366 (C. 17:48-1 et seq.) may merge with a medical service corporation established pursuant to the provisions of P.L. 1940, c. 74 (C. 17:48A-1 et seq.) pursuant to the provisions of P.L. 1985, c. 236 (C. 17:48E-1 et seq.), provided that the board of directors of the hospital service corporation executes a merger agreement, which shall be filed with the commissioner, and which shall provide that the board of directors of the survivor corporation be constituted in the manner provided for in section 6 of P.L. 1985, c. 236 (C. 17:48E-6).
##### **§ 17:48-3** Issuance of certificate of authority; conditions and requirements; alteration or amendment of certificate {#sec-17-48-3 omnilex-key=us-nj-statutes--title-17--17:48-3}
The Commissioner of Banking and Insurance may issue such certificate of authority to any such hospital service corporation of this State when it shall have filed in the Department of Banking and Insurance a certified copy of its charter or certificate of incorporation, a copy of its constitution or by-laws, a statement of its financial condition in such form and detail as the Commissioner of Banking and Insurance shall require, signed and sworn to by its president and secretary or other proper officers, and the Commissioner of Banking and Insurance is satisfied, on the basis of examination or otherwise, that the corporation has complied with the requirements of this chapter and that its condition or methods of operation are not such as would render its operations hazardous to the public or to its subscribers. No change in, amendment to, alteration in, addition to, or substitution for any document, instrument or other paper so filed shall become operative or effective until the same shall also have been filed in a similar manner. No such certificate of authority shall be issued to any hospital service corporation not incorporated under the laws of this State.
##### **§ 17:48-4** Applications for hospital service contracts as condition precedent to issuance of certificate of authority {#sec-17-48-4 omnilex-key=us-nj-statutes--title-17--17:48-4}
No certificate of authority shall be issued to any hospital service corporation except on receipt of evidence by the Commissioner of Banking and Insurance that the corporation is in receipt of not less than five hundred dollars ($500.00) on bona fide applications for hospital service contracts from not less than two hundred persons, which applications shall contain provisions to the effect that any amounts collected with such applications will be returned to such persons if the certificate of authority applied for is not received by the corporation within one year from the date of the first of such applications. The commissioner may refuse to issue any certificate of authority applied for if, in his judgment, the issue thereof is contrary to the public interest.
##### **§ 17:48-5** Filing copy of certificate of incorporation; qualification of directors {#sec-17-48-5 omnilex-key=us-nj-statutes--title-17--17:48-5}
A copy of a certificate of incorporation of a hospital service corporation may be filed in the Department of Insurance as aforesaid only when there shall be indorsed on or appended to the original thereof the approval of the Commissioner of Insurance, who is hereby authorized to grant such approval if, in his judgment, the operation of a nonprofit hospital service plan by such corporation is in the public interest. No certificate of authority shall be issued to any such corporation unless the bylaws provide that the board of directors of such hospital service corporation subject to the provisions of this act shall be composed of persons who are representative of the member hospitals of such corporation, its subscribers and the general public. Not more than one-third of the directors of any hospital service corporation shall be persons who are licensed to practice medicine and surgery in this State (other than physicians employed on a full-time basis in the fields of public health, public welfare, medical research or medical education) or who are trustees, directors or employees of a corporation organized for hospital purposes. Of the directors not included in the classification set forth in the preceding sentence, one-half in number, as nearly as possible, shall be persons (1) who have coverage under a contract or contracts issued by such hospital service corporation, (2) who are generally representative of broad segments of the subscribers covered under contracts issued by such corporation, and (3) who, or whose spouse or minor children, are not officers, directors or owners of more than 10% of the stock of a corporation whose aggregate sales to hospitals exceed 5% of its total sales, and one-half in number, as nearly as possible, shall be persons (a) whose background and experience indicate that they are qualified to act in the broad public interest, (b) who may or may not have coverage under a contract or contracts issued by such hospital service corporation, and (c) who, or whose spouse or minor children, are not officers, directors or owners of more than 10% of the stock of a corporation whose aggregate sales to hospitals exceed 5% of its total sales. Each such hospital service corporation shall have an executive committee the members of which shall be composed, as nearly as possible, of an equal number of representatives of the member hospitals of such corporation, its subscribers and general public. Compliance with the provisions of this section shall be under the supervision of the Commissioner of Insurance. Within 10 days after a vacancy in the board of directors of a hospital service corporation shall occur, such corporation shall notify the Commissioner of Insurance in writing that such vacancy exists. Not more than 10 days after the election of a person as a director of a hospital service corporation, such corporation shall furnish, in writing, the following information to the Commissioner of Insurance: the name and address of the person so elected; whether such person is representative of the member hospitals of such corporation, or its subscribers, or the general public and qualified to serve under the provisions of this section; and a biographical statement concerning such person. In the event that the Commissioner of Insurance shall find, after hearing, that the composition of the board of directors of a hospital service corporation is not in compliance with the provisions of this section, he may direct that such board of directors be reconstituted in accordance with his finding. The provisions of this section shall apply only to directors of hospital service corporations elected or re-elected after the effective date of this act.
##### **§ 17:48-6** Contracts; certificates; contents. {#sec-17-48-6 omnilex-key=us-nj-statutes--title-17--17:48-6}
6. Every individual contract made by a corporation subject to the provisions of this chapter to furnish services to a subscriber shall provide for the furnishing of services for a period of 12 months, and no contract shall be made providing for the inception of such services at a date later than one year after the actual date of the making of such contract. Any such contract may provide that it shall be automatically renewed from year to year unless there shall have been at least 30 days' prior written notice of termination by either the subscriber or the corporation. In the absence of fraud or material misrepresentation in the application for a contract or for reinstatement, no contract with an individual subscriber shall be terminated by the corporation unless all contracts of the same type, in the same group, or covering the same classification of persons are terminated under the same conditions.
No contract between any such corporation and a subscriber shall entitle more than one person to services, except that a contract issued as a family contract may provide that services will be furnished to a husband and wife; husband, wife, and their dependent child or children; or the subscriber and his (or her) dependent child or children. Adult dependent(s) of a subscriber may also be included for coverage under the contract of such subscriber.
Whenever, pursuant to the provisions of a subscription certificate or group contract issued by a corporation, the former spouse of a named subscriber under such a certificate or contract is no longer entitled to coverage as an eligible dependent by reason of divorce, separate coverage for such former spouse shall be made available by the corporation on an individual non-group basis under the following conditions:
(a) Application for such non-group coverage shall be made to the corporation by or on behalf of such former spouse no later than 31 days following the date his or her coverage under the prior certificate or contract terminated.
(b) No new evidence of insurability shall be required in connection with the application for such non-group coverage, but any health exception, limitation, or exclusion applicable to said former spouse under the prior coverage may, at the option of the corporation, be carried over to the new non-group coverage.
(c) The effective date of the new coverage shall be the day following the date on which such former spouse's coverage under the prior certificate or contract terminated.
(d) The benefits provided under the non-group coverage issued to such former spouse shall be at least equal to the basic benefits provided in contracts then being issued by the corporation to new non-group applicants of the same age and family status.
Family type contracts shall provide that the services applicable for children shall be payable with respect to a newly born child of the subscriber or his or her spouse from the moment of birth. The services for newly born children shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities. If a subscription payment is required to provide services for a child, the contract may require that notification of birth of a newly born child and the required payment must be furnished to the service corporation within 90 days after the date of birth in order to have the coverage continue beyond such 90-day period.
Nonfamily type contracts which provide for services to the subscriber, but not to family members or dependents of that subscriber, shall also provide services to newly born children of the subscriber which shall commence with the moment of birth of each child and shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities, provided that application therefor and payment of the required subscription amount are made to include in said contract the coverage described in the preceding paragraph of this section within 90 days from the date of birth of a newborn child.
A contract under which coverage of a dependent of a subscriber terminates at a specified age shall, with respect to an unmarried child, covered by the contract prior to attainment of age 19, who is incapable of self-sustaining employment by reason of an intellectual disability or physical handicap and who became so incapable prior to attainment of age 19 and who is chiefly dependent upon such subscriber for support and maintenance, not so terminate while the contract remains in force and the dependent remains in such condition, if the subscriber has within 31 days of such dependent's attainment of the termination age submitted proof of such dependent's incapacity as described herein. The foregoing provisions of this paragraph shall not apply retrospectively or prospectively to require a hospital service corporation to insure as a covered dependent any child with an intellectual disability or physically handicapped child of the applicant where the contract is underwritten on evidence of insurability based on health factors required to be set forth in the application. In such cases, any contract heretofore or hereafter issued may specifically exclude such child with an intellectual disability or physically handicapped child from coverage.
Every individual contract entered into by any such corporation with any subscriber thereto shall be in writing and a certificate stating the terms and conditions thereof shall be furnished to the subscriber to be kept by him. No such certificate form shall be made, issued, or delivered in this State unless it contains the following provisions:
(a) A statement of the contract rate, or amount payable to the corporation by or on behalf of the subscriber for the original quarter-annual period of coverage and of the time or times at which, and the manner in which, such amount is to be paid, and a provision requiring 30 days' written notice to the subscriber before any change in the contract, including a change in the amount of subscription rate, shall take effect;
(b) A statement of the nature of the services to be furnished and the period during which they will be furnished; and if there are any services to be excepted, a detailed statement of such exceptions printed as hereinafter specified;
(c) A statement of the terms and conditions, if any, upon which the contract may be amended on approval of the commissioner or canceled or otherwise terminated at the option of either party. Any notice to the subscriber shall be effective if sent by mail to the subscriber's address as shown at the time on the plan's record, except that, in the case of persons for whom payment of the contract is made through a remitting agent, any such notice to the subscriber shall also be effective if a personalized notice is sent to the remitting agent for delivery to the subscriber, in which case it shall be the responsibility of the remitting agent to make such delivery. The notice to the subscriber as herein required shall be sent at least 30 days before the amendment, cancellation or termination of the contract takes effect. Any rider or endorsement accompanying such notice, and amending the rates or other provisions of the contract, shall be deemed to be a part of the contract as of the effective date of such rider or endorsement;
(d) A statement that the contract includes the endorsements thereon and attached papers, if any, and contains the entire contract for services;
(e) A statement that no statement by the subscriber in his application for a contract shall void the contract or be used in any legal proceeding thereunder, unless such application or an exact copy thereof is included in or attached to such contract, and that no agent or representative of such corporation, other than an officer or officers designated therein, is authorized to change the contract or waive any of its provisions;
(f) A statement that if the subscriber defaults in making any payment under the contract, the subsequent acceptance of a payment by the corporation or by one of its duly authorized agents shall reinstate the contract, but with respect to sickness and injury may cover such sickness as may be first manifested more than 10 days after the date of such acceptance;
(g) A statement of the period of grace which will be allowed the subscriber for making any payment due under the contract. Such period shall be not less than 10 days.
In every such contract made, issued or delivered in this State:
(a) All printed portions shall be plainly printed in type of which the face is not smaller than 10 point;
(b) There shall be a brief description of the contract on its first page and on its filing back in type of which the face is not smaller than 14 point;
(c) The exceptions of the contract shall appear with the same prominence as the benefits to which they apply; and
(d) If the contract contains any provision purporting to make any portion of the articles, constitution or bylaws of the corporation a part of the contract, such portion shall be set forth in full.
##### **§ 17:48-6b** Benefits for reconstructive breast surgery {#sec-17-48-6b omnilex-key=us-nj-statutes--title-17--17:48-6b}
1. Every subscription certificate and group and individual contract providing hospital service benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits, following a mastectomy on one breast or both breasts, for reconstructive breast surgery, surgery to restore and achieve symmetry between the two breasts, and the cost of prostheses and, under any contract providing outpatient x-ray or radiation therapy, benefits for outpatient chemotherapy following surgical procedures in connection with the treatment of breast cancer shall be included as a part of the outpatient x-ray or radiation therapy benefit. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium. Such benefits shall be provided to the same extent as for any other sickness under the contract.
##### **§ 17:48-6c** Hospital service contracts {#sec-17-48-6c omnilex-key=us-nj-statutes--title-17--17:48-6c}
Every group and individual contract providing hospital service benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act, shall offer coverage for maternity care without regard to marital status to subscribers or other persons covered thereunder for expenses incurred in pregnancy and childbirth. The maternity benefits shall be provided to the same extent as the hospitalization benefit is provided in the contract for any other covered illness.
L. 1985, c. 276, s. 1.
##### **§ 17:48-6d** Benefits for blood products, blood infusion equipment {#sec-17-48-6d omnilex-key=us-nj-statutes--title-17--17:48-6d}
Every group or individual contract providing hospital expense benefits to any subscriber or other person covered thereunder for expenses incurred in connection with the treatment of routine bleeding episodes associated with hemophilia shall provide benefits for expenses incurred in connection with the purchase of blood products and blood infusion equipment required for home treatment of routine bleeding episodes associated with hemophilia when the home treatment program is under the supervision of a State approved hemophilia treatment center. The benefits shall be provided to the same extent as for any sickness under the contract.
As used in this act, "blood product" includes, but is not limited to, Factor VIII, Factor IX and cryoprecipitate; and "blood infusion equipment" includes, but is not limited to, syringes and needles.
Participation in a home treatment program shall not preclude further or additional treatment or care at any eligible facility if the number of home treatments, in accordance with a ratio of home treatments to benefit days established by regulation by the Commissioner of Insurance, does not exceed the total number of benefit days provided for any other sickness under the contract.
##### **§ 17:48-6e** Hospital service corporation insurance benefits for preexisting condition. {#sec-17-48-6e omnilex-key=us-nj-statutes--title-17--17:48-6e}
2. a. Notwithstanding any other provision of law to the contrary, no group health insurance contract issued by a hospital service corporation pursuant to the provisions of P.L.1938, c.366 (C.17:48-1 et seq.), shall contain any provision which denies benefits for a preexisting condition to any person becoming a member of that group. A hospital service corporation shall not include a preexisting condition as a factor in calculating the premium.
b. Nothing in this section shall be construed to operate to add any benefit, to increase the scope of any benefit, or to increase any benefit level under any group contract.
c. This section shall apply to every group contract or policy in which the corporation or insurer has the right to change the premium.
##### **§ 17:48-6f** Hospital service corporation to pay benefits for treatment of Wilm's tumor {#sec-17-48-6f omnilex-key=us-nj-statutes--title-17--17:48-6f}
Every group or individual hospital service corporation contract providing hospital or medical expense benefits shall provide benefits to any subscriber or other person covered thereunder for expenses incurred in the treatment of Wilm's tumor, including autologous bone marrow transplants when standard chemotherapy treatment is unsuccessful, notwithstanding that any such treatment may be deemed experimental or investigational. These benefits shall be provided to the same extent as for any other sickness under the contract.
##### **§ 17:48-6g** Hospital service corporation contract, mammogram examination benefits. {#sec-17-48-6g omnilex-key=us-nj-statutes--title-17--17:48-6g}
1. a. No group or individual hospital service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred in conducting:
(1) one baseline mammogram examination for women who are 40 years of age; a mammogram examination every year for women age 40 and over; and, in the case of a woman who is under 40 years of age and has a family history of breast cancer or other breast cancer risk factors, a mammogram examination at such age and intervals as deemed medically necessary by the woman's health care provider; and
(2) an ultrasound evaluation, a magnetic resonance imaging scan, a three-dimensional mammography, or other additional testing of an entire breast or breasts, after a baseline mammogram examination, if the mammogram demonstrates extremely dense breast tissue, if the mammogram is abnormal within any degree of breast density including not dense, moderately dense, heterogeneously dense, or extremely dense breast tissue, or if the patient has additional risk factors for breast cancer including but not limited to family history of breast cancer, prior personal history of breast cancer, positive genetic testing, extremely dense breast tissue based on the Breast Imaging Reporting and Data System established by the American College of Radiology, or other indications as determined by the patient's health care provider. The coverage required under this paragraph may be subject to utilization review, including periodic review, by the hospital service corporation of the medical necessity of the additional screening and diagnostic testing.
b. These benefits shall be provided to the same extent as for any other sickness under the contract.
c. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6h** Hospital service corporation, benefits for "off-label" drugs required {#sec-17-48-6h omnilex-key=us-nj-statutes--title-17--17:48-6h}
2. a. Except as provided in P.L.1992, c.161 (C.17B:27A-2 et al.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), no group or individual hospital service corporation contract which provides benefits for expenses incurred in prescribing drugs approved by the federal Food and Drug Administration shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred in prescribing a drug for a treatment for which it has not been approved by the Food and Drug Administration if the drug is recognized as being medically appropriate for the specific treatment for which it has been prescribed in one of the following established reference compendia:
(1) the American Medical Association Drug Evaluations;
(2) the American Hospital Formulary Service Drug Information;
(3) the United States Pharmacopoeia Drug Information;
or, it is recommended by a clinical study or review article in a major peer-reviewed professional journal.
b. Notwithstanding the provisions of this section, coverage shall not be required for any experimental or investigational drug or any drug which the Food and Drug Administration has determined to be contraindicated for the specific treatment for which the drug has been prescribed. The benefits provided pursuant to this section shall be provided to the same extent as other benefits under the contract for drugs prescribed for a treatment approved by the Food and Drug Administration.
c. This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
d. Any coverage of a drug required by this section shall also include medically necessary services associated with the administration of the drug.
##### **§ 17:48-6i** Hospital service corporation, benefits of health promotion {#sec-17-48-6i omnilex-key=us-nj-statutes--title-17--17:48-6i}
3. a. Every hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.1999, c.339, shall provide benefits to any subscriber or other person covered thereunder for expenses incurred in a health promotion program through health wellness examinations and counselling, which program shall include, but not be limited to, the following tests and services:
(1) For all persons 20 years of age and older, annual tests to determine blood hemoglobin; blood pressure; blood glucose level; and blood cholesterol level or, alternatively, low-density lipoprotein (LDL) level and blood high-density lipoprotein (HDL) level;
(2) For all persons 35 years of age or older, a glaucoma eye test every five years;
(3) For all persons 40 years of age or older, an annual stool examination for presence of blood;
(4) For all persons 45 years of age or older, a left-sided colon examination of 35 to 60 centimeters every five years;
(5) For all women 20 years of age or older, a pap smear pursuant to the provisions of section 2 of P.L.1995, c.415 (C.17:48-6o);
(6) For all women 40 years of age or older, a mammogram examination pursuant to the provisions of section 1 of P.L.1991, c.279 (C.17:48-6g);
(7) For all adults, recommended immunizations; and
(8) For all persons 20 years of age or older, an annual consultation with a health care provider to discuss lifestyle behaviors that promote health and well-being including, but not limited to, smoking control, nutrition and diet recommendations, exercise plans, lower back protection, weight control, immunization practices, breast self-examination, testicular self-examination and seat belt usage in motor vehicles.
Notwithstanding the provisions of this subsection to the contrary, if a physician or other health care provider recommends that it would be medically appropriate for a covered person to receive a different schedule of tests and services than that provided for under this subsection, the hospital service corporation shall provide payment for the tests or services actually provided, within the limits of the amounts listed in subsection b. of this section.
b. Every individual or group health care contract offered for sale in this State by a hospital service corporation pursuant to subsection a. of this section shall provide payment for the benefits set forth in subsection a. of this section in an amount which shall not exceed: $125 a year for each person between the ages of 20 to 39, inclusive; $145 a year for each man age 40 and over; and $235 a year for each woman age 40 and over; except that for persons 45 years of age or older, the cost of a left-sided colon examination shall not be included in the above amount; however, no hospital service corporation shall be required to provide payment for benefits for a left-sided colon examination in excess of $150.
c. The Commissioner of Banking and Insurance, in consultation with the Department of the Treasury, shall annually adjust the threshold amounts provided by subsection b. of this section in direct proportion to the increase or decrease in the consumer price index for all urban consumers in the New York City and Philadelphia areas as reported by the United States Department of Labor. The adjustment shall become effective on July 1 of the year in which the adjustment is made.
d. This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
e. The provisions of this section shall not apply to a health benefits plan subject to the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.).
##### **§ 17:48-6j** Requirements for hospital service corporation providing benefits for pharmacy services. {#sec-17-48-6j omnilex-key=us-nj-statutes--title-17--17:48-6j}
1. a. Notwithstanding any other provision of law to the contrary, no group or individual hospital service corporation contract which provides benefits for pharmacy services, prescription drugs, or for participation in a prescription drug plan, shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, unless the contract:
(1) Permits the subscriber, at the time of issuance, amendment or renewal, to select benefit coverage allowing the subscriber to choose a pharmacy or pharmacist for the provision of prescription drugs or pharmacy services, provided that any pharmacist or pharmacy selected by the subscriber is registered pursuant to R.S.45:14-1 et seq.;
(2) Provides that no pharmacy or pharmacist shall be denied the right to participate as a preferred provider or as a contracting provider, under the same terms and conditions currently applicable to all other preferred or contracting providers, if the contract provides for coverage by contracted or preferred providers for pharmaceutical services, provided the pharmacy or pharmacist is registered pursuant to R.S.45:14-1 et seq., and accepts the terms and conditions of the contract;
(3) Provides that no copayment, fee, or other condition shall be imposed upon a subscriber selecting a participating or contracting pharmacist or pharmacy that is not also equally imposed upon all subscribers selecting a participating or contracting pharmacist or pharmacy;
(4) (a) Provides that no subscriber shall be required to obtain pharmacy services and prescription drugs from a mail service pharmacy;
(b) Provides for no differential in any copayment applicable to any prescription drug of the same strength, quantity and days' supply, whether obtained from a mail service pharmacy or a non-mail service pharmacy, provided that the non-mail service pharmacy agrees to the same terms, conditions, price and services applicable to the mail service pharmacy; and
(c) Provides that the limit on days' supply is the same whether the prescription drug is obtained from a mail service pharmacy or a non-mail service pharmacy, and that the limit shall not be less than 90 days;
(5) Sets forth the auditing procedures to be used by the hospital service corporation and includes a provision that any audit shall take place at a time mutually agreeable to the pharmacy or pharmacist and the auditor. No audit by a hospital service corporation shall include a review of any document relating to any person or prescription plan other than those reimbursable by the hospital service corporation;
(6) Provides that the hospital service corporation, or any agent or intermediary thereof, including a third party administrator, shall not restrict or prohibit, directly or indirectly, a pharmacy from charging the subscriber for services rendered by the pharmacy that are in addition to charges for the drug, for dispensing the drug or for prescription counseling. Services rendered by the pharmacy for which additional charges are imposed shall be subject to the approval of the Board of Pharmacy. A pharmacy shall disclose to the purchaser the charges for the additional services and the purchaser's out-of-pocket cost for those services prior to dispensing the drug. A pharmacy shall not impose any additional charges for patient counseling or for other services required by the Board of Pharmacy or State or federal law;
(7) The provisions of P.L.1999, c.395 shall apply to all contracts delivered. issued or renewed on or after the effective date of P.L.1999, c.395.
b. Nothing in this section shall be construed to operate to add any benefit, to increase the scope of any benefit, or to increase any benefit level under any contract.
c. This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the subscriber charge.
##### **§ 17:48-6k** Benefits for certain cancer treatments {#sec-17-48-6k omnilex-key=us-nj-statutes--title-17--17:48-6k}
1. In addition to benefits provided under regulations adopted pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), a hospital service corporation shall offer under every group or individual hospital service corporation contract providing hospital or medical expense benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance, on or after the effective date of this act to provide benefits for the treatment of cancer by dose-intensive chemotherapy/autologous bone marrow transplants and peripheral blood stem cell transplants when performed by institutions approved by the National Cancer Institute or pursuant to protocols consistent with the guidelines of the American Society of Clinical Oncologists. Benefits for such treatment shall be provided to the same extent as for any other illness under the contract.
The offer required pursuant to this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium. Nothing in this section shall be construed to limit a hospital service corporation in adjusting premium amounts, or providing for reasonable deductibles or copayments, with respect to benefits provided pursuant to this section.
##### **§ 17:48-6l** Coverage for birth and natal care; hospital service corporation {#sec-17-48-6l omnilex-key=us-nj-statutes--title-17--17:48-6l}
1. a. Every individual or group contract that provides maternity benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act shall provide coverage for a minimum of 48 hours of in-patient care following a vaginal delivery and a minimum of 96 hours of in-patient care following a cesarean section for a mother and her newly born child in a health care facility licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.). The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
b. Notwithstanding the provisions of subsection a. of this section, a hospital service corporation contract that provides coverage for post-delivery care to a mother and her newly born child in the home shall not be required to provide for a minimum of 48 hours and 96 hours, respectively, of in-patient care unless such in-patient care is determined to be medically necessary by the attending physician or is requested by the mother. For the purposes of this section, attending physician shall include the attending obstetrician, pediatrician or other physician attending the mother or newly born child.
c. Every hospital service corporation shall provide notice to policyholders regarding the coverage required by this section in accordance with this subsection and regulations promulgated by the Commissioner of Health pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The notice shall be in writing and prominently positioned in any literature or correspondence and shall be transmitted at the earliest of: (1) the next mailing to the policyholder; (2) the yearly informational packet sent to the policyholder; or (3) January 1, 1996.
##### **§ 17:48-6m** Hospital service corporation contracts, child screening, blood lead, hearing loss; immunizations. {#sec-17-48-6m omnilex-key=us-nj-statutes--title-17--17:48-6m}
2. No hospital service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons shall be delivered, issued, executed, or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.), unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in the following:
a. Screening by blood lead measurement for lead poisoning for children, including confirmatory blood lead testing as specified by the Department of Health pursuant to section 7 of P.L.1995, c.316 (C.26:2-137.1); and medical evaluation and any necessary medical follow-up and treatment for lead poisoned children.
b. All childhood immunizations as recommended by the Department of Health, which shall consider the recommendations of the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention in the federal Department of Health and Human Services and, as appropriate, the recommendations of the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Physicians. A hospital service corporation shall notify its subscribers, in writing, of any change in coverage with respect to childhood immunizations and any related changes in premium. Such notification shall be in a form and manner to be determined by the Commissioner of Banking and Insurance.
c. Screening for newborn hearing loss by appropriate electrophysiologic screening measures and periodic monitoring of infants for delayed onset hearing loss, pursuant to P.L.2001, c.373 (C.26:2-103.1 et al.). Payment for this screening service shall be separate and distinct from payment for routine new baby care in the form of a newborn hearing screening fee as negotiated with the provider and facility.
The benefits provided pursuant to this section shall be provided to the same extent as for any other medical condition under the contract, except that a deductible shall not be applied for benefits provided pursuant to this section; however, with respect to a contract that qualifies as a high deductible health plan for which qualified medical expenses are paid using a health savings account established pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223), a deductible shall not be applied for any benefits provided pursuant to this section which represent preventive care as permitted by that federal law, and shall not be applied as provided pursuant to section 6 of P.L.2005, c.248 (C.17:48-6dd). This section shall apply to all hospital service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48-6n** Coverage, diabetes treatment, individual, group hospital service corporation. {#sec-17-48-6n omnilex-key=us-nj-statutes--title-17--17:48-6n}
1. a. Every individual or group hospital service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall provide benefits to any subscriber or other person covered thereunder for expenses incurred for the following equipment and supplies for the treatment of diabetes, if recommended or prescribed by a physician or nurse practitioner/clinical nurse specialist: blood glucose monitors and blood glucose monitors for the legally blind; test strips for glucose monitors and visual reading and urine testing strips; insulin; injection aids; cartridges for the legally blind; syringes; insulin pumps and appurtenances thereto; insulin infusion devices; and oral agents for controlling blood sugar. Coverage for the purchase of a short-acting, intermediate-acting, rapid-acting, long-acting, and pre-mixed insulin product shall not be subject to any deductible, and no copayment or coinsurance for the purchase of insulin shall exceed $35 per 30-day supply. The provisions of this subsection shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this subsection shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this subsection shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
b. Each individual or group hospital service corporation contract shall also provide benefits for expenses incurred for diabetes self-management education to ensure that a person with diabetes is educated as to the proper self-management and treatment of their diabetic condition, including information on proper diet. Benefits provided for self-management education and education relating to diet shall be limited to visits medically necessary upon the diagnosis of diabetes; upon diagnosis by a physician or nurse practitioner/clinical nurse specialist of a significant change in the subscriber's or other covered person's symptoms or conditions which necessitate changes in that person's self-management; and upon determination of a physician or nurse practitioner/clinical nurse specialist that reeducation or refresher education is necessary. Diabetes self-management education shall be provided by a dietitian registered by a nationally recognized professional association of dietitians or a health care professional recognized as a Certified Diabetes Educator by the American Association of Diabetes Educators or a registered pharmacist in the State qualified with regard to management education for diabetes by any institution recognized by the board of pharmacy of the State of New Jersey.
c. The benefits required by this section shall be provided to the same extent as for any other sickness under the contract.
d. This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
e. The provisions of this section shall not apply to a health benefits plan subject to the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.).
f. The Commissioner of Banking and Insurance may, in consultation with the Commissioner of Health, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate and periodically update a list of additional diabetes equipment and related supplies that are medically necessary for the treatment of diabetes and for which benefits shall be provided according to the provisions of this section.
##### **§ 17:48-6o** Hospital service corporation contract, Pap smear benefits {#sec-17-48-6o omnilex-key=us-nj-statutes--title-17--17:48-6o}
2. No hospital service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting a Pap smear. The benefits shall be provided to the same extent as for any other medical condition under the contract.
As used in this section, and notwithstanding the provisions of this section to the contrary, "Pap smear" means an initial Pap smear and any confirmatory test when medically necessary and as ordered by the covered person's physician and includes all laboratory costs associated with the initial Pap smear and any such confirmatory test.
This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6p** Hospital service corporation contract, prostate cancer testing {#sec-17-48-6p omnilex-key=us-nj-statutes--title-17--17:48-6p}
2. No hospital service corporation contract providing hospital or medical expense benefits for groups with greater than 49 persons shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act, unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting an annual medically recognized diagnostic examination including, but not limited to, a digital rectal examination and a prostate-specific antigen test for men age 50 and over who are asymptomatic and for men age 40 and over with a family history of prostate cancer or other prostate cancer risk factors.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6q** Coverage for minimum inpatient care following mastectomy by individual, group hospital service corporation {#sec-17-48-6q omnilex-key=us-nj-statutes--title-17--17:48-6q}
1. a. Every individual or group hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall provide coverage for a minimum of 72 hours of inpatient care following a modified radical mastectomy and a minimum of 48 hours of inpatient care following a simple mastectomy. The contract shall not require a health care provider to obtain authorization from the hospital service corporation for prescribing 72 or 48 hours, as appropriate, of inpatient care as provided for in this section.
The provisions of this section shall not be construed to: require a patient to receive inpatient care for 72 or 48 hours, as appropriate, if the patient in consultation with the patient's physician determines that a shorter length of stay is medically appropriate; or relieve a patient or a patient's physician, if appropriate, of any notification requirements to the hospital service corporation under the contract.
The benefits shall be provided to the same extent as for any other sickness under the contract.
The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
b. The Commissioner of Banking and Insurance shall adopt regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to implement the provisions of this section.
##### **§ 17:48-6r** Applicability of Health Care Quality Act {#sec-17-48-6r omnilex-key=us-nj-statutes--title-17--17:48-6r}
25. Notwithstanding the provisions of P.L.1938, c.366 (C.17:48-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L.1997, c.192 (C.26:2S-1 et al.) and regulations adopted thereto. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6s** Coverage for treatment of inherited metabolic diseases by hospital service corporation. {#sec-17-48-6s omnilex-key=us-nj-statutes--title-17--17:48-6s}
1. No group or individual hospital service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, unless the contract provides benefits to each person covered thereunder for expenses incurred in the therapeutic treatment of inherited metabolic diseases, including the purchase of medical foods and low protein modified food products, when diagnosed and determined to be medically necessary by the covered person's physician.
For the purposes of this section, "inherited metabolic disease" means a disease caused by an inherited abnormality of body chemistry for which testing is mandated pursuant to P.L.1977, c.321 (C.26:2-110 et seq.); "low protein modified food product" means a food product that is specially formulated to have less than one gram of protein per serving and is intended to be used under the direction of a physician for the dietary treatment of an inherited metabolic disease, but does not include a natural food that is naturally low in protein; and "medical food" means a food that is intended for the dietary treatment of a disease or condition for which nutritional requirements are established by medical evaluation and is formulated to be consumed or administered enterally under direction of a physician.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6t** Coverage for treatment of domestic violence injuries by hospital service corporation. {#sec-17-48-6t omnilex-key=us-nj-statutes--title-17--17:48-6t}
1. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), no group or individual hospital service corporation contract providing hospital or medical expense benefits shall contain any provision which denies benefits for expenses incurred in the treatment of an injury or injuries sustained as the result of domestic violence as defined in section 3 of P.L.1991, c.261 (C.2C:25-19), to a subscriber or other person covered thereunder. Benefits shall be provided to the same extent as for any other treatment under the contract. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6u** Coverage for certain dental procedures for the severely disabled or child age five or under by hospital service corporation {#sec-17-48-6u omnilex-key=us-nj-statutes--title-17--17:48-6u}
1. a. No group or individual hospital service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this amendatory and supplementary act, unless the contract provides benefits to any person covered thereunder who is severely disabled or a child age five or under for expenses incurred for: (1) general anesthesia and hospitalization for dental services; or (2) a medical condition covered by the contract which requires hospitalization or general anesthesia for dental services rendered by a dentist regardless of where the dental services are provided.
b. A group or individual hospital service corporation contract may require prior authorization of hospitalization for dental services in the same manner that prior authorization is required for hospitalization for other covered diseases or conditions.
c. This section shall apply to all group or individual hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6v** Hospital service corporation to provide coverage for mental health conditions, substance use disorders; collaborative care model. {#sec-17-48-6v omnilex-key=us-nj-statutes--title-17--17:48-6v}
1. a. (1) Every individual and group hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act shall provide coverage for mental health conditions and substance use disorders under the same terms and conditions as provided for any other sickness under the contract and shall meet the requirements of the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 42 U.S.C. s.18031(j), and any amendments to, and federal guidance or regulations issued under that act, including 45 C.F.R. Parts 146 and 147 and 45 C.F.R. s.156.115(a)(3).
Coverage provided pursuant to this section shall include benefits delivered through the psychiatric Collaborative Care Model.
(2) As used in this section:
"Mental health condition" means a condition defined to be consistent with generally recognized independent standards of current medical practice referenced in the current version of the Diagnostic and Statistical Manual of Mental Disorders.
"Psychiatric Collaborative Care Model" means the evidence-based, integrated behavioral health service delivery method wherein a primary care provider and a care manager collaborate with a psychiatric consultant to provide care to a patient. "Psychiatric Collaborative Care Model" shall include those benefits that are billed using the following list of Current Procedural Terminology (CPT) codes, which list shall be updated by the Commissioner of Banking and Insurance whenever the codes are altered or supplemented:
(a) 99492 - Initial psychiatric collaborative care management;
(b) 99493 - Subsequent psychiatric collaborative care management; and
(c) 99494 - Initial or subsequent psychiatric collaborative care management, additional time.
"Same terms and conditions" means that the hospital service corporation cannot apply more restrictive non-quantitative limitations, such as utilization review and other criteria or more quantitative limitations such as copayments, deductibles, aggregate or annual limits or benefit limits to mental health condition and substance use disorder benefits than those applied to substantially all other medical or surgical benefits.
"Substance use disorder" means a disorder defined to be consistent with generally recognized independent standards of current medical practice referenced in the most current version of the Diagnostic and Statistical Manual of Mental Disorders.
b. (Deleted by amendment, P.L.2019, c.58)
c. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
d. Nothing in this section shall reduce the requirement for a hospital service corporation to provide benefits pursuant to section 1 of P.L.2017, c.28 (C.17:48-6nn).
##### **§ 17:48-6w** Coverage for hemophilia services by hospital service corporations {#sec-17-48-6w omnilex-key=us-nj-statutes--title-17--17:48-6w}
7. Notwithstanding the provisions of P.L.1938, c.366 (C.17:48-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of P.L.2000, c.121 (C.26:2S-10.1 et al.) unless the contract meets the requirements of sections 1 and 2 of P.L.2000, c.121 (C.26:2S-10.1 and C.26:2S-10.2) and the regulations adopted thereto. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6x** Hospital service corporation to provide coverage for treatment of infertility. {#sec-17-48-6x omnilex-key=us-nj-statutes--title-17--17:48-6x}
1. a. A hospital service corporation contract which provides hospital or medical expense benefits for groups with more than 50 persons, which includes pregnancy-related benefits, shall not be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act unless the contract provides coverage for persons covered under the contract for medically necessary expenses, as determined by a physician, incurred in the diagnosis and treatment of infertility as provided pursuant to this section. The hospital service corporation contract shall provide coverage for any services related to infertility in accordance with American Society for Reproductive Medicine guidelines and as determined by a physician, which includes, but is not limited to: diagnosis and diagnostic tests; medications; surgery; intrauterine insemination; in vitro fertilization, including in vitro fertilization using donor eggs and in vitro fertilization where the embryo is transferred to a gestational carrier or surrogate; genetic testing; artificial insemination; intracytoplasmic sperm injection; four completed egg retrievals; unlimited embryo transfers, in accordance with guidelines from the American Society for Reproductive Medicine, using single embryo transfer when recommended and deemed medically appropriate by a physician; and medical costs of egg or sperm donors, including office visits, medications, laboratory and radiological procedures, and retrieval, shall be covered until the donor is released from treatment by the reproductive endocrinologist. The hospital service corporation may provide that coverage for in vitro fertilization shall be limited to a covered person who has used all reasonable, less expensive, and medically appropriate treatments, as determined by a licensed physician, and is still unable to become pregnant or carry a pregnancy to a live birth. Coverage for infertility services provided to partners of persons who have successfully reversed a voluntary sterilization shall not be excluded. A contract shall not impose any restriction concerning the coverage of infertility services based on age.
As used in this section:
"Infertility" means a disease, condition, or status characterized by any of the following:
(1) the inability to achieve a successful pregnancy based on a patient's medical, sexual, and reproductive history, age, physical findings, diagnostic testing, or any combination of those factors;
(2) the need for medical intervention, including, but not limited to, the use of donor gametes or donor embryos in order to achieve a successful pregnancy either as an individual or with a partner; or
(3) in patients having regular, unprotected intercourse and without any known etiology for either partner suggestive of impaired reproductive ability, evaluation should be initiated at 12 months when the female partner is under 35 years of age and at 6 months when the female partner is 35 years of age or older.
Nothing in this definition shall be used to deny or delay treatment to any individual, regardless of relationship status or sexual orientation.
"Treatment of infertility" means the recommended treatment plan or prescribed procedures, services, and medications as directed by a licensed physician for infertility as defined in this section.
The benefits shall be provided to the same extent as for other medical conditions under the contract, except that the services provided for in this section shall be performed at facilities that conform to standards established by the American Society for Reproductive Medicine or the American College of Obstetricians and Gynecologists. The same copayments, deductibles and benefit limits shall apply to the diagnosis and treatment of infertility pursuant to this section as those applied to other medical or surgical benefits under the contract. Infertility resulting from a voluntary unreversed sterilization procedure may be excluded if the voluntary unreversed sterilization is the sole cause of infertility, provided, however, that coverage for infertility services shall not be excluded if the voluntary sterilization is successfully reversed.
b. A religious employer may request, and a hospital service corporation shall grant, an exclusion under the contract for the coverage required by this section for in vitro fertilization, embryo transfer, artificial insemination, zygote intra fallopian transfer, and intracytoplasmic sperm injection if the required coverage is contrary to the religious employer's bona fide religious tenets. The hospital service corporation that issues a contract containing such an exclusion shall provide written notice thereof to each prospective subscriber or subscriber, which shall appear in not less than 10 point type, in the contract, application and sales brochure. For the purposes of this subsection, "religious employer" means an employer that is a church, convention or association of churches, or any group or entity that is operated, supervised, or controlled by or in connection with a church or a convention or association of churches as defined in 26 U.S.C. s.3121(w)(3)(A), and that qualifies as a tax-exempt organization under 26 U.S.C. s.501(c)(3).
c. This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
d. The provisions of this section shall not apply to a hospital service corporation contract which, pursuant to a contract between the hospital service corporation and the Department of Human Services, provides benefits to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.), the NJ FamilyCare Program established pursuant to P.L.2005, c.156 (C.30:4J-8 et al.), or any other program administered by the Division of Medical Assistance and Health Services in the Department of Human Services.
e. Nothing in this section shall preclude the hospital service corporation from performing utilization review, including periodic review of the medical necessity of a particular service, provided all utilization review decisions are consistent with American Society for Reproductive Medicine guidelines.
##### **§ 17:48-6y** Hospital service corporation to provide coverage for colorectal cancer screening. {#sec-17-48-6y omnilex-key=us-nj-statutes--title-17--17:48-6y}
1. a. Every hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting a colorectal cancer screening in accordance with United States Preventive Services Task Force recommendations. The method and frequency of screening to be utilized shall be in accordance with the most recently published recommendations of the United States Preventive Services Task Force and as determined medically necessary by the covered person's physician, in consultation with the covered person.
b. No deductible, coinsurance, copayment, or any other cost-sharing requirement shall be imposed for a colonoscopy performed following a positive result on a non-colonoscopy, colorectal cancer screening test recommended by the United States Preventive Services Task Force.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6z** Hospital service corporation prescription drug plans to cover certain infant formulas. {#sec-17-48-6z omnilex-key=us-nj-statutes--title-17--17:48-6z}
1. A hospital service corporation which provides hospital or medical expense benefits for expenses incurred in the purchase of prescription drugs under a contract that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits under the contract for expenses incurred in the purchase of specialized non-standard infant formulas, when the covered infant's physician has diagnosed the infant as having multiple food protein intolerance and has determined such formula to be medically necessary, and when the covered infant has not been responsive to trials of standard non-cow milk-based formulas, including soybean and goat milk. The coverage may be subject to utilization review, including periodic review, of the continued medical necessity of the specialized infant formula.
The benefits shall be provided to the same extent as for any other prescribed items under the contract.
This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6aa** Contracts issued under C.17:48-1 et seq. required to cover certain out-of-network services. {#sec-17-48-6aa omnilex-key=us-nj-statutes--title-17--17:48-6aa}
7. Notwithstanding the provisions of P.L.1938, c.366 (C.17:48-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L.2001, c.367 (C.26:2S-6.1 et al.). The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6bb** Hospital service corporation to offer coverage for domestic partner. {#sec-17-48-6bb omnilex-key=us-nj-statutes--title-17--17:48-6bb}
47. A hospital service corporation that provides hospital or medical expense benefits under a contract that is delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2003, c.246 (C.26:8A-1 et al.), under which dependent coverage is available, shall offer dependent coverage to a covered person for a covered person's domestic partner. For the purposes of this section, "domestic partner" means a domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3).
This section shall apply to those contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6cc** Hospital service corporation, high deductible, coverage for preventive care. {#sec-17-48-6cc omnilex-key=us-nj-statutes--title-17--17:48-6cc}
5. No hospital service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons, that qualifies as a high deductible health plan for which qualified medical expenses are paid using a health savings account established pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223), shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.), unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in connection with any medically necessary benefits provided in-network that represent preventive care as permitted by that federal law.
The benefits provided pursuant to this section shall be provided to the same extent as for any other medical condition under the contract, except that a deductible shall not be applied for benefits provided pursuant to this section. This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6dd** Hospital service corporation, high deductible, deductible inapplicable, certain circumstances. {#sec-17-48-6dd omnilex-key=us-nj-statutes--title-17--17:48-6dd}
6. Notwithstanding the provisions of section 2 of P.L.1995, c.316 (C.17:48-6m) regarding deductibles for a high deductible health plan, a contract offered by a hospital service corporation providing hospital or medical expense benefits for groups with greater than 50 persons, that qualifies as a high deductible health plan for which qualified medical expenses are paid using a health savings account established pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223), and that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.), shall not apply a deductible for any benefits for which a deductible is not applicable pursuant to any law enacted after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.).
This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6ee** Hospital service corporation, coverage for contraceptives. {#sec-17-48-6ee omnilex-key=us-nj-statutes--title-17--17:48-6ee}
1. a. A hospital service corporation that provides hospital or medical expense benefits shall provide coverage under every contract delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, for expenses incurred in the purchase of prescription female contraceptives, and the following services, drugs, devices, products, and procedures on an in-network basis:
(1) Any contraceptive drug, device or product approved by the United States Food and Drug Administration, which coverage shall be subject to all of the following conditions:
(a) If there is a therapeutic equivalent of a contraceptive drug, device or product approved by the United States Food and Drug Administration, coverage shall be provided for either the requested contraceptive drug, device or product or for one or more therapeutic equivalents of the requested drug, device or product.
(b) Coverage shall be provided without a prescription for all contraceptive drugs available for over-the-counter sale that are approved by the United States Food and Drug Administration.
(c) Coverage shall be provided without any infringement upon a subscriber's choice of contraception and medical necessity shall be determined by the provider for covered contraceptive drugs, devices or other products approved by the United States Food and Drug Administration.
(2) Voluntary male and female sterilization.
(3) Patient education and counseling on contraception.
(4) Services related to the administration and monitoring of drugs, devices, products and services required under this section, including but not limited to:
(a) Management of side effects;
(b) Counseling for continued adherence to a prescribed regimen;
(c) Device insertion and removal;
(d) Provision of alternative contraceptive drugs, devices or products deemed medically appropriate in the judgment of the subscriber's health care provider; and
(e) Diagnosis and treatment services provided pursuant to, or as a follow-up to, a service required under this section.
b. The coverage provided shall include prescriptions for dispensing contraceptives for:
(1) (Deleted by amendment, P.L.2021, c.376)
(2) up to a 12-month period at one time.
c. (1) Except as provided in paragraph (2) of this subsection, the benefits shall be provided to the same extent as for any other service, drug, device, product, or procedure under the contract, except no deductible, coinsurance, copayment, or any other cost-sharing requirement on the coverage shall be imposed.
(2) In the case of a high-deductible health plan, benefits for male sterilization or male contraceptives shall be provided at the lowest deductible and other cost-sharing permitted for a high-deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
d. This section shall apply to those contracts in which the hospital service corporation has reserved the right to change the premium.
e. Nothing in this section shall limit coverage of any additional preventive service for women, as identified or recommended by the United States Preventive Services Task Force or the Health Resources and Services Administration of the United States Department of Health and Human Services pursuant to the provisions of 42 U.S.C. 300gg-13.
##### **§ 17:48-6ff** Hospital service corporation to provide benefits for orthotic and prosthetic appliances. {#sec-17-48-6ff omnilex-key=us-nj-statutes--title-17--17:48-6ff}
1. a. Every hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2007, c.345 (C.17:48-6ff et al.), shall provide benefits to any person covered thereunder for expenses incurred in obtaining:
(1) an orthotic or prosthetic appliance from any licensed orthotist or prosthetist, licensed podiatrist, or any certified pedorthist, as determined medically necessary by the covered person's physician; and
(2) an additional orthotic or prosthetic appliance from any licensed orthotist or prosthetist, licensed podiatrist, or any certified pedorthist, if the covered person's physician determines that the additional appliance is necessary to enable the covered person to engage in physical and recreational activities, including running, bicycling, swimming, climbing, skiing, snowboarding, and team and individual sports.
As used in this section, "orthotic appliance," "prosthetic appliance," "licensed orthotist" and "licensed prosthetist" have the meaning assigned to them in section 3 of P.L.1991, c.512 (C.45:12B-3), "licensed podiatrist" has the meaning assigned to it in R.S.45:5-1 et seq., and "certified pedorthist" has the meaning assigned to it in subsection j. of section 18 of P.L.1991, c.512 (C.45:12B-18).
b. On and after the effective date of P.L.2007, c.345 (C.17:48-6ff et al.), a hospital service corporation contract shall reimburse for orthotic and prosthetic appliances at the same rate as reimbursement for such appliances under the federal Medicare reimbursement schedule.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6gg** Hospital service corporation to provide coverage for hearing aids, cochlear implant for covered persons. {#sec-17-48-6gg omnilex-key=us-nj-statutes--title-17--17:48-6gg}
2. a. A hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for medically necessary expenses incurred in the purchase of a hearing aid or cochlear implant for a covered person, as provided in this section.
b. A hospital service corporation contract shall provide coverage that includes the purchase of a hearing aid for each ear, when medically necessary and as prescribed or recommended by a licensed physician or audiologist. A hospital service corporation may limit the benefit provided in this section to one hearing aid for each hearing-impaired ear every 24 months.
c. A hospital service corporation contract shall provide coverage of the cost of treatment related to cochlear implants, including procedures for the implantation of cochlear devices and costs for any parts, attachments, or accessories of the device, including replacement of obsolete external cochlear implant processors.
d. The benefits shall be provided to the same extent as for any other condition under the contract.
e. This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6hh** Hospital service corporation to provide installment payments to obstetrical provider for maternity services. {#sec-17-48-6hh omnilex-key=us-nj-statutes--title-17--17:48-6hh}
1. a. Every individual or group hospital service corporation contract that provides benefits for maternity services, and that is delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State, by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide for reimbursement in installments to an obstetrical provider licensed in New Jersey for maternity services rendered during the term of a covered person's pregnancy.
b. For the purposes of this section, "obstetrical provider licensed in New Jersey" means:
(1) an obstetrician/gynecologist licensed by the State Board of Medical Examiners; or
(2) a midwife licensed by the State Board of Medical Examiners as a certified midwife or a certified nurse midwife.
c. This section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6ii** Hospital service corporation to provide benefits for treatment of autism or other developmental disability. {#sec-17-48-6ii omnilex-key=us-nj-statutes--title-17--17:48-6ii}
1. Notwithstanding any other provision of law to the contrary, every hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage pursuant to the provisions of this section.
a. The hospital service corporation shall provide coverage for expenses incurred in screening and diagnosing autism or another developmental disability.
b. When the covered person's primary diagnosis is autism or another developmental disability, the hospital service corporation shall provide coverage for expenses incurred for medically necessary occupational therapy, physical therapy, and speech therapy, as prescribed through a treatment plan. Coverage of these therapies shall not be denied on the basis that the treatment is not restorative.
c. When the covered person is under 21 years of age and the covered person's primary diagnosis is autism, the hospital service corporation shall provide coverage for expenses incurred for medically necessary behavioral interventions based on the principles of applied behavioral analysis and related structured behavioral programs, as prescribed through a treatment plan, subject to the provisions of this subsection.
(1) Except as provided in paragraph (3) of this subsection, the benefits provided pursuant to this subsection shall be provided to the same extent as for any other medical condition under the contract, but shall not be subject to limits on the number of visits that a covered person may make to a provider of behavioral interventions.
(2) The benefits provided pursuant to this subsection shall not be denied on the basis that the treatment is not restorative.
(3) (a) The maximum benefit amount for a covered person in any calendar year through 2011 shall be $36,000.
(b) Commencing on January 1, 2012, the maximum benefit amount shall be subject to an adjustment, to be promulgated by the Commissioner of Banking and Insurance and published in the New Jersey Register no later than February 1 of each calendar year, which shall be equal to the change in the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor, for the calendar year preceding the calendar year in which the adjustment to the maximum benefit amount is promulgated.
(c) The adjusted maximum benefit amount shall apply to a contract that is delivered, issued, executed, or renewed, or approved for issuance or renewal, in the 12-month period following the date on which the adjustment is promulgated.
(d) Notwithstanding the provisions of this paragraph to the contrary, a hospital service corporation shall not be precluded from providing a benefit amount for a covered person in any calendar year that exceeds the benefit amounts set forth in subparagraphs (a) and (b) of this paragraph.
d. The treatment plan required pursuant to subsections b. and c. of this section shall include all elements necessary for the hospital service corporation to appropriately provide benefits, including, but not limited to: a diagnosis; proposed treatment by type, frequency, and duration; the anticipated outcomes stated as goals; the frequency by which the treatment plan will be updated; and the treating physician's signature. The hospital service corporation may only request an updated treatment plan once every six months from the treating physician to review medical necessity, unless the hospital service corporation and the treating physician agree that a more frequent review is necessary due to emerging clinical circumstances.
e. The provisions of subsections b. and c. of this section shall not be construed as limiting benefits otherwise available to a covered person.
f. The provisions of subsections b. and c. of this section shall not be construed to require that benefits be provided to reimburse the cost of services provided under an individualized family service plan or an individualized education program, or affect any requirement to provide those services; except that the benefits provided pursuant to those subsections shall include coverage for expenses incurred by participants in an individualized family service plan through a family cost share.
g. The coverage required under this section may be subject to utilization review, including periodic review, by the hospital service corporation of the continued medical necessity of the specified therapies and interventions.
h. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6jj** Hospital service corporation to provide coverage for oral anticancer medications. {#sec-17-48-6jj omnilex-key=us-nj-statutes--title-17--17:48-6jj}
1. a. A hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells on a basis no less favorable than the contract provides for intravenously administered or injected anticancer medications.
b. Pursuant to subsection a. of this section, coverage for expenses for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells shall not be subject to any prior authorization, dollar limit, copayment, deductible or coinsurance provision that does not apply to intravenously administered or injected anticancer medications.
c. A hospital service corporation contract shall not achieve compliance with the provisions of this section by imposing an increase in patient cost sharing, including any copayment, deductible or coinsurance, for anticancer medications, whether intravenously administered or injected or orally administered, that are covered under the contract as of the effective date of this act.
d. This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6kk** Hospital service corporation to provide coverage for sickle cell anemia. {#sec-17-48-6kk omnilex-key=us-nj-statutes--title-17--17:48-6kk}
1. Every hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for medical expenses incurred by a covered person for the treatment of sickle cell anemia and, if the contract provides benefits for expenses incurred in the purchase of outpatient prescription drugs, then the contract shall provide coverage for prescription drug expenses incurred by a covered person for the treatment of sickle cell anemia.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6ll** Hospital service corporation to provide coverage for prescription eye drops. {#sec-17-48-6ll omnilex-key=us-nj-statutes--title-17--17:48-6ll}
1. a. A hospital service corporation which provides hospital or medical expense benefits that include coverage for prescription eye drops under a contract delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred for refills of prescription eye drops in accordance with the Guidance for Early Refill Edits of Topical Ophthalmic Products provided to Medicare Part D plan sponsors by the Centers for Medicare & Medicaid Services of the U.S. Department of Health and Human Services, provided that:
(1) the prescribing health care practitioner indicates on the original prescription that additional quantities of the prescription eye drops are needed; and
(2) the refill requested by the subscriber or covered person does not exceed the number of additional quantities indicated on the original prescription by the prescribing health care practitioner.
b. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6mm** Hospital service corporation contract, coverage for synchronization of prescribed medications. {#sec-17-48-6mm omnilex-key=us-nj-statutes--title-17--17:48-6mm}
1. a. Every group or individual hospital service corporation contract delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, which provides benefits for pharmacy services, prescription drugs, or for participation in a prescription drug plan shall, on at least one occasion per year for each covered person:
(1) apply a prorated daily cost-sharing rate to prescriptions that are dispensed by a network pharmacy for less than a 30 days' supply if the prescriber or pharmacist indicates the fill or refill is in the best interest of the covered person or is for the purpose of synchronizing the covered person's chronic medications;
(2) provide coverage for a drug prescribed for the treatment of a chronic illness dispensed in accordance with a plan among the covered person, the prescriber and the pharmacist to synchronize the refilling of multiple prescriptions for the covered person; and
(3) determine dispensing fees based exclusively on the total number of prescriptions dispensed; dispensing fees shall not be prorated or based on the number of the days' supply of medication prescribed or dispensed.
b. This section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
c. This section shall not apply to prescriptions for opioid analgesics. "Opioid analgesic" means a drug in the opioid analgesic drug class prescribed to treat moderate to severe pain or other conditions, whether in immediate release or extended release form, and whether or not combined with other drug substances to form a single drug product or dosage form.
##### **§ 17:48-6nn** Hospital service corporation to provide benefits for treatment of substance use disorder. {#sec-17-48-6nn omnilex-key=us-nj-statutes--title-17--17:48-6nn}
1. a. A hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide unlimited benefits for inpatient and outpatient treatment of substance use disorder at in-network facilities. The services for the treatment of substance use disorder shall be prescribed by a licensed physician, licensed psychologist, or licensed psychiatrist and provided by licensed health care professionals or licensed or certified substance use disorder providers in licensed or otherwise State-approved facilities, as required by the laws of the state in which the services are rendered.
b. The benefits for the first 180 days per plan year of inpatient and outpatient treatment of substance use disorder shall be provided when determined medically necessary by the covered person's physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements. The facility shall notify the hospital service corporation of both the admission and the initial treatment plan within 48 hours of the admission or initiation of treatment. If there is no in-network facility immediately available for a covered person, a hospital service corporation shall provide necessary exceptions to its network to ensure admission in a treatment facility within 24 hours.
c. Providers of treatment for substance use disorder to persons covered under a covered contract shall not require pre-payment of medical expenses during this 180 days in excess of applicable co-payment, deductible, or co-insurance under the contract.
d. The benefits for outpatient visits shall not be subject to concurrent or retrospective review of medical necessity or any other utilization management review.
e. (1) The benefits for the first 28 days of an inpatient stay during each plan year shall be provided without any retrospective review or concurrent review of medical necessity and medical necessity shall be as determined by the covered person's physician.
(2) The benefits for days 29 and thereafter of inpatient care shall be subject to concurrent review as defined in this section. A request for approval of inpatient care beyond the first 28 days shall be submitted for concurrent review before the expiration of the initial 28-day period. A request for approval of inpatient care beyond any period that is approved under concurrent review shall be submitted within the period that was previously approved. No hospital service corporation shall initiate concurrent review more frequently than at two-week intervals. If a hospital service corporation determines that continued inpatient care in a facility is no longer medically necessary, the hospital service corporation shall within 24 hours provide written notice to the covered person and the covered person's physician of its decision and the right to file an expedited internal appeal of the determination pursuant to an expedited process pursuant to sections 11 through 13 of P.L.1997, c.192 (C.26:2S-11 through 26:2S-13) and N.J.A.C.11:24A-3.5, as applicable. The hospital service corporation shall review and make a determination with respect to the internal appeal within 24 hours and communicate such determination to the covered person and the covered person's physician. If the determination is to uphold the denial, the covered person and the covered person's physician have the right to file an expedited external appeal with the Independent Health Care Appeals Program in the Department of Banking and Insurance pursuant to sections 11 through 13 of P.L.1997, c.192 (C.26:2S-11 through 26:2S-13) and N.J.A.C.11:24A-3.6, as applicable. An independent utilization review organization shall make a determination within 24 hours. If the hospital service corporation's determination is upheld and it is determined continued inpatient care is not medically necessary, the hospital service corporation shall remain responsible to provide benefits for the inpatient care through the day following the date the determination is made and the covered person shall only be responsible for any applicable co-payment, deductible and co-insurance for the stay through that date as applicable under the contract. The covered person shall not be discharged or released from the inpatient facility until all internal appeals and independent utilization review organization appeals are exhausted. For any costs incurred after the day following the date of determination until the day of discharge, the covered person shall only be responsible for any applicable cost-sharing, and any additional charges shall be paid by the facility or provider.
f. (1) The benefits for the first 28 days of intensive outpatient or partial hospitalization services shall be provided without any retrospective review of medical necessity and medical necessity shall be as determined by the covered person's physician.
(2) The benefits for days 29 and thereafter of intensive outpatient or partial hospitalization services shall be subject to a retrospective review of the medical necessity of the services.
g. Benefits for inpatient and outpatient treatment of substance use disorder after the first 180 days per plan year shall be subject to the medical necessity determination of the hospital service corporation and may be subject to prior authorization or, retrospective review and other utilization management requirements.
h. Medical necessity review shall utilize an evidence-based and peer reviewed clinical review tool to be designated through rulemaking by the Commissioner of Human Services in consultation with the Department of Health.
i. The benefits for outpatient prescription drugs to treat substance use disorder shall be provided when determined medically necessary by the covered person's physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements.
j. The first 180 days per plan year of benefits shall be computed based on inpatient days. One or more unused inpatient days may be exchanged for two outpatient visits. All extended outpatient services such as partial hospitalization and intensive outpatient, shall be deemed inpatient days for the purpose of the visit to day exchange provided in this subsection.
k. Except as stated above, the benefits and cost-sharing shall be provided to the same extent as for any other medical condition covered under the contract.
l. The benefits required by this section are to be provided to all covered persons with a diagnosis of substance use disorder. The presence of additional related or unrelated diagnoses shall not be a basis to reduce or deny the benefits required by this section.
m. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
n. The Attorney General's Office shall be responsible for overseeing any violations of law that may result from P.L.2017, c.28 (C.17:48-6nn et al.), including fraud, abuse, waste, and mistreatment of covered persons. The Attorney General's Office is authorized to adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to implement any of the provisions of P.L.2017, c.28 (C.17:48-6nn et al.).
o. The provisions of this section shall not apply to a hospital service corporation contract which, pursuant to a contract between the hospital service corporation and the Department of Human Services, provides benefits to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.), the "Family Health Care Coverage Act," P.L.2005, c.156 (C.30:4J-8 et seq.), or any other program administered by the Division of Medical Assistance and Health Services in the Department of Human Services.
p. As used in this section:
"Concurrent review" means inpatient care is reviewed as it is provided. Medically qualified reviewers monitor appropriateness of the care, the setting, and patient progress, and as appropriate, the discharge plans.
"Substance use disorder" is as defined by the American Psychiatric Association in the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition and any subsequent editions and shall include substance use withdrawal.
##### **§ 17:48-6oo** Hospital service corporation to provide coverage regardless of gender identity, expression. {#sec-17-48-6oo omnilex-key=us-nj-statutes--title-17--17:48-6oo}
1. a. Notwithstanding any other law or regulation to the contrary, a hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State, by the Commissioner of Banking and Insurance on or after the effective date of this act, shall not contain any provision that discriminates, and the hospital service corporation shall not discriminate, on the basis of a covered person's or prospective covered person's gender identity or expression or on the basis that the covered person or prospective covered person is a transgender person.
b. The discrimination prohibited by this section shall include:
(1) denying, cancelling, limiting or refusing to issue or renew a contract on the basis of a covered person's or prospective covered person's gender identity or expression, or for the reason that the covered person or prospective covered person is a transgender person;
(2) demanding or requiring a payment or premium that is based in whole or in part on a covered person's or prospective covered person's gender identity or expression, or for the reason that the covered person or prospective covered person is a transgender person;
(3) designating a covered person's or prospective covered person's gender identity or expression, or the fact that a covered person or prospective covered person is a transgender person, as a preexisting condition for which coverage will be denied or limited; or
(4) denying or limiting coverage, or denying a claim, for services including but not limited to the following, due to a covered person's gender identity or expression or for the reason that the covered person is a transgender person:
(a) health care services related to gender transition if coverage is available for those services under the contract when the services are not related to gender transition, including but not limited to hormone therapy, hysterectomy, mastectomy, and vocal training; or
(b) health care services that are ordinarily or exclusively available to individuals of one sex when the denial or limitation is due only to the fact that the covered person is enrolled as belonging to the other sex or has undergone, or is in the process of undergoing, gender transition.
c. For the purposes of this section:
"Gender expression" means a person's gender-related appearance and behavior, whether or not stereotypically associated with the person's assigned sex at birth.
"Gender identity" means a person's internal sense of their own gender, regardless of the sex the person was assigned at birth.
"Gender transition" means the process of changing a person's outward appearance, including physical sex characteristics, to accord with the person's actual gender identity.
"Transgender person" means a person who identifies as a gender different from the sex assigned to the person at birth.
d. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
e. Nothing in this section shall preclude the hospital service corporation from performing utilization review, including periodic review of the medical necessity of a particular service.
##### **§ 17:48-6pp** Hospital service corporation to cover digital tomosynthesis of the breast. {#sec-17-48-6pp omnilex-key=us-nj-statutes--title-17--17:48-6pp}
1. a. A hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in conducting digital tomosynthesis to detect or screen for breast cancer in women 40 years of age and over; and for diagnostic purposes in women of any age.
b. In the case of digital tomosynthesis conducted to detect or screen for breast cancer in women 40 years of age and over, no deductible, coinsurance or other cost sharing shall be applied; and in the case of digital tomosynthesis conducted for diagnostic purposes in women of any age, the same deductibles, coinsurance, and other cost sharing as apply to similar services under the contract shall be applied.
c. This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6qq** Hospital service corporation to provide coverage for donated human breast milk. {#sec-17-48-6qq omnilex-key=us-nj-statutes--title-17--17:48-6qq}
1. a. A hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in the provision of pasteurized donated human breast milk, which may include human milk fortifiers if indicated by the prescribing licensed medical practitioner, provided that:
(1) the covered person is an infant under the age of six months;
(2) the milk is obtained from a human milk bank that meets quality guidelines established by the Department of Health ; and
(3) a licensed medical practitioner has issued an order for an infant who is medically or physically unable to receive maternal breast milk or participate in breast feeding or whose mother is medically or physically unable to produce maternal breast milk in sufficient quantities or participate in breast feeding despite optimal lactation support; or
(4) a licensed medical practitioner has issued an order for an infant who meets any of the following conditions:
(a) a body weight below healthy levels determined by the licensed medical practitioner;
(b) a congenital or acquired condition that places the infant at a high risk for development of necrotizing enterocolitis; or
(c) a congenital or acquired condition that may benefit from the use of donor breast milk as determined by the Department of Health.
b. The provisions of this section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
c. Nothing in this section shall preclude the hospital service corporation from performing utilization review, including periodic review of the medical necessity of a particular service.
d. The benefits shall be provided to the same extent as for any other prescribed items under the contract.
e. If there is no supply of human breast milk that meets the requirements of paragraph (2) of subsection a. of this section, the hospital service corporation shall not be required to provide coverage of expenses pursuant to this section.
##### **§ 17:48-6rr** Hospital service corporation to provide coverage for standard fertility preservation services. {#sec-17-48-6rr omnilex-key=us-nj-statutes--title-17--17:48-6rr}
1. a. A hospital service corporation contract which provides hospital or medical expense benefits for groups with more than 50 persons and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for standard fertility preservation services when a medically necessary treatment may directly or indirectly cause iatrogenic infertility.
For the purposes of this section:
"Iatrogenic infertility" means an impairment of fertility caused by surgery, radiation, chemotherapy, or other medical treatment affecting reproductive organs or processes.
"May directly or indirectly cause" means a medical treatment with a likely side effect of iatrogenic infertility as established by the American Society for Reproductive Medicine, the American Society of Clinical Oncology, or as defined by the New Jersey Department of Health.
"Standard fertility preservation services" means procedures consistent with established medical practices and professional guidelines published by the American Society for Reproductive Medicine, the American Society of Clinical Oncology, or as defined by the New Jersey Department of Health. "Standard fertility preservation services" shall not include the storage of sperm or oocytes.
The benefits shall be provided to the same extent as for any other medical condition under the contract. The same copayments, deductibles, and benefit limits shall apply to the provision of standard fertility preservation services pursuant to this section as those applied to other medical or surgical benefits under the contract.
b. A hospital service corporation providing coverage under this section shall not determine the provision of standard fertility preservation services based on a covered person's expected length of life, present or predicted disability, degree of medical dependency, perceived quality of life, or other health conditions, or based on personal characteristics, including age, sex, sexual orientation, marital status, or gender identity.
c. This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6ss** Hospital service corporation to provide coverage for breastfeeding support. {#sec-17-48-6ss omnilex-key=us-nj-statutes--title-17--17:48-6ss}
1. a. A hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2019, c.343 (C.17:48-6ss et al.), shall provide coverage for comprehensive lactation support, counseling, and consultation, and the costs for renting or purchasing breastfeeding equipment, in conjunction with each birth, for the duration of breastfeeding for health plan enrollees, with no cost-sharing.
b. Coverage of breastfeeding equipment shall include:
(1) Purchase of a single-user breast pump, subject to the following conditions:
(a) A contract shall cover the purchase of a double electric breast pump. If an enrollee requests a manual pump in lieu of the double electric breast pump, the health plan shall cover the purchase of a manual pump.
(b) A double electric breast pump provided pursuant to this paragraph shall be of sufficient power and durability to establish and maintain milk supply for the duration of breastfeeding.
(c) A contract shall not require documentation of medical necessity, prior authorization, or a prescription for a breast pump provided pursuant to this paragraph.
(d) Coverage shall be available at any time during pregnancy and the postpartum period, and shall continue for the duration of breastfeeding as defined by the plan enrollee.
(e) Coverage for breast pumps shall include repair or replacement if necessary.
(2) Rental or purchase of a multi-user breast pump, on the recommendation of a licensed health care provider, subject to the following conditions:
(a) When recommended by a licensed health care provider, a contract shall provide coverage for a multi-user breast pump.
(b) A hospital service corporation may determine whether a rental or purchase is covered.
(c) Coverage for a multi-user breast pump shall be covered without regard to coverage or acquisition of a single-user breast pump.
(d) A hospital service corporation may require a letter of medical necessity from a lactation consultant or other health care provider for coverage of a multi-user pump. The letter shall not interfere with the timely acquisition of a multi-user pump.
(3) Coverage of breastfeeding equipment pursuant to this section shall include two breast pump kits per birth event, as well as appropriate size breast pump flanges, or other lactation accessories recommended by a health care provider.
(4) Breastfeeding equipment specified in paragraphs (1) and (3) of this subsection shall be furnished: within 48 hours of notification of need, if requested after the birth of the child; or by the later of two weeks before the enrollee's expected due date or 72 hours after notification, if requested prior to the birth of the child. If the hospital service corporation cannot ensure an enrollee receives breastfeeding equipment within 48 hours, an enrollee may purchase the equipment and the health plan shall reimburse all out-of-pocket expenses incurred by the enrollee, including any balance billing amounts.
(5) Breastfeeding equipment specified in paragraph (2) of this subsection shall be made available within 12 hours of notification of need. If equipment is not available within 12 hours of notification of need, the hospital service corporation shall reimburse all out-of-pocket rental expenses incurred by an enrollee, including any balance billing amounts, until the enrollee receives breastfeeding equipment.
c. Coverage of comprehensive lactation counseling and lactation consultation shall include:
(1) In-person, one-on-one lactation counseling and lactation consultation, subject to the following conditions:
(a) Coverage shall include visits that occur inside and outside a hospital or office setting. In-person lactation counseling and lactation consultation shall be covered regardless of location of service provision and shall include home visits.
(b) Lactation counseling and lactation consultation shall be made available within 24 hours of notification of need.
(2) Telephonic lactation assistance shall be covered in addition to, and not as a substitute for, in-person, one-on-one lactation counseling or lactation consultation, when an enrollee requests one-on-one, in-person lactation counseling or lactation consultation. The telephonic lactation assistance shall be provided within 12 hours of notification of need.
(3) Group lactation counseling shall be covered in addition to, and not as a substitute for, one-on-one, in-person lactation counseling or lactation consultation, if an enrollee requests one-on-one, in-person lactation counseling or lactation consultation. Group counseling shall include educational classes and support groups.
(4) A contract shall not require prior authorization, prescription or referral for any lactation counseling or lactation consultation, regardless of provider type or setting.
(5) A hospital service corporation shall not impose medical management techniques not described in this section.
d. Except as otherwise authorized pursuant to this section, a hospital service corporation shall not impose restrictions on the coverage provided pursuant to this section, including, but not limited to, limitations on reimbursement to allowable amounts or reasonable and customary charges, documentation requests, or delays on the coverage provided.
e. As used in this section:
"Cost-sharing" means deductible, co-insurance or co-payments, or similar charges.
"Breast pump kit" means a collection of tubing, valves, flanges, collection bottles, or other parts required to extract human milk using a breast pump.
"Lactation consultant" means an individual who is an International Board Certified Lactation Consultant.
"Lactation consultation" means the clinical application by a lactation consultant or other licensed health care provider of scientific principles and a multidisciplinary body of evidence for evaluation, problem identification, treatment, education, and consultation to child-bearing families utilizing lactation care and services.
Lactation care and services shall include, but not be limited to:
(1) lactation assessment through the systematic collection of subjective and objective data;
(2) analysis of data and creation of a plan of care;
(3) implementation of a lactation care plan with demonstration and instruction to parents and communication to the primary health care provider;
(4) evaluation of outcomes;
(5) provision of lactation education to parents and health care providers; and
(6) the recommendation and use of assistive devices.
"Lactation counseling" means breastfeeding education and support services provided by a lactation counselor, such as:
(1) educating women, families, health care professionals, and the community about the impact of breastfeeding and human lactation on health and what to expect in the normal course of breastfeeding;
(2) acting as an advocate for breastfeeding as the norm for feeding infants and young children;
(3) providing breastfeeding support, encouragement, and care from preconception to weaning in order to help women and their families meet their breastfeeding goals;
(4) using principles of adult education when teaching clients, health care providers, and others in the community; and
(5) identifying and referring high-risk mothers and babies and those requiring clinical treatment appropriately.
"Lactation counselor" means an individual, other than an International Board Certified Lactation Consultant or a licensed health care provider, who is:
(1) licensed or certified to practice lactation counseling under any law, or who is an accredited member belonging to another profession or occupation, who provides breastfeeding education and support services for which that person is licensed, regulated, accredited, or certified; or
(2) a community-based lactation supporter who has received at least 40 hours of specialty education in breastfeeding and lactation, and who works within a lactation counselor's scope of practice.
"Telephonic lactation assistance" means lactation counseling or consultation with a lactation counselor or lactation consultant conducted remotely through live voice communication.
f. This section shall apply to those contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6tt** Hospital service corporation to cover preventive services. {#sec-17-48-6tt omnilex-key=us-nj-statutes--title-17--17:48-6tt}
1. a. A hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage, without requiring any cost sharing, for the following preventive services:
(1) evidence-based items or services that have in effect a rating of "A" or "B" in the current recommendations of the United States Preventive Services Task Force;
(2) immunizations that have in effect a recommendation from the Department of Health, which shall in making its recommendations consider the recommendations of the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention in the federal Department of Health and Human Services and, as appropriate, the recommendations of the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Physicians;
(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration; and
(4) with respect to women, any additional preventive care and screenings not described in paragraph (1) as provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.
b. (1) Except as provided in paragraph (2) of this subsection, nothing in this section shall:
(a) require a contract which has a network of providers to provide benefits for items or services described in subsection a. of this section that are delivered by an out-of-network provider; or
(b) preclude a contract which has a network of providers from imposing cost-sharing requirements for items or services described in subsection a. of this section that are delivered by an out-of-network provider.
(2) If a contract does not have in its network a provider who can provide an item or service described in subsection a. of this section, the contract shall cover the item or service when performed by an out-of-network provider and shall not impose cost sharing with respect to that item or service.
c. (1) A contract shall provide coverage for an item or service described in subsection a. of this section for plan years that begin on or after the date that is one year after the date the recommendation or guideline is issued.
(2) (a) Except as provided in subparagraph (b) of this paragraph, a contract that is required to provide coverage for an item or service described in subsection a. of this section on the first day of a plan year shall provide coverage for that item or service through the last day of the plan year.
(b) The commissioner may remove a coverage requirement for an item or service during a plan year if the recommendation or guideline changes or is no longer described in subsection a. of this section.
d. The provisions of this section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
e. With respect to an annual wellness visit for a covered member who is over three years of age, a carrier is required to cover only one wellness visit per plan year or calendar year, as provided for under the health benefits plan contract, but may not impose a waiting period for the wellness visit.
##### **§ 17:48-6uu** Hospital service corporation to provide certain coverage for prescription drugs. {#sec-17-48-6uu omnilex-key=us-nj-statutes--title-17--17:48-6uu}
1. a. Notwithstanding any other provision of law to the contrary, a hospital service corporation that offers a contract that provides benefits for expenses incurred in the purchase of prescription drugs and is delivered, issued, executed, or renewed in this State, shall ensure that at least 25 percent of all plans, or at least one plan if the corporation offers less than four plans, offered by the corporation in each rating area and in each of the bronze, silver, gold, and platinum levels of coverage, in the individual market pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.), and in the small employer market pursuant to P.L.1992, c.162 (C.17B:27A-17), shall conform with the following:
(1) (a) a contract that provides a silver, gold, or platinum level of coverage, as defined in 45 C.F.R. s.156.140, shall limit a covered person's cost-sharing, including any copayment or coinsurance, for prescription drugs, including specialty drugs, to no more than $150 per month for each prescription drug for up to a 30-day supply of any single drug;
(b) a contract that provides a bronze level of coverage, as defined in 45 C.F.R. s.156.140, shall ensure that any required covered person's cost-sharing, including any copayment or coinsurance, does not exceed $250 per month for each prescription drug for up to a 30-day supply of any single drug;
(c) a contract that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, shall be exempt from the requirements of subparagraphs (a) and (b) of this paragraph;
(2) except as provided in paragraph (3) of this subsection, the limits described in paragraph (1) of this subsection shall apply at any point in the benefit design, including before and after any applicable deductible is reached; and
(3) for prescription drug benefits offered in conjunction with a high-deductible health plan, the contract shall not provide prescription drug benefits until the expenditures applicable to the deductible under the plan have met the amount of the minimum annual deductibles in effect for self-only and family coverage under section 223(c)(2)(A)(i) of the federal Internal Revenue Code (26 U.S.C. s.223(c)(2)(A)(i)) for self-only and family coverage, respectively. Once the foregoing expenditure amount has been met under the plan, coverage for prescription drug benefits shall begin, and the limit on out-of-pocket expenditures for prescription drug benefits shall be as specified in paragraph (1) of this subsection.
b. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6vv** Hospital service corporation contract to cover adolescent depression screenings. {#sec-17-48-6vv omnilex-key=us-nj-statutes--title-17--17:48-6vv}
1. A hospital service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in screening adolescents between the ages of 12 and 18 for major depressive disorder, so long as screening for major depressive disorder in adolescents continues to receive a rating of "A" or "B" from the United States Preventative Services Task Force. Coverage shall not be denied solely on the basis that the screening is provided in conjunction with any other health care evaluation, treatment, or service.
The benefits shall be provided to the same extent as for any other condition under the contract, except that the hospital service corporation shall not impose on covered persons receiving these services any form of cost sharing, including, but not limited to, copayments, deductibles, or coinsurance.
This section shall apply to those hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6ww** Hospital service corporation contract to cover newborn home nurse visitation program. {#sec-17-48-6ww omnilex-key=us-nj-statutes--title-17--17:48-6ww}
5. a. No group or individual hospital service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159). The contract shall:
(1) provide coverage for the services provided by the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159);
(2) notify a covered person of the services provided by the newborn home nurse visitation program, upon application by the covered person for coverage of a newborn infant;
(3) ensure that the contract does not contain any provision that requires a covered person to receive the services provided by the newborn home nurse visitation program as a condition of coverage, or that denies or limits benefits to the covered person if that person declines the services provided under the program; and
(4) have the discretion to determine how best to reimburse for the expenses incurred for services provided under the newborn home nurse visitation program, including, but not limited to, utilizing:
(a) a value-based payment methodology;
(b) an invoice claim process;
(c) a capitated payment arrangement;
(d) a payment methodology that takes into account the need for an agency or organization providing services under the program to expand its capacity to provide services and address health disparities; or
(e) any other payment arrangement agreed to by the hospital service corporation and an agency or organization providing services under the program.
b. Any copayment, coinsurance, or deductible that may be required pursuant to the contract for such services shall be waived.
c. Every hospital service corporation that is subject to the provisions of this section shall submit to the Department of Banking and Insurance, in a form and manner prescribed by the department, a report on the claims submitted for services provided under the newborn home nurse visitation program.
The information contained in the report shall be shared with the Department of Children and Families and used by that department to assess the newborn home nurse visitation program pursuant to subsection a. of section 4 of P.L.2021, c.187 (C.26:2H-161).
d. (1) Except as provided in paragraphs (2) and (3) of this subsection, the contract shall specify that no deductible, coinsurance, copayment, or any other cost-sharing requirement may be imposed on the coverage required pursuant to this section.
(2) A contract offered by a group or individual hospital service corporation that qualifies as a high deductible health plan shall provide benefits for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159) at the lowest deductible and other cost-sharing requirement permitted for a high deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
(3) A contract offered by a group or individual hospital service corporation that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, shall provide benefits for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159) at the lowest deductible and other cost-sharing requirement to the extent permitted for a catastrophic plan under federal law.
e. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-6xx** Individual, group hospital service corporation contract, coverage, epinephrine auto-injector device. {#sec-17-48-6xx omnilex-key=us-nj-statutes--title-17--17:48-6xx}
2. An individual or group hospital service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2023, c.105 (C.17:48-6xx et al.) shall provide coverage for at least one epinephrine auto-injector device, if recommended or prescribed by a participating physician or participating nurse practitioner/clinical nurse specialist. Coverage for the purchase of an epinephrine auto-injector device shall not be subject to any deductible, and no copayment or coinsurance for the purchase of an epinephrine auto-injector device shall exceed $25 per 30-day supply. The provisions of this section shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this section shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this section shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
Nothing in this section shall prevent a hospital service corporation from reducing a subscriber's or other covered person's cost-sharing requirement by an amount greater than the amount specified in this section.
##### **§ 17:48-6yy** Individual, group hospital service corporation contract, coverage, prescription asthma inhaler. {#sec-17-48-6yy omnilex-key=us-nj-statutes--title-17--17:48-6yy}
3. An individual or group hospital service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2023, c.105 (C.17:48-6xx et al.) shall provide benefits to a subscriber or other person covered thereunder for expenses incurred for a prescription asthma inhaler, if recommended or prescribed by a participating physician or participating nurse practitioner/clinical nurse specialist. Coverage for the purchase of a covered prescription asthma inhaler shall not be subject to any deductible, and no copayment or coinsurance for the purchase of a covered prescription asthma inhaler shall exceed $50 per 30-day supply. The provisions of this section shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this section shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this section shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
Nothing in this section shall prevent a hospital service corporation from reducing a subscriber's or other covered person's cost-sharing requirement by an amount greater than the amount specified in this section.
##### **§ 17:48-6zz** Biomarker precision medical testing coverage, hospital service corporation contracts. {#sec-17-48-6zz omnilex-key=us-nj-statutes--title-17--17:48-6zz}
1. a. Each hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or is approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for biomarker precision medical testing, as defined by subsection g. of this section.
b. Biomarker precision medical testing shall be covered for the purposes of diagnosis, treatment, appropriate management, or ongoing monitoring of a disease or condition, excluding asymptomatic screening, to guide treatment decisions of a subscriber when the efficacy and appropriateness of biomarker precision medical testing for the diagnosis, treatment, appropriate management, or guiding treatment decisions for a subscriber's disease or condition is recognized by:
(1) labeled indications for an FDA-approved or FDA-cleared test;
(2) indicated tests for an FDA-approved drug;
(3) actions to address warnings and precautions on FDA-approved drug labels;
(4) Centers for Medicare and Medicaid Services National Coverage Determinations or Medicare Administrative Contractor Local Coverage Determinations; or
(5) nationally recognized clinical practice guidelines.
c. Coverage, pursuant to subsection b. of this section, shall be provided in a manner that limits disruption, including multiple biopsies or biospecimen samples, in the care of a subscriber.
d. (1) If utilization review is required, a hospital service corporation shall provide a decision pursuant to the guidelines and timeframes set forth in P.L.2023, c.296 (C.17B:30-55.1 et al.).
(2) The subscriber and the treating health care provider or treating health care entity prescribing biomarker precision medical testing for the subscriber shall have access to clear, readily accessible, and conspicuous information on the process to submit an appeal to an adverse determination.
e. The benefits shall be provided to the same extent as for any other medical condition under the contract, including determinations of clinical review criteria used for utilization review of health care services along with copayment, deductible, and coinsurance provisions.
f. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
g. As used in this section:
"Biomarker" means a characteristic that is objectively measured and evaluated as an indicator of normal biological processes, pathogenic processes, or pharmacologic responses to a specific therapeutic intervention, including known gene-drug interactions for medications being considered for use or already being administered. Biomarkers shall also include, but not be limited to, gene mutations, characteristics of genes, or protein expression.
"Biomarker precision medical testing" means the analysis of tissue, blood, or other biospecimen for the presence of a biomarker. Biomarker precision medical testing includes, but is not limited to, single-analyte tests, multiplex panel tests, protein expression, and whole exome, whole genome, and whole transcriptome sequencing.
"Nationally recognized clinical practice guidelines" means evidence-based clinical practice guidelines developed by independent organizations or medical professional societies utilizing a transparent methodology and reporting structure and with a conflict of interest policy. The guidelines establish standards of care informed by a systematic review of evidence and an assessment of the benefits and risks of alternative care options and include recommendations intended to optimize patient care.
##### **§ 17:48-6aaa** Group, individual hospital service corporation contracts, HIV preexposure prophylaxis, HIV postexposure prophylaxis. {#sec-17-48-6aaa omnilex-key=us-nj-statutes--title-17--17:48-6aaa}
3. a. (1) Except as provided in paragraph (2) of this subsection, no group or individual hospital service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for HIV preexposure prophylaxis and HIV postexposure prophylaxis furnished without an individual prescription pursuant to the requirements of section 2 of P.L.2025, c.196 (C.45:14-67.13) without requiring prior authorization or step therapy.
(2) If the federal Food and Drug Administration has authorized or approved one or more therapeutic equivalents of a drug, device, or product for the prevention of HIV and AIDS, paragraph (1) of this subsection shall not be construed to require the contract to cover all therapeutically equivalent versions without prior authorization or step therapy, if at least one version is covered without prior authorization or step therapy.
b. Reimbursement issued under this section to a pharmacist shall be at a rate that is no less than the rate provided by the group or individual hospital service corporation contract to other non-physician practitioners if the reimbursement is for a service or procedure that meets the following criteria:
(1) the service or procedure is within the scope of practice of the treating pharmacist; and
(2) the service or procedure would otherwise be covered under the contract if provided by a healthcare provider, including a physician, advanced practice nurse, or physician assistant.
c. A contract offered by a group or individual hospital service corporation shall grant a licensed pharmacist receiving reimbursement under this section the same rights of participation, plan admission, and registration as may be granted by the contract to a healthcare provider, including a physician, advanced practice nurse, or physician assistant, who is reimbursed for an identical service.
d. A contract offered by a group or individual hospital service corporation shall not:
(1) prohibit, or permit a delegated pharmacy benefits manager to prohibit, a pharmacist from dispensing HIV preexposure prophylaxis or HIV postexposure prophylaxis; and
(2) be required to cover HIV preexposure prophylaxis that has been furnished by a pharmacist without an individual prescription pursuant to pursuant to section 2 of P.L.2025, c.196 (C.45:14-67.13) in excess of a 90-day supply for a single patient within a given two year period.
e. Nothing in this section shall be construed to require a contract offered by a group or individual hospital service corporation to provide coverage for HIV preexposure prophylaxis or HIV postexposure prophylaxis furnished by a pharmacist at an out-of-network pharmacy, unless the contract has an out-of-network pharmacy benefit.
f. The provisions of this section shall apply to all contracts in which the hospital service corporation has reserved the right to change the premium.
g. As used in this section:
“HIV preexposure prophylaxis” means the same as that term is defined in section 1 of P.L.2025, c.196 (C.45:14-67.12).
“HIV postexposure prophylaxis” means the same as that term is defined in section 1 of P.L.2025, c.196 (C.45:14-67.12).
“Step therapy” means requiring that a lower-cost alternative to HIV preexposure prophylaxis or HIV postexposure prophylaxis be shown to have been ineffective as a condition of providing prescription benefits coverage for the prophylaxis.
##### **§ 17:48-6bbb** Benefits provided under hospital service corporation contracts. {#sec-17-48-6bbb omnilex-key=us-nj-statutes--title-17--17:48-6bbb}
1. a. A hospital service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2025, c.200 (C. 17:48-6bbb et al.), shall provide benefits to any named subscriber or other person covered thereunder for expenses incurred in obtaining medically necessary treatment for women with a diagnosis of perimenopause, menopause, and symptoms associated with perimenopause and menopause, including, but not limited to:
(1) hormonal therapies such as hormone replacement therapy and bioidentical hormone treatments;
(2) non-hormonal treatments, including medications to manage perimenopause and menopausal symptoms;
(3) behavioral health care services;
(4) pelvic floor physical therapy;
(5) bone health treatments, including screenings and medications due to hormonal changes related to perimenopause and menopause;
(6) preventative services that have a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force for early detection and treatment of health conditions related to perimenopause and menopause such as osteoporosis and cancer; and
(7) counseling regarding menopause management.
b. A hospital service corporation shall provide clear and accessible information to subscribers or covered persons regarding covered perimenopause and menopause treatments.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all hospital service corporation contracts in which the hospital service corporation has reserved the right to change the premium.
e. As used in this section:
“Menopause” means the permanent end of a female’s menstrual cycle, diagnosed by a licensed medical provider after 12 consecutive months without a menstrual period.
“Perimenopause” means the transitional period leading to menopause, marked by fluctuating hormone levels and changes in menstrual cycles.
##### **§ 17:48-6.1** Group contracts issued by hospital service corporation. {#sec-17-48-6.1 omnilex-key=us-nj-statutes--title-17--17:48-6.1}
2. A hospital service corporation may issue to a policyholder a group contract, covering at least two employees or members at the date of issue, if it conforms to the following description:
(a) A contract issued to an employer or to the trustees of a fund established by one or more employers, or issued to a labor union, or issued to an association formed for purposes other than obtaining such contract, or issued to the trustees of a fund established by one or more labor unions, or by one or more employers and one or more labor unions, covering employees and members of associations or labor unions.
(b) A contract issued to cover any other group which the Commissioner of Banking and Insurance determines may be covered in accordance with sound underwriting principles.
Benefits may be provided for one or more members of the families or one or more dependents of persons who may be covered under a group contract referred to in (a) or (b) above.
Family type contracts shall provide that the services applicable for children shall be payable with respect to a newly born child of the subscriber or his or her spouse from the moment of birth. The services for newly born children shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities. If a subscription payment is required to provide services for a child, the contract may require that notification of birth of a newly born child and the required payment must be furnished to the service corporation within 90 days after the date of birth in order to have the coverage continue beyond such 90-day period.
Group contracts which provide for services to the subscriber, but not to family members or dependents of that subscriber, other than contracts which provide no dependent coverage whatsoever for the subscriber's class, shall also provide services to newly born children of the subscriber which shall commence with the moment of birth of each child and shall consist of coverage of injury or sickness including the necessary care and treatment of medically diagnosed congenital defects and abnormalities, provided that application therefor and payment of the required subscription amount are made to include in said contract the coverage described in the preceding paragraph of this section within 90 days from the date of birth of a newborn child.
A contract under which coverage of such a dependent terminates at a specified age shall, with respect to an unmarried child, covered by the contract prior to attainment of age 19, who is incapable of self-sustaining employment by reason of intellectual disability or physical handicap and who became so incapable prior to attainment of age 19 and who is chiefly dependent upon the covered employee or member for support and maintenance, not so terminate while the coverage of the employee or member remains in force and the dependent remains in such conditions, if the employee or member has within 31 days of such dependent's attainment of the termination age submitted proof of such dependent's incapacity as described herein. The foregoing provisions of this paragraph shall not apply retrospectively or prospectively to require a hospital service corporation to insure as a covered dependent any child with an intellectual disability or physical handicap of the applicant where the contract is underwritten on evidence of insurability based on health factors required to be set forth in the application. In such cases, any contract heretofore or hereafter issued may specifically exclude such child with an intellectual disability or physical handicap from coverage.
Any group contract which contains provisions for the payment by the insurer of benefits for members of the family or dependents of a person in the insured group shall provide that, subject to payment of the appropriate premium, such family members or dependents be permitted to have coverage continued for at least 180 days after the death of the person in the insured group.
The contract may provide that the term "employees" shall include as employees of a single employer the employees of one or more subsidiary corporations and the employees, individual proprietors, and partners of affiliated corporations, proprietorships, and partnerships if the business of the employer and such corporations, proprietorships, or partnerships are under common control through stock ownership, contract, or otherwise. The contract may provide that the term "employees" shall include the individual proprietor or partners of an individual proprietorship or a partnership. The contract may provide that the term "employees" shall include retired employees. A contract issued to trustees may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship. A contract issued to the trustees of a fund established by the members of an association of employers may provide that the term "employees" shall include the employees of the association.
##### **§ 17:48-6.2** Provisions applicable to group contracts; subscriber defined {#sec-17-48-6.2 omnilex-key=us-nj-statutes--title-17--17:48-6.2}
The provisions of the act to which this act is a supplement shall apply to group contracts except that sections 6 and 9 of such act shall not apply. The word "subscriber" as used in said act means the policyholder under a group contract where the context so requires.
##### **§ 17:48-6.3** Group contract form {#sec-17-48-6.3 omnilex-key=us-nj-statutes--title-17--17:48-6.3}
Every group contract entered into by a hospital service corporation with any policyholder shall be in writing and a contract form stating the terms and conditions thereof shall be furnished to the policyholder to be kept by him. No group contract form shall be used unless it contains the following provisions:
(a) A statement of the contract rate payable to the hospital service corporation by or on behalf of the policyholder for the original period of coverage, the time or times at which, and the manner in which, the contract rate due is to be paid, and the basis, if any, on which the rate may subsequently be adjusted;
(b) A provision that all contract rates due under the contract shall be paid by the policyholder, or by the designated representative of the policyholder, to the hospital service corporation on or before the due date thereof or within such period of grace as may be specified therein;
(c) A statement of the nature of the services to be furnished and the period during which they will be furnished, and if there are any services to be excepted, a detailed statement of such exceptions;
(d) A provision that the contract, any endorsements or riders thereto, the application of the policyholder in whose name the contract is issued, a copy of which shall be attached to the contract, and the individual applications, if any, of the employees or members shall constitute the entire contract between the parties and that all statements contained in any such application for coverage shall be deemed representations and not warranties;
(e) A provision that there shall be issued to the policyholder, for delivery to the employee or member, a certificate or other document which sets forth or summarizes the essential features of the coverage including the time, place and method for making claims for benefits;
(f) A provision that all new employees or new members, as the case may be, in the groups or classes eligible for the coverage must be added to the eligible groups or classes;
(g) A statement of the terms and conditions, if any, upon which the contract may be terminated or amended. Any notice to the policyholder shall be effective if sent by mail to the policyholder's address as shown at the time on the corporation's records. The notice to the policyholder as herein required shall be sent at least 30 days before the termination or amendment of the contract takes effect.
##### **§ 17:48-6.4** Participation agreements {#sec-17-48-6.4 omnilex-key=us-nj-statutes--title-17--17:48-6.4}
A hospital service corporation of this State may enter into agreements to participate with other corporations in the issuance of group contracts to policyholders whose employees or members are located in more than one state. Such agreements may provide for experience rating, for a sharing of the premiums, claims, and expenses by the participating corporations or for acceptance or ceding of the whole or portions of group risks on a reinsurance basis. Such agreements shall be filed with and approved by the commissioner before becoming effective.
##### **§ 17:48-6.5** Schedule of rates {#sec-17-48-6.5 omnilex-key=us-nj-statutes--title-17--17:48-6.5}
No hospital service corporation shall issue group contracts which are not experience rated pursuant to section 5 of this act, until it shall have filed with the commissioner a full schedule of the rates which are to apply to such contracts. The commissioner may disapprove such schedule at any time if he finds that such rates are excessive, inadequate or unfairly discriminatory. It shall be unlawful for any corporation to effect any such group contract according to such rates thereafter.
##### **§ 17:48-6.6** Combined hospital-medical contracts {#sec-17-48-6.6 omnilex-key=us-nj-statutes--title-17--17:48-6.6}
A hospital service corporation and a medical service corporation authorized to do business in this State may issue a combined contract providing for hospital care and medical care but no one of such corporations shall issue any such combined contract. Any one of such corporations may act as agent for the other without being required to obtain a license as an agent.
##### **§ 17:48-6.7** Review of determinations of commissioner of banking and insurance {#sec-17-48-6.7 omnilex-key=us-nj-statutes--title-17--17:48-6.7}
All determinations of the Commissioner of Banking and Insurance made under the provisions of this act, or of the act to which this act is a supplement, shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48-6.8** Review of practices, rules and procedures of hospital service corporation {#sec-17-48-6.8 omnilex-key=us-nj-statutes--title-17--17:48-6.8}
All practices, rules and procedures of a hospital service corporation, involving termination or refusal to renew coverage, modification of coverage or rates in the case of persons classified as left-group, selection of risks, and underwriting classifications, shall be subject to review at any time by the commissioner and upon his request for information relative to any such practice, rule, or procedure the hospital service corporation shall furnish such information in writing without delay. If in the opinion of the commissioner, any such practice, rule, or procedure, is unjust, unfair, or inequitable, taking into consideration the nonprofit and tax-exempt status of the hospital service corporation, he shall so notify the hospital service corporation and fix a time and place for hearing before him or his designated representative at which the hospital service corporation may be heard. Following such hearing, the commissioner may make an order based on the record of the proceeding. If such order be one of disapproval, it shall be unlawful for the corporation to continue such practice, rule, or procedure. Such disapproval by the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48-6.9** Adjustment of rates; experience rating formulas; approval {#sec-17-48-6.9 omnilex-key=us-nj-statutes--title-17--17:48-6.9}
Any group contract, covering at least 50 employees or members, may provide for the adjustment of the rate of premium at the end of the first year or any subsequent year of insurance thereunder based on the experience thereunder both past and contemplated. No hospital service corporation shall use any form of experience rating plan until it shall have filed with the commissioner the formulas to be used and the classes of groups to which they are to apply. The commissioner may disapprove the formulas or classes at any time if he finds that the rates produced thereby are excessive, inadequate or unfairly discriminatory or that the formulas or classes are such as to prejudice the interests of persons who are eligible for hospital services under contracts with the hospital service corporation which are not subject to experience rating.
Excluding those rating formulas applicable to groups the employees or members of which are located in more than one state and which are underwritten in participation with other corporation(s) of other state(s), no rating formula shall be approved by the commissioner unless it provides that the experience rated groups will be assessed a reasonable community charge. Any such rating formula may provide for the allowance of an equitable discount in the event the policyholder agrees to perform certain administrative and record keeping functions in connection with the routine maintenance of the group account.
Nothing in this section shall preclude the hospital service corporation from incorporating in the rate formula such claim cost and utilization trend factors as it deems necessary in its discretion so long as the rates produced are self-supporting and the formulas for classes do not prejudice the interests of persons who are eligible for hospital services under contracts with the hospital service corporation which are not subject to experience rating.
For experience rated groups of 50 to 99 employees or members, the commissioner will have the authority to determine that rates charged depart from community rates in such a way as to assure continuity of rating principles with the community rated and experience rated groups of 100 or more.
##### **§ 17:48-6.10** Definitions {#sec-17-48-6.10 omnilex-key=us-nj-statutes--title-17--17:48-6.10}
As used in this act:
a. "Group policy" means a group contract or individual group certificate delivered or issued for delivery by a hospital service corporation, medical service corporation or similar corporation or organization.
b. "Insurer" means the entity issuing a group contract or an individual group certificate.
c. "Insurance" , "Insurers" and "Insured" refer to coverage under a group contract or individual group certificate on a premium-paying basis.
d. "Premium" includes any premium or other consideration payable for coverage under a group contract or individual group certificate.
e. "Medicare" means Title XVIII of the United States Social Security Act as amended or superseded.
f. "Total disability of an employee or member" exists only while the employee or member (1) is not engaged in any gainful occupation, and (2) is completely unable, due to sickness or injury or both, to engage in any and every gainful occupation for which the person is reasonably fitted by education, training, or experience.
##### **§ 17:48-6.11** Group contract or individual group certificate; total disability of employee or member; continuation of coverage; conditions {#sec-17-48-6.11 omnilex-key=us-nj-statutes--title-17--17:48-6.11}
A group contract or individual group certificate delivered or issued for delivery in this State which covers employees or members and their dependents for hospital, medical-surgical or major medical coverage on an expense incurred or service basis, other than for specific diseases or for accidental injuries only, shall provide that employees or members whose coverage under the group contract or individual group certificate would otherwise terminate because of termination of employment or membership due to total disability of the employee or member shall be entitled to continue their hospital, medical-surgical and major medical coverage under that group contract or individual group certificate for themselves and their eligible dependents, subject to all of the group contract's or individual group certificate's terms and conditions applicable to those forms of coverage and subject to the following conditions:
a. Continuation shall only be available to any employee or member who has been continuously covered under the group contract or individual group certificate during the entire 3-months period ending with such termination.
b. Continuation shall be available for any person who is covered by or eligible for Medicare, subject to any nonduplication of benefits provisions of the group contract or individual group certificate.
c. In addition to hospital, medical-surgical, or major medical benefits, continuation shall include any other health care expense benefit, including dental, vision care, or prescription drug benefits available through the insured group.
d. An employee or member electing continuation shall pay to the group contract holder or his employer, on a monthly basis in advance, the amount of contribution required by the contract holder or employer, but not more than the group rate for the coverage being continued under the group contract or individual group certificate on the due date of each payment. The employee's or member's written election for continuation, together with the first contribution required to establish contributions on a monthly basis in advance, shall be given to the contract holder or employer within 31 days of the date the employee's or member's coverage would otherwise terminate.
e. Continuation of coverage under the group contract or individual group certificate for any person shall terminate at the first to occur of the following:
(1) Failure of the former employee or member to make timely payment of a required contribution. Termination shall occur at the end of the period for which contributions were made.
(2) The date the employee again becomes employed and eligible for benefits under another group plan providing health care expense benefits, or in the case of a qualified eligible dependent, the date such dependent becomes employed and eligible for such benefits.
(3) The date on which the group contract or individual group certificate is terminated or, in the case of an employee, the date his employer terminates participation under the group contract or individual group certificate, provided that
(a) the employee or member shall have the right to become covered under any new group contract or individual group certificate contracted for by the employer, for the balance of the period that he would have remained covered under the prior group contract or individual group certificate in accordance with this act had a termination of a group not occurred;
(b) the minimum level of benefits to be provided by the other group contract or individual group certificate shall be the applicable level of benefits of the prior group contract or individual group certificate reduced by any benefits payable under that prior group contract or individual group certificate, and
(c) the prior group contract or individual group certificate shall continue to provide benefits to the extent of its accrued liabilities and extensions of benefits, but only when replacement occurred.
f. A notification of the continuation privilege shall be included in any individual group certificate or employee booklet.
##### **§ 17:48-6.12** Inapplicability of act if insurer not have right to terminate contract or certificate without consent of insured {#sec-17-48-6.12 omnilex-key=us-nj-statutes--title-17--17:48-6.12}
The provisions of this act shall not apply to any contract or individual group certificate in which the insurer does not have the right to terminate the contract or individual group certificate without the consent of the insured.
##### **§ 17:48-6.15** Coverage provided by hospital service corporation for subscriber's child. {#sec-17-48-6.15 omnilex-key=us-nj-statutes--title-17--17:48-6.15}
1. a. A hospital service corporation contract which provides hospital or medical expense benefits under which dependent coverage is available shall continue to make that coverage available for an adult child until the child turns 26 years of age. A contract shall not deny coverage for a subscriber's child on the grounds that:
(1) The child was born out of wedlock;
(2) The child is not claimed as a dependent on the subscriber's federal tax return;
(3) The child does not reside with the subscriber or in the hospital service corporation's service area, provided that, in the case of a managed care plan, the child complies with the terms and conditions of the contract with respect to the use of specified providers;
(4) The child is married;
(5) The child has or adopts a child; or
(6) The child starts or leaves school.
b. If a child has coverage through a hospital service corporation contract of a noncustodial parent, the hospital service corporation shall:
(1) Provide such information to the custodial parent as may be necessary for the child to obtain benefits through the child's noncustodial parent's coverage;
(2) Permit the custodial parent, or the health care provider with the authorization of the custodial parent, to submit claims for covered services without the approval of the noncustodial parent; and
(3) Make payments on claims submitted in accordance with paragraph (2) of this subsection directly to the custodial parent, the health care provider or the Division of Medical Assistance and Health Services in the Department of Human Services which administers the State Medicaid program, as appropriate.
c. When a parent who is the subscriber is eligible for dependent coverage and is required by a court or administrative order to provide health insurance coverage for his child, the hospital service corporation shall:
(1) Permit the parent to enroll his child as a dependent, without regard to any open enrollment restrictions;
(2) Permit the child's other parent, or the Division of Medical Assistance and Health Services as the State Medicaid agency or the Division of Family Development as the State IV-D agency, in the Department of Human Services, to enroll the child under the contract if the parent who is the subscriber fails to enroll the child; and
(3) Not terminate coverage of the child unless the parent who is the subscriber provides the hospital service corporation with satisfactory written evidence that: the court or administrative order is no longer in effect; or the child is or will be enrolled in a comparable health benefits plan whose coverage will be effective on the date of the termination of coverage.
##### **§ 17:48-6.16** Requirements applicable to State Medicaid {#sec-17-48-6.16 omnilex-key=us-nj-statutes--title-17--17:48-6.16}
2. A hospital service corporation shall not impose requirements on the Division of Medical Assistance and Health Services in the Department of Human Services which has been assigned the rights of an individual who is eligible for medical assistance under the State Medicaid program, that are different from requirements applicable to an agent or assignee of any other subscriber.
##### **§ 17:48-6.17** Eligibility for enrollment in hospital service corporation {#sec-17-48-6.17 omnilex-key=us-nj-statutes--title-17--17:48-6.17}
1. Notwithstanding any other provision of law to the contrary, a hospital service corporation shall not consider a person's eligibility for medical assistance pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), or the equivalent statute in another state, when determining the person's eligibility for enrollment in, or the provision of benefits under, a hospital service corporation contract providing hospital or medical expense benefits delivered, issued or executed in this State, or approved for issuance in this State by the Commissioner of Insurance.
##### **§ 17:48-6.18** Hospital service corporation contract, exclusion, rates, terms based on genetic information prohibited {#sec-17-48-6.18 omnilex-key=us-nj-statutes--title-17--17:48-6.18}
11. Every individual or group hospital service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall not exclude any person or eligible dependent and shall not establish any rates or terms therefor on the basis of an actual or expected health condition or on the basis of any genetic characteristic. For the purposes of this section, "genetic characteristic" means any inherited gene or chromosome, or alteration thereof, that is scientifically or medically believed to predispose an individual to a disease, disorder or syndrome, or to be associated with statistically increased risk of development of a disease, disorder or syndrome.
##### **§ 17:48-6.19** Coverage for certain dependents until age 31 by hospital service corporation. {#sec-17-48-6.19 omnilex-key=us-nj-statutes--title-17--17:48-6.19}
1. a. As used in this section, "dependent" means a subscriber's child by blood or by law who:
(1) is 30 years of age or younger;
(2) is unmarried;
(3) has no dependent of his own;
(4) is a resident of this State or is enrolled as a full-time student at an accredited public or private institution of higher education; and
(5) (a) is not actually provided coverage as a named subscriber, insured, enrollee, or covered person under any other group or individual health benefits plan, group health plan, church plan or health benefits plan, or entitled to benefits under Title XVIII of the Social Security Act, Pub.L.74-271 (42 U.S.C. s.1395 et seq.) at the time dependent coverage pursuant to this section begins or will begin; and
(b) there is evidence of prior creditable coverage or receipt of benefits under a benefits plan or by law as set forth in subparagraph (a) of this paragraph.
b. (1) A hospital service corporation contract that provides coverage for a subscriber's dependent under which coverage of the dependent terminates at a specific age on or before the dependent's 30th birthday, and is delivered, issued, executed or renewed in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this section of P.L.2008, c.38, shall, upon application of the dependent as set forth in subsection c. of this section, provide coverage to the dependent after that specific age, until the dependent's 31st birthday.
(2) Nothing herein shall be construed to require:
(a) coverage for services provided to a dependent before the effective date of this section of P.L.2008, c.38; or
(b) that an employer or other group policyholder pay all or part of the cost of coverage for a dependent as provided pursuant to this section.
c. (1) A dependent covered by a subscriber's contract, which coverage under the contract terminates at a specific age on or before the dependent's 30th birthday, may make a written election for coverage as a dependent pursuant to this section, until the dependent's 30th birthday:
(a) within 30 days prior to the termination of coverage at the specific age provided in the contract;
(b) within 30 days after meeting the requirements for dependent status as set forth in subsection a. of this section, when coverage for the dependent under the contract previously terminated; or
(c) during an open enrollment period, as provided pursuant to the contract, if the dependent meets the requirements for dependent status as set forth in subsection a. of this section during the open enrollment period.
(2) (Deleted by amendment, P.L.2008, c.38)
d. (1) Coverage for a dependent who makes a written election for coverage pursuant to subsection c. of this section shall consist of coverage which is identical to the coverage provided to that dependent prior to the termination of coverage at the specific age provided in the contract. If coverage is modified under the contract for any similarly situated dependents for coverage prior to the termination of coverage at the specific age provided in the contract, the coverage shall also be modified in the same manner for the dependent.
(2) Coverage for a dependent who makes a written election for coverage pursuant to subsection c. of this section shall not be conditioned upon, or discriminate on the basis of, lack of evidence of insurability.
e. (1) The subscriber's contract may require payment of a premium by the subscriber or dependent, as appropriate, subject to the approval of the Commissioner of Banking and Insurance, for any period of coverage relating to a dependent's written election for coverage pursuant to subsection c. of this section. The payment shall not exceed 102% of the applicable portion of the premium previously paid for that dependent's coverage under the contract prior to the termination of coverage at the specific age provided in the contract.
(2) The applicable portion of the premium previously paid for the dependent's coverage under the contract shall be determined pursuant to regulations promulgated by the Commissioner of Banking and Insurance, based upon the difference between the contract's rating tiers for adult and dependent coverage or family coverage, as appropriate, and single coverage, or based upon any other formula or dependent rating tier deemed appropriate by the commissioner which provides a substantially similar result.
(3) Payments of the premium may, at the election of the payor, be made in monthly installments.
f. Coverage for a dependent provided pursuant to this section shall be provided until the earlier of the following:
(1) the date upon which the dependent is disqualified for dependent status as set forth in subsection a. of this section;
(2) the date upon which coverage ceases under the contract by reason of a failure to make a timely payment of any premium required under the contract by the subscriber or dependent for coverage provided pursuant to this section. The payment of any premium shall be considered to be timely if made within 30 days after the due date or within a longer period as may be provided for by the contract; or
(3) the date upon which the contract, under which coverage is provided to a dependent, ceases to provide coverage to the subscriber.
Nothing herein shall be construed to permit a hospital service corporation to refuse a written election for coverage by a dependent pursuant to subsection c. of this section, based upon the dependent's prior disqualification pursuant to paragraph (1) of this subsection, other than a disqualification based on age or lack of evidence of prior, creditable coverage or receipt of benefits.
g. Notice regarding coverage for a dependent as provided pursuant to this section shall be provided to a subscriber by the hospital service corporation:
(1) in the certificate of coverage or other equivalent document prepared for subscribers and delivered on or about the date of commencement of the subscribers' coverage; and
(2) (Deleted by amendment, P.L.2008, c.38)
(3) in a notice delivered to subscribers on a quarterly basis.
h. This section shall apply to those contracts in which the hospital service corporation has reserved the right to change the premium.
##### **§ 17:48-7** Health care facilities eligible for contracts; approval of rates of payment {#sec-17-48-7 omnilex-key=us-nj-statutes--title-17--17:48-7}
Any hospital service corporation may enter into contracts with health care facilities for the rendering of health care services to any of its subscribers only with licensed health care facilities.
Rates of payment by such hospital service corporation shall be approved as to reasonableness by the Hospital Rate Setting Commission pursuant to section 18 of the Health Care Facilities Planning Act (P.L.1971, c. 136). The maximum rate of payment to eligible hospitals and institutions not under contract with such hospital service corporation shall not exceed the particular hospital's or institution's regular charges to the general public for the same services and shall be set forth in the certificate issued by such hospital service corporation to any subscriber. The basis and extent of payment, if any, by such hospital service corporation under agreement with nonprofit hospital service plans of other states shall be subject to the approval of the Commissioner of Insurance.
##### **§ 17:48-8** Filing of copy of contract or certificate and applications, etc., with commissioner; disapproval {#sec-17-48-8 omnilex-key=us-nj-statutes--title-17--17:48-8}
No hospital service corporation shall enter into any contract with a subscriber unless and until it shall have filed with the Commissioner of Banking and Insurance a copy of the contract or certificate and of all applications, riders and endorsements for use in connection with the issuance or renewal thereof. If the commissioner shall at any time notify the corporation filing the same of his disapproval of any such form, as contrary to law, or as being oppressive or calculated to mislead the public, specifying particulars, it shall be unlawful for such corporation thereafter to issue such form so disapproved. Such disapproval of the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48-8.1** Hospital service corporation contract; compliance {#sec-17-48-8.1 omnilex-key=us-nj-statutes--title-17--17:48-8.1}
3. No hospital service corporation contract subject to the provisions of P.L.1938, c.366, (C.17:48-1 et seq.), or application for that contract, if a written application is required and is to be made a part of that contract, or a printed rider or an endorsement for use with that contract, shall be delivered or issued for delivery in this State unless its provisions comply with all of the applicable requirements of P.L.1938, c.366 (C.17:48-1 et seq.) and any regulations adopted or guidelines published by the Commissioner of Insurance consistent with the requirements thereof. Any contract, application, rider, or endorsement issued or delivered in this State that is not in compliance with that law or regulations or guidelines shall be deemed to be in compliance with the requirements and shall be interpreted by the courts and among the persons affected by the contract as if that contract form were in compliance with the requirements; except that this provision shall not relieve the hospital service corporation from any penalty that may be imposed for violation of this act or any other applicable provision of P.L.1938, c.366 (C.17:48-1 et seq.).
##### **§ 17:48-8.2** Filing of contract or related form {#sec-17-48-8.2 omnilex-key=us-nj-statutes--title-17--17:48-8.2}
4. a. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), any contract subject to the provisions of P.L.1938, c.366 (C.17:48-1 et seq.), including any application, rider, or endorsement which is made a part of that contract, shall be filed with the commissioner for approval as provided in this section. Any such contract, and any related form, except those certified pursuant to section 5 of this act, shall be filed with the commissioner for approval pursuant to this section.
b. Any contract or related form filed with the commissioner for approval pursuant to this section shall be deemed approved upon the expiration of 60 days after the submission of the form unless disapproved in writing by the commissioner within that time. Any such disapproval shall be based only on the specific provisions of applicable statutes, regulations adopted by the commissioner, or guidelines published by the commissioner as of the effective date of this act, with regard to forms of that type. A disapproved contract or related form may be resubmitted.
c. Any contract or related form submitted for approval pursuant to this section and disapproved by the commissioner before the expiration of 60 days after its submission shall be deemed withdrawn at the expiration of 60 days after the transmittal of the commissioner's specific objections unless the filer submits a complete written response to all of the commissioner's objections regarding the submission within the 60 day period.
d. A contract or related form, resubmitted in response to the commissioner's objections pursuant to subsection b. of this section, shall be deemed approved upon the expiration of 30 days after its resubmission unless disapproved in writing by the commissioner within that time. No disapproval by the commissioner of a resubmission shall be based on any objection not specified by the commissioner in his initial disapproval of the filing, except that the commissioner may disapprove such form based upon any new provisions introduced in the resubmission or if in addressing the specified objections cited in the commissioner's disapproval transmission, the hospital service corporation changes or modifies any substantive provisions of the form. Any contract or related form resubmitted for approval pursuant to this section and disapproved by the commissioner before the expiration of 30 days after its submission shall be deemed withdrawn at the expiration of 30 days after the transmittal of the commissioner's specific objections, unless the filer submits a complete written response to all of the commissioner's objections regarding the submission within the 30 day period.
e. With respect to all types of contracts or related forms required to be filed pursuant to this section and currently on file with and approved by the commissioner upon enactment of this act, the commissioner shall propose regulations, which may be amended or modified by the commissioner from time to time after adoption, concerning any actuarial or form requirements consistent with applicable statutory provisions but not specified therein, not later than 180 days after enactment of this act. Any such regulation shall be adopted not later than 180 days after it is proposed. With respect to any type of form not then on file with the commissioner but filed subsequent to the enactment of this act, the commissioner shall propose regulations, which may be amended or modified by the commissioner from time to time after adoption, concerning any actuarial or form requirements consistent with applicable statutory provisions but not specified therein, within 120 days after the form is approved or deemed approved by the commissioner pursuant to this section. Any such regulation shall be adopted not later than 180 days after it is proposed. The commissioner may issue bulletins which are interpretive of existing regulations consistent with statutory provisions, with respect to any type of form that may be certified pursuant to section 5 of this act. Nothing in this section shall preclude a hospital service corporation from filing a certifiable contract or related form for approval by the commissioner.
f. Any such form which is filed with the commissioner or deemed filed may be so delivered or issued for delivery until such time as any subsequent withdrawal of the filing by the commissioner, following an opportunity for a hearing held in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, becomes final in accordance therewith.
g. For purposes of this section, "days" means calendar days, except that when the last day of any specified time period is a Saturday, Sunday, or State holiday, then the time period shall end on the next following business day. With respect to any specified time period pertaining to correspondence between a hospital service corporation and the commissioner, the time period shall commence on the date that such correspondence is postmarked or submitted to a private delivery service.
##### **§ 17:48-8.3** Contract forms; certification memorandum {#sec-17-48-8.3 omnilex-key=us-nj-statutes--title-17--17:48-8.3}
5. a. Pursuant to the provisions of this section, a hospital service corporation authorized to do business in this State may file with the commissioner and use, in accordance with subsection d. of this section, any contract, endorsement or related form that is stipulated by the commissioner to be of a kind or type eligible for file and use pursuant to subsection b. of this section. The form shall be accompanied by a certification memorandum which includes a statement that it is filed in accordance with the provisions of this section, and which is executed by a responsible officer of the hospital service corporation who certifies that the form being filed is in conformance with the law or regulation applicable to that type or kind of form as specified in a certification form to be determined by the commissioner. If the commissioner determines that the form being filed does not conform with the law or regulation applicable to that type or kind of form, the commissioner shall notify the hospital service corporation of his objections in writing and may disapprove that form for further use in New Jersey.
b. Contract forms, including related endorsements, riders and application forms, eligible for certification pursuant to this section shall include, but not be limited to, certain categories of individual and group hospital service corporation contracts which the commissioner shall define by regulation.
c. The certification memorandum shall be signed and acknowledged by a responsible officer of the hospital service corporation. The acknowledgment by that officer shall be done in the same manner in which documents for recording instruments conveying or affecting interests in real estate in this State must be acknowledged to be eligible for recording, or in such other manner as specified by the commissioner by regulation from time to time.
d. Upon receipt of an acknowledgment from the commissioner that the form and a certification memorandum which conforms to the requirements of this section have been received, the form so submitted may be used by the hospital service corporation.
e. (1) Improper certification shall subject a hospital service corporation submitting such improper certification to a fine not to exceed $50,000 and, in addition, a maximum penalty of $1,000 per contract issued on a form determined to be improperly certified pursuant to the provisions of this section. The commissioner shall promulgate a schedule of penalties to be applied pursuant to this section. In determining the amount of any penalty to be imposed, the commissioner shall consider the severity of the violation based upon the potential adverse impact to the public and whether it is the filer's first violation of this section.
(2) If, after notice and a hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), a hospital service corporation is found by the commissioner to be in violation of this section, the form may be disapproved, and in addition to any other penalties that may be imposed under P.L.1938, c.366 (C.17:48-1 et seq.), the commissioner may bar that hospital service corporation from participating in the certification process pursuant to this section for a period not to exceed one year.
f. The commissioner shall hold a hearing annually, or more often, for the purpose of adopting regulations to define the specific forms eligible for certification pursuant to this section. Initial regulations shall be adopted pursuant to this section no later than 180 days after enactment of this act.
g. For purposes of this section:
(1) "a responsible officer of the hospital service corporation" means a corporate officer of the level of vice president or higher, or of equivalent title within the hospital service corporation's structure, who is either the actuary of the hospital service corporation with responsibility for the type of form filed, or the individual with responsibility for managing the form filing process for the hospital service corporation with regard to the type of form filed; and
(2) "improper certification" means providing any misrepresentation or false statement material to a certification form required pursuant to subsection a. of this section.
##### **§ 17:48-8.4** Hospital service corporation to receive, transmit transactions electronically; standards. {#sec-17-48-8.4 omnilex-key=us-nj-statutes--title-17--17:48-8.4}
4. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a hospital service corporation or its agent or a subsidiary that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to a hospital service corporation, or its agent, its subsidiary or its covered persons.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a hospital service corporation or its agent or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all group and individual contracts issued, delivered, executed or renewed in this State.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a hospital service corporation or its agent shall require that health care providers file all claims for payment for health care services. A covered person who receives health care services shall not be required to submit a claim for payment, but notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the contract.
d. For the purposes of this subsection, "substantiating documentation" means any information specific to the particular health care service provided to a covered person.
(1) Effective 180 days after the effective date of P.L.1999, c.154, a hospital service corporation or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a covered person or health care provider, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42 U.S.C. s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the health care provider is eligible at the date of service;
(b) the person who received the health care service was covered on the date of service;
(c) the claim is for a service or supply covered under the health benefits plan;
(d) the claim is submitted with all the information requested by the payer on the claim form or in other instructions that were distributed in advance to the health care provider or covered person in accordance with the provisions of section 5 of P.L.2023, c.296 (C.17B:30-55.4); and
(e) the payer has no reason to believe that the claim has been submitted fraudulently.
(2) If all or a portion of the claim is not paid within the time frames provided in paragraph (1) of this subsection because:
(a) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(b) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(c) the payer disputes the amount claimed; or
(d) there is strong evidence of fraud by the provider and the payer has initiated an investigation into the suspected fraud,
the payer shall notify the health care provider, by electronic means and the covered person in writing within 30 days of receiving an electronic claim, or notify the covered person and health care provider in writing within 40 days of receiving a claim submitted by other than electronic means, that:
(i) the claim is incomplete with a statement as to what substantiating documentation is required for adjudication of the claim;
(ii) the claim contains incorrect information with a statement as to what information must be corrected for adjudication of the claim;
(iii) the payer disputes the amount claimed in whole or in part with a statement as to the basis of that dispute; or
(iv) the payer finds there is strong evidence of fraud and has initiated an investigation into the suspected fraud in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(3) If all or a portion of an electronically submitted claim cannot be adjudicated because the diagnosis coding, procedure coding or any other data required to be submitted with the claim was missing, the payer shall electronically notify the health care provider or its agent within seven days of that determination and request any information required to complete adjudication of the claim.
(4) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(5) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider, no later than two working days following receipt of the transmission of the claim.
(6) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(7) Payment of an eligible claim pursuant to paragraphs (1) and (4) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
If payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of paragraph (2) or paragraph (3) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or information or modification of an initial submission.
If payment is withheld on all or a portion of a claim by a payer pursuant to paragraph (2) or (3) of this subsection and the provider is not notified within the time frames provided for in those paragraphs, the claim shall be deemed to be overdue.
(8) (a) No payer that has reserved the right to change the premium shall deny payment on all or a portion of a claim because the payer requests documentation or information that is not specific to the health care service provided to the covered person.
(b) No payer shall deny payment on all or a portion of a claim while seeking coordination of benefits information unless good cause exists for the payer to believe that other insurance is available to the covered person. Good cause shall exist only if the payer's records indicate that other coverage exists. Routine requests to determine whether coordination of benefits exists shall not be considered good cause.
(c) In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of this paragraph, the claims payment shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means or on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
(9) An overdue payment shall bear simple interest at the rate of 12% per annum. The interest shall be paid to the health care provider at the time the overdue payment is made. The amount of interest paid to a health care provider for an overdue claim shall be credited to any civil penalty for late payment of the claim levied by the Department of Human Services against a payer that does not reserve the right to change the premium.
(10) With the exception of claims that were submitted fraudulently or submitted by health care providers that have a pattern of inappropriate billing or claims that were subject to coordination of benefits, no payer shall seek reimbursement for overpayment of a claim previously paid pursuant to this section later than 18 months after the date the first payment on the claim was made. No payer shall seek more than one reimbursement for overpayment of a particular claim. At the time the reimbursement request is submitted to the health care provider, the payer shall provide written documentation that identifies the error made by the payer in the processing or payment of the claim that justifies the reimbursement request. No payer shall base a reimbursement request for a particular claim on extrapolation of other claims, except under the following circumstances:
(a) in judicial or quasi-judicial proceedings, including arbitration;
(b) in administrative proceedings;
(c) in which relevant records required to be maintained by the health care provider have been improperly altered or reconstructed, or a material number of the relevant records are otherwise unavailable; or
(d) in which there is clear evidence of fraud by the health care provider and the payer has investigated the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), and referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(11) (a) In seeking reimbursement for the overpayment from the health care provider, except as provided for in subparagraph (b) of this paragraph, no payer shall collect or attempt to collect:
(i) the funds for the reimbursement on or before the 45th calendar day following the submission of the reimbursement request to the health care provider;
(ii) the funds for the reimbursement if the health care provider disputes the request and initiates an appeal on or before the 45th calendar day following the submission of the reimbursement request to the health care provider and until the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section are exhausted; or
(iii) a monetary penalty against the reimbursement request, including but not limited to, an interest charge or a late fee.
The payer may collect the funds for the reimbursement request by assessing them against payment of any future claims submitted by the health care provider after the 45th calendar day following the submission of the reimbursement request to the health care provider or after the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section have been exhausted if the payer submits an explanation in writing to the provider in sufficient detail so that the provider can reconcile each covered person's bill.
(b) If a payer has determined that the overpayment to the health care provider is a result of fraud committed by the health care provider and the payer has conducted its investigation and reported the fraud to the Office of the Insurance Fraud Prosecutor as required by law, the payer may collect an overpayment by assessing it against payment of any future claim submitted by the health care provider.
(12) No health care provider shall seek reimbursement from a payer or covered person for underpayment of a claim submitted pursuant to this section later than 18 months from the date the first payment on the claim was made, except if the claim is the subject of an appeal submitted pursuant to subsection e. of this section or the claim is subject to continual claims submission. No health care provider shall seek more than one reimbursement for underpayment of a particular claim.
e. (1) A hospital service corporation or its agent, hereinafter the payer, shall establish an internal appeal mechanism to resolve any dispute raised by a health care provider regardless of whether the health care provider is under contract with the payer regarding compliance with the requirements of this section or compliance with the requirements of sections 5 through 15 of P.L.2023, c.296 (C.17B:30-55.4 through 17B:30-55.14). No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of an appeal pursuant to this subsection. The payer shall conduct the appeal at no cost to the health care provider.
A health care provider may initiate an appeal on or before the 90th calendar day following receipt by the health care provider of the payer's claims determination, which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance which shall describe the type of substantiating documentation that must be submitted with the form. The payer shall conduct a review of the appeal and notify the health care provider of its determination on or before the 30th calendar day following the receipt of the appeal form. If the health care provider is not notified of the payer's determination of the appeal within 30 days, the health care provider may refer the dispute to arbitration as provided by paragraph (2) of this subsection.
If the payer issues a determination in favor of the health care provider, the payer shall comply with the provisions of this section and pay the amount of money in dispute, if applicable, with accrued interest at the rate of 12% per annum, on or before the 30th calendar day following the notification of the payer's determination on the appeal. Interest shall begin to accrue on the day the appeal was received by the payer.
If the payer issues a determination against the health care provider, the payer shall notify the health care provider of its findings on or before the 30th calendar day following the receipt of the appeal form and shall include in the notification written instructions for referring the dispute to arbitration as provided by paragraph (2) of this subsection.
The payer shall report annually to the Commissioner of Banking and Insurance the number of appeals it has received and the resolution of each appeal.
(2) Any dispute regarding the determination of an internal appeal conducted pursuant to paragraph (1) of this subsection may be referred to arbitration as provided in this paragraph. The Commissioner of Banking and Insurance shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings.
Any party may initiate an arbitration proceeding on or before the 90th calendar day following the receipt of the determination which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance. No dispute shall be accepted for arbitration unless the payment amount in dispute is $1,000 or more, except that a health care provider may aggregate his own disputed claim amounts for the purposes of meeting the threshold requirements of this subsection. No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of arbitration pursuant to this subsection.
(3) The arbitrator shall conduct the arbitration proceedings pursuant to the rules of the arbitration entity, including rules of discovery subject to confidentiality requirements established by State or federal law.
(4) An arbitrator's determination shall be:
(a) signed by the arbitrator;
(b) issued in writing, in a form prescribed by the Commissioner of Banking and Insurance, including a statement of the issues in dispute and the findings and conclusions on which the determination is based; and
(c) issued on or before the 30th calendar day following the receipt of the required documentation.
The arbitration shall be nonappealable and binding on all parties to the dispute.
(5) If the arbitrator determines that a payer has withheld or denied payment in violation of the provisions of this section, the arbitrator shall order the payer to make payment of the claim, together with accrued interest, on or before the 10th business day following the issuance of the determination. If the arbitrator determines that a payer has withheld or denied payment on the basis of information submitted by the health care provider and the payer requested, but did not receive, this information from the health care provider when the claim was initially processed pursuant to subsection d. of this section or reviewed under internal appeal pursuant to paragraph (1) of this subsection, the payer shall not be required to pay any accrued interest.
(6) If the arbitrator determines that a health care provider has engaged in a pattern and practice of improper billing and a refund is due to the payer, the arbitrator may award the payer a refund, including interest accrued at the rate of 12% per annum. Interest shall begin to accrue on the day the appeal was received by the payer for resolution through the internal appeals process established pursuant to paragraph (1) of this subsection.
(7) The arbitrator shall file a copy of each determination with and in the form prescribed by the Commissioner of Banking and Insurance.
f. As used in this section, "insured claim" or "claim" means a claim by a covered person for payment of benefits under an insured hospital service corporation contract for which the financial obligation for the payment of a claim under the contract rests upon the hospital service corporation.
g. Any person found in violation of this section with a pattern and practice as determined by the Commissioner of Banking and Insurance shall be liable to a civil penalty as set forth in section 17 of P.L.2005, c.352 (C.17B:30-55).
##### **§ 17:48-9** Schedule of rates; filing; disapproval by Commissioner {#sec-17-48-9 omnilex-key=us-nj-statutes--title-17--17:48-9}
No corporation subject to the provisions of this act shall enter into any contract with a subscriber unless and until it shall have filed with the Commissioner of Banking and Insurance a full schedule of the rates to be paid by the subscribers to such contracts. The commissioner may disapprove such schedule at any time if he finds that such rates are excessive, inadequate or discriminatory. It shall be unlawful for any corporation to effect any contract according to such rates thereafter. Such disapproval of the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48-10** Solicitation and administrative expenses; investment of funds; surplus {#sec-17-48-10 omnilex-key=us-nj-statutes--title-17--17:48-10}
No corporation subject to the provisions of this chapter shall during any one year disburse more than 10% of the aggregate amount of the payments received from subscribers during that year as expenditures for the soliciting of subscribers, except that during the first year after the issuance of a certificate of authority such corporation may so disburse not more than 20% of such amount and during the second year not more than 15%.
No such corporation shall, during any one year, disburse a sum greater than 20% of the payments received from subscribers during that year as administrative expenses. The term, "administrative expenses," as used in this section, shall include all expenditures for nonprofessional services and in general all expenses not directly connected with the furnishing of hospital services, but not including expenses of soliciting subscribers.
The funds of any hospital service corporation may be invested only in accordance with the requirements now or hereafter provided by law for the investment of funds of life insurance companies. Every hospital service corporation after the first full calendar year of doing business after the effective date of this chapter, shall accumulate and maintain a special contingent surplus over and above its reserves and liabilities at the rate of 2% annually of its net premium income until such surplus shall be not less than $100,000.00. Thereafter for any subsequent calendar year, such special contingent surplus shall be maintained at 2 1/2 % of the net premium income received during that year as determined by reference to the statement of financial condition filed pursuant to R.S. 17:48-11. The special contingent surplus as herein provided shall be contributed by each of the following two categories: 1) community rated, excluding open enrollment and conversion groups; and 2) experience rated subscribers, in the ratio that the net premium income of each category bears to the total net premium income of the corporation and by contributions from the category that gives rise to a diminution of the surplus required to be maintained under this act. Whenever it shall appear that such special contingent surplus has deviated from the amount required to be maintained by more than 2% of the aggregate amount of the net premium income received during that year, the Commissioner of Insurance shall approve and promulgate a plan reasonably calculated to return such special contingent surplus to the amount required to be maintained, within 2 years from the date of implementation of the plan specified above. Approval and promulgation of said plan by the Commissioner of Insurance shall not abrogate the responsibilities of corporate officers with regard to the reporting of financial conditions pursuant to section 11 of the act which that act amends.
##### **§ 17:48-10.1** Hospital service corporation, aggregate benefits. {#sec-17-48-10.1 omnilex-key=us-nj-statutes--title-17--17:48-10.1}
1. a. Beginning with the calendar year starting on January 1, 2020, and in each calendar year thereafter, a hospital service corporation providing health benefits plan to a large employer shall return, in the form of aggregate benefits for all large group health benefits plans offered by the hospital service corporation, at least 85 percent of the aggregate premiums collected for all of those plans.
b. A hospital service corporation shall annually report to the Commissioner of Banking and Insurance, no later than August 1 of each year, the loss ratio calculated for all of the health benefits plans for the previous calendar year. In each case in which the loss ratio fails to substantially comply with the 85 percent loss ratio requirement, the hospital service corporation shall issue a dividend or credit against future premiums for all contract holders in an amount sufficient to assure that the aggregate benefits paid in the previous calendar year plus the amount of the dividends and credits shall equal 85 percent of the premiums collected. The hospital service corporation shall distribute all dividends and credits by December 31 of the year following the calendar year in which the loss ratio requirements were not satisfied. The hospital service corporation's annual report shall include the hospital service corporation's calculation of the dividends and credits applicable to all health benefits plans, as well as an explanation of the hospital service corporation's plan to issue dividends or credits.
c. The commissioner shall specify by regulation:
(1) any informational filings required to be submitted by a hospital service corporation to the commissioner in order to determine whether the hospital service corporation is in compliance with the loss ratio requirements;
(2) the instructions and format for calculating and reporting loss ratios and issuing dividends or credits;
(3) procedures for the distribution of a dividend or credit in the event of cancellation or termination by a contract holder; and
(4) the instructions and format for submitting annual reports.
d. As used in this section, "large employer" means an employer with more than 50 employees, who is not a small employer as defined in section 1 of P.L.1992, c.162 (C.17B:27A-17).
##### **§ 17:48-11** Statement of financial condition; inquiries by Commissioner; penalties {#sec-17-48-11 omnilex-key=us-nj-statutes--title-17--17:48-11}
Every hospital service corporation transacting business in this State shall annually on or before the first day of March file in the Department of Banking and Insurance a statement, subscribed and sworn to by its president and secretary, or in their absence, by two of its principal officers, showing its financial condition at the close of business on the thirty-first day of December of the year last preceding, and its business for that year, which statement shall be in such form and contain such matters as the Commissioner of Banking and Insurance shall prescribe; said commissioner may also address inquiries to any such corporation or its officers in relation to its condition or affairs, or any matter connected with its transactions, and it shall be the duty of the officers of such corporation to promptly reply in writing to all such inquiries; for good cause shown the commissioner may extend the time within which any such statement may be filed.
Any hospital service corporation neglecting to make and file its annual statement in the form and within the time provided by the last preceding section or neglecting to reply in writing to inquiries of the Commissioner of Banking and Insurance within such reasonable time as may be specified by him shall forfeit twenty-five dollars ($25.00) for each day's neglect, to be recovered in a civil action, and upon notice by the Commissioner of Banking and Insurance to that effect its authority to do new business in this State shall cease while such default continues.
##### **§ 17:48-12** Examination of assets and liabilities and affairs; expenses; duty to exhibit books, records and accounts {#sec-17-48-12 omnilex-key=us-nj-statutes--title-17--17:48-12}
The Commissioner of Banking and Insurance shall have the power, whenever he deems it expedient, to make or cause to be made an examination of the assets and liabilities, method of conducting business and all other affairs of every hospital service corporation authorized or which has made application for authority to transact business under the provisions of this act. For the purpose of such examination the commissioner may authorize and employ such persons to conduct the same or to assist therein as he may deem advisable, which examination may be conducted in any State in which the corporation examined has an office, agent or place of business.
The reasonable expense of such examination shall be fixed and determined by the Commissioner of Banking and Insurance, and he shall collect the same from the corporation examined, which shall pay same on presentation of a detailed account of such expense. In case any corporation, after such examination, shall be adjudged by the Superior Court to be insolvent, the expense of such examination, if unpaid, shall be ordered paid out of the assets of the corporation. No corporation shall, either directly or indirectly, pay, by way of gift, credit or otherwise, any other or further sum to the commissioner or to any person in the employ of the Department of Banking and Insurance, for extra service or for purposes of legislation, or for any purpose whatsoever.
It shall be the duty of the officers, agents and employees of any such corporation to exhibit all its books, records and accounts for the purpose of such examination, and otherwise to facilitate the same so far as it may be in their power to do so, and for that purpose the Commissioner of Banking and Insurance, and his deputies, assistants and employees shall have the power to examine, under oath, the officers, agents and employees of any such corporation relative to its business and affairs.
##### **§ 17:48-12.1** Definitions. {#sec-17-48-12.1 omnilex-key=us-nj-statutes--title-17--17:48-12.1}
11. As used in sections 11 through 15 of P.L.2014, c.81 (C.17:48-12.1 through C.17:48-12.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Hospital service corporation" means an entity authorized to transact business in this State pursuant to P.L.1938, c.366 (C.17:48-1 et seq.).
##### **§ 17:48-12.2** Increase in amount of capital or surplus required of hospital service corporation. {#sec-17-48-12.2 omnilex-key=us-nj-statutes--title-17--17:48-12.2}
12. The commissioner may increase the amount of capital or surplus required of a hospital service corporation, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the hospital service corporation's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a hospital service corporation's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section, shall be made only after a departmental hearing, unless that hearing is waived by the affected hospital service corporation. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the hospital service corporation. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular hospital service corporation, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the hospital service corporation charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the hospital service corporation charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the hospital service corporation, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the hospital service corporation's financial condition.
##### **§ 17:48-12.3** Determination of increase, revision or redetermination; factors. {#sec-17-48-12.3 omnilex-key=us-nj-statutes--title-17--17:48-12.3}
13. In determining any increase, revision or redetermination in the capital or surplus of a hospital service corporation pursuant to the provisions of section 12 of P.L.2014, c.81 (C.17:48-12.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 12 of P.L.2014, c.81 (C.17:48-12.2);
c. The extent to which risks described in section 12 of P.L.2014, c.81 (C.17:48-12.2) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the hospital service corporation has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the hospital service corporation's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48-12.4** Suspension, revocation to do business. {#sec-17-48-12.4 omnilex-key=us-nj-statutes--title-17--17:48-12.4}
14. The commissioner may suspend or revoke the authority to do business in this State of any hospital service corporation that does not comply with the provisions of sections 11 through 15 of P.L.2014, c.81 (C.17:48-12.1 through C.17:48-12.5).
##### **§ 17:48-12.5** Rules, regulations. {#sec-17-48-12.5 omnilex-key=us-nj-statutes--title-17--17:48-12.5}
15. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C. 52:14B-1 et seq.) necessary to effectuate the purposes of sections 11 through 15 of P.L.2014, c.81 (C.17:48-12.1 through C.17:48-12.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48-14** Fees {#sec-17-48-14 omnilex-key=us-nj-statutes--title-17--17:48-14}
Every corporation to which this chapter shall be applicable shall pay the following fees to the Commissioner of Insurance for enforcement of the provisions of this chapter, viz.: for filing its application and charter, $10.00; for filing each annual statement, $20.00; for each copy of any paper filed in the Department of Insurance, $0.20 a sheet or folio of 100 words and $1.00 for certifying the same. In addition, such corporation shall pay on April 1 of each year a general supervisory fee to the Commissioner of Insurance of $0.02 per subscriber covered under subscription contracts, other than group contracts, at the end of the preceding year plus $0.02 per member or employee covered under group contracts at the end of the preceding year, and the first such general supervisory fee shall be due as of December 31, 1970, payable April 1, 1971.
##### **§ 17:48-15** Violations of Act; penalties; enforcement {#sec-17-48-15 omnilex-key=us-nj-statutes--title-17--17:48-15}
Any hospital service corporation of this or any other State, country or province which shall have violated any of the provisions of or shall have neglected, failed or refused to comply with any of the requirements of this act, except the failure to file an annual statement, shall be liable to a penalty of five hundred dollars ($500.00), to be sued for and collected by the Commissioner of Banking and Insurance in a civil action in the name of the State. The penalties when recovered shall be paid by the Commissioner of Banking and Insurance into the State treasury for the use of the State. Any officer, agent, employee or member of any such corporation doing business in this State who shall issue, circulate or cause or permit to be circulated, any estimate, illustration, circular of any sort misrepresenting the terms of any contract issued by such corporation, or any other such corporation authorized to transact business under this act, or misrepresent the benefits or advantages promised thereby, or use any name or title of any contract or class of contracts misrepresenting the true nature thereof, or who shall solicit, negotiate or effect the issue of any contract of any hospital service corporation which shall have neglected, failed or refused to procure a certificate of authority as provided for by the provisions of this act or who shall accept any premiums, dues, deposits, contributions, fees, assessments or thing of value of any kind in consideration for such contract or certificate on behalf of such corporation, shall be guilty of a misdemeanor.
##### **§ 17:48-16** Disputes between corporation and hospitals; review {#sec-17-48-16 omnilex-key=us-nj-statutes--title-17--17:48-16}
Any dispute arising between a corporation subject to the provisions of this act and any hospital with which such corporation has a contract for hospital service may be submitted to the Commissioner of Banking and Insurance for his determination with respect thereto. All determinations of the Commissioner of Banking and Insurance made under the provisions of this act shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48-17** Application of chapter {#sec-17-48-17 omnilex-key=us-nj-statutes--title-17--17:48-17}
The provisions of this chapter shall not apply to any corporation carrying on the business of life, health or accident insurance, for profit or gain, nor to fraternal beneficiary associations as defined in section 17:39-1 of the Revised Statutes. Any hospital service corporation authorized to transact business pursuant to this chapter shall be exempt from all other provisions of Title 17 of the Revised Statutes except as herein specified.
##### **§ 17:48-18** Corporation as charitable and benevolent institution; exemption from taxation {#sec-17-48-18 omnilex-key=us-nj-statutes--title-17--17:48-18}
Every corporation subject to the provisions of this chapter is hereby declared to be a charitable and benevolent institution and all of its funds shall be exempt from every State, county, district, municipal and school tax other than taxes on real estate and equipment.
## **Chapter 48A** {#struct-chapter-48a}
##### **§ 17:48A-1** Definitions; liability for medical services {#sec-17-48a-1 omnilex-key=us-nj-statutes--title-17--17:48A-1}
As used in this act the following words and phrases shall have the following meanings:
A medical service corporation is any corporation organized, without capital stock, and not for profit, for the purpose of establishing, maintaining and operating nonprofit medical service plans, or to provide or pay for medical services on the basis of premiums or other valuable consideration. A nonprofit medical service plan is any plan or arrangement operated by a medical service corporation, under the provisions of this act, and whereby the expense of medical services to subscribers and other covered dependents is paid in whole or in part by the corporation to participating physicians of such plans or arrangements and to others as provided herein. A subscriber is a person to whom a subscription certificate is issued by the corporation and which sets forth the kinds and extent of the medical services for which the corporation is liable to make payment and which constitutes the contract between the subscriber and the corporation. A covered dependent is the spouse, an adult dependent or a child of the subscriber who is named in the subscription certificate issued to the subscriber and with respect to whom appropriate premium is specified in the certificate. A participating physician is any physician licensed to practice medicine and surgery, or licensed to practice chiropractic in the State of New Jersey pursuant to chapter 9, Title 45, of the Revised Statutes, who agrees in writing with the corporation to perform the medical services specified in the contracts issued by the corporation and at such rates of compensation as shall be determined by its board of trustees and who agrees to abide by the bylaws, rules and regulations of the corporation applicable to participating physicians. Medical service includes all general and special medical, dental and surgical services and chiropractic diagnostic X-ray services, ordinarily provided by such licensed physicians and by others as provided herein in accordance with accepted practices in the community at the time the service is rendered, and within the scope of their licenses. No subscriber or his covered dependents shall be liable for any payment to any participating physician for medical services specified in the subscriber's certificate to be paid to the participating physician by the corporation.
##### **§ 17:48A-2** Nonprofit corporation; trustees and physicians; who may operate medical service plan; certificate of authority {#sec-17-48a-2 omnilex-key=us-nj-statutes--title-17--17:48A-2}
No medical service corporation shall be converted into a corporation organized for pecuniary profit. Every such corporation shall be operated for the benefit of the subscribers. No person shall be elected a trustee of any medical service corporation unless his nomination has been approved by a recognized medical society or professional medical organization having not less than 2,000 members holding licenses to practice medicine and surgery pursuant to chapter 9, Title 45, of the Revised Statutes, and which has been incorporated for a period of not less than 10 years. No medical service corporation shall impose any restrictions on physicians who administer to its subscribers as to methods of diagnosis or treatment. The private relationship of physician and patient shall be maintained and the subscriber shall at all times be free to choose either a doctor of medicine, doctor of chiropractic or any other participating physician. No person, firm, association or corporation other than a medical service corporation shall establish, maintain or operate a medical service plan or any other means, agency or device for contracting with persons to pay for or to provide for medical services on the basis of premiums or other valuable considerations to be collected by such person, firm, association or corporation from such persons for the issue of such contracts; provided, that this section shall not be construed as preventing the exercise of any authority or privilege granted to any corporation by any certificate of authority issued by the Commissioner of Insurance pursuant to any law of this State; and provided further, that this section shall not be construed as preventing any person, firm, association or corporation from furnishing medical services required under any workmen's compensation law. No medical service corporation shall solicit subscribers or enter into any contract with any subscriber until it has received from the Commissioner of Insurance a certificate of authority to do so.
##### **§ 17:48A-2.1** Medical service corporation merger procedure {#sec-17-48a-2.1 omnilex-key=us-nj-statutes--title-17--17:48A-2.1}
A medical service corporation established pursuant to the provisions of P.L. 1940, c. 74 (C. 17:48A-1 et seq.) may merge with a hospital service corporation established pursuant to P.L. 1938, c. 366 (C. 17:48-1 et seq.), pursuant to the provisions of P.L. 1985, c. 236 (C. 17:48E-1 et seq.) provided that the board of directors of the hospital service corporation executes a merger agreement, which shall be filed with the commissioner, and which shall provide that the board of directors of the survivor corporation be constituted in the manner provided for in section 6 of P.L. 1985, c. 236 (C. 17:48E-6).
L. 1985, c. 236, s. 46, eff. July 15, 1985.
##### **§ 17:48A-3** Issuance of certificate of authority; amendment; counties affected {#sec-17-48a-3 omnilex-key=us-nj-statutes--title-17--17:48A-3}
The Commissioner of Banking and Insurance shall issue such certificate of authority to any such medical service corporation of this State when it shall have filed in the Department of Banking and Insurance a certified copy of its charter or certificate of incorporation, a copy of its by-laws certified by the lawful custodian of the original, a statement of its financial condition in such form and detail and containing such matters as the Commissioner of Banking and Insurance shall require, signed and sworn to by its president and secretary or other proper officers, and when the Commissioner of Banking and Insurance is satisfied, on the basis of examination or otherwise, that the corporation is organized without capital stock and not for pecuniary profit and has complied with the requirements of this chapter and that its condition or methods of operation are not such as would render its operations hazardous to the public or its subscribers. No change in, or amendment to, or alteration in, addition to, or substitution of any document, instrument or other papers so filed shall become operative or effective until the same shall also have been filed in a similar manner. The certificate of authority issued by the commissioner shall specify the county or counties in which the corporation may conduct its business. Such certificate may be amended from time to time to include additional counties on the basis of qualification pursuant to the provisions of this act. No such certificate shall be issued to authorize a corporation to transact business in any county, or if issued, the authority with respect to such county shall be canceled by the commissioner, if he shall find that less than fifty-one per centum (51%) of the eligible physicians in any county are participating physicians. No certificate of authority shall be issued to any medical service corporation not incorporated as a corporation without capital stock not for pecuniary profit under the laws of this State.
##### **§ 17:48A-4** Corporate funds required {#sec-17-48a-4 omnilex-key=us-nj-statutes--title-17--17:48A-4}
No certificate of authority shall be issued to any medical service corporation except on receipt of evidence by the Commissioner of Banking and Insurance that the corporation is in possession of unencumbered funds of not less than five thousand dollars ($5,000.00) and that such amount is held in cash or in bank to the credit of the corporation.
##### **§ 17:48A-5** Subscription contracts. {#sec-17-48a-5 omnilex-key=us-nj-statutes--title-17--17:48A-5}
5. Every individual contract made by any corporation subject to the provisions of this chapter to provide payment for medical services shall provide for the payment of medical services for a period of 12 months from the date of issue of the subscription certificate. Any such contract may provide that it shall be automatically renewed from year to year unless there shall have been one month's prior written notice of termination by either the subscriber or the corporation. In the absence of fraud or material misrepresentation in the application for contract or for reinstatement, no contract with an individual subscriber shall be terminated by the corporation unless all contracts of the same type, in the same group, or covering the same classification of persons are terminated under the same conditions. No contract between such corporation and subscriber shall allow for the payment for medical services for more than one person, except that a family contract may provide that payment will be made for medical services rendered to a subscriber and any of those dependents defined in section 1 of this act.
Whenever, pursuant to the provisions of a subscription certificate or group contract issued by a corporation, the former spouse of a named subscriber under such a certificate or contract is no longer entitled to coverage as an eligible dependent by reason of divorce, separate coverage for such former spouse shall be made available by the corporation on an individual nongroup basis under the following conditions:
(a) Application for such nongroup coverage shall be made to the corporation by or on behalf of such former spouse no later than 31 days following the date his or her coverage under the prior certificate or contract terminated.
(b) No new evidence of insurability shall be required in connection with the application for such nongroup coverage, but any health exception, limitation, or exclusion applicable to said former spouse under the prior coverage may, at the option of the corporation, be carried over to the new nongroup coverage.
(c) The effective date of the new coverage shall be the day following the date on which such former spouse's coverage under the prior certificate or contract terminated.
(d) The benefits provided under the nongroup coverage issued to such former spouse shall be at least equal to the basic benefits provided in contracts then being issued by the corporation to new nongroup applicants of the same age and family status.
Family type contracts shall provide that the services applicable for children shall be payable with respect to a newly born child of the subscriber or his or her spouse from the moment of birth. The services for newly born children shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities. If a subscription payment is required to provide services for a child, the contract may require that notification of birth of a newly born child and the required payment shall be furnished to the service corporation within 90 days after the date of birth in order to have the coverage continue beyond such 90-day period.
Nonfamily type contracts which provide for services to the subscriber, but not to family members or dependents of that subscriber, shall also provide services to newly born children of the subscriber which shall commence with the moment of birth of each child and shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities, provided that application therefor and payment of the required subscription amount are made to include in said contract the coverage described in the preceding paragraph of this section within 90 days from the date of birth of a newborn child.
A contract under which coverage of a dependent of a subscriber terminates at a specified age shall, with respect to an unmarried child, covered by the contract prior to attainment of age 19, who is incapable of self-sustaining employment by reason of intellectual disability or physical handicap and who became so incapable prior to attainment of age 19 and who is chiefly dependent upon such subscriber for support and maintenance, not so terminate while the contract remains in force and the dependent remains in such condition, if the subscriber has within 31 days of such dependent's attainment of the termination age submitted proof of such dependent's incapacity as described herein. The foregoing provisions of this paragraph shall not apply retrospectively or prospectively to require a medical service corporation to insure as a covered dependent any child with an intellectual disability or physical handicap of the applicant where the contract is underwritten on evidence of insurability based on health factors required to be set forth in the application. In such cases, any contract heretofore or hereafter issued may specifically exclude such child with an intellectual disability or physical handicap from coverage.
##### **§ 17:48A-6** Written contracts required; subscription certificates {#sec-17-48a-6 omnilex-key=us-nj-statutes--title-17--17:48A-6}
Every individual contract entered into by any such corporation with any subscriber shall be in writing and a certificate stating the terms and conditions thereof shall be furnished to the subscriber. No such subscription certificate shall be issued or delivered by any medical service corporation of this State unless it contains the following provisions:
(a) A statement of the amounts payable to the corporation by the subscriber and the times at which and the manner in which such amounts shall be paid; and a provision requiring 1 month's written notice to the subscriber before termination or cancellation of the contract or any change in the contract, including a change of subscription rate, shall take effect;
(b) A statement of the nature of the medical services to be paid for and the period during which the certificate is effective; and if there are any types of medical services to be excepted, or for which benefits are limited, a detailed statement of such exceptions and limitations printed as hereinafter specified;
(c) A statement of the terms or conditions, if any, upon which the certificate may be canceled or otherwise terminated at the option of either party. Any notice to the subscriber shall be effective if sent by mail to the subscriber's address as shown at the time on the plan's records, except that, in the case of persons for whom payment is made through a remitting agent, any such notice to the subscriber shall also be effective if a personalized notice is sent to the remitting agent for delivery to the subscriber, in which case it shall be the responsibility of the remitting agent to make such delivery. The notice to the subscriber as herein required shall be sent at least 30 days before the amendment, cancellation or termination of the contract takes effect. Any rider or endorsement accompanying such notice, and amending the rates or other provisions of the contract, shall be deemed to be a part of the contract as of the effective date of such rider or endorsement;
(d) A statement that the subscription certificate constitutes the contract between the corporation and the subscriber and includes the endorsements thereon and attached papers, if any, and contains the entire contract;
(e) A statement that no statement by the subscriber in his application for a certificate shall avoid the contract or be used in any legal proceeding thereunder, unless such application or an exact copy thereof is included in or attached to the certificate, and that no agent or representative of such corporation, other than an officer or officers designated in the certificate, is authorized to change the contract or waive any of its provisions;
(f) A statement that if the subscriber defaults in making any payment under the certificate, the subsequent acceptance of a payment by the corporation or by one of its duly authorized agents shall reinstate the certificate, but with respect to sickness and injury may cover only such sickness and injury as may be first manifested more than a specified number of days, not exceeding 10, after the date of such acceptance;
(g) A statement of the period of grace which will be allowed the subscriber for making any payment due under the contract. Such period shall not be less than 10 days;
(h) A statement that indemnity in the form of cash will not be paid to any subscriber except in payment for medical services for which the corporation was liable at the time of such payment.
Any such subscription certificate may contain a provision that all medical services paid for by a medical service corporation shall be in accordance with the accepted medical practices in the community at the time, but the corporation shall not be liable for injuries resulting from negligence, misfeasance, malfeasance, nonfeasance or malpractice on the part of any officer or employee or on the part of any physician in the course of rendering medical services to subscribers.
Any medical service corporation may classify subscribers whereby under specified circumstances a subscriber or covered dependents may pay a participating physician for medical services an amount in addition to that payable by the corporation for medical services and the subscription certificate issued to any subscriber affected thereby shall contain the provisions thereof and shall specify such circumstances.
##### **§ 17:48A-6.1** Elective surgery; definitions {#sec-17-48a-6.1 omnilex-key=us-nj-statutes--title-17--17:48A-6.1}
As used in this act:
a. "Elective surgical procedure" means any nonemergency surgical procedure which may be scheduled at the convenience of the patient or the surgeon without jeopardizing the patient's life or causing serious impairment to the patient's bodily functions.
b. "Second surgical opinion" means an opinion of an eligible physician based on that physician's examination of a person for the purpose of evaluating the medical advisability of that person undergoing an elective surgical procedure. The examination must be performed after another physician licensed to practice medicine and surgery has recommended such surgical procedure, but prior to the performance of such surgical procedure.
c. "Eligible physician" means a physician licensed to practice medicine and surgery who holds the rank of Diplomate of an American Board (M.D.) or Certified Specialist (D.O.) in the surgical or medical specialty for which surgery is proposed. The program may be limited to eligible physicians who have agreed to participate in the corporation's second surgical opinion program.
##### **§ 17:48A-6.2** Second surgical opinion program {#sec-17-48a-6.2 omnilex-key=us-nj-statutes--title-17--17:48A-6.2}
Any corporation issuing a group or individual contract in accordance with chapter 48A of Title 17 of the Revised Statutes, which provides payment for surgical services rendered to a person while confined in a hospital as an inpatient, shall make available benefits for a second surgical opinion for elective surgical procedures, which would require an inpatient admission to a hospital. In the case of a group contract, benefits for a second surgical opinion shall be available only if requested by the group policyholder.
##### **§ 17:48A-6.3** Payment for second surgical opinion {#sec-17-48a-6.3 omnilex-key=us-nj-statutes--title-17--17:48A-6.3}
A second surgical opinion program shall provide for payment for the second surgical opinion of an eligible physician and for essential laboratory and X-ray services incidental thereto.
##### **§ 17:48A-6.4** Third surgical opinion {#sec-17-48a-6.4 omnilex-key=us-nj-statutes--title-17--17:48A-6.4}
If a second surgical opinion does not confirm that the proposed elective surgical procedure is medically advisable, the program shall cover a third surgical opinion in the same manner as the second opinion.
##### **§ 17:48A-6.5** Second opinion exclusions {#sec-17-48a-6.5 omnilex-key=us-nj-statutes--title-17--17:48A-6.5}
A second surgical opinion program may exclude benefits while the patient is confined in a hospital as an inpatient, any surgical procedures not covered by the group or individual contract, and surgical procedures in the following categories: cosmetic surgery, dental surgery, and podiatric surgery.
##### **§ 17:48A-6.6** Physicians furnishing opinion and performing surgical procedure; payment {#sec-17-48a-6.6 omnilex-key=us-nj-statutes--title-17--17:48A-6.6}
If a physician who furnishes a second or third surgical opinion also performs the surgical procedure, the second surgical opinion program need not provide payment for the second or third opinion services.
##### **§ 17:48A-6.7** Application {#sec-17-48a-6.7 omnilex-key=us-nj-statutes--title-17--17:48A-6.7}
This act shall apply to all contracts in which the corporation has reserved the right to change the premium.
##### **§ 17:48A-6.10** Eligibility for enrollment in medical service corporation {#sec-17-48a-6.10 omnilex-key=us-nj-statutes--title-17--17:48A-6.10}
2. Notwithstanding any other provision of law to the contrary, a medical service corporation shall not consider a person's eligibility for medical assistance pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), or the equivalent statute in another state, when determining the person's eligibility for enrollment in, or the provision of benefits under, a medical service corporation contract providing hospital or medical expense benefits delivered, issued or executed in this State, or approved for issuance in this State by the Commissioner of Insurance.
##### **§ 17:48A-6.11** Medical service corporation contract, exclusion, rates, terms based on genetic information prohibited. {#sec-17-48a-6.11 omnilex-key=us-nj-statutes--title-17--17:48A-6.11}
12. Every individual or group medical service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall not exclude any person or eligible dependent and shall not establish any rates or terms therefor on the basis of an actual or expected health condition or on the basis of any genetic characteristic. For the purposes of this section, "genetic characteristic" means any inherited gene or chromosome, or alteration thereof, that is scientifically or medically believed to predispose an individual to a disease, disorder or syndrome, or to be associated with statistically increased risk of development of a disease, disorder or syndrome.
##### **§ 17:48A-7** Formal requirements for subscription certificates {#sec-17-48a-7 omnilex-key=us-nj-statutes--title-17--17:48A-7}
In every such subscription certificate issued or delivered by any medical service corporation of this State:
(a) All printed portions shall be plainly printed in type of which the face is not smaller than ten point;
(b) There shall be a brief description of the subscription certificate on its first page, and on its filing back in type of which the face is not smaller than fourteen points;
(c) The exceptions and limitations of the contract shall appear with the same prominence in the certificate as the benefits to which they apply; and
(d) If the contract contains any provisions purporting to make any portion of the articles, constitution or by-laws or regulations of the corporation or plans a part of the contract, such portion shall be set forth in full in the subscription certificate.
##### **§ 17:48A-7b** Reconstructive breast surgery; benefits {#sec-17-48a-7b omnilex-key=us-nj-statutes--title-17--17:48A-7b}
1. Every subscription certificate and group and individual contract providing medical service benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits, following a mastectomy on one breast or both breasts, for reconstructive breast surgery, surgery to restore and achieve symmetry between the two breasts, and the costs of prostheses and, under any contract providing out-of-hospital x-ray or radiation therapy, benefits for out-of-hospital chemotherapy following surgical procedures in connection with the treatment of breast cancer shall be included as a part of the out-of-hospital x-ray or radiation therapy benefit. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium. Such benefits shall be provided to the same extent as for any other sickness under the contract.
##### **§ 17:48A-7c** Medical service contracts {#sec-17-48a-7c omnilex-key=us-nj-statutes--title-17--17:48A-7c}
Every group and individual contract providing medical service benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this amendatory and supplementary act, shall offer coverage for maternity care without regard to marital status to subscribers or other persons covered thereunder for expenses incurred in pregnancy and childbirth. The maternity benefits shall be provided to the same extent as the benefits are provided in the contract for any other covered illness. If a fixed amount is specified in the contract for surgery, the fixed amount for a pregnancy-related surgical procedure shall be commensurate with the fixed amount payable for a surgical procedure of comparable difficulty and severity.
##### **§ 17:48A-7d** Medical service corporation insurance benefits for preexisting condition. {#sec-17-48a-7d omnilex-key=us-nj-statutes--title-17--17:48A-7d}
1. a. Notwithstanding any other provision of law to the contrary, no group health insurance contract issued by a medical service corporation pursuant to the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.), shall contain any provision which denies benefits for a preexisting condition to any person becoming a member of that group. A medical service corporation shall not include a preexisting condition as a factor in calculating the premium.
b. Nothing in this section shall be construed to operate to add any benefit, to increase the scope of any benefit, or to increase any benefit level under any group contract.
c. This section shall apply to every group contract or policy in which the corporation or insurer has the right to change the premium.
##### **§ 17:48A-7e** Medical service corporation to pay benefits for treatment of Wilm's tumor {#sec-17-48a-7e omnilex-key=us-nj-statutes--title-17--17:48A-7e}
Every group or individual medical service corporation contract providing hospital or medical expense benefits shall provide benefits to any subscriber or other person covered thereunder for expenses incurred in the treatment of Wilm's tumor, including autologous bone marrow transplants when standard chemotherapy treatment is unsuccessful, notwithstanding that any such treatment may be deemed experimental or investigational. These benefits shall be provided to the same extent as for any other sickness under the contract.
##### **§ 17:48A-7f** Medical service corporation contract, mammogram examination benefits. {#sec-17-48a-7f omnilex-key=us-nj-statutes--title-17--17:48A-7f}
2. a. No group or individual medical service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred in conducting:
(1) one baseline mammogram examination for women who are 40 years of age; a mammogram examination every year for women age 40 and over; and, in the case of a woman who is under 40 years of age and has a family history of breast cancer or other breast cancer risk factors, a mammogram examination at such age and intervals as deemed medically necessary by the woman's health care provider; and
(2) an ultrasound evaluation, a magnetic resonance imaging scan, a three-dimensional mammography, or other additional testing of an entire breast or breasts, after a baseline mammogram examination, if the mammogram demonstrates extremely dense breast tissue, if the mammogram is abnormal within any degree of breast density including not dense, moderately dense, heterogeneously dense, or extremely dense breast tissue, or if the patient has additional risk factors for breast cancer including but not limited to family history of breast cancer, prior personal history of breast cancer, positive genetic testing, extremely dense breast tissue based on the Breast Imaging Reporting and Data System established by the American College of Radiology, or other indications as determined by the patient's health care provider. The coverage required under this paragraph may be subject to utilization review, including periodic review, by the medical service corporation of the medical necessity of the additional screening and diagnostic testing.
b. These benefits shall be provided to the same extent as for any other sickness under the contract.
c. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7g** Medical service corporation, benefits for "off-label" drugs required {#sec-17-48a-7g omnilex-key=us-nj-statutes--title-17--17:48A-7g}
3. a. Except as provided in P.L.1992, c.161 (C.17B:27A-2 et al.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), no group or individual medical service corporation contract which provides benefits for expenses incurred in prescribing drugs approved by the federal Food and Drug Administration shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred in prescribing a drug for a treatment for which it has not been approved by the Food and Drug Administration if the drug is recognized as being medically appropriate for the specific treatment for which it has been prescribed in one of the following established reference compendia:
(1) the American Medical Association Drug Evaluations;
(2) the American Hospital Formulary Service Drug Information;
(3) the United States Pharmacopoeia Drug Information;
or, it is recommended by a clinical study or review article in a major peer-reviewed professional journal.
b. Notwithstanding the provisions of this section, coverage shall not be required for any experimental or investigational drug or any drug which the Food and Drug Administration has determined to be contraindicated for the specific treatment for which the drug has been prescribed. The benefits provided pursuant to this section shall be provided to the same extent as other benefits under the contract for drugs prescribed for a treatment approved by the Food and Drug Administration.
c. This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
d. Any coverage of a drug required by this section shall also include medically necessary services associated with the administration of the drug.
##### **§ 17:48A-7h** Medical service corporation, benefits for health promotion {#sec-17-48a-7h omnilex-key=us-nj-statutes--title-17--17:48A-7h}
4. a. Every medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.1999, c.339, shall provide benefits to any subscriber or other person covered thereunder for expenses incurred in a health promotion program through health wellness examinations and counselling, which program shall include, but not be limited to, the following tests and services:
(1) For all persons 20 years of age and older, annual tests to determine blood hemoglobin, blood pressure, blood glucose level, and blood cholesterol level or, alternatively, low-density lipoprotein (LDL) level and blood high-density lipoprotein (HDL) level;
(2) For all persons 35 years of age or older, a glaucoma eye test every five years;
(3) For all persons 40 years of age or older, an annual stool examination for presence of blood;
(4) For all persons 45 years of age or older, a left-sided colon examination of 35 to 60 centimeters every five years;
(5) For all women 20 years of age or older, a pap smear pursuant to the provisions of section 3 of P.L.1995, c.415 (C.17:48A-7m);
(6) For all women 40 years of age or older, a mammogram examination pursuant to the provisions of section 2 of P.L.1991, c.279 (C.17:48A-7f);
(7) For all adults, recommended immunizations; and
(8) For all persons 20 years of age or older, an annual consultation with a health care provider to discuss lifestyle behaviors that promote health and well-being including, but not limited to, smoking control, nutrition and diet recommendations, exercise plans, lower back protection, weight control, immunization practices, breast self-examination, testicular self-examination and seat belt usage in motor vehicles.
Notwithstanding the provisions of this subsection to the contrary, if a physician or other health care provider recommends that it would be medically appropriate for a covered person to receive a different schedule of tests and services than that provided for under this subsection, the medical service corporation shall provide payment for the tests or services actually provided, within the limits of the amounts listed in subsection b. of this section.
b. Every individual or group basic health care contract offered for sale in this State by a medical service corporation pursuant to subsection a. of this section shall provide payment for the benefits set forth in subsection a. of this section in an amount which shall not exceed: $125 a year for each person between the ages of 20 to 39, inclusive; $145 a year for each man age 40 and over; and $235 a year for each woman age 40 and over; except that for persons 45 years of age or older, the cost of a left-sided colon examination shall not be included in the above amount; however, no medical service corporation shall be required to provide payment for benefits for a left-sided colon examination in excess of $150.
c. The Commissioner of Banking and Insurance, in consultation with the Department of the Treasury, shall annually adjust the threshold amounts provided by subsection b. of this section in direct proportion to the increase or decrease in the consumer price index for all urban consumers in the New York City and Philadelphia areas as reported by the United States Department of Labor. The adjustment shall become effective on July 1 of the year in which the adjustment is made.
d. This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
e. The provisions of this section shall not apply to a health benefits plan subject to the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.).
##### **§ 17:48A-7i** Requirements for medical service corporation providing benefits for pharmacy services. {#sec-17-48a-7i omnilex-key=us-nj-statutes--title-17--17:48A-7i}
2. a. Notwithstanding any other provision of law to the contrary, no group or individual medical service corporation contract which provides benefits for pharmacy services, prescription drugs, or for participation in a prescription drug plan, shall be delivered, issued, executed or renewed in this State or approved for issuance in this State on or after the effective date of this act, unless the contract:
(1) Permits the subscriber, at the time of issuance, amendment or renewal, to select benefit coverage allowing the subscriber to choose a pharmacy or pharmacist for the provision of prescription drugs or pharmacy services, provided that any pharmacist or pharmacy selected by the subscriber is registered pursuant to R.S.45:14-1 et seq.;
(2) Provides that no pharmacy or pharmacist shall be denied the right to participate as a preferred provider or as a contracting provider, under the same terms and conditions currently applicable to all other preferred or contracting providers, if the contract provides for coverage by contracted or preferred providers for pharmaceutical services, provided the pharmacy or pharmacist is registered pursuant to R.S.45:14-1 et seq., and accepts the terms and conditions of the contract;
(3) Provides that no copayment, fee, or other condition shall be imposed upon a subscriber selecting a participating or contracting pharmacist or pharmacy that is not also equally imposed upon all subscribers selecting a participating or contracting pharmacist or pharmacy;
(4) (a) Provides that no subscriber shall be required to obtain pharmacy services and prescription drugs from a mail service pharmacy;
(b) Provides for no differential in any copayment applicable to any prescription drug of the same strength, quantity and days' supply, whether obtained from a mail service pharmacy or a non-mail service pharmacy, provided that the non-mail service pharmacy agrees to the same terms, conditions, price and services applicable to the mail service pharmacy; and
(c) Provides that the limit on days' supply is the same whether the prescription drug is obtained from a mail service pharmacy or a non-mail service pharmacy, and that the limit shall not be less than 90 days;
(5) Sets forth the auditing procedures to be used by the medical service corporation and includes a provision that any audit shall take place at a time mutually agreeable to the pharmacy or pharmacist and the auditor. No audit by a medical service corporation shall include a review of any document relating to any person or prescription plan other than those reimbursable by the medical service corporation;
(6) Provides that the medical service corporation, or any agent or intermediary thereof, including a third party administrator, shall not restrict or prohibit, directly or indirectly, a pharmacy from charging the subscriber for services rendered by the pharmacy that are in addition to charges for the drug, for dispensing the drug or for prescription counseling. Services rendered by the pharmacy for which additional charges are imposed shall be subject to the approval of the Board of Pharmacy. A pharmacy shall disclose to the purchaser the charges for the additional services and the purchaser's out-of-pocket cost for those services prior to dispensing the drug. A pharmacy shall not impose any additional charges for patient counseling or for other services required by the Board of Pharmacy or State or federal law;
(7) The provisions of P.L.1999, c.395 shall apply to all contracts delivered. issued or renewed on or after the effective date of P.L.1999, c.395.
b. Nothing in this section shall be construed to operate to add any benefit, to increase the scope of any benefit, or to increase any benefit level under any contract.
c. This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the subscriber charge.
##### **§ 17:48A-7j** Benefits for certain cancer treatments {#sec-17-48a-7j omnilex-key=us-nj-statutes--title-17--17:48A-7j}
2. In addition to benefits provided under regulations adopted pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), a medical service corporation shall offer under every group or individual medical service corporation contract providing hospital or medical expense benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance, on or after the effective date of this act to provide benefits for the treatment of cancer by dose-intensive chemotherapy/autologous bone marrow transplants and peripheral blood stem cell transplants when performed by institutions approved by the National Cancer Institute or pursuant to protocols consistent with the guidelines of the American Society of Clinical Oncologists. Benefits for such treatment shall be provided to the same extent as for any other illness under the contract.
The offer required pursuant to this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium. Nothing in this section shall be construed to limit a medical service corporation in adjusting premium amounts, or providing for reasonable deductibles or copayments, with respect to benefits provided pursuant to this section.
##### **§ 17:48A-7k** Coverage for birth and natal care; medical service corporation {#sec-17-48a-7k omnilex-key=us-nj-statutes--title-17--17:48A-7k}
2. a. Every individual or group contract that provides maternity benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act shall provide coverage for a minimum of 48 hours of in-patient care following a vaginal delivery and a minimum of 96 hours of in-patient care following a cesarean section for a mother and her newly born child in a health care facility licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.). The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
b. Notwithstanding the provisions of subsection a. of this section, a medical service corporation contract that provides coverage for post-delivery care to a mother and her newly born child in the home shall not be required to provide for a minimum of 48 hours and 96 hours, respectively, of in-patient care unless such in-patient care is determined to be medically necessary by the attending physician or is requested by the mother. For the purposes of this section, attending physician shall include the attending obstetrician, pediatrician or other physician attending the mother or newly born child.
c. Every medical service corporation shall provide notice to policyholders regarding the coverage required by this section in accordance with this subsection and regulations promulgated by the Commissioner of Health pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The notice shall be in writing and prominently positioned in any literature or correspondence and shall be transmitted at the earliest of: (1) the next mailing to the policyholder; (2) the yearly informational packet sent to the policyholder; or (3) January 1, 1996.
##### **§ 17:48A-7l** Coverage, diabetes treatment, individual, group medical service corporation. {#sec-17-48a-7l omnilex-key=us-nj-statutes--title-17--17:48A-7l}
2. a. Every individual or group medical service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall provide benefits to any subscriber or other person covered thereunder for expenses incurred for the following equipment and supplies for the treatment of diabetes, if recommended or prescribed by a physician or nurse practitioner/clinical nurse specialist: blood glucose monitors and blood glucose monitors for the legally blind; test strips for glucose monitors and visual reading and urine testing strips; insulin; injection aids; cartridges for the legally blind; syringes; insulin pumps and appurtenances thereto; insulin infusion devices; and oral agents for controlling blood sugar. Coverage for the purchase of a short-acting, intermediate-acting, rapid-acting, long-acting, and pre-mixed insulin product shall not be subject to any deductible, and no copayment or coinsurance for the purchase of insulin shall exceed $35 per 30-day supply. The provisions of this subsection shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this subsection shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this subsection shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
b. Each individual or group medical service corporation contract shall also provide benefits for expenses incurred for diabetes self-management education to ensure that a person with diabetes is educated as to the proper self-management and treatment of their diabetic condition, including information on proper diet. Benefits provided for self-management education and education relating to diet shall be limited to visits medically necessary upon the diagnosis of diabetes; upon diagnosis by a physician or nurse practitioner/clinical nurse specialist of a significant change in the subscriber's or other covered person's symptoms or conditions which necessitate changes in that person's self-management; and upon determination of a physician or nurse practitioner/clinical nurse specialist that reeducation or refresher education is necessary. Diabetes self-management education shall be provided by a dietitian registered by a nationally recognized professional association of dietitians or a health care professional recognized as a Certified Diabetes Educator by the American Association of Diabetes Educators or a registered pharmacist in the State qualified with regard to management education for diabetes by any institution recognized by the board of pharmacy of the State of New Jersey.
c. The benefits required by this section shall be provided to the same extent as for any other sickness under the contract.
d. This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
e. The provisions of this section shall not apply to a health benefits plan subject to the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.).
f. The Commissioner of Banking and Insurance may, in consultation with the Commissioner of Health, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate and periodically update a list of additional diabetes equipment and related supplies that are medically necessary for the treatment of diabetes and for which benefits shall be provided according to the provisions of this section.
##### **§ 17:48A-7m** Medical service corporation contract, Pap smear benefits {#sec-17-48a-7m omnilex-key=us-nj-statutes--title-17--17:48A-7m}
3. No medical service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting a Pap smear. The benefits shall be provided to the same extent as for any other medical condition under the contract.
As used in this section, and notwithstanding the provisions of this section to the contrary, "Pap smear" means an initial Pap smear and any confirmatory test when medically necessary and as ordered by the covered person's physician and includes all laboratory costs associated with the initial Pap smear and any such confirmatory test.
This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7n** Medical service corporation contract, prostate cancer testing {#sec-17-48a-7n omnilex-key=us-nj-statutes--title-17--17:48A-7n}
3. No medical service corporation contract providing hospital or medical expense benefits for groups with greater than 49 persons shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act, unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting an annual medically recognized diagnostic examination including, but not limited to, a digital rectal examination and a prostate-specific anitgen test for men age 50 and over who are asymptomatic and for men age 40 and over with a family history of prostate cancer or other prostate cancer risk factors.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7o** Coverage for minimum inpatient care following mastectomy by individual, group medical service corporation {#sec-17-48a-7o omnilex-key=us-nj-statutes--title-17--17:48A-7o}
2. a. Every individual or group medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall provide coverage for a minimum of 72 hours of inpatient care following a modified radical mastectomy and a minimum of 48 hours of inpatient care following a simple mastectomy. The contract shall not require a health care provider to obtain authorization from the medical service corporation for prescribing 72 or 48 hours, as appropriate, of inpatient care as provided for in this section.
The provisions of this section shall not be construed to: require a patient to receive inpatient care for 72 or 48 hours, as appropriate, if the patient in consultation with the patient's physician determines that a shorter length of stay is medically appropriate; or relieve a patient or a patient's physician, if appropriate, of any notification requirements to the medical service corporation under the contract.
The benefits shall be provided to the same extent as for any other sickness under the contract.
The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
b. The Commissioner of Banking and Insurance shall adopt regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to implement the provisions of this section.
##### **§ 17:48A-7p** Applicability of Health Care Quality Act {#sec-17-48a-7p omnilex-key=us-nj-statutes--title-17--17:48A-7p}
26. Notwithstanding the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L.1997, c.192 (C.26:2S-1 et al.) and regulations adopted thereto. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7q** Coverage for treatment of inherited metabolic diseases by medical service corporation. {#sec-17-48a-7q omnilex-key=us-nj-statutes--title-17--17:48A-7q}
2. No group or individual medical service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, unless the contract provides benefits to each person covered thereunder for expenses incurred in the therapeutic treatment of inherited metabolic diseases, including the purchase of medical foods and low protein modified food products, when diagnosed and determined to be medically necessary by the covered person's physician.
For the purposes of this section, "inherited metabolic disease" means a disease caused by an inherited abnormality of body chemistry for which testing is mandated pursuant to P.L.1977, c.321 (C.26:2-110 et seq.); "low protein modified food product" means a food product that is specially formulated to have less than one gram of protein per serving and is intended to be used under the direction of a physician for the dietary treatment of an inherited metabolic disease, but does not include a natural food that is naturally low in protein; and "medical food" means a food that is intended for the dietary treatment of a disease or condition for which nutritional requirements are established by medical evaluation and is formulated to be consumed or administered enterally under direction of a physician.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7r** Medical service corporation to cover certain audiology, speech-language pathology services. {#sec-17-48a-7r omnilex-key=us-nj-statutes--title-17--17:48A-7r}
3. Notwithstanding any other provision of P.L.1940, c.74 (C.17:48A-1 et seq.), benefits shall not be denied to any eligible individual for eligible services, as determined under the terms of the contract or as otherwise required by law, when the services are determined by a physician to be medically necessary and are performed or rendered to that individual by a licensed audiologist or speech-language pathologist within the scope of practice. The practices of audiology and speech-language pathology shall be deemed to be within the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.) and duly licensed audiologists and speech-language pathologists shall have such privileges and benefits in the scope of their practice under that act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-7s** Coverage for treatment of domestic violence injuries by medical service corporation. {#sec-17-48a-7s omnilex-key=us-nj-statutes--title-17--17:48A-7s}
2. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), no group or individual medical service corporation contract providing hospital or medical expense benefits shall contain any provision which denies benefits for expenses incurred in the treatment of an injury or injuries sustained as the result of domestic violence as defined in section 3 of P.L.1991, c.261 (C.2C:25-19), to a subscriber or other person covered thereunder. Benefits shall be provided to the same extent as for any other treatment under the contract. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7t** Coverage for certain dental procedures for the severely disabled or child age five or under by medical service corporation {#sec-17-48a-7t omnilex-key=us-nj-statutes--title-17--17:48A-7t}
2. a. No group or individual medical service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this amendatory and supplementary act, unless the contract provides benefits to any person covered thereunder who is severely disabled or a child age five or under for expenses incurred for: (1) general anesthesia and hospitalization for dental services; or (2) a medical condition covered by the contract which requires hospitalization or general anesthesia for dental services rendered by a dentist regardless of where the dental services are provided.
b. A group or individual medical service corporation contract may require prior authorization of hospitalization for dental services in the same manner that prior authorization is required for hospitalization for other covered diseases or conditions.
c. This section shall apply to all group or individual medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7u** Medical service corporation to provide coverage for mental health conditions, substance use disorders; collaborative care model. {#sec-17-48a-7u omnilex-key=us-nj-statutes--title-17--17:48A-7u}
2. a. (1) Every individual and group medical service corporation contract that provides hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act shall provide coverage for mental health conditions and substance use disorders under the same terms and conditions as provided for any other sickness under the contract and shall meet the requirements of the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 42 U.S.C. s.18031(j), and any amendments to, and federal guidance or regulations issued under that act, including 45 s.C.F.R. Parts 146 and 147 and 45 C.F.R. s.156.115(a)(3).
Coverage provided pursuant to this section shall include benefits delivered through the psychiatric Collaborative Care Model.
(2) As used in this section:
"Mental health condition" means a condition defined to be consistent with generally recognized independent standards of current medical practice referenced in the current version of the Diagnostic and Statistical Manual of Mental Disorders.
"Psychiatric Collaborative Care Model" means the evidence-based, integrated behavioral health service delivery method wherein a primary care provider and a care manager collaborate with a psychiatric consultant to provide care to a patient. "Psychiatric Collaborative Care Model" shall include those benefits that are billed using the following list of Current Procedural Terminology (CPT) codes, which list shall be updated by the Commissioner of Banking and Insurance whenever the codes are altered or supplemented:
(a) 99492 - Initial psychiatric collaborative care management;
(b) 99493 - Subsequent psychiatric collaborative care management; and
(c) 99494 - Initial or subsequent psychiatric collaborative care management, additional time.
"Same terms and conditions" means that the medical service corporation cannot apply more restrictive non-quantitative limitations, such as utilization review and other criteria or more quantitative limitations such as copayments, deductibles, aggregate or annual limits or benefit limits to mental health condition and substance use disorder benefits than those applied to substantially all other medical or surgical benefits.
"Substance use disorder" means a disorder defined to be consistent with generally recognized independent standards of current medical practice referenced in the most current version of the Diagnostic and Statistical Manual of Mental Disorders.
b. (Deleted by amendment, P.L.2019, c.58)
c. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
d. Nothing in this section shall reduce the requirement for a medical service corporation to provide benefits pursuant to section 2 of P.L.2017, c.28 (C.17:48A-7kk).
##### **§ 17:48A-7v** Coverage for hemophilia services by medical services corporation {#sec-17-48a-7v omnilex-key=us-nj-statutes--title-17--17:48A-7v}
8. Notwithstanding the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of P.L.2000, c.121 (C.26:2S-10.1 et al.) unless the contract meets the requirements of sections 1 and 2 of P.L.2000, c.121 (C.26:2S-10.1 and C.26:2S-10.2) and the regulations adopted thereto. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7w** Medical service corporation to provide coverage for treatment of infertility. {#sec-17-48a-7w omnilex-key=us-nj-statutes--title-17--17:48A-7w}
2. a. A medical service corporation contract which provides hospital or medical expense benefits for groups with more than 50 persons, which includes pregnancy-related benefits, shall not be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act unless the contract provides coverage for persons covered under the contract for medically necessary expenses, as determined by a physician, incurred in the diagnosis and treatment of infertility as provided pursuant to this section. The medical service corporation contract shall provide coverage for any services related to infertility in accordance with American Society for Reproductive Medicine guidelines and as determined by a physician, which includes, but is not limited to: diagnosis and diagnostic tests; medications; surgery; intrauterine insemination; in vitro fertilization, including in vitro fertilization using donor eggs and in vitro fertilization where the embryo is transferred to a gestational carrier or surrogate; genetic testing; artificial insemination; intracytoplasmic sperm injection; four completed egg retrievals; unlimited embryo transfers, in accordance with guidelines from the American Society for Reproductive Medicine, using single embryo transfer when recommended and deemed medically appropriate by a physician; and medical costs of egg or sperm donors, including office visits, medications, laboratory and radiological procedures, and retrieval, shall be covered until the donor is released from treatment by the reproductive endocrinologist. The medical service corporation may provide that coverage for in vitro fertilization shall be limited to a covered person who has used all reasonable, less expensive, and medically appropriate treatments, as determined by a licensed physician, and is still unable to become pregnant or carry a pregnancy to a live birth. Coverage for infertility services provided to partners of persons who have successfully reversed a voluntary sterilization shall not be excluded. A contract shall not impose any restriction concerning the coverage of infertility services based on age.
As used in this section:
"Infertility" means a disease, condition, or status characterized by any of the following:
(1) the inability to achieve a successful pregnancy based on a patient's medical, sexual, and reproductive history, age, physical findings, diagnostic testing, or any combination of those factors;
(2) the need for medical intervention, including, but not limited to, the use of donor gametes or donor embryos in order to achieve a successful pregnancy either as an individual or with a partner; or
(3) in patients having regular, unprotected intercourse and without any known etiology for either partner suggestive of impaired reproductive ability, evaluation should be initiated at 12 months when the female partner is under 35 years of age and at 6 months when the female partner is 35 years of age or older.
Nothing in this definition shall be used to deny or delay treatment to any individual, regardless of relationship status or sexual orientation.
"Treatment of infertility" means the recommended treatment plan or prescribed procedures, services, and medications as directed by a licensed physician for infertility as defined in this section.
The benefits shall be provided to the same extent as for other medical conditions under the contract, except that the services provided for in this section shall be performed at facilities that conform to standards established by the American Society for Reproductive Medicine or the American College of Obstetricians and Gynecologists. The same copayments, deductibles and benefit limits shall apply to the diagnosis and treatment of infertility pursuant to this section as those applied to other medical or surgical benefits under the contract. Infertility resulting from a voluntary unreversed sterilization procedure may be excluded if the voluntary unreversed sterilization is the sole cause of infertility, provided, however, that coverage for infertility services shall not be excluded if the voluntary sterilization is successfully reversed.
b. A religious employer may request, and a hospital service corporation shall grant, an exclusion under the contract for the coverage required by this section for in vitro fertilization, embryo transfer, artificial insemination, zygote intra fallopian transfer, and intracytoplasmic sperm injection if the required coverage is contrary to the religious employer's bona fide religious tenets. The hospital service corporation that issues a contract containing such an exclusion shall provide written notice thereof to each prospective subscriber or subscriber, which shall appear in not less than 10 point type, in the contract, application and sales brochure. For the purposes of this subsection, "religious employer" means an employer that is a church, convention or association of churches, or any group or entity that is operated, supervised, or controlled by or in connection with a church or a convention or association of churches as defined in 26 U.S.C. s.3121(w)(3)(A), and that qualifies as a tax-exempt organization under 26 U.S.C. s.501(c)(3).
c. This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
d. The provisions of this section shall not apply to a medical service corporation contract which, pursuant to a contract between the medical service corporation and the Department of Human Services, provides benefits to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.), the NJ FamilyCare Program established pursuant to P.L.2005, c.156 (C.30:4J-8 et al.), or any other program administered by the Division of Medical Assistance and Health Services in the Department of Human Services.
e. Nothing in this section shall preclude the medical service corporation from performing utilization review, including periodic review of the medical necessity of a particular service, provided all utilization review decisions are consistent with American Society for Reproductive Medicine guidelines.
##### **§ 17:48A-7x** Medical service corporation to provide coverage for colorectal cancer screening. {#sec-17-48a-7x omnilex-key=us-nj-statutes--title-17--17:48A-7x}
2. a. Every medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting a colorectal cancer screening in accordance with United States Preventive Services Task Force recommendations. The method and frequency of screening to be utilized shall be in accordance with the most recently published recommendations of the United States Preventive Services Task Force and as determined medically necessary by the covered person's physician, in consultation with the covered person.
b. No deductible, coinsurance, copayment, or any other cost-sharing requirement shall be imposed for a colonoscopy performed following a positive result on a non-colonoscopy, colorectal cancer screening test recommended by the United States Preventive Services Task Force.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7y** Medical service corporation prescription drug plans to cover certain infant formulas. {#sec-17-48a-7y omnilex-key=us-nj-statutes--title-17--17:48A-7y}
2. A medical service corporation which provides hospital or medical expense benefits for expenses incurred in the purchase of prescription drugs under a contract that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits under the contract for expenses incurred in the purchase of specialized non-standard infant formulas, when the covered infant's physician has diagnosed the infant as having multiple food protein intolerance and has determined such formula to be medically necessary, and when the covered infant has not been responsive to trials of standard non-cow milk-based formulas, including soybean and goat milk. The coverage may be subject to utilization review, including periodic review, of the continued medical necessity of the specialized infant formula.
The benefits shall be provided to the same extent as for any other prescribed items under the contract.
This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7z** Contract issued under C.17:48A-1 et seq. required to cover certain out-of-network services. {#sec-17-48a-7z omnilex-key=us-nj-statutes--title-17--17:48A-7z}
8. Notwithstanding the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L.2001, c.367 (C.26:2S-6.1 et al.). The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7aa** Medical service corporation to offer coverage for domestic partner. {#sec-17-48a-7aa omnilex-key=us-nj-statutes--title-17--17:48A-7aa}
48. A medical service corporation that provides hospital or medical expense benefits under a contract that is delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2003, c.246 (C.26:8A-1 et al.), under which dependent coverage is available, shall offer dependent coverage to a covered person for a covered person's domestic partner. For the purposes of this section, "domestic partner" means a domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3).
This section shall apply to those contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7bb** Medical service corporation, coverage for contraceptives. {#sec-17-48a-7bb omnilex-key=us-nj-statutes--title-17--17:48A-7bb}
2. a. A medical service corporation that provides hospital or medical expense benefits shall provide coverage under every contract delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, for expenses incurred in the purchase of prescription female contraceptives, and the following services, drugs, devices, products, and procedures on an in-network basis:
(1) Any contraceptive drug, device or product approved by the United States Food and Drug Administration, which coverage shall be subject to all of the following conditions:
(a) If there is a therapeutic equivalent of a contraceptive drug, device or product approved by the United States Food and Drug Administration, coverage shall be provided for either the requested contraceptive drug, device or product or for one or more therapeutic equivalents of the requested drug, device or product.
(b) Coverage shall be provided without a prescription for all contraceptive drugs available for over-the-counter sale that are approved by the United States Food and Drug Administration.
(c) Coverage shall be provided without any infringement upon a subscriber's choice of contraception and medical necessity shall be determined by the provider for covered contraceptive drugs, devices or other products approved by the United States Food and Drug Administration.
(2) Voluntary male and female sterilization.
(3) Patient education and counseling on contraception.
(4) Services related to the administration and monitoring of drugs, devices, products and services required under this section, including but not limited to:
(a) Management of side effects;
(b) Counseling for continued adherence to a prescribed regimen;
(c) Device insertion and removal;
(d) Provision of alternative contraceptive drugs, devices or products deemed medically appropriate in the judgment of the subscriber's health care provider; and
(e) Diagnosis and treatment services provided pursuant to, or as a follow-up to, a service required under this section.
b. The coverage provided shall include prescriptions for dispensing contraceptives for:
(1) (Deleted by amendment, P.L.2021, c.376)
(2) up to a 12-month period at one time.
c. (1) Except as provided in paragraph (2) of this subsection, the benefits shall be provided to the same extent as for any other service, drug, device, product, or procedure under the contract, except no deductible, coinsurance, copayment, or any other cost-sharing requirement on the coverage shall be imposed.
(2) In the case of a high-deductible health plan, benefits for male sterilization or male contraceptives shall be provided at the lowest deductible and other cost-sharing permitted for a high-deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
d. This section shall apply to those contracts in which the medical service corporation has reserved the right to change the premium.
e. Nothing in this section shall limit coverage of any additional preventive service for women, as identified or recommended by the United States Preventive Services Task Force or the Health Resources and Services Administration of the United States Department of Health and Human Services pursuant to the provisions of 42 U.S.C. 300gg-13.
##### **§ 17:48A-7cc** Medical service corporation to provide benefits for orthotic and prosthetic appliances. {#sec-17-48a-7cc omnilex-key=us-nj-statutes--title-17--17:48A-7cc}
2. a. Every medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2007, c.345 (C.17:48-6ff et al.), shall provide benefits to any person covered thereunder for expenses incurred in obtaining:
(1) an orthotic or prosthetic appliance from any licensed orthotist or prosthetist, licensed podiatrist, or any certified pedorthist, as determined medically necessary by the covered person's physician; and
(2) an additional orthotic or prosthetic appliance from any licensed orthotist or prosthetist, licensed podiatrist, or any certified pedorthist, if the covered person's physician determines that the additional appliance is necessary to enable the covered person to engage in physical and recreational activities, including running, bicycling, swimming, climbing, skiing, snowboarding, and team and individual sports.
As used in this section, "orthotic appliance," "prosthetic appliance," "licensed orthotist" and "licensed prosthetist" have the meaning assigned to them in section 3 of P.L.1991, c.512 (C.45:12B-3), "licensed podiatrist" has the meaning assigned to it in R.S.45:5-1 et seq., and "certified pedorthist" has the meaning assigned to it in subsection j. of section 18 of P.L.1991, c.512 (C.45:12B-18).
b. On and after the effective date of P.L.2007, c.345 (C.17:48-6ff et al.), a medical service corporation contract shall reimburse for orthotic and prosthetic appliances at the same rate as reimbursement for such appliances under the federal Medicare reimbursement schedule.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7dd** Medical service corporation to provide coverage for hearing aids, cochlear implant for covered persons. {#sec-17-48a-7dd omnilex-key=us-nj-statutes--title-17--17:48A-7dd}
3. a. A medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for medically necessary expenses incurred in the purchase of a hearing aid or cochlear implant for a covered person, as provided in this section.
b. A medical service corporation contract shall provide coverage that includes the purchase of a hearing aid for each ear, when medically necessary and as prescribed or recommended by a licensed physician or audiologist. A medical service corporation may limit the benefit provided in this section to one hearing aid for each hearing-impaired ear every 24 months.
c. A medical service corporation contract shall provide coverage of the cost of treatment related to cochlear implants, including procedures for the implantation of cochlear devices and costs for any parts, attachments, or accessories of the device, including replacement of obsolete external cochlear implant processors.
d. The benefits shall be provided to the same extent as for any other condition under the contract.
e. This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7ee** Individual, group medical service corporation to provide installment payments to obstetrical provider for maternity services. {#sec-17-48a-7ee omnilex-key=us-nj-statutes--title-17--17:48A-7ee}
2. a. Every individual or group medical service corporation contract that provides benefits for maternity services, and that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide for reimbursement in installments to an obstetrical provider licensed in New Jersey for maternity services rendered during the term of a covered person's pregnancy.
b. For the purposes of this section, "obstetrical provider licensed in New Jersey" means:
(1) an obstetrician/gynecologist licensed by the State Board of Medical Examiners; or
(2) a midwife licensed by the State Board of Medical Examiners as a certified midwife or a certified nurse midwife.
c. This section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7ff** Medical service corporation to provide benefits for treatment of autism or other developmental disability. {#sec-17-48a-7ff omnilex-key=us-nj-statutes--title-17--17:48A-7ff}
2. Notwithstanding any other provision of law to the contrary, every medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage pursuant to the provisions of this section.
a. The medical service corporation shall provide coverage for expenses incurred in screening and diagnosing autism or another developmental disability.
b. When the covered person's primary diagnosis is autism or another developmental disability, the medical service corporation shall provide coverage for expenses incurred for medically necessary occupational therapy, physical therapy, and speech therapy, as prescribed through a treatment plan. Coverage of these therapies shall not be denied on the basis that the treatment is not restorative.
c. When the covered person is under 21 years of age and the covered person's primary diagnosis is autism, the medical service corporation shall provide coverage for expenses incurred for medically necessary behavioral interventions based on the principles of applied behavioral analysis and related structured behavioral programs, as prescribed through a treatment plan, subject to the provisions of this subsection.
(1) Except as provided in paragraph (3) of this subsection, the benefits provided pursuant to this subsection shall be provided to the same extent as for any other medical condition under the contract, but shall not be subject to limits on the number of visits that a covered person may make to a provider of behavioral interventions.
(2) The benefits provided pursuant to this subsection shall not be denied on the basis that the treatment is not restorative.
(3) (a) The maximum benefit amount for a covered person in any calendar year through 2011 shall be $36,000.
(b) Commencing on January 1, 2012, the maximum benefit amount shall be subject to an adjustment, to be promulgated by the Commissioner of Banking and Insurance and published in the New Jersey Register no later than February 1 of each calendar year, which shall be equal to the change in the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor, for the calendar year preceding the calendar year in which the adjustment to the maximum benefit amount is promulgated.
(c) The adjusted maximum benefit amount shall apply to a contract that is delivered, issued, executed, or renewed, or approved for issuance or renewal, in the 12-month period following the date on which the adjustment is promulgated.
(d) Notwithstanding the provisions of this paragraph to the contrary, a medical service corporation shall not be precluded from providing a benefit amount for a covered person in any calendar year that exceeds the benefit amounts set forth in subparagraphs (a) and (b) of this paragraph.
d. The treatment plan required pursuant to subsections b. and c. of this section shall include all elements necessary for the medical service corporation to appropriately provide benefits, including, but not limited to: a diagnosis; proposed treatment by type, frequency, and duration; the anticipated outcomes stated as goals; the frequency by which the treatment plan will be updated; and the treating physician's signature. The medical service corporation may only request an updated treatment plan once every six months from the treating physician to review medical necessity, unless the medical service corporation and the treating physician agree that a more frequent review is necessary due to emerging clinical circumstances.
e. The provisions of subsections b. and c. of this section shall not be construed as limiting benefits otherwise available to a covered person.
f. The provisions of subsections b. and c. of this section shall not be construed to require that benefits be provided to reimburse the cost of services provided under an individualized family service plan or an individualized education program, or affect any requirement to provide those services; except that the benefits provided pursuant to those subsections shall include coverage for expenses incurred by participants in an individualized family service plan through a family cost share.
g. The coverage required under this section may be subject to utilization review, including periodic review, by the medical service corporation of the continued medical necessity of the specified therapies and interventions.
h. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7gg** Medical service corporation to provide coverage for oral anticancer medications. {#sec-17-48a-7gg omnilex-key=us-nj-statutes--title-17--17:48A-7gg}
2. a. A medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells on a basis no less favorable than the contract provides for intravenously administered or injected anticancer medications.
b. Pursuant to subsection a. of this section, coverage for expenses for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells shall not be subject to any prior authorization, dollar limit, copayment, deductible or coinsurance provision that does not apply to intravenously administered or injected anticancer medications.
c. A medical service corporation contract shall not achieve compliance with the provisions of this section by imposing an increase in patient cost sharing, including any copayment, deductible or coinsurance, for anticancer medications, whether intravenously administered or injected or orally administered, that are covered under the contract as of the effective date of this act.
d. This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7hh** Medical service corporation to provide coverage for sickle cell anemia. {#sec-17-48a-7hh omnilex-key=us-nj-statutes--title-17--17:48A-7hh}
2. Every medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for medical expenses incurred by a covered person for the treatment of sickle cell anemia and, if the contract provides benefits for expenses incurred in the purchase of outpatient prescription drugs, then the contract shall provide coverage for prescription drug expenses incurred by a covered person for the treatment of sickle cell anemia.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7ii** Medical service corporation to provide coverage for prescription eye drops. {#sec-17-48a-7ii omnilex-key=us-nj-statutes--title-17--17:48A-7ii}
2. a. A medical service corporation which provides hospital or medical expense benefits that include coverage for prescription eye drops under a contract delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred for refills of prescription eye drops in accordance with the Guidance for Early Refill Edits of Topical Ophthalmic Products provided to Medicare Part D plan sponsors by the Centers for Medicare & Medicaid Services of the U.S. Department of Health and Human Services, provided that:
(1) the prescribing health care practitioner indicates on the original prescription that additional quantities of the prescription eye drops are needed; and
(2) the refill requested by the subscriber or covered person does not exceed the number of additional quantities indicated on the original prescription by the prescribing health care practitioner.
b. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7jj** Medical service corporation contract, coverage for synchronization of prescribed medications. {#sec-17-48a-7jj omnilex-key=us-nj-statutes--title-17--17:48A-7jj}
2. a. Every group or individual medical service corporation contract delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, which provides benefits for pharmacy services, prescription drugs, or for participation in a prescription drug plan, shall, on at least one occasion per year for each covered person:
(1) apply a prorated daily cost-sharing rate to prescriptions that are dispensed by a network pharmacy for less than a 30 days' supply if the prescriber or pharmacist indicates the fill or refill is in the best interest of the covered person or is for the purpose of synchronizing the covered person's chronic medications;
(2) provide coverage for a drug prescribed for the treatment of a chronic illness dispensed in accordance with a plan among the covered person, the prescriber and the pharmacist to synchronize the refilling of multiple prescriptions for the covered person; and
(3) determine dispensing fees based exclusively on the total number of prescriptions dispensed; dispensing fees shall not be prorated or based on the number of the days' supply of medication prescribed or dispensed.
b. This section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
c. This section shall not apply to prescriptions for opioid analgesics. "Opioid analgesic" means a drug in the opioid analgesic drug class prescribed to treat moderate to severe pain or other conditions, whether in immediate release or extended release form, and whether or not combined with other drug substances to form a single drug product or dosage form.
##### **§ 17:48A-7kk** Medical service corporation to provide benefits for treatment of substance use disorder. {#sec-17-48a-7kk omnilex-key=us-nj-statutes--title-17--17:48A-7kk}
2. a. A medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide unlimited benefits for inpatient and outpatient treatment of substance use disorder at in-network facilities. The services for the treatment of substance use disorder shall be prescribed by a licensed physician, licensed psychologist, or licensed psychiatrist and provided by licensed health care professionals or licensed or certified substance use disorder providers in licensed or otherwise State-approved facilities, as required by the laws of the state in which the services are rendered.
b. The benefits for the first 180 days per plan year of inpatient and outpatient treatment of substance use disorder shall be provided when determined medically necessary by the covered person's physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements. The facility shall notify the medical service corporation of both the admission and the initial treatment plan within 48 hours of the admission or initiation of treatment. If there is no in-network facility immediately available for a covered person, a medical service corporation shall provide necessary exceptions to its network to ensure admission in a treatment facility within 24 hours.
c. Providers of treatment for substance use disorder to persons covered under a covered contract shall not require pre-payment of medical expenses during this 180 days in excess of applicable co-payment, deductible, or co-insurance under the contract.
d. The benefits for outpatient visits shall not be subject to concurrent or retrospective review of medical necessity or any other utilization management review.
e. (1) The benefits for the first 28 days of an inpatient stay during each plan year shall be provided without any retrospective review or concurrent review of medical necessity and medical necessity shall be as determined by the covered person's physician.
(2) The benefits for days 29 and thereafter of inpatient care shall be subject to concurrent review as defined in this section. A request for approval of inpatient care beyond the first 28 days shall be submitted for concurrent review before the expiration of the initial 28-day period. A request for approval of inpatient care beyond any period that is approved under concurrent review shall be submitted within the period that was previously approved. No medical service corporation shall initiate concurrent review more frequently than at two-week intervals. If a medical service corporation determines that continued inpatient care in a facility is no longer medically necessary, the medical service corporation shall within 24 hours provide written notice to the covered person and the covered person's physician of its decision and the right to file an expedited internal appeal of the determination pursuant to an expedited process pursuant to sections 11 through 13 of P.L.1997, c.192 (C.26:2S-11 through 26:2S-13) and N.J.A.C.11:24A-3.5, as applicable. The medical service corporation shall review and make a determination with respect to the internal appeal within 24 hours and communicate such determination to the covered person and the covered person's physician. If the determination is to uphold the denial, the covered person and the covered person's physician have the right to file an expedited external appeal with the Independent Health Care Appeals Program in the Department of Banking and Insurance pursuant to sections 11 through 13 of P.L.1997, c.192 (C.26:2S-11 through 26:2S-13) and N.J.A.C.11:24A-3.6, as applicable. An independent utilization review organization shall make a determination within 24 hours. If the medical service corporation's determination is upheld and it is determined continued inpatient care is not medically necessary, the medical service corporation shall remain responsible to provide benefits for the inpatient care through the day following the date the determination is made and the covered person shall only be responsible for any applicable co-payment, deductible and co-insurance for the stay through that date as applicable under the contract. The covered person shall not be discharged or released from the inpatient facility until all internal appeals and independent utilization review organization appeals are exhausted. For any costs incurred after the day following the date of determination until the day of discharge, the covered person shall only be responsible for any applicable cost-sharing, and any additional charges shall be paid by the facility or provider.
f. (1) The benefits for the first 28 days of intensive outpatient or partial hospitalization services shall be provided without any retrospective review of medical necessity and medical necessity shall be as determined by the covered person's physician.
(2) The benefits for days 29 and thereafter of intensive outpatient or partial hospitalization services shall be subject to a retrospective review of the medical necessity of the services.
g. Benefits for inpatient and outpatient treatment of substance use disorder after the first 180 days per plan year shall be subject to the medical necessity determination of the medical service corporation and may be subject to prior authorization or, retrospective review and other utilization management requirements.
h. Medical necessity review shall utilize an evidence-based and peer reviewed clinical review tool to be designated through rulemaking by the Commissioner of Human Services in consultation with the Department of Health.
i. The benefits for medication-assisted treatments for substance use disorder shall be provided when determined medically necessary by the covered person's physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements.
j. The first 180 days per plan year of benefits shall be computed based on inpatient days. One or more unused inpatient days may be exchanged for two outpatient visits. All extended outpatient services such as partial hospitalization and intensive outpatient, shall be deemed inpatient days for the purpose of the visit to day exchange provided in this subsection.
k. Except as stated above, the benefits and cost-sharing shall be provided to the same extent as for any other medical condition covered under the contract.
l. The benefits required by this section are to be provided to all covered persons with a diagnosis of substance use disorder. The presence of additional related or unrelated diagnoses shall not be a basis to reduce or deny the benefits required by this section.
m. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
n. The Attorney General's office shall be responsible for overseeing any violations of law that may result from P.L.2017, c.28 (C.17:48-6nn et al.), including fraud, abuse, waste, and mistreatment of covered persons. The Attorney General's office is authorized to adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to implement any of the provisions of P.L.2017, c.28 (C.17:48-6nn et al.).
o. The provisions of this section shall not apply to a medical service corporation contract which, pursuant to a contract between the medical service corporation and the Department of Human Services, provides benefits to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.), the "Family Health Care Coverage Act," P.L.2005, c.156 (C.30:4J-8 et seq.), or any other program administered by the Division of Medical Assistance and Health Services in the Department of Human Services.
p. As used in this section:
"Concurrent review" means inpatient care is reviewed as it is provided. Medically qualified reviewers monitor appropriateness of the care, the setting, and patient progress, and as appropriate, the discharge plans.
"Substance use disorder" is as defined by the American Psychiatric Association in the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition and any subsequent editions and shall include substance use withdrawal.
##### **§ 17:48A-7ll** Medical service corporation to provide coverage regardless of gender identity, expression. {#sec-17-48a-7ll omnilex-key=us-nj-statutes--title-17--17:48A-7ll}
2. a. Notwithstanding any other law or regulation to the contrary, a medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State, by the Commissioner of Banking and Insurance on or after the effective date of this act, shall not contain any provision that discriminates, and the medical service corporation shall not discriminate, on the basis of a covered person's or prospective covered person's gender identity or expression or on the basis that the covered person or prospective covered person is a transgender person.
b. The discrimination prohibited by this section shall include:
(1) denying, cancelling, limiting or refusing to issue or renew a contract on the basis of a covered person's or prospective covered person's gender identity or expression, or for the reason that the covered person or prospective covered person is a transgender person;
(2) demanding or requiring a payment or premium that is based in whole or in part on a covered person's or prospective covered person's gender identity or expression, or for the reason that the covered person or prospective covered person is a transgender person;
(3) designating a covered person's or prospective covered person's gender identity or expression, or the fact that a covered person or prospective covered person is a transgender person, as a preexisting condition for which coverage will be denied or limited; or
(4) denying or limiting coverage, or denying a claim, for services including but not limited to the following, due to a covered person's gender identity or expression or for the reason that the covered person is a transgender person:
(a) health care services related to gender transition if coverage is available for those services under the contract when the services are not related to gender transition, including but not limited to hormone therapy, hysterectomy, mastectomy, and vocal training; or
(b) health care services that are ordinarily or exclusively available to individuals of one sex when the denial or limitation is due only to the fact that the covered person is enrolled as belonging to the other sex or has undergone, or is in the process of undergoing, gender transition.
c. For the purposes of this section:
"Gender expression" means a person's gender-related appearance and behavior, whether or not stereotypically associated with the person's assigned sex at birth.
"Gender identity" means a person's internal sense of their own gender, regardless of the sex the person was assigned at birth.
"Gender transition" means the process of changing a person's outward appearance, including physical sex characteristics, to accord with the person's actual gender identity.
"Transgender person" means a person who identifies as a gender different from the sex assigned to the person at birth.
d. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
e. Nothing in this section shall preclude the medical service corporation from performing utilization review, including periodic review of the medical necessity of a particular service.
##### **§ 17:48A-7mm** Medical service corporation contract to cover digital tomosynthesis of the breast. {#sec-17-48a-7mm omnilex-key=us-nj-statutes--title-17--17:48A-7mm}
2. a. A medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in conducting digital tomosynthesis to detect or screen for breast cancer in women 40 years of age and over; and for diagnostic purposes in women of any age.
b. In the case of digital tomosynthesis conducted to detect or screen for breast cancer in women 40 years of age and over, no deductible, coinsurance or other cost sharing shall be applied; and in the case of digital tomosynthesis conducted for diagnostic purposes in women of any age, the same deductibles, coinsurance, and other cost sharing as apply to similar services under the contract shall be applied.
c. This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7nn** Medical service corporation to provide coverage for donated human breast milk. {#sec-17-48a-7nn omnilex-key=us-nj-statutes--title-17--17:48A-7nn}
2. a. A medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in the provision of pasteurized donated human breast milk, which may include human milk fortifiers if indicated by the prescribing licensed medical practitioner, provided that:
(1) the covered person is an infant under the age of six months;
(2) the milk is obtained from a human milk bank that meets quality guidelines established by the Department of Health ; and
(3) a licensed medical practitioner has issued an order for an infant who is medically or physically unable to receive maternal breast milk or participate in breast feeding or whose mother is medically or physically unable to produce maternal breast milk in sufficient quantities or participate in breast feeding despite optimal lactation support; or
(4) a licensed medical practitioner has issued an order for an infant who meets any of the following conditions:
(a) a body weight below healthy levels determined by the licensed medical practitioner;
(b) a congenital or acquired condition that places the infant at a high risk for development of necrotizing enterocolitis; or
(c) a congenital or acquired condition that may benefit from the use of donor breast milk as determined by the Department of Health.
b. The provisions of this section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
c. Nothing in this section shall preclude the medical service corporation from performing utilization review, including periodic review of the medical necessity of a particular service.
d. The benefits shall be provided to the same extent as for any other prescribed items under the contract.
e. If there is no supply of human breast milk that meets the requirements of paragraph (2) of subsection a. of this section, the medical service corporation shall not be required to provide coverage of expenses pursuant to this section.
##### **§ 17:48A-7oo** Medical service corporation to provide coverage for standard fertility preservation services. {#sec-17-48a-7oo omnilex-key=us-nj-statutes--title-17--17:48A-7oo}
2. a. A medical service corporation contract which provides hospital or medical expense benefits for groups with more than 50 persons and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for standard fertility preservation services when a medically necessary treatment may directly or indirectly cause iatrogenic infertility.
For the purposes of this section:
"Iatrogenic infertility" means an impairment of fertility caused by surgery, radiation, chemotherapy, or other medical treatment affecting reproductive organs or processes.
"May directly or indirectly cause" means a medical treatment with a likely side effect of iatrogenic infertility as established by the American Society for Reproductive Medicine, the American Society of Clinical Oncology, or as defined by the New Jersey Department of Health.
"Standard fertility preservation services" means procedures consistent with established medical practices and professional guidelines published by the American Society for Reproductive Medicine, the American Society of Clinical Oncology, or as defined by the New Jersey Department of Health. "Standard fertility preservation services" shall not include the storage of sperm or oocytes.
The benefits shall be provided to the same extent as for any other medical condition under the contract. The same copayments, deductibles, and benefit limits shall apply to the provision of standard fertility preservation services pursuant to this section as those applied to other medical or surgical benefits under the contract.
b. A medical service corporation providing coverage under this section shall not determine the provision of standard fertility preservation services based on a covered person's expected length of life, present or predicted disability, degree of medical dependency, perceived quality of life, or other health conditions, or based on personal characteristics, including age, sex, sexual orientation, marital status, or gender identity.
c. This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7pp** Medical service corporation to provide coverage for breastfeeding support. {#sec-17-48a-7pp omnilex-key=us-nj-statutes--title-17--17:48A-7pp}
2. a. A medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2019, c.343 (C.17:48-6ss et al.), shall provide coverage for comprehensive lactation support, counseling, and consultation, and the costs for renting or purchasing breastfeeding equipment, in conjunction with each birth, for the duration of breastfeeding for health plan enrollees, with no cost-sharing.
b. Coverage of breastfeeding equipment shall include:
(1) Purchase of a single-user breast pump, subject to the following conditions:
(a) A contract shall cover the purchase of a double electric breast pump. If an enrollee requests a manual pump in lieu of the double electric breast pump, the health plan shall cover the purchase of a manual pump.
(b) A double electric breast pump provided pursuant to this paragraph shall be of sufficient power and durability to establish and maintain milk supply for the duration of breastfeeding.
(c) A contract shall not require documentation of medical necessity, prior authorization, or a prescription for a breast pump provided pursuant to this paragraph.
(d) Coverage shall be available at any time during pregnancy and the postpartum period, and shall continue for the duration of breastfeeding as defined by the plan enrollee.
(e) Coverage for breast pumps shall include repair or replacement if necessary.
(2) Rental or purchase of a multi-user breast pump, on the recommendation of a licensed health care provider, subject to the following conditions:
(a) When recommended by a licensed health care provider, a contract shall provide coverage for a multi-user breast pump.
(b) A medical service corporation may determine whether a rental or purchase is covered.
(c) Coverage for a multi-user breast pump shall be covered without regard to coverage or acquisition of a single-user breast pump.
(d) A medical service corporation may require a letter of medical necessity from a lactation consultant or other health care provider for coverage of a multi-user pump. The letter shall not interfere with the timely acquisition of a multi-user pump.
(3) Coverage of breastfeeding equipment pursuant to this section shall include two breast pump kits per birth event, as well as appropriate size breast pump flanges, or other lactation accessories recommended by a health care provider.
(4) Breastfeeding equipment specified in paragraphs (1) and (3) of this subsection shall be furnished: within 48 hours of notification of need, if requested after the birth of the child; or by the later of two weeks before the enrollee's expected due date or 72 hours after notification, if requested prior to the birth of the child. If the medical service corporation cannot ensure an enrollee receives breastfeeding equipment within 48 hours, an enrollee may purchase the equipment and the health plan shall reimburse all out-of-pocket expenses incurred by the enrollee, including any balance billing amounts.
(5) Breastfeeding equipment specified in paragraph (2) of this subsection shall be made available within 12 hours of notification of need. If equipment is not available within 12 hours of notification of need, the medical service corporation shall reimburse all out-of-pocket rental expenses incurred by an enrollee, including any balance billing amounts, until the enrollee receives breastfeeding equipment.
c. Coverage of comprehensive lactation counseling and lactation consultation shall include:
(1) In-person, one-on-one lactation counseling and lactation consultation, subject to the following conditions:
(a) Coverage shall include visits that occur inside and outside a hospital or office setting. In-person lactation counseling and lactation consultation shall be covered regardless of location of service provision and shall include home visits.
(b) Lactation counseling and lactation consultation shall be made available within 24 hours of notification of need.
(2) Telephonic lactation assistance shall be covered in addition to, and not as a substitute for, in-person, one-on-one lactation counseling or lactation consultation, when an enrollee requests one-on-one, in-person lactation counseling or lactation consultation. The telephonic lactation assistance shall be provided within 12 hours of notification of need.
(3) Group lactation counseling shall be covered in addition to, and not as a substitute for, one-on-one, in-person lactation counseling or lactation consultation, if an enrollee requests one-on-one, in-person lactation counseling or lactation consultation. Group counseling shall include educational classes and support groups.
(4) A contract shall not require prior authorization, prescription or referral for any lactation counseling or lactation consultation, regardless of provider type or setting.
(5) A medical service corporation shall not impose medical management techniques not described in this section.
d. Except as otherwise authorized pursuant to this section, a medical service corporation shall not impose restrictions on the coverage provided pursuant to this section, including, but not limited to, limitations on reimbursement to allowable amounts or reasonable and customary charges, documentation requests, or delays on the coverage provided.
e. As used in this section:
"Cost-sharing" means deductible, co-insurance or co-payments, or similar charges.
"Breast pump kit" means a collection of tubing, valves, flanges, collection bottles, or other parts required to extract human milk using a breast pump.
"Lactation consultant" means an individual who is an International Board Certified Lactation Consultant.
"Lactation consultation" means the clinical application by a lactation consultant or other licensed health care provider of scientific principles and a multidisciplinary body of evidence for evaluation, problem identification, treatment, education, and consultation to child-bearing families utilizing lactation care and services.
Lactation care and services shall include, but not be limited to:
(1) lactation assessment through the systematic collection of subjective and objective data;
(2) analysis of data and creation of a plan of care;
(3) implementation of a lactation care plan with demonstration and instruction to parents and communication to the primary health care provider;
(4) evaluation of outcomes;
(5) provision of lactation education to parents and health care providers; and
(6) the recommendation and use of assistive devices.
"Lactation counseling" means breastfeeding education and support services provided by a lactation counselor, such as:
(1) educating women, families, health care professionals, and the community about the impact of breastfeeding and human lactation on health and what to expect in the normal course of breastfeeding;
(2) acting as an advocate for breastfeeding as the norm for feeding infants and young children;
(3) providing breastfeeding support, encouragement, and care from preconception to weaning in order to help women and their families meet their breastfeeding goals;
(4) using principles of adult education when teaching clients, health care providers, and others in the community; and
(5) identifying and referring high-risk mothers and babies and those requiring clinical treatment appropriately.
"Lactation counselor" means an individual, other than an International Board Certified Lactation Consultant or a licensed health care provider, who is:
(1) licensed or certified to practice lactation counseling under any law, or who is an accredited member belonging to another profession or occupation, who provides breastfeeding education and support services for which that person is licensed, regulated, accredited, or certified; or
(2) a community-based lactation supporter who has received at least 40 hours of specialty education in breastfeeding and lactation, and who works within a lactation counselor's scope of practice.
"Telephonic lactation assistance" means lactation counseling or consultation with a lactation counselor or lactation consultant conducted remotely through live voice communication.
f. This section shall apply to those contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7qq** Medical service corporation to cover preventive services. {#sec-17-48a-7qq omnilex-key=us-nj-statutes--title-17--17:48A-7qq}
2. a. A medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage, without requiring any cost sharing, for the following preventive services:
(1) evidence-based items or services that have in effect a rating of "A" or "B" in the current recommendations of the United States Preventive Services Task Force;
(2) immunizations that have in effect a recommendation from the Department of Health, which shall in making its recommendations consider the recommendations of the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention in the federal Department of Health and Human Services and, as appropriate, the recommendations of the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Physicians;
(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration; and
(4) with respect to women, any additional preventive care and screenings not described in paragraph (1) as provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.
b. (1) Except as provided in paragraph (2) of this subsection, nothing in this section shall:
(a) require a contract which has a network of providers to provide benefits for items or services described in subsection a. of this section that are delivered by an out-of-network provider; or
(b) preclude a contract which has a network of providers from imposing cost-sharing requirements for items or services described in subsection a. of this section that are delivered by an out-of-network provider.
(2) If a contract does not have in its network a provider who can provide an item or service described in subsection a. of this section, the contract shall cover the item or service when performed by an out-of-network provider and shall not impose cost sharing with respect to that item or service.
c. (1) A contract shall provide coverage for an item or service described in subsection a. of this section for plan years that begin on or after the date that is one year after the date the recommendation or guideline is issued.
(2) (a) Except as provided in subparagraph (b) of this paragraph, a contract that is required to provide coverage for an item or service described in subsection a. of this section on the first day of a plan year shall provide coverage for that item or service through the last day of the plan year.
(b) The commissioner may remove a coverage requirement for an item or service during a plan year if the recommendation or guideline changes or is no longer described in subsection a. of this section.
d. The provisions of this section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
e. With respect to an annual wellness visit for a covered member who is over three years of age, a carrier is required to cover only one wellness visit per plan year or calendar year, as provided for under the health benefits plan contract, but may not impose a waiting period for the wellness visit.
##### **§ 17:48A-7rr** Medical service corporation to provide certain coverage for prescription drugs. {#sec-17-48a-7rr omnilex-key=us-nj-statutes--title-17--17:48A-7rr}
2. a. Notwithstanding any other provision of law to the contrary, a medical service corporation that offers a contract that provides benefits for expenses incurred in the purchase of prescription drugs and is delivered, issued, executed, or renewed in this State, shall ensure that at least 25 percent of all plans, or at least one plan if the corporation offers less than four plans, offered by the corporation in each rating area and in each of the bronze, silver, gold, and platinum levels of coverage, in the individual market pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.), and in the small employer market pursuant to P.L.1992, c.162 (C.17B:27A-17), shall conform with the following:
(1) (a) a contract that provides a silver, gold, or platinum level of coverage, as defined in 45 C.F.R. s.156.140, shall limit a covered person's cost-sharing, including any copayment or coinsurance, for prescription drugs, including specialty drugs, to no more than $150 per month for each prescription drug for up to a 30-day supply of any single drug;
(b) a contract that provides a bronze level of coverage, as defined in 45 C.F.R. s.156.140, shall ensure that any required covered person's cost-sharing, including any copayment or coinsurance, does not exceed $250 per month for each prescription drug for up to a 30-day supply of any single drug;
(c) a contract that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, shall be exempt from the requirements of subparagraphs (a) and (b) of this paragraph;
(2) except as provided in paragraph (3) of this subsection, the limits described in paragraph (1) of this subsection shall apply at any point in the benefit design, including before and after any applicable deductible is reached; and
(3) for prescription drug benefits offered in conjunction with a high-deductible health plan, the contract shall not provide prescription drug benefits until the expenditures applicable to the deductible under the plan have met the amount of the minimum annual deductibles in effect for self-only and family coverage under section 223(c)(2)(A)(i) of the federal Internal Revenue Code (26 U.S.C. s.223(c)(2)(A)(i)) for self-only and family coverage, respectively. Once the foregoing expenditure amount has been met under the plan, coverage for prescription drug benefits shall begin, and the limit on out-of-pocket expenditures for prescription drug benefits shall be as specified in paragraph (1) of this subsection.
b. The provisions of this section shall apply to all contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7ss** Medical service corporation to cover adolescent depression screenings. {#sec-17-48a-7ss omnilex-key=us-nj-statutes--title-17--17:48A-7ss}
2. A medical service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in screening adolescents between the ages of 12 and 18 for major depressive disorder, so long as screening for major depressive disorder in adolescents continues to receive a rating of "A" or "B" from the United States Preventative Services Task Force. Coverage shall not be denied solely on the basis that the screening is provided in conjunction with any other health care evaluation, treatment, or service.
The benefits shall be provided to the same extent as for any other condition under the contract, except that the medical service corporation shall not impose on covered persons receiving these services any form of cost sharing, including, but not limited to, copayments, deductibles, or coinsurance.
This section shall apply to those medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7tt** Medical service corporation to cover newborn home nurse visitation. {#sec-17-48a-7tt omnilex-key=us-nj-statutes--title-17--17:48A-7tt}
6. a. No group or individual medical service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159). The contract shall:
(1) provide coverage for the services provided by the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159);
(2) notify a covered person of the services provided by the newborn home nurse visitation program, upon application by the covered person for coverage of a newborn infant;
(3) ensure that the contract does not contain any provision that requires a covered person to receive the services provided by the newborn home nurse visitation program as a condition of coverage, or that denies or limits benefits to the covered person if that person declines the services provided under the program; and
(4) have the discretion to determine how best to reimburse for the expenses incurred for services provided under the newborn home nurse visitation program, including, but not limited to, utilizing:
(a) a value-based payment methodology;
(b) an invoice claim process;
(c) a capitated payment arrangement;
(d) a payment methodology that takes into account the need for an agency or organization providing services under the program to expand its capacity to provide services and address health disparities; or
(e) any other payment arrangement agreed to by the medical service corporation and an agency or organization providing services under the program.
b. Any copayment, coinsurance, or deductible that may be required pursuant to the contract for services covered pursuant to subsection a. of this section shall be waived.
c. Every group or individual medical service corporation that is subject to the provisions of this section shall submit to the Department of Banking and Insurance, in a form and manner prescribed by the department, a report on the claims submitted for services provided under the newborn home nurse visitation program.
The information contained in the report shall be shared with the Department of Children and Families and used by that department to assess the newborn home nurse visitation program pursuant to subsection a. of section 4 of P.L.2021, c.187 (C.26:2H-161).
d. (1) Except as provided in paragraphs (2) and (3) of this subsection, the contract shall specify that no deductible, coinsurance, copayment, or any other cost-sharing requirement may be imposed on the coverage required pursuant to this section.
(2) A contract offered by a group or individual medical service corporation that qualifies as a high deductible health plan shall provide benefits for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159) at the lowest deductible and other cost-sharing requirement permitted for a high deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
(3) A contract offered by a group or individual medical service corporation that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, shall provide benefits for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159) at the lowest deductible and other cost-sharing requirement to the extent permitted for a catastrophic plan under federal law.
e. The provisions of this section shall apply to all contracts in which the group or individual medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-7uu** Individual, group medical service corporation contract, coverage, epinephrine auto-injector device. {#sec-17-48a-7uu omnilex-key=us-nj-statutes--title-17--17:48A-7uu}
5. An individual or group medical service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2023, c.105 (C.17:48-6xx et al.) shall provide coverage for at least one epinephrine auto-injector device, if recommended or prescribed by a participating physician or participating nurse practitioner/clinical nurse specialist. Coverage for the purchase of an epinephrine auto-injector device shall not be subject to any deductible, and no copayment or coinsurance for the purchase of an epinephrine auto-injector device shall exceed $25 per 30-day supply. The provisions of this section shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this section shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this section shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
Nothing in this section shall prevent a medical service corporation from reducing a subscriber's or other covered person's cost-sharing requirement by an amount greater than the amount specified in this section.
##### **§ 17:48A-7vv** Individual, group medical service corporation contract, coverage, prescription asthma inhaler. {#sec-17-48a-7vv omnilex-key=us-nj-statutes--title-17--17:48A-7vv}
6. An individual or group medical service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2023, c.105 (C.17:48-6xx et al.) shall provide benefits to a subscriber or other person covered thereunder for expenses incurred for a prescription asthma inhaler, if recommended or prescribed by a participating physician or participating nurse practitioner/clinical nurse specialist. Coverage for the purchase of a covered prescription asthma inhaler shall not be subject to any deductible, and no copayment or coinsurance for the purchase of a covered prescription asthma inhaler shall exceed $50 per 30-day supply. The provisions of this section shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this section shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this section shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
Nothing in this section shall prevent a medical service corporation from reducing a subscriber's or other covered person's cost-sharing requirement by an amount greater than the amount specified in this section.
##### **§ 17:48A-7ww** Biomarker precision medical testing coverage, medical service corporation contracts. {#sec-17-48a-7ww omnilex-key=us-nj-statutes--title-17--17:48A-7ww}
2. a. Each medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) or is approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for biomarker precision medical testing, as defined by subsection g. of this section.
b. Biomarker precision medical testing shall be covered for the purposes of diagnosis, treatment, appropriate management, or ongoing monitoring of a disease or condition, excluding asymptomatic screening, to guide treatment decisions of a subscriber when the efficacy and appropriateness of biomarker precision medical testing for the diagnosis, treatment, appropriate management, or guiding treatment decisions for a subscriber's disease or condition is recognized by:
(1) labeled indications for an FDA-approved or -cleared test;
(2) indicated tests for an FDA-approved drug;
(3) actions to address warnings and precautions on FDA-approved drug labels;
(4) Centers for Medicare and Medicaid Services National Coverage Determinations or Medicare Administrative Contractor Local Coverage Determinations; or
(5) nationally recognized clinical practice guidelines.
c. Coverage, pursuant to subsection b. of this section, shall be provided in a manner that limits disruption, including multiple biopsies or biospecimen samples, in the care of a subscriber.
d. (1) If utilization review is required, a medical service corporation shall provide a decision pursuant to the guidelines and timeframes set forth in P.L.2023, c.296 (C.17B:30-55.1 et. al).
(2) The subscriber and the treating health care provider or treating health care entity prescribing biomarker precision medical testing for the subscriber shall have access to clear, readily accessible, and conspicuous information on the process to submit an appeal to an adverse determination.
e. The benefits shall be provided to the same extent as for any other medical condition under the contract, including determinations of clinical review criteria used for utilization review of health care services along with copayment, deductible, and coinsurance provisions.
f. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
g. As used in this section:
"Biomarker" means a characteristic that is objectively measured and evaluated as an indicator of normal biological processes, pathogenic processes, or pharmacologic responses to a specific therapeutic intervention, including known gene-drug interactions for medications being considered for use or already being administered. Biomarkers shall also include, but not be limited to, gene mutations, characteristics of genes, or protein expression.
"Biomarker precision medical testing" means the analysis of tissue, blood, or other biospecimen for the presence of a biomarker. Biomarker precision medical testing includes, but is not limited to, single-analyte tests, multiplex panel tests, protein expression, and whole exome, whole genome, and whole transcriptome sequencing.
"Nationally recognized clinical practice guidelines" means evidence-based clinical practice guidelines developed by independent organizations or medical professional societies utilizing a transparent methodology and reporting structure and with a conflict of interest policy. The guidelines establish standards of care informed by a systematic review of evidence and an assessment of the benefits and risks of alternative care options and include recommendations intended to optimize patient care.
##### **§ 17:48A-7xx** Group, individual medical service corporation contracts, HIV preexposure prophylaxis, HIV postexposure prophylaxis. {#sec-17-48a-7xx omnilex-key=us-nj-statutes--title-17--17:48A-7xx}
4. a. (1) Except as provided in paragraph (2) of this subsection, no group or individual medical service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for HIV preexposure prophylaxis and HIV postexposure prophylaxis furnished without an individual prescription pursuant to the requirements of section 2 of P.L.2025, c.196 (C.45:14-67.13) without requiring prior authorization or step therapy.
(2) If the federal Food and Drug Administration has authorized or approved one or more therapeutic equivalents of a drug, device, or product for the prevention of HIV and AIDS, paragraph (1) of this subsection shall not be construed to require the contract to cover all therapeutically equivalent versions without prior authorization or step therapy, if at least one version is covered without prior authorization or step therapy.
b. Reimbursement issued under this section to a pharmacist shall be at a rate that is no less than the rate provided by the group or individual medical service corporation contract to other non-physician practitioners if the reimbursement is for a service or procedure that meets the following criteria:
(1) the service or procedure is within the scope of practice of the treating pharmacist; and
(2) the service or procedure would otherwise be covered under the contract if provided by a healthcare provider, including a physician, advanced practice nurse, or physician assistant.
c. A contract offered by a group or individual medical service corporation shall grant a licensed pharmacist receiving reimbursement under this section the same rights of participation, plan admission, and registration as may be granted by the contract to a healthcare provider, including a physician, advanced practice nurse, or physician assistant, who is reimbursed for an identical service.
d. A contract offered by a group or individual medical service corporation shall not:
(1) prohibit, or permit a delegated pharmacy benefits manager to prohibit, a pharmacist from dispensing HIV preexposure prophylaxis or HIV postexposure prophylaxis; and
(2) be required to cover HIV preexposure prophylaxis that has been furnished by a pharmacist without an individual prescription pursuant to pursuant to section 2 P.L.2025, c.196 (C.45:14-67.13) in excess of a 90-day supply for a single patient within a given two year period.
e. Nothing in this section shall be construed to require a contract offered by a group or individual medical service corporation to provide coverage for HIV preexposure prophylaxis or HIV postexposure prophylaxis furnished by a pharmacist at an out-of-network pharmacy, unless the contract has an out-of-network pharmacy benefit.
f. The provisions of this section shall apply to all contracts in which the group or individual medical service corporation has reserved the right to change the premium.
g. As used in this section:
“HIV preexposure prophylaxis” means the same as that term is defined in section 1 of P.L.2025, c.196 (C.45:14-67.12).
“HIV postexposure prophylaxis” means the same as that term is defined in section 1 of P.L.2025, c.196 (C.45:14-67.12).
“Step therapy” means requiring that a lower-cost alternative to HIV preexposure prophylaxis or HIV postexposure prophylaxis be shown to have been ineffective as a condition of providing prescription benefits coverage for the prophylaxis.
##### **§ 17:48A-7yy** Benefits provided under medical service corporation contracts. {#sec-17-48a-7yy omnilex-key=us-nj-statutes--title-17--17:48A-7yy}
2. a. Every medical service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2025, c.200 (C. 17:48-6bbb et al.), shall provide benefits to any named subscriber or other person covered thereunder for expenses incurred in obtaining medically necessary treatment for women with a diagnosis of perimenopause, menopause, and symptoms associated with perimenopause and menopause, including, but not limited to:
(1) hormonal therapies such as hormone replacement therapy and bioidentical hormone treatments;
(2) non-hormonal treatments, including medications to manage perimenopause and menopausal symptoms;
(3) behavioral health care services;
(4) pelvic floor physical therapy;
(5) bone health treatments, including screenings and medications due to hormonal changes related to perimenopause and menopause;
(6) preventative services that have a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force for early detection and treatment of health conditions related to perimenopause and menopause such as osteoporosis and cancer; and
(7) counseling and education regarding menopause management.
b. A medical service corporation shall provide clear and accessible information to subscribers or covered persons regarding covered perimenopause and menopause treatments.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all medical service corporation contracts in which the medical service corporation has reserved the right to change the premium.
e. As used in this section:
“Menopause” means the permanent end of a female’s menstrual cycle, diagnosed by a licensed medical provider after 12 consecutive months without a menstrual period.
“Perimenopause” means the transitional period leading to menopause, marked by fluctuating hormone levels and changes in menstrual cycles.
##### **§ 17:48A-7.1** Group contracts; issuance; description; benefits; employees defined. {#sec-17-48a-7.1 omnilex-key=us-nj-statutes--title-17--17:48A-7.1}
1. A medical service corporation may issue to a policyholder a group contract, covering at least 10 employees or members at the date of issue, if it conforms to the following description:
(a) A contract issued to an employer or to the trustees of a fund established by one or more employers, or issued to a labor union, or issued to an association formed for purposes other than obtaining such contract, or issued to the trustees of a fund established by one or more labor unions or by one or more employers and one or more labor unions, covering employees and members of associations or labor unions.
(b) A contract issued to cover any other group which the Commissioner of Banking and Insurance (hereinafter called the commissioner) determines may be covered in accordance with sound underwriting principles.
Benefits may be provided for one or more members of the families or one or more dependents of persons who may be covered under a group contract referred to in (a) or (b) above.
Family type contracts shall provide that the services applicable for children shall be payable with respect to a newly born child of the subscriber or his or her spouse from the moment of birth. The services for newly born children shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities. If a subscription payment is required to provide services for a child, the contract may require that notification of birth of a newly born child and the required payment must be furnished to the service corporation within 90 days after the date of birth in order to have the coverage continue beyond such 90-day period.
Group contracts which provide for services to the subscriber, but not to family members or dependents of that subscriber, other than contracts which provide no dependent coverage whatsoever for the subscriber's class, shall also provide services to newly born children of the subscriber which shall commence with the moment of birth of each child and shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities, provided that application therefor and payment of the required subscription amount are made to include in said contract the coverage described in the preceding paragraph of this section within 90 days from the date of birth of a newborn child.
A contract under which coverage of such a dependent terminates at a specified age shall, with respect to an unmarried child, covered by the contract prior to attainment of age 19, who is incapable of self-sustaining employment by reason of intellectual disability or physical handicap and who became so incapable prior to attainment of age 19 and who is chiefly dependent upon the covered employee or member for support and maintenance, not so terminate while the coverage of the employee or member remains in force and the dependent remains in such condition, if the employee or member has within 31 days of such dependent's attainment of the termination age submitted proof of such dependent's incapacity as described herein. The foregoing provisions of this paragraph shall apply retrospectively or prospectively to require a medical service corporation to insure as a covered dependent any child with an intellectual disability or physical handicap of the applicant where the contract is underwritten on evidence of insurability based on health factors required to be set forth in the application. In such cases, any contract heretofore or hereafter issued may specifically exclude such child with an intellectual disability or physical handicap from coverage.
Any group contract which contains provisions for the payment by the insurer of benefits for members of the family or dependents of a person in the insured group shall, subject to payment of the appropriate premium, provide that such family members or dependents be permitted to have coverage continued for at least 180 days after the death of the person in the insured group.
The contract may provide that the term "employees" shall include as employees of a single employer the employees of one or more subsidiary corporations and the employees, individual proprietors, and partners of affiliated corporations, proprietorships and partnerships if the business of the employer and such corporations, proprietorships, or partnerships are under common control through stock ownership, contract, or otherwise. The contract may provide that the term "employees" shall include the individual proprietor or partners of an individual proprietorship or a partnership. The contract may provide that the term "employees" shall include retired employees. A contract issued to trustees may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship. A contract issued to the trustees of a fund established by the members of an association of employers may provide that the term "employees" shall include the employees of the association.
##### **§ 17:48A-7.2** Provisions applicable to group contracts {#sec-17-48a-7.2 omnilex-key=us-nj-statutes--title-17--17:48A-7.2}
The provisions of the act to which this act is a supplement shall apply to group contracts except that sections 5, 6, 7 and 10 of such act shall not apply. The word "subscriber" as used in said act means the policyholder under a group contract where the context so requires.
##### **§ 17:48A-7.3** Group contract form {#sec-17-48a-7.3 omnilex-key=us-nj-statutes--title-17--17:48A-7.3}
Every group contract entered into by a medical service corporation with any policyholder shall be in writing and a contract form stating the terms and conditions thereof shall be furnished to the policyholder to be kept by him. No group contract form shall be used unless it contains the following provisions:
(a) A statement of the contract rate payable to the medical service corporation by or on behalf of the policyholder for the original period of coverage, the time or times at which, the manner in which, the contract rate due is to be paid, and the basis, if any, on which the rate may subsequently be adjusted;
(b) A provision that all contract rates due under the contract shall be paid by the policyholder, or by the designated representative of the policyholder, to the medical service corporation on or before the due date thereof or within such period of grace as may be specified therein;
(c) A statement of the nature of the medical services to be paid for and the period during which such payments will be made, and if there are any services to be excepted, a detailed statement of such exceptions;
(d) A provision that the contract, any endorsements or riders thereto, the application of the policyholder in whose name the contract is issued, a copy of which shall be attached to the contract, and the individual applications, if any, of the employees or members shall constitute the entire contract between the parties and that all statements contained in any such application for coverage shall be deemed representations and not warranties;
(e) A provision that there shall be issued to the policyholder, for delivery to the employee or member, a certificate or other document which sets forth or summarizes the essential features of the coverage including the time, place and method for making claims for benefits;
(f) A provision that all new employees or new members, as the case may be, in the groups or classes eligible for the coverage must be added to the eligible groups or classes;
(g) A statement of the terms and conditions, if any, upon which the contract may be terminated or amended. Any notice to the policyholder shall be effective if sent by mail to the policyholder's address as shown at the time on the corporation's records. The notice to the policyholder as herein required shall be sent at least 30 days before the termination or amendment of the contract takes effect.
Any such group contract may contain a provision that all medical services paid for by a medical service corporation shall be in accordance with the accepted medical practices in the community at the time, but the corporation shall not be liable for injuries resulting from negligence, misfeasance, malfeasance, nonfeasance or malpractice on the part of any officer or employee or on the part of any physician in the course of rendering medical services to persons covered.
Any medical service corporation may classify persons covered whereby under specified circumstances a covered person may pay a participating physician for medical services an amount in addition to that payable by the corporation for medical services and the group contract shall contain the provisions thereof and specify such circumstances.
##### **§ 17:48A-7.4** Participation agreements {#sec-17-48a-7.4 omnilex-key=us-nj-statutes--title-17--17:48A-7.4}
A medical service corporation of this State may enter into agreements to participate with other corporations in the issuance of group contracts to policyholders whose employees or members are located in more than one State. Such agreements may provide for experience rating, for a sharing of the premium, claims, and expenses by the participating corporations or for acceptance or ceding of the whole or portions of group risks on a reinsurance basis. Such agreements shall be filed with and approved by the commissioner before becoming effective.
##### **§ 17:48A-7.5** Schedule of rates {#sec-17-48a-7.5 omnilex-key=us-nj-statutes--title-17--17:48A-7.5}
No medical service corporation shall issue group contracts which are not experience-rated pursuant to section 4 of this act, until it shall have filed with the commissioner a full schedule of the rates which are to apply to such contracts. The commissioner may disapprove such schedule at any time if he finds that such rates are excessive, inadequate or unfairly discriminatory. It shall be unlawful for any corporation to effect any such group contract according to such rates thereafter.
##### **§ 17:48A-7.6** Combined hospital-medical contract {#sec-17-48a-7.6 omnilex-key=us-nj-statutes--title-17--17:48A-7.6}
A medical service corporation and a hospital service corporation authorized to do business in this State may issue a combined contract providing for medical care and hospital care but no one of such corporations shall issue any such combined contract. Any one of such corporations may act as agent for the other without being required to obtain a license as an agent.
##### **§ 17:48A-7.7** Review of determinations of commissioner of banking and insurance {#sec-17-48a-7.7 omnilex-key=us-nj-statutes--title-17--17:48A-7.7}
All determinations of the Commissioner of Banking and Insurance made under the provisions of this act, or the act to which this act is a supplement, shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48A-7.8** Review of practices, rules and procedures of medical service corporations {#sec-17-48a-7.8 omnilex-key=us-nj-statutes--title-17--17:48A-7.8}
All practices, rules, and procedures of a medical service corporation, involving termination or refusal to renew coverage, modification of coverage or rates in the case of persons classified as left-group, selection of risks, and underwriting classifications, shall be subject to review at any time by the commissioner and upon his request for information relative to any such practice, rule, or procedure the medical service corporation shall furnish such information in writing without delay. If in the opinion of the commissioner any such practice, rule, or procedure, is unjust, unfair, or inequitable, taking into consideration the nonprofit and tax-exempt status of the medical service corporation, he shall so notify the medical service corporation and fix a time and place for hearing before him or his designated representative at which the medical service corporation may be heard. Following such hearing, the commissioner may make an order based on the record of the proceeding. If such order be one of disapproval, it shall be unlawful for the corporation to continue such practice, rule, or procedure. Such disapproval by the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48A-7.9** Adjustment of rates; experience rating formula; approval {#sec-17-48a-7.9 omnilex-key=us-nj-statutes--title-17--17:48A-7.9}
Group contracts, covering at least 50 employees or members, may provide for the adjustment of the rate of premium at the end of the first year or any subsequent year of insurance thereunder based on the experience thereunder both past and contemplated. No medical service corporation shall use any form of experience rating plan until it shall have filed with the commissioner the formulas to be used and the classes of groups to which they are to apply. The commissioner may disapprove the formulas or classes at any time if he finds that the rates produced thereby are excessive, inadequate or unfairly discriminatory or that the rates, formulas or classes are such as to prejudice the interests of persons who are eligible for medical services under contracts with the medical service corporation which are not subject to experience rating. Excluding those rating formulas applicable to groups the employees or members of which are located in more than one State and which are underwritten in participation with other corporation(s) of other State(s), no rating formula shall be approved by the commissioner unless it provides that the groups with better than average experience will be assessed a reasonable community charge. Any such rating formula may provide for the allowance of an equitable discount in the event the policyholder agrees to perform certain administrative and record keeping functions in connection with the routine maintenance of the group account.
Nothing in this section shall preclude the medical service corporation from incorporating in the rate formula such claim cost and utilization trend factors as it deems necessary in its discretion so long as the rates produced are self-supporting and the formulas for classes do not prejudice the interests of persons who are eligible for medical services under contracts with the medical service corporation which are not subject to experience rating.
For experience rated groups of 50 to 99 employees or members, the commissioner will have the authority to determine that rates charged depart from community rates in such a way as to assure continuity of rating principles with the community rated and experience rated groups of 100 or more.
##### **§ 17:48A-7.10** Coverage provided by medical service corporation for subscriber's child. {#sec-17-48a-7.10 omnilex-key=us-nj-statutes--title-17--17:48A-7.10}
3. a. A medical service corporation contract which provides hospital or medical expense benefits under which dependent coverage is available shall continue to make that coverage available for an adult child until the child turns 26 years of age. A contract shall not deny coverage for a subscriber's child on the grounds that:
(1) The child was born out of wedlock;
(2) The child is not claimed as a dependent on the subscriber's federal tax return;
(3) The child does not reside with the subscriber or in the medical service corporation's service area, provided that, in the case of a managed care plan, the child complies with the terms and conditions of the contract with respect to the use of specified providers;
(4) The child is married;
(5) The child has or adopts a child; or
(6) The child starts or leaves school.
b. If a child has coverage through a medical service corporation contract of a noncustodial parent, the medical service corporation shall:
(1) Provide such information to the custodial parent as may be necessary for the child to obtain benefits through the child's noncustodial parent's coverage;
(2) Permit the custodial parent, or the health care provider with the authorization of the custodial parent, to submit claims for covered services without the approval of the noncustodial parent; and
(3) Make payments on claims submitted in accordance with paragraph (2) of this subsection directly to the custodial parent, the health care provider or the Division of Medical Assistance and Health Services in the Department of Human Services which administers the State Medicaid program, as appropriate.
c. When a parent who is the subscriber is eligible for dependent coverage and is required by a court or administrative order to provide health insurance coverage for his child, the medical service corporation shall:
(1) Permit the parent to enroll his child as a dependent, without regard to any open enrollment restrictions;
(2) Permit the child's other parent, or the Division of Medical Assistance and Health Services as the State Medicaid agency or the Division of Family Development as the State IV-D agency, in the Department of Human Services, to enroll the child under the contract if the parent who is the subscriber fails to enroll the child; and
(3) Not terminate coverage of the child unless the parent who is the subscriber provides the medical service corporation with satisfactory written evidence that: the court or administrative order is no longer in effect; or the child is or will be enrolled in a comparable health benefits plan whose coverage will be effective on the date of the termination of coverage.
##### **§ 17:48A-7.11** Requirements applicable to State Medicaid {#sec-17-48a-7.11 omnilex-key=us-nj-statutes--title-17--17:48A-7.11}
4. A medical service corporation shall not impose requirements on the Division of Medical Assistance and Health Services in the Department of Human Services which has been assigned the rights of an individual who is eligible for medical assistance under the State Medicaid program, that are different from requirements applicable to an agent or assignee of any other subscriber.
##### **§ 17:48A-7.12** Medical service corporation to receive, transmit transactions electronically; standards. {#sec-17-48a-7.12 omnilex-key=us-nj-statutes--title-17--17:48A-7.12}
3. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a medical service corporation or its agent or a subsidiary that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to a medical service corporation, or its agent, its subsidiary or its covered persons.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a medical service corporation or its agent or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all group and individual contracts issued, delivered, executed or renewed in this State.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a medical service corporation or its agent shall require that health care providers file all claims for payment for health care services. A covered person who receives health care services shall not be required to submit a claim for payment, but notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the contract.
d. For the purposes of this subsection, "substantiating documentation" means any information specific to the particular health care service provided to a covered person.
(1) Effective 180 days after the effective date of P.L.1999, c.154, a medical service corporation or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a covered person or health care provider, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42 U.S.C. s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the health care provider is eligible at the date of service;
(b) the person who received the health care service was covered on the date of service;
(c) the claim is for a service or supply covered under the health benefits plan;
(d) the claim is submitted with all the information requested by the payer on the claim form or in other instructions that were distributed in advance to the health care provider or covered person in accordance with the provisions of section 5 of P.L.2023, c.296 (C.17B:30-55.4); and
(e) the payer has no reason to believe that the claim has been submitted fraudulently.
(2) If all or a portion of the claim is not paid within the time frames provided in paragraph (1) of this subsection because:
(a) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(b) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(c) the payer disputes the amount claimed; or
(d) there is strong evidence of fraud by the provider and the payer has initiated an investigation into the suspected fraud,
the payer shall notify the health care provider, by electronic means and the covered person in writing within 30 days of receiving an electronic claim, or notify the covered person and health care provider in writing within 40 days of receiving a claim submitted by other than electronic means, that:
(i) the claim is incomplete with a statement as to what substantiating documentation is required for adjudication of the claim;
(ii) the claim contains incorrect information with a statement as to what information must be corrected for adjudication of the claim;
(iii) the payer disputes the amount claimed in whole or in part with a statement as to the basis of that dispute; or
(iv) the payer finds there is strong evidence of fraud and has initiated an investigation into the suspected fraud in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(3) If all or a portion of an electronically submitted claim cannot be adjudicated because the diagnosis coding, procedure coding or any other data required to be submitted with the claim was missing, the payer shall electronically notify the health care provider or its agent within seven days of that determination and request any information required to complete adjudication of the claim.
(4) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(5) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider, no later than two working days following receipt of the transmission of the claim.
(6) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(7) Payment of an eligible claim pursuant to paragraphs (1) and (4) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
If payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of paragraph (2) or paragraph (3) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or information or modification of an initial submission.
If payment is withheld on all or a portion of a claim by a payer pursuant to paragraph (2) or (3) of this subsection and the provider is not notified within the time frames provided for in those paragraphs, the claim shall be deemed to be overdue.
(8) (a) No payer that has reserved the right to change the premium shall deny payment on all or a portion of a claim because the payer requests documentation or information that is not specific to the health care service provided to the covered person.
(b) No payer shall deny payment on all or a portion of a claim while seeking coordination of benefits information unless good cause exists for the payer to believe that other insurance is available to the covered person. Good cause shall exist only if the payer's records indicate that other coverage exists. Routine requests to determine whether coordination of benefits exists shall not be considered good cause.
(c) In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of this paragraph, the claims payment shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means or on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
(9) An overdue payment shall bear simple interest at the rate of 12% per annum. The interest shall be paid to the health care provider at the time the overdue payment is made. The amount of interest paid to a health care provider for an overdue claim shall be credited to any civil penalty for late payment of the claim levied by the Department of Human Services against a payer that does not reserve the right to change the premium.
(10) With the exception of claims that were submitted fraudulently or submitted by health care providers that have a pattern of inappropriate billing or claims that were subject to coordination of benefits, no payer shall seek reimbursement for overpayment of a claim previously paid pursuant to this section later than 18 months after the date the first payment on the claim was made. No payer shall seek more than one reimbursement for overpayment of a particular claim. At the time the reimbursement request is submitted to the health care provider, the payer shall provide written documentation that identifies the error made by the payer in the processing or payment of the claim that justifies the reimbursement request. No payer shall base a reimbursement request for a particular claim on extrapolation of other claims, except under the following circumstances:
(a) in judicial or quasi-judicial proceedings, including arbitration;
(b) in administrative proceedings;
(c) in which relevant records required to be maintained by the health care provider have been improperly altered or reconstructed, or a material number of the relevant records are otherwise unavailable; or
(d) in which there is clear evidence of fraud by the health care provider and the payer has investigated the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), and referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(11) (a) In seeking reimbursement for the overpayment from the health care provider, except as provided for in subparagraph (b) of this paragraph, no payer shall collect or attempt to collect:
(i) the funds for the reimbursement on or before the 45th calendar day following the submission of the reimbursement request to the health care provider;
(ii) the funds for the reimbursement if the health care provider disputes the request and initiates an appeal on or before the 45th calendar day following the submission of the reimbursement request to the health care provider and until the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section are exhausted; or
(iii) a monetary penalty against the reimbursement request, including but not limited to, an interest charge or a late fee.
The payer may collect the funds for the reimbursement request by assessing them against payment of any future claims submitted by the health care provider after the 45th calendar day following the submission of the reimbursement request to the health care provider or after the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section have been exhausted if the payer submits an explanation in writing to the provider in sufficient detail so that the provider can reconcile each covered person's bill.
(b) If a payer has determined that the overpayment to the health care provider is a result of fraud committed by the health care provider and the payer has conducted its investigation and reported the fraud to the Office of the Insurance Fraud Prosecutor as required by law, the payer may collect an overpayment by assessing it against payment of any future claim submitted by the health care provider.
(12) No health care provider shall seek reimbursement from a payer or covered person for underpayment of a claim submitted pursuant to this section later than 18 months from the date the first payment on the claim was made, except if the claim is the subject of an appeal submitted pursuant to subsection e. of this section or the claim is subject to continual claims submission. No health care provider shall seek more than one reimbursement for underpayment of a particular claim.
e. (1) A medical service corporation or its agent, hereinafter the payer, shall establish an internal appeal mechanism to resolve any dispute raised by a health care provider regardless of whether the health care provider is under contract with the payer regarding compliance with the requirements of this section or compliance with the requirements of sections 5 through 15 of P.L.2023, c.296 (C.17B:30-55.4 through 17B:30-55.14). No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of an appeal pursuant to this subsection. The payer shall conduct the appeal at no cost to the health care provider.
A health care provider may initiate an appeal on or before the 90th calendar day following receipt by the health care provider of the payer's claims determination, which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance which shall describe the type of substantiating documentation that must be submitted with the form. The payer shall conduct a review of the appeal and notify the health care provider of its determination on or before the 30th calendar day following the receipt of the appeal form. If the health care provider is not notified of the payer's determination of the appeal within 30 days, the health care provider may refer the dispute to arbitration as provided by paragraph (2) of this subsection.
If the payer issues a determination in favor of the health care provider, the payer shall comply with the provisions of this section and pay the amount of money in dispute, if applicable, with accrued interest at the rate of 12% per annum, on or before the 30th calendar day following the notification of the payer's determination on the appeal. Interest shall begin to accrue on the day the appeal was received by the payer.
If the payer issues a determination against the health care provider, the payer shall notify the health care provider of its findings on or before the 30th calendar day following the receipt of the appeal form and shall include in the notification written instructions for referring the dispute to arbitration as provided by paragraph (2) of this subsection.
The payer shall report annually to the Commissioner of Banking and Insurance the number of appeals it has received and the resolution of each appeal.
(2) Any dispute regarding the determination of an internal appeal conducted pursuant to paragraph (1) of this subsection may be referred to arbitration as provided in this paragraph. The Commissioner of Banking and Insurance shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings.
Any party may initiate an arbitration proceeding on or before the 90th calendar day following the receipt of the determination which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance. No dispute shall be accepted for arbitration unless the payment amount in dispute is $1,000 or more, except that a health care provider may aggregate his own disputed claim amounts for the purposes of meeting the threshold requirements of this subsection. No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of arbitration pursuant to this subsection.
(3) The arbitrator shall conduct the arbitration proceedings pursuant to the rules of the arbitration entity, including rules of discovery subject to confidentiality requirements established by State or federal law.
(4) An arbitrator's determination shall be:
(a) signed by the arbitrator;
(b) issued in writing, in a form prescribed by the Commissioner of Banking and Insurance, including a statement of the issues in dispute and the findings and conclusions on which the determination is based; and
(c) issued on or before the 30th calendar day following the receipt of the required documentation.
The arbitration shall be nonappealable and binding on all parties to the dispute.
(5) If the arbitrator determines that a payer has withheld or denied payment in violation of the provisions of this section, the arbitrator shall order the payer to make payment of the claim, together with accrued interest, on or before the 10th business day following the issuance of the determination. If the arbitrator determines that a payer has withheld or denied payment on the basis of information submitted by the health care provider and the payer requested, but did not receive, this information from the health care provider when the claim was initially processed pursuant to subsection d. of this section or reviewed under internal appeal pursuant to paragraph (1) of this subsection, the payer shall not be required to pay any accrued interest.
(6) If the arbitrator determines that a health care provider has engaged in a pattern and practice of improper billing and a refund is due to the payer, the arbitrator may award the payer a refund, including interest accrued at the rate of 12% per annum. Interest shall begin to accrue on the day the appeal was received by the payer for resolution through the internal appeals process established pursuant to paragraph (1) of this subsection.
(7) The arbitrator shall file a copy of each determination with and in the form prescribed by the Commissioner of Banking and Insurance.
f. As used in this section, "insured claim" or "claim" means a claim by a covered person for payment of benefits under an insured medical service corporation contract for which the financial obligation for the payment of a claim under the contract rests upon the medical service corporation.
g. Any person found in violation of this section with a pattern and practice as determined by the Commissioner of Banking and Insurance shall be liable to a civil penalty as set forth in section 17 of P.L.2005, c.352 (C.17B:30-55).
##### **§ 17:48A-7.13** Coverage for certain dependents until age 31 by medical service corporation. {#sec-17-48a-7.13 omnilex-key=us-nj-statutes--title-17--17:48A-7.13}
2. a. As used in this section, "dependent" means a subscriber's child by blood or by law who:
(1) is 30 years of age or younger;
(2) is unmarried;
(3) has no dependent of his own;
(4) is a resident of this State or is enrolled as a full-time student at an accredited public or private institution of higher education; and
(5) (a) is not actually provided coverage as a named subscriber, insured, enrollee, or covered person under any other group or individual health benefits plan, group health plan, church plan or health benefits plan, or entitled to benefits under Title XVIII of the Social Security Act, Pub.L.74-271 (42 U.S.C. s.1395 et seq.) at the time dependent coverage pursuant to this section begins or will begin; and
(b) there is evidence of prior, creditable coverage or receipt of benefits under a benefits plan or by law as set forth in subparagraph (a) of this paragraph.
b. (1) A medical service corporation contract that provides coverage for a subscriber's dependent under which coverage of the dependent terminates at a specific age on or before the dependent's 30th birthday, and is delivered, issued, executed or renewed in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this section of P.L.2008, c.38, shall, upon application of the dependent as set forth in subsection c. of this section, provide coverage to the dependent after that specific age, until the dependent's 31st birthday.
(2) Nothing herein shall be construed to require:
(a) coverage for services provided to a dependent before the effective date of this section of P.L.2008, c.38; or
(b) that an employer or other group policyholder pay all or part of the cost of coverage for a dependent as provided pursuant to this section.
c. (1) A dependent covered by a subscriber's contract, which coverage under the contract terminates at a specific age on or before the dependent's 30th birthday, may make a written election for coverage as a dependent pursuant to this section, until the dependent's 30th birthday:
(a) within 30 days prior to the termination of coverage at the specific age provided in the contract;
(b) within 30 days after meeting the requirements for dependent status as set forth in subsection a. of this section, when coverage for the dependent under the contract previously terminated; or
(c) during an open enrollment period, as provided pursuant to the contract, if the dependent meets the requirements for dependent status as set forth in subsection a. of this section during the open enrollment period.
(2) (Deleted by amendment, P.L.2008, c.38)
d. (1) Coverage for a dependent who makes a written election for coverage pursuant to subsection c. of this section shall consist of coverage which is identical to the coverage provided to that dependent prior to the termination of coverage at the specific age provided in the contract. If coverage is modified under the contract for any similarly situated dependents for coverage prior to the termination of coverage at the specific age provided in the contract, the coverage shall also be modified in the same manner for the dependent.
(2) Coverage for a dependent who makes a written election for coverage pursuant to subsection c. of this section shall not be conditioned upon, or discriminate on the basis of, lack of evidence of insurability.
e. (1) The subscriber's contract may require payment of a premium by the subscriber or dependent, as appropriate, subject to the approval of the Commissioner of Banking and Insurance, for any period of coverage relating to a dependent's written election for coverage pursuant to subsection c. of this section. The premium shall not exceed 102% of the applicable portion of the premium previously paid for that dependent's coverage under the contract prior to the termination of coverage at the specific age provided in the contract.
(2) The applicable portion of the premium previously paid for the dependent's coverage under the contract shall be determined pursuant to regulations promulgated by the Commissioner of Banking and Insurance, based upon the difference between the contract's rating tiers for adult and dependent coverage or family coverage, as appropriate, and single coverage, or based upon any other formula or dependent rating tier deemed appropriate by the commissioner which provides a substantially similar result.
(3) Payments of the premium may, at the election of the payor, be made in monthly installments.
f. Coverage for a dependent provided pursuant to this section shall be provided until the earlier of the following:
(1) the date upon which the dependent is disqualified for dependent status as set forth in subsection a. of this section;
(2) the date upon which coverage ceases under the contract by reason of a failure to make a timely payment of any premium required under the contract by the subscriber or dependent for coverage provided pursuant to this section. The payment of any premium shall be considered to be timely if made within 30 days after the due date or within a longer period as may be provided for by the contract; or
(3) the date upon which the contract, under which coverage is provided to a dependent, ceases to provide coverage to the subscriber.
Nothing herein shall be construed to permit a medical service corporation to refuse a written election for coverage by a dependent pursuant to subsection c. of this section, based upon the dependent's prior disqualification pursuant to paragraph (1) of this subsection, other than a disqualification based on age or lack of evidence of prior, creditable coverage or receipt of benefits.
g. Notice regarding coverage for a dependent as provided pursuant to this section shall be provided to a subscriber by the medical service corporation:
(1) in the certificate of coverage or other equivalent document prepared for subscribers and delivered on or about the date of commencement of the subscribers' coverage; and
(2) (Deleted by amendment, P.L.2008, c.38)
(3) in a notice delivered to subscribers on a quarterly basis.
h. This section shall apply to those contracts in which the medical service corporation has reserved the right to change the premium.
##### **§ 17:48A-8** Participating physicians; payments for medical services {#sec-17-48a-8 omnilex-key=us-nj-statutes--title-17--17:48A-8}
Any medical service corporation may enter into agreements with eligible persons whereby such persons become participating physicians of a plan operated by the corporation and may make to such persons such payments as shall have accrued by reason of services required to be performed under the plan. No person shall become a participating physician unless he shall be a physician licensed to practice medicine and surgery in the State of New Jersey, pursuant to chapter nine, Title 45, of the Revised Statutes. Any medical service corporation may enter into contracts for the payment of medical services to the subscribers or members of similar nonprofit medical service corporations of other States subject to the supervision of such other States, and shall have the right to make payment to any other nonprofit medical service corporation, or to any physicians licensed to practice medicine and surgery in this or any other State for services rendered to its subscribers and their dependents at not exceeding the same rate paid participating physicians under the certificate of the subscriber.
##### **§ 17:48A-9** Filing form of subscription certificate, etc.; disapproval by commissioner {#sec-17-48a-9 omnilex-key=us-nj-statutes--title-17--17:48A-9}
No subscription certificate shall be issued by any medical service corporation to any subscriber unless and until the form thereof shall have been filed with the Commissioner of Banking and Insurance together with all applications, riders and endorsements for use in connection with the issuance or renewal thereof. If the commissioner shall at any time notify the corporation filing the same of his disapproval of any such form, as contrary to law, or as being oppressive or calculated to mislead the public, specifying particulars, it shall be unlawful for such corporation thereafter to issue any such form so disapproved. Such disapproval of the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48A-9.1** Medical service corporation contract; compliance {#sec-17-48a-9.1 omnilex-key=us-nj-statutes--title-17--17:48A-9.1}
7. No medical service corporation contract subject to the provisions of P.L.1940, c.74, (C.17:48A-1 et seq.) or application for that contract, if a written application is required and is to be made a part of that contract, or a printed rider or an endorsement for use with that contract, shall be delivered or issued for delivery in this State unless its provisions comply with all of the applicable requirements of P.L.1940, c.74, (C.17:48A-1 et seq.) and any regulations adopted or guidelines published by the Commissioner of Insurance consistent with the requirements thereof. Any contract, application, rider, or endorsement issued or delivered in this State that is not in compliance with that law or regulations or guidelines shall be deemed to be in compliance with the requirements and shall be interpreted by the courts and among the persons affected by the contract as if that contract form were in compliance with the requirements; except that this provision shall not relieve the medical service corporation from any penalty that may be imposed for violation of this act or any other applicable provision of P.L.1940, c.74 (C.17:48A-1 et seq.).
##### **§ 17:48A-9.2** Filing of contract or related forms {#sec-17-48a-9.2 omnilex-key=us-nj-statutes--title-17--17:48A-9.2}
8. a. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), any contract subject to the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.), including any application, rider, or endorsement which is made a part of that contract, shall be filed with the commissioner for approval as provided in this section. Any such contract, and any related form, except those certified pursuant to section 9 of this act, shall be filed with the commissioner for approval pursuant to this section.
b. Any contract or related form filed with the commissioner for approval pursuant to this section shall be deemed approved upon the expiration of 60 days after the submission of the form unless disapproved in writing by the commissioner within that time. Any such disapproval shall be based only on the specific provisions of applicable statutes, regulations adopted by the commissioner, or guidelines published by the commissioner as of the effective date of this act, with regard to forms of that type. A disapproved contract or related form may be resubmitted.
c. Any contract or related form submitted for approval pursuant to this section and disapproved by the commissioner before the expiration of 60 days after its submission shall be deemed withdrawn at the expiration of 60 days after the transmittal of the commissioner's specific objections unless the filer submits a complete written response to all of the commissioner's objections regarding the submission within the 60 day period.
d. A contract or related form, resubmitted in response to the commissioner's objections pursuant to subsection b. of this section, shall be deemed approved upon the expiration of 30 days after its resubmission unless disapproved in writing by the commissioner within that time. No disapproval by the commissioner of a resubmission shall be based on any objection not specified by the commissioner in his initial disapproval of the filing, except that the commissioner may disapprove such form based upon any new provisions introduced in the resubmission or if in addressing the specified objections cited in the commissioner's disapproval transmission, the medical service corporation modifies any substantive provisions of the form. Any contract or related form resubmitted for approval pursuant to this section and disapproved by the commissioner before the expiration of 30 days after its submission shall be deemed withdrawn at the expiration of 30 days after the transmittal of the commissioner's specific objections, unless the filer submits a complete written response to all of the commissioner's objections regarding the submission within the 30 day period.
e. With respect to all types of contracts or related forms required to be filed pursuant to this section and currently on file with and approved by the commissioner upon enactment of this act, the commissioner shall propose regulations, which may be amended or modified by the commissioner from time to time after adoption, concerning any actuarial or form requirements consistent with applicable statutory provisions but not specified therein, not later than 180 days after enactment of this act. Any such regulation shall be adopted not later than 180 days after it is proposed. With respect to any type of form not then on file with the commissioner but filed subsequent to the enactment of this act, the commissioner shall propose regulations, which may be amended or modified by the commissioner from time to time after adoption, concerning any actuarial or form requirements consistent with applicable statutory provisions but not specified therein, within 120 days after the form is approved or deemed approved by the commissioner pursuant to this section. Any such regulation shall be adopted not later than 180 days after it is proposed. The commissioner may issue bulletins which are interpretive of existing regulations consistent with statutory provisions, with respect to any type of form that may be certified pursuant to section 9 of this act. Nothing in this section shall preclude a medical service corporation from filing a certifiable contract or related form for approval by the commissioner.
f. Any such form which is filed with the commissioner or deemed filed may be so delivered or issued for delivery until such time as any subsequent withdrawal of the filing by the commissioner, following an opportunity for a hearing held in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, becomes final in accordance therewith.
g. For purposes of this section, "days" means calendar days, except that when the last day of any specified time period is a Saturday, Sunday, or State holiday, then the time period shall end on the next following business day. With respect to any specified time period pertaining to correspondence between a medical service corporation and the commissioner, the time period shall commence on the date that such correspondence is postmarked or submitted to a private delivery service.
##### **§ 17:48A-9.3** Contract forms; certification memorandum {#sec-17-48a-9.3 omnilex-key=us-nj-statutes--title-17--17:48A-9.3}
9. a. Pursuant to the provisions of this section, a medical service corporation authorized to do business in this State may file with the commissioner and use, in accordance with subsection d. of this section, any contract, endorsement or related form that is stipulated by the commissioner to be of a kind or type eligible for file and use pursuant to subsection b. of this section. The form shall be accompanied by a certification memorandum which includes a statement that it is filed in accordance with the provisions of this section, and which is executed by a responsible officer of the medical service corporation who certifies that the form being filed is in conformance with the law or regulation applicable to that type or kind of form as specified in a certification form to be determined by the commissioner. If the commissioner determines that the form being filed does not conform with the law or regulation applicable to that type or kind of form, the commissioner shall notify the medical service corporation of his objections in writing and may disapprove that form for further use in New Jersey.
b. Contract forms, including related endorsements, riders and application forms, eligible for certification pursuant to this section shall include, but not be limited to, certain categories of individual and group medical service corporation contracts which the commissioner shall define by regulation.
c. The certification memorandum shall be signed and acknowledged by a responsible officer of the medical service corporation. The acknowledgment by that officer shall be done in the same manner in which documents for recording instruments conveying or affecting interests in real estate in this State must be acknowledged to be eligible for recording, or in such other manner as specified by the commissioner by regulation from time to time.
d. Upon receipt of an acknowledgment from the commissioner that the form and a certification memorandum which conforms to the requirements of this section have been received, the form so submitted may be used by the medical service corporation.
e. (1) Improper certification shall subject a medical service corporation submitting such improper certification to a fine not to exceed $50,000 and, in addition, a maximum penalty of $1,000 per contract issued on a form determined to be improperly certified pursuant to the provisions of this section. The commissioner shall promulgate a schedule of penalties to be applied pursuant to this section. In determining the amount of any penalty to be imposed, the commissioner shall consider the severity of the violation based upon the potential adverse impact to the public and whether it is the filer's first violation of this section.
(2) If, after notice and a hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), a medical service corporation is found by the commissioner to be in violation of this section, the form may be disapproved, and in addition to any other penalties that may be imposed under P.L.1940, c.74 (C.17:48A-1 et seq.), the commissioner may bar that medical service corporation from participating in the certification process pursuant to this section for a period not to exceed one year.
f. The commissioner shall hold a hearing annually, or more often, for the purpose of adopting regulations to define the specific forms eligible for certification pursuant to this section. Initial regulations shall be adopted pursuant to this section no later than 180 days after enactment of this act.
g. For purposes of this section:
(1) "a responsible officer of the medical service corporation" means a corporate officer of the level of vice president or higher, or of equivalent title within the medical service corporation's structure, who is either the actuary of the medical service corporation with responsibility for the type of form filed, or the individual with responsibility for managing the form filing process for the medical service corporation with regard to the type of form filed; and
(2) "improper certification" means providing any misrepresentation or false statement material to a certification form required pursuant to subsection a. of this section.
##### **§ 17:48A-10** Schedule of rates; filing, disapproval {#sec-17-48a-10 omnilex-key=us-nj-statutes--title-17--17:48A-10}
No corporation subject to the provisions of this act shall enter into any contract with a subscriber unless and until it shall have filed with the Commissioner of Banking and Insurance a full schedule of the rates to be paid by the subscribers to such contracts. The commissioner may disapprove such schedule of rates at any time if he finds that such rates are excessive, inadequate or discriminatory. It shall be unlawful for any corporation to effect any contract or issue any subscription certificate until a revised schedule of rates has been filed. Such disapproval by the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48A-11** Agreements with physicians; approval of payments; corporate records {#sec-17-48a-11 omnilex-key=us-nj-statutes--title-17--17:48A-11}
No corporation subject to the provisions of this chapter shall enter into any contract with a subscriber unless and until it shall have filed with the Commissioner of Banking and Insurance a copy of the agreement proposed to be entered into by the corporation and the participating physicians. Every such agreement shall provide for the payment for medical services to subscribers and covered dependents to the end of the subscription certificate year; that thirty days written notice of termination of such agreement may be given to the corporation at any time by any participating physician but shall not apply to any subscription certificate in force at the time of such notice until the first date thereafter when such subscription certificate may properly be terminated by the corporation, and that the agreement of the physician to render such service to the end of any certificate year shall not be affected by cessation of the transaction of business by reason of appropriate resolution of the board of trustees, or directors of such corporation, injunction issued by a court of competent authority, legislative act or by any other exercise of judicial, administrative or legislative authority; provided, that this requirement shall not apply to any subscription certificate which is not maintained in force by the payment of premiums required thereby. There shall be included in the minutes of the board of trustees of every such corporation a record of the approval of payments to be made to participating physicians. The corporation shall maintain in its office complete records of all the medical services rendered to subscribers and covered dependents in such form as will indicate the kind of services rendered, the amounts claimed for such services by the participating physicians, and the amounts paid by the corporation. No payment to any participating physicians shall be authorized by the board of trustees except in accordance with a plan of payments adopted by the board and recorded in the minutes of a meeting.
##### **§ 17:48A-12** Expenditures in soliciting subscribers {#sec-17-48a-12 omnilex-key=us-nj-statutes--title-17--17:48A-12}
No corporation subject to the provisions of this chapter shall disburse during any one calendar year more than ten per centum (10%) of the aggregate amount of payments received from subscribers during that year as expenditures for the solicitation of subscribers except that during the first year after the issuance of a certificate of authority such corporation may so disburse not more than twenty per centum (20%) of such amount and during the second year not more than fifteen per centum (15%).
##### **§ 17:48A-13** Administrative expenses {#sec-17-48a-13 omnilex-key=us-nj-statutes--title-17--17:48A-13}
No such corporation shall disburse during any one year, a sum greater than twenty per centum (20%) of payments received from subscribers during that year as administrative expenses. The term "administrative expense" as used in this section shall include all expenditures for nonprofessional services and in general all expenses not directly connected with the payment for medical services, but not including expenses of soliciting subscriptions.
##### **§ 17:48A-13.1** Medical service corporation, aggregate benefits. {#sec-17-48a-13.1 omnilex-key=us-nj-statutes--title-17--17:48A-13.1}
2. a. Beginning with the calendar year starting on January 1, 2020, and in each calendar year thereafter, a medical service corporation providing health benefits plans to a large employer shall return, in the form of aggregate benefits for all large group health benefits plans offered by the medical service corporation, at least 85 percent of the aggregate premiums collected for all of those plans.
b. A medical service corporation shall annually report to the Commissioner of Banking and Insurance, no later than August 1 of each year, the loss ratio calculated for all of the health benefits plans for the previous calendar year. In each case in which the loss ratio fails to substantially comply with the 85 percent loss ratio requirement, the medical service corporation shall issue a dividend or credit against future premiums for all contract holders in an amount sufficient to assure that the aggregate benefits paid in the previous calendar year plus the amount of the dividends and credits shall equal 85 percent of the premiums collected. The medical service corporation shall distribute all dividends and credits by December 31 of the year following the calendar year in which the loss ratio requirements were not satisfied. The medical service corporation's annual report shall include the medical service corporation's calculation of the dividends and credits applicable to all health benefits plans, as well as an explanation of the medical service corporation's plan to issue dividends or credits.
c. The commissioner shall specify by regulation:
(1) any informational filings required to be submitted by a medical service corporation to the commissioner in order to determine whether the medical service corporation is in compliance with the loss ratio requirements;
(2) the instructions and format for calculating and reporting loss ratios and issuing dividends or credits;
(3) procedures for the distribution of a dividend or credit in the event of cancellation or termination by a contract holder; and
(4) the instructions and format for submitting annual reports.
d. As used in this section, "large employer" means an employer with more than 50 employees, who is not a small employer as defined in section 1 of P.L.1992, c.162 (C.17B:27A-17).
##### **§ 17:48A-14** Investments; surplus {#sec-17-48a-14 omnilex-key=us-nj-statutes--title-17--17:48A-14}
The funds of any medical service corporation may be invested only in accordance with the requirements now or hereafter provided by law for the investment of funds of life insurance companies. Every medical service corporation after the first full calendar year of doing business after the effective date of this chapter, shall accumulate and maintain a special contingent surplus over and above its reserves and liabilities at the rate of two per centum (2%) annually of its net premium income until such surplus shall be not less than one hundred thousand dollars ($100,000.00) except that no such corporation shall be required to maintain a special contingent surplus exceeding fifty-five per centum (55%) of its average annual premium income for the previous five years.
##### **§ 17:48A-15** Statement of financial condition; inquiries by commissioner {#sec-17-48a-15 omnilex-key=us-nj-statutes--title-17--17:48A-15}
Every medical service corporation transacting business in this State shall file annually, on or before the first day of March, in the Department of Banking and Insurance a statement, subscribed and sworn to by its president and secretary, or in their absence, by two of its principal officers, showing its financial condition at the close of business on the thirty-first day of December of the year last preceding, and showing its business transacted during that year, which statement shall be in such form and contain such matters as the Commissioner of Banking and Insurance shall prescribe; said commissioner may also address inquiries to any such corporation or its officers in relation to its condition or affairs, or any matter connected with its transactions, and it shall be the duty of the officers of such corporation to reply promptly in writing to all such inquiries; for good cause shown the commissioner may extend the time within which any such statement may be filed.
##### **§ 17:48A-16** Failure to file statement or answer inquiries; penalty {#sec-17-48a-16 omnilex-key=us-nj-statutes--title-17--17:48A-16}
Any medical service corporation neglecting to make and file its annual statement in the form and within the time provided by the last preceding section, or neglecting to reply in writing to inquiries of the Commissioner of Banking and Insurance within such reasonable time as may be specified by him, shall forfeit twenty-five dollars ($25.00) for each day's neglect, to be recovered in a civil action; and upon notice by the Commissioner of Banking and Insurance to such effect, its authority to do new business in this State shall cease while such default continues.
##### **§ 17:48A-17** Examination of assets and affairs; assistants {#sec-17-48a-17 omnilex-key=us-nj-statutes--title-17--17:48A-17}
The Commissioner of Banking and Insurance shall have the power, whenever he deems the same expedient, to make or cause to be made an examination of the assets and liabilities, method of conducting business and all other affairs of every medical service corporation authorized or which has made application for authority to transact business under the provisions of this chapter. For the purpose of such examination the commissioner may commission and employ such persons to conduct the same or to assist therein as he may deem advisable, which examination may be conducted in any State in which the corporation examined has an office, agent or place of business.
##### **§ 17:48A-18** Expense of examination; gifts, etc., to departmental employees {#sec-17-48a-18 omnilex-key=us-nj-statutes--title-17--17:48A-18}
The reasonable expense of such examination shall be fixed and determined by the Commissioner of Banking and Insurance, and he shall collect the same from the corporation examined, which shall pay same on presentation of a detailed account of such expense. In case any corporation, after such examination, shall be adjudged by the Superior Court to be insolvent, the expense of such examination, if unpaid, shall be ordered paid out of the assets of the corporation. No corporation shall, either directly or indirectly, pay, by way of gift, credit or otherwise, any other further sum to the commissioner or to any person in the employ of the Department of Banking and Insurance, for extra service or for purposes of legislation, or for any other purpose whatsoever.
##### **§ 17:48A-19** Exhibition of records and accounts; examinations under oath {#sec-17-48a-19 omnilex-key=us-nj-statutes--title-17--17:48A-19}
It shall be the duty of the officers, agents and employees of any such corporation to exhibit all its books, records and accounts for the purpose of such examination and otherwise to facilitate the same so far as it may be in their power to do so, and for that purpose the Commissioner of Banking and Insurance, and his deputies, assistants and employees shall have the power to examine, under oath, the officers, agents and employees of any such corporation relative to its business and affairs.
##### **§ 17:48A-19.1** Definitions. {#sec-17-48a-19.1 omnilex-key=us-nj-statutes--title-17--17:48A-19.1}
16. As used in sections 16 through 20 of P.L.2014, c.81 (C.17:48A-19.1 through C.17:48A-19.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Medical service corporation" means an entity authorized to transact business in this State pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.).
##### **§ 17:48A-19.2** Increase in amount of capital or surplus required of medical service corporation. {#sec-17-48a-19.2 omnilex-key=us-nj-statutes--title-17--17:48A-19.2}
17. The commissioner may increase the amount of capital or surplus required of a medical service corporation, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the medical service corporation's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a medical service corporation's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section, shall be made only after a departmental hearing, unless that hearing is waived by the affected medical service corporation. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the medical service corporation. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular medical service corporation, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the medical service corporation charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the medical service corporation charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the medical service corporation, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the medical service corporation's financial condition.
##### **§ 17:48A-19.3** Determination of increase, revision or redetermination; factors. {#sec-17-48a-19.3 omnilex-key=us-nj-statutes--title-17--17:48A-19.3}
18. In determining any increase, revision or redetermination in the capital or surplus of a medical service corporation pursuant to the provisions of section 17 of P.L.2014, c.81 (C.17:48A-19.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 17 of P.L.2014, c.81 (C.17:48A-19.2);
c. The extent to which risks described in section 17 of P.L.2014, c.81 (C.17:27A-5.1) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the medical service corporation has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the medical service corporation's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48A-19.4** Suspension, revocation of authority to do business. {#sec-17-48a-19.4 omnilex-key=us-nj-statutes--title-17--17:48A-19.4}
19. The commissioner may suspend or revoke the authority to do business in this State of any medical service corporation that does not comply with the provisions of sections 16 through 20 of P.L.2014, c.81 (C.17:48A-19.1 through C.17:48A-19.5).
##### **§ 17:48A-19.5** Rules, regulations. {#sec-17-48a-19.5 omnilex-key=us-nj-statutes--title-17--17:48A-19.5}
20. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of sections 16 through 20 of P.L.2014, c.81 (C.17:48A-19.1 through C.17:48A-19.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48A-21** Fees {#sec-17-48a-21 omnilex-key=us-nj-statutes--title-17--17:48A-21}
Every corporation to which this chapter shall be applicable shall pay the following fees to the Commissioner of Insurance for enforcement of the provisions of this chapter, viz.: for filing its application and charter, $10.00; for filing each annual statement, $20.00; for each copy of any paper filed in the Department of Insurance, $0.20 a sheet or folio of 100 words and $1.00 for certifying the same. In addition, such corporation shall pay on April 1 of each year a general supervisory fee to the Commissioner of Insurance of $0.02 per subscriber covered under subscription contracts, other than group contracts, at the end of the preceding year plus $0.02 per member or employee covered under group contracts at the end of the preceding year, and the first such general supervisory fee shall be due as of December 31, 1970, payable April 1, 1971.
##### **§ 17:48A-22** Violations of chapter; penalty and recovery thereof; misdemeanors {#sec-17-48a-22 omnilex-key=us-nj-statutes--title-17--17:48A-22}
Any medical service corporation of this or any other State, country or province which shall have violated any of the provisions of or shall have neglected, failed or refused to comply with any of the requirements of this act, except the failure to file an annual statement, shall be liable to a penalty of five hundred dollars ($500.00), to be sued for and collected by the Commissioner of Banking and Insurance in a civil action in the name of the State. The penalties when recovered shall be paid by the Commissioner of Banking and Insurance into the State treasury for the use of the State. Any officer, agent, employee or member of any such corporation doing business in this State, or any other person who shall issue, circulate or cause or permit to be circulated, any estimate, illustration, circular of any sort misrepresenting the terms of any contract issued by such corporation, or any other such corporation authorized to transact business under this act, or misrepresent the benefits or advantages promised thereby, or use any name or title of any contract or class of contracts misrepresenting the true nature thereof, and any person who shall solicit, negotiate or effect the issue of any contract or subscription certificate of any medical service corporation of this or any other State which shall have neglected, failed or refused to procure a certificate of authority as provided for by the provisions of this act, or who shall accept any premiums, dues, deposits, contributions, fees, assessments or thing of value of any kind in consideration for such contract or certificate on behalf of such corporation, shall be guilty of a misdemeanor.
##### **§ 17:48A-23** Grants for needy persons {#sec-17-48a-23 omnilex-key=us-nj-statutes--title-17--17:48A-23}
A medical service corporation may receive and accept from any governmental agencies any grant or allocation of funds for the purpose of providing payment for medical services, and hospital services when rendered incident thereto, to eligible persons under such terms or conditions as shall be specified by such agency. Any medical service corporation may in its discretion accept the grant of funds from private agencies, corporations, associations, groups of individuals or individuals for the purpose of providing medical services to needy persons under such conditions as shall be satisfactory to such persons or organizations and to the corporation. All funds received under such grants shall be segregated in a separate fund or funds to be used for the purposes agreed upon. Neither the income from subscribers to the corporation, nor the assets accumulated from income received from subscribers shall be available for the payment of any obligations assumed by the corporation under such grants, nor shall any funds received through such grants be available for the payment of the obligations assumed by the corporation under its subscription certificates. The authority of the Commissioner of Banking and Insurance under the provisions of this act shall not extend to funds received under such grants except to such extent as is necessary to satisfy him that the requirements of this act have been complied with.
##### **§ 17:48A-24** Corporation as charitable and benevolent institution; tax exemption {#sec-17-48a-24 omnilex-key=us-nj-statutes--title-17--17:48A-24}
Any corporation subject to the provisions of this act is hereby declared to be a charitable and benevolent institution, and its funds and property shall be exempt from taxation by the State or any political subdivision thereof.
##### **§ 17:48A-25** Partial invalidity {#sec-17-48a-25 omnilex-key=us-nj-statutes--title-17--17:48A-25}
Should any provision or section of this act be held invalid for any reason, such holding shall not be construed as affecting the validity of any remaining portion of such section or of this act, it being the legislative intent that this act shall stand notwithstanding the invalidity of any such provision or section.
##### **§ 17:48A-26** Podiatrist, services performed by. {#sec-17-48a-26 omnilex-key=us-nj-statutes--title-17--17:48A-26}
1. Notwithstanding any other provision of the act to which this act is a supplement, benefits shall not be denied to an eligible individual for eligible services when such services are performed or rendered such persons by a licensed podiatrist within the scope of his practice. The practice of podiatric medicine shall be deemed to be within the provisions of the act to which this act is a supplement and licensed podiatrists shall have the privileges and benefits in the scope of their practice under such act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-27** Bio-analytical laboratory, services performed by {#sec-17-48a-27 omnilex-key=us-nj-statutes--title-17--17:48A-27}
Notwithstanding any other provision of the act to which this act is a supplement, benefits shall not be denied to an eligible individual for eligible services when such services are performed or rendered such persons by a duly registered bio-analytical laboratory within the scope of its authority pursuant to P.L.1953, c. 420. Services performed by a bio-analytical laboratory within the scope of said authority shall be deemed to be within the provisions of the act to which this act is a supplement and such laboratory shall have the privileges and benefits in the performance of such services under such act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-28** Dentists, services performed by {#sec-17-48a-28 omnilex-key=us-nj-statutes--title-17--17:48A-28}
Notwithstanding any other provision of the act to which this act is a supplement, benefits shall not be denied to an eligible individual for eligible services when such services are performed or rendered such persons by a licensed dentist within the scope of his practice and a medical service corporation under this act may issue separate contracts covering the services of licensed dentists. The practice of dentistry shall be deemed to be within the provisions of the act to which this act is a supplement and licensed dentists shall have the privileges and benefits in the scope of their practice under such act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-28.1** Policies providing for reimbursement of services of dentist; additional applicable provisions {#sec-17-48a-28.1 omnilex-key=us-nj-statutes--title-17--17:48A-28.1}
Notwithstanding any provision of a group or individual policy or contract of a medical service plan, whenever such a policy or contract provides for reimbursement for any service which is within the lawful scope of practice of a duly licensed dentist, the following provisions shall apply:
a. A person covered under such medical service policy or contract shall be entitled to reimbursement for such service regardless of whether the service is performed by a duly licensed physician or duly licensed dentist.
b. Equal reimbursement rates shall be paid for services performed, regardless of the discipline of the provider of the service.
##### **§ 17:48A-28.2** Application of act to contracts with reservation of right to change premium {#sec-17-48a-28.2 omnilex-key=us-nj-statutes--title-17--17:48A-28.2}
This act shall apply to all contracts in which the company has reserved the right to change the premium.
##### **§ 17:48A-29** Optometrist, services performed by {#sec-17-48a-29 omnilex-key=us-nj-statutes--title-17--17:48A-29}
Notwithstanding any other provision of the act to which this act is a supplement, benefits shall not be denied to an eligible individual for eligible services when such services are performed or rendered such persons by a duly licensed optometrist within the scope of his practice. The practice of an optometrist shall be deemed to be within the provision of the act to which this act is a supplement and duly licensed optometrists shall have the privileges and benefits in the scope of their practice under such act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-30** Psychologist, services performed by {#sec-17-48a-30 omnilex-key=us-nj-statutes--title-17--17:48A-30}
Notwithstanding any other provision of the act to which this act is a supplement, benefits shall not be denied to any eligible individual for eligible services when such services are performed or rendered such persons by a licensed psychologist within the scope of his practice. The practice of psychology shall be deemed to be within the provisions of the act to which this act is a supplement and duly licensed psychologists shall have such privileges and benefits in the scope of their practice under such act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-31** Physical therapist, services performed by {#sec-17-48a-31 omnilex-key=us-nj-statutes--title-17--17:48A-31}
Notwithstanding any other provision of the act to which this act is a supplement, benefits shall not be denied to an eligible individual for eligible services when such services are performed or rendered such persons by a duly registered physical therapist within the scope of his practice whether in an approved hospital or within the confines of his office. The practice of a physical therapist shall be deemed to be within the provisions of the act to which this act is a supplement and duly registered physical therapists shall have the privileges and benefits in the scope of their practice under such act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-32** Chiropractors; authorization for payment for diagnostic X-rays; inclusion in act as physician licensed to practice medicine or surgery; liberal construction {#sec-17-48a-32 omnilex-key=us-nj-statutes--title-17--17:48A-32}
To the extent that under any contract issued by any medical service corporation, or rider or supplement thereto, payment is authorized to physicians licensed to practice medicine and surgery for diagnostic X-rays rendered or performed in their offices, similar payment shall be authorized in the same contract, rider, or supplement for diagnostic X-rays rendered or performed by chiropractors, within the scope of their licenses, in their offices. Wherever in the act to which this act is a supplement the words "physician licensed to practice medicine and surgery" or similar words appear, there shall be added thereto the words "or licensed to practice chiropractic for services within the scope of their licenses." The foregoing provisions shall be liberally construed in favor of payment for chiropractic services.
##### **§ 17:48A-33** Chiropractors, services performed by {#sec-17-48a-33 omnilex-key=us-nj-statutes--title-17--17:48A-33}
Notwithstanding any other provision of P.L.1940, c. 74 (C. 17:48A-1 et seq.), benefits shall not be denied to any eligible individual for eligible services when such services are performed or rendered such persons by a licensed chiropractor within the scope of his practice. The practice of chiropractic shall be deemed to be within the provisions of P.L.1940, c. 74 and duly licensed chiropractors shall have the privileges and benefits in the scope of their practice under the act as are afforded to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-34** Nurse-midwives, services performed by {#sec-17-48a-34 omnilex-key=us-nj-statutes--title-17--17:48A-34}
Notwithstanding any other provision of P.L.1940, c. 74 (C. 17:48A-1 et seq.), benefits shall not be denied to any eligible individual for eligible services when the services are performed or rendered those individuals by a certified nurse-midwife within the scope of his practice. The practice of nurse-midwifery shall be deemed to be within the provisions of P.L.1940, c. 74 and duly certified nurse-midwives shall have such privileges and benefits in the scope of their practice under the act as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
##### **§ 17:48A-35** Services provided by registered professional nurse; benefits {#sec-17-48a-35 omnilex-key=us-nj-statutes--title-17--17:48A-35}
Notwithstanding any other provision of P.L. 1940, c. 74 (C. 17:48A-1 et seq.), benefits shall not be denied to any eligible individual for eligible services when the services are performed or rendered to those individuals by a registered professional nurse, within the scope of the nurse's practice, and the nurse is not being paid a salary by a health care provider for the services so performed. The benefits may be payable subject to deductible or coinsurance provisions, and a contract providing such benefits may contain a limitation on the number of benefit days payable under the contract.
This act shall exclude salaried services which are already reimbursed and shall not be construed to affect or impair hospital procedures for billing in-hospital nursing care. The practice of nursing shall be deemed to be within the provisions of P.L. 1940, c. 74 (C. 17:48A-1 et seq.) and duly registered professional nurses shall have those privileges and benefits in the scope of their practice as are afforded thereunder to licensed physicians and surgeons in the scope of their practice.
## **Chapter 48B** {#struct-chapter-48b}
##### **§ 17:48B-1** Additional powers {#sec-17-48b-1 omnilex-key=us-nj-statutes--title-17--17:48B-1}
Any hospital service corporation and any medical service corporation, organized pursuant to the laws of this State, in addition to other powers conferred upon it, shall be authorized and empowered to issue contracts, policies or certificates of insurance for hospital services, medical services, and related benefits, in such form, upon such conditions, of such types, and at such rates as may be necessary to comply with the requirement of any applicable statute, and rules and regulations adopted pursuant thereto, for the provision of health and accident benefits to persons by reason of employment by any government and to members of the families of such persons, as well as to enter into any contracts, agreements or arrangements and to do all other acts necessary for such compliance.
##### **§ 17:48B-2** Rules and regulations {#sec-17-48b-2 omnilex-key=us-nj-statutes--title-17--17:48B-2}
The Commissioner of Banking and Insurance is authorized to promulgate rules and regulations, not inconsistent with this act, with respect to the keeping of records, reporting of information, segregation of accounts, entry of credits and charges, use of appropriate accounting procedures, and all other matters connected with activities carried on pursuant to the additional powers conferred by this act.
## **Chapter 48C** {#struct-chapter-48c}
##### **§ 17:48C-1** Objects and purposes {#sec-17-48c-1 omnilex-key=us-nj-statutes--title-17--17:48C-1}
The objects and purposes of a dental service corporation authorized pursuant to this act shall be to establish, maintain and operate a nonprofit dental service plan or plans in the public interest whereby dental care may be provided to individuals either singly or in groups who become subscribers thereto; and in furtherance thereof to enter into contracts with duly licensed dentists whereby such dentists agree to provide such dental care to its subscribers; and to do everything necessary, incidental or appropriate for the performance and fulfillment of the aforesaid objects and purposes or which may lawfully be done by a nonprofit corporation organized under the laws of the State of New Jersey.
##### **§ 17:48C-2** Definitions. {#sec-17-48c-2 omnilex-key=us-nj-statutes--title-17--17:48C-2}
2. As used in this act the following words and phrases shall have the stated meanings unless a different meaning clearly appears from the context:
(a) The term "dental service corporation" or "the corporation" shall mean a corporation which is (1) organized, without capital stock, and not for profit, for the purpose of establishing, maintaining and operating a nonprofit dental service plan, whereby the expense of dental services to subscribers and other covered dependents is paid in whole or in part by the corporation to participating dentists and to others as provided herein in return for premiums or other valuable considerations, and which (2) holds a certificate of authority issued under this act;
(b) The term "subscriber" shall mean a person to whom a subscription certificate is issued by the corporation and which sets forth the kinds and extent of the dental services for which the corporation is liable to make and which constitutes the contract between the subscriber and the corporation;
(c) The term "covered dependent" shall mean the spouse, civil union partner, or domestic partner, former spouse, former civil union partner, or former domestic partner for whom the subscriber is legally liable to provide dental coverage, an adult dependent or a child of the subscriber who is named in the subscription certificate issued to the subscriber and with respect to whom appropriate premium is specified in the certificate;
(d) The term "participating dentist" shall mean any dentist authorized to practice dentistry under the laws of this State and who agrees in writing with the corporation to provide the dental services specified in the subscription certificates issued by the corporation and at such rates of compensation as shall be determined by its board of trustees and who agrees to abide by the by-laws, rules and regulations of the corporation applicable to participating dentists , which rules and regulations may exclude a dentist: (1) who is suspended, debarred, or otherwise ineligible to participate in or provide services to persons covered by or receive payment from a government health care program, or (2) whose participation violates one or more standards established in accordance with State or federal laws or regulations;
(e) The term "dental service" shall mean any and all general and special dental services ordinarily provided by such licensed dentists in accordance with accepted practices in the community at the time the service is rendered;
(f) The term "commissioner" shall mean the Commissioner of Banking and Insurance.
##### **§ 17:48C-3** Nonprofit corporation; restrictions as to methods of diagnosis and treatment; dissolution {#sec-17-48c-3 omnilex-key=us-nj-statutes--title-17--17:48C-3}
No dental service corporation shall be converted into a corporation organized for pecuniary profit. Every such corporation shall be operated for the benefit of the subscribers. No dental service corporation shall impose any restrictions as to methods of diagnosis or treatment on dentists who administer to its subscribers. The certificate of incorporation or by-laws shall contain an irrevocable provision that in the event of any dissolution of the corporation the net assets remaining shall be applied to one or more charitable or educational purposes, as near as may be to those for which the corporation was formed, to be selected by a majority of the trustees of the corporation with the approval of the commissioner; and in case of the failure or inability of the trustees to so select, or in case of any disagreement in respect to the validity of such selection, the same shall be made by the Superior Court by application of the doctrine of cy pres and other applicable equitable doctrines in a summary proceeding initiated by one or more trustees, or by any other person having a substantial interest in the provisions of this section, including, without limitation, the commissioner or the Attorney General.
##### **§ 17:48C-4** Certificate of authority; application; issuance; amendment {#sec-17-48c-4 omnilex-key=us-nj-statutes--title-17--17:48C-4}
A nonprofit corporation organized under Title 15 of the Revised Statutes for the purpose of establishing, maintaining and operating a nonprofit dental service plan, as described in section 2(a) of this act, intending to do so as a dental service corporation certified under and thereby subject to the provisions of this act, shall seek certification therefor by application to the commissioner. The application of such a corporation shall include a certified copy of its certificate of incorporation, a copy of its by-laws certified by the lawful custodian of the original, and a statement in such form and detail as the commissioner shall prescribe, showing its financial condition, its proposed methods and places of operation, and such other matters as the commissioner shall prescribe, signed and sworn to by its president and secretary or other proper officers. If the commissioner is satisfied, on the basis of examination or otherwise that such corporation is organized without capital stock and not for pecuniary profit and has complied with the requirements of this act and that its condition or methods of operation are not such as would render its operations hazardous to the public or its subscribers, the commissioner shall issue a certificate of authority to such corporation as a dental service corporation of this State. A corporation to which a certificate of authority has been issued under this act thenceforth shall be subject in all its activities to the provisions of this act as long as the certificate of authority as issued or thereafter amended remains in effect. No change in, or amendment to, or alteration in, addition to, or substitution of any document, instrument or other papers so filed with the commissioner shall become operative or effective until the same shall also have been filed with the commissioner in a similar manner. No certificate of authority shall be issued to any corporation not incorporated as a corporation without capital stock and not for pecuniary profit under the laws of this State, or to any corporation which, prior to or pending its application for such certificate, has solicited a subscriber or issued a subscription certificate. No dental service corporation shall solicit a subscriber or issue a subscription certificate until its board of trustees has been fully constituted as provided in this act.
##### **§ 17:48C-4.1** Supplying administrative services by dental service corporation {#sec-17-48c-4.1 omnilex-key=us-nj-statutes--title-17--17:48C-4.1}
1. A dental service corporation may supply administrative services only.
##### **§ 17:48C-5** Standards in reviewing application. {#sec-17-48c-5 omnilex-key=us-nj-statutes--title-17--17:48C-5}
5. In reviewing any application for authority to operate under this act, the commissioner shall be guided by the following standards:
(a) It shall be shown that the initial working funds are adequate. No certificate of authority shall be issued to any applicant therefor except on receipt of evidence by the commissioner that such applicant is in possession of unencumbered funds of not less than $25,000.00 and that such amount is held in cash or in bank to its credit. From and after the issuance of a certificate of authority to an applicant, the corporation shall maintain such amount as a general surplus over and above its reserves, liabilities, and special contingent surplus.
(b) It shall be shown that the applicant has enlisted a sufficient number of participating dentists, with skills in appropriate fields and accessible to subscribers, to indicate ability to render the intended dental service. In carrying out the intent of this section the commissioner shall determine that at least 100 dentists have agreed to participate.
(c) It shall be shown that the applicant will accept as a participating dentist any dentist who is authorized to practice dentistry in the jurisdiction where his services are to be rendered, and is ready, available and willing to render dental service to be provided under a contract or contracts; provided, however, that any dentist who is suspended, debarred, or otherwise ineligible to participate in or provide services to persons covered by or receive payment from a governmental health care program, and any dentist whose participation would violate one or more standards established in accordance with State or federal laws or regulations need not be accepted as a participating dentist.
##### **§ 17:48C-6** Board of trustees; membership; chairman. {#sec-17-48c-6 omnilex-key=us-nj-statutes--title-17--17:48C-6}
6. The activities and operations of a dental service corporation shall be conducted by a board of trustees composed initially of an even number of persons, not less than 10 in all, as may be specified in the certificate of incorporation or an amendment thereto, 1/2 of whom shall be persons who are licensed to practice dentistry in this State and who are holders of active registration certificates in good standing. The initial members of the board shall elect one additional person to serve as chairman of the board to preside at all meetings of the board, and who shall be a member of the board and participate in its work and functions, except that he shall cast no vote on any matter coming before the board except in case of a tie in the votes cast by the other members of the board. The offering and operation of contracts and agreements under the authority of this act shall not constitute the practice of dentistry.
##### **§ 17:48C-7** Contracts; provisions. {#sec-17-48c-7 omnilex-key=us-nj-statutes--title-17--17:48C-7}
7. Every contract made by any dental service corporation to provide payment for dental service shall provide for the payment for dental service for a period of 12 months or less, and no contract shall be made providing for the inception of such services at a date later than one year after the actual date of the making of such contract. Any such contract may provide that it shall be automatically renewed from year to year unless there shall have been 90 days' prior written notice of termination by either the subscriber or the corporation. No contract between the corporation and a subscriber shall provide for payment for dental services for more than one person, except that a family contract may provide that payment will be made for dental services rendered to a subscriber, or covered dependents, or both.
##### **§ 17:48C-8** Written contracts required; subscription certificate; provisions required {#sec-17-48c-8 omnilex-key=us-nj-statutes--title-17--17:48C-8}
Every contract entered into by the corporation with any subscriber shall be in writing and a certificate stating the terms and conditions thereof shall be furnished to the subscriber. No such subscription certificate shall be issued or delivered by any dental service corporation unless it contains the following provisions:
(a) A statement of the amounts payable to the corporation by the subscriber and the times at which and the manner in which such amounts shall be paid; and a provision requiring 90 days' written notice to the subscriber before any change in the contract, including a change in the amount of subscription rate, shall take effect;
(b) a statement of the nature of the dental services to be paid for and the period during which the certificate is effective; and if there are any types of dental services to be excepted, or for which benefits are limited, a detailed statement of such exceptions and limitations printed as hereinafter specified;
(c) a statement of the terms or conditions, if any, upon which the certificate may be canceled or otherwise terminated at the option of either party;
(d) a statement that the subscription certificate constitutes the contract between the corporation and the subscriber and includes the endorsements thereon and attached papers, if any, and contains the entire contract;
(e) a statement that no statement by the subscriber in his application for a certificate shall void the contract or be used in any legal proceeding thereunder, unless such application or an exact copy thereof is included in or attached to the certificate, and that no agent or representative of the corporation, other than an officer or officers designated in the certificate, is authorized to change the contract or waive any of its provisions;
(f) a statement that if the subscriber defaults in making any payment under the certificate, the subsequent acceptance of a payment by the corporation or by one of its duly authorized agents shall reinstate the contract, but such reinstatement shall not provide coverage for the period during which the subscriber was in default in making such payment;
(g) a statement of the period of grace which will be allowed the subscriber for making any payment due under the contract, which period shall not be less than 10 days;
(h) a statement that indemnity in the form of cash will not be paid to any subscriber except in payment for dental services for which the corporation was liable at the time of such payment.
##### **§ 17:48C-8.1** Dental service corporation to receive, transmit transactions electronically. {#sec-17-48c-8.1 omnilex-key=us-nj-statutes--title-17--17:48C-8.1}
8. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a dental service corporation, or a subsidiary that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to a dental service corporation, its subsidiary or its covered persons.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a dental service corporation or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all group and individual contracts issued, delivered, executed or renewed in this State.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a dental service corporation shall require that health care providers file all claims for payment for dental services. A covered person who receives dental services shall not be required to submit a claim for payment, but notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the contract.
d. (1) Effective 180 days after the effective date of P.L.1999, c.154, a dental service corporation or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a subscriber or that subscriber's agent or assignee if the contract provides for assignment of benefits, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42U.S.C.s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the claim is an eligible claim for a health care service provided by an eligible health care provider to a covered person under the contract;
(b) the claim has no material defect or impropriety, including, but not limited to, any lack of required substantiating documentation or incorrect coding;
(c) there is no dispute regarding the amount claimed;
(d) the payer has no reason to believe that the claim has been submitted fraudulently; and
(e) the claim requires no special treatment that prevents timely payments from being made on the claim under the terms of the contract.
(2) If all or a portion of the claim is denied by the payer because:
(a) the claim is an ineligible claim;
(b) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(c) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(d) the payer disputes the amount claimed; or
(e) the claim requires special treatment that prevents timely payments from being made on the claim under the terms of the contract, the payer shall notify the subscriber, or that subscriber's agent or assignee if the contract provides for assignment of benefits, in writing or by electronic means, as appropriate, within 30 days, of the following: if all or a portion of the claim is denied, all the reasons for the denial; if the claim lacks the required substantiating documentation, including incorrect coding, a statement as to what substantiating documentation or other information is required to complete adjudication of the claim; if the amount of the claim is disputed, a statement that it is disputed; and if the claim requires special treatment that prevents timely payments from being made, a statement of the special treatment to which the claim is subject.
(3) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(4) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider or subscriber, no later than two working days following receipt of the transmission of the claim.
(5) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(6) Payment of an eligible claim pursuant to paragraphs (1) and (3) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (b) of paragraph (2) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or modification of an initial submission.
(7) An overdue payment shall bear simple interest at the rate of 10% per annum.
e. As used in this subsection, "insured claim" or "claim" means a claim by a subscriber for payment of benefits under an insured dental service corporation contract for which the financial obligation for the payment of a claim under the contract rests upon the dental service corporation.
##### **§ 17:48C-8.2** Dental service corporation to offer coverage for domestic partner. {#sec-17-48c-8.2 omnilex-key=us-nj-statutes--title-17--17:48C-8.2}
55. Every dental service corporation contract that is delivered, issued, executed or renewed in this State pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2003, c.246 (C.26:8A-1 et al.), under which dependent coverage is available, shall offer dependent coverage to a covered person for a covered person's domestic partner. For the purposes of this section, "domestic partner" means a domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3).
This section shall apply to all contracts in which the dental service corporation has reserved the right to change the premium.
##### **§ 17:48C-8.3** Payment of out-of-network benefits by dental service corporation. {#sec-17-48c-8.3 omnilex-key=us-nj-statutes--title-17--17:48C-8.3}
1. a. (1) Except as provided in subsection e. of this section, a dental service corporation that makes a dental benefit payment to a covered person for services rendered by an out-of-network dentist shall issue the payment to the covered person in accordance with the time frames set forth in section 8 of P.L.1999, c.154 (C.17:48C-8.1), and shall, within three days of issuing the payment, provide a notification to the out-of-network dentist of the amount and date of the payment and the services for which the payment was made.
(2) In the case of a dental service corporation that supplies an administrative services only contract and makes a dental benefit payment to a covered person for services rendered by an out-of-network dentist under that contract, paragraph (1) of this subsection shall not apply, but the dental service corporation shall, within three days of issuing the payment, provide a notification to the out-of-network dentist of the amount and date of the payment.
b. A covered person may enter into an agreement with an out-of-network dentist to sign over the dental benefit payment received from the dental service corporation to the dentist. The agreement shall:
(1) be in writing;
(2) be signed by the person who is entitled to receive the dental benefit payment from the dental service corporation;
(3) be retained by the dentist for at least six years following the date of the most recent payment from the covered person; and
(4) give the covered person at least 10 business days within which to sign over the dental benefit to the dentist.
c. A covered person who agrees to sign over a dental benefit payment in accordance with this section shall comply with the terms of the agreement; except that, if the covered person owes the out-of-network dentist less than the amount of the dental benefit payment, the covered person shall pay the dentist the balance owed to the dentist.
d. A covered person who fails to sign over the dental benefit payment in accordance with subsections b. and c. of this section shall be liable to the out-of-network dentist for payment of attorney fees and costs reasonably incurred by the dentist in enforcing the agreement established pursuant to those subsections.
e. (1) With respect to a dental service corporation that makes a dental benefit payment to a covered person for services rendered by an out-of-network dentist, if the covered person assigns, through an assignment of benefits, his right to receive reimbursement to an out-of-network dentist, the dental service corporation shall issue the payment for the reimbursement directly to the dentist in the form of a check payable to the dentist, or in the alternative, to the dentist and the covered person as joint payees, with a signature line for each of the payees. Payment shall be made in accordance with section 8 of P.L.1999, c.154 (C.17:48C-8.1). Any payment made only to the covered person rather than the dentist while such an assignment of benefits is in effect shall be considered unpaid, and unless issued to the dentist within the time frames established by section 8 of P.L.1999, c.154 (C.17:48C-8.1), shall be considered overdue and subject to interest charges as provided in that section.
(2) Nothing in this subsection shall be construed to apply to a dental service corporation that supplies a self-funded dental services plan or an administrative services only contract for a self-funded dental services plan, when making a dental benefit payment to a covered person for services rendered by an out-of-network dentist under that plan or contract.
##### **§ 17:48C-9** Additional payments by subscribers {#sec-17-48c-9 omnilex-key=us-nj-statutes--title-17--17:48C-9}
Any dental service corporation may classify subscribers whereby under specified circumstances a subscriber or covered dependents may pay a participating dentist for dental services an amount in addition to that payable by the corporation for dental services and the subscription certificate issued to any subscriber affected thereby shall contain the provisions thereof and shall specify such circumstances. No subscriber or covered dependent shall be liable for that portion of a participating dentist's fee for dental service specified in the subscriber's certificate, which is to be paid by the corporation to the participating dentist.
##### **§ 17:48C-10** Liability of corporation for injuries {#sec-17-48c-10 omnilex-key=us-nj-statutes--title-17--17:48C-10}
Any subscription certificate may contain a provision that all dental services paid for by a dental service corporation shall be in accordance with the accepted dental practices in the community at the time, but the corporation shall not be liable for injuries resulting from negligence, misfeasance, malfeasance, nonfeasance or malpractice on the part of any officer or employee or on the part of any dentist or others engaged by him in the course of rendering dental services to subscribers.
##### **§ 17:48C-11** Formal requirements for subscription certificates {#sec-17-48c-11 omnilex-key=us-nj-statutes--title-17--17:48C-11}
In every subscription certificate issued or delivered by any dental service corporation of this State:
(a) All printed portions shall be plainly printed in type of which the face is not smaller than 10 point;
(b) there shall be a brief description of the subscription certificate on its first page and on its filing back, in type of which the face is not smaller than 14 point;
(c) the exceptions and limitations of the contract shall appear with the same prominence in the certificate as the benefits to which they apply; and
(d) if the contract contains any provisions purporting to make any portion of the articles, constitution or by-laws or regulations of the corporation or plans a part of the contract, such portion shall be set forth in full.
##### **§ 17:48C-12** Participating dentists; payments for dental services {#sec-17-48c-12 omnilex-key=us-nj-statutes--title-17--17:48C-12}
Any dental service corporation may enter into agreements with eligible dentists whereby such dentists become participating dentists in a plan operated by the corporation and may make to such dentists such payments as shall have accrued by reason of services required to be performed under the plan. No person shall become a participating dentist unless he shall be a dentist authorized to practice dentistry under the laws of this State. Any dental service corporation may enter into contracts for the payment of dental services to the subscribers or members of similar nonprofit dental service corporations of this or any other State, subject to the supervision of the State in which such similar corporation is located, and shall have the right to make payment to any other nonprofit dental service corporation, or to any dentists authorized to practice dentistry in this or any other State for services rendered to its subscribers and their covered dependents at rates not exceeding the rates paid participating dentists under the certificate of the subscriber. The making of any such contract or arrangement, or the rendering of dental service pursuant thereto, shall not be a violation of any law, rule or regulation governing the practice of dentistry.
##### **§ 17:48C-13** Filing form of subscription certificate; disapproval {#sec-17-48c-13 omnilex-key=us-nj-statutes--title-17--17:48C-13}
No subscription certificate shall be issued by any dental service corporation to any subscriber unless and until the form thereof shall have been filed with the commissioner, together with all applications, riders and endorsements for use in connection with the issuance or renewal thereof. If the commissioner shall at any time notify the corporation filing the same of his disapproval of any such form, as contrary to law, or as being oppressive or calculated to mislead the public, specifying particulars, it shall be unlawful for such corporation thereafter to issue any such form so disapproved. Such disapproval of the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48C-14** Schedule of rates; filing; disapproval {#sec-17-48c-14 omnilex-key=us-nj-statutes--title-17--17:48C-14}
No dental service corporation shall enter into any contract with a subscriber unless and until it shall have filed with the commissioner a full schedule of the rates to be paid by the subscribers to such contracts. The commissioner may disapprove such schedule of rates at any time if he finds that such rates are excessive, inadequate or discriminatory. It shall be unlawful for any dental service corporation whose schedule of rates has been disapproved to effect any contract or issue any subscription certificate until a revised schedule of rates has been filed. Such disapproval by the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48C-15** Agreements with dentists; approval of payments; corporate records. {#sec-17-48c-15 omnilex-key=us-nj-statutes--title-17--17:48C-15}
15. No dental service corporation shall enter into any contract with a subscriber unless and until it shall have filed with the commissioner a copy of the agreement proposed to be entered into by the corporation and the participating dentists. Every such agreement shall provide for the payment of dental services to subscribers and covered dependents to the end of the subscription certificate year; that 30 days' written notice of termination of such agreement may be given to the corporation at any time by any participating dentist but shall not apply to any subscription certificate in force at the time of such notice until the first date thereafter when such subscription certificate may properly be terminated by the corporation, and that the agreement of the dentist to render such service to the end of any certificate year shall not be affected by cessation of the transaction of business by reason of appropriate resolution of the board of trustees, or directors of such corporation, injunction issued by a court of competent authority, legislative act or by any other exercise of judicial, administrative or legislative authority; provided, that this requirement shall not apply to any subscription certificate which is not maintained in force by the payment of premiums required thereby. There shall be included in the minutes of the board of trustees of every dental service corporation a record of the approval of payments to be made to participating dentists. The corporation shall maintain in its office complete records of all the dental services rendered to subscribers and covered dependents in such form as will indicate the kind of services rendered, the amounts claimed for such services by the participating dentists, and the amounts paid by the corporation during the preceding seven-year period. No payment to any participating dentists shall be authorized by the board of trustees except in accordance with a plan of payments adopted by the board and recorded in the minutes of a meeting. Every dental service corporation shall furnish a copy of the plan of payments to the commissioner at the commissioner's request. If the commissioner at any time shall notify the corporation of his disapproval of any rate of payment included in the plan of payments as being excessive or inadequate in itself or in relation to other rates of payment, payment shall not thereafter be made at the rate. In making his determination the commissioner shall give consideration to prevailing rates of payment by insurers and hospital, medical and dental service corporations of this and other States for similar services under similar conditions, the fair relationships of the values of the different kinds of services covered in the plan of payments and any other relevant facts. Upon request of the commissioner, the corporation shall furnish to the commissioner such information as the commissioner shall specify to facilitate review of any plan of payments.
##### **§ 17:48C-16** Group contract; benefits; "employees" defined. {#sec-17-48c-16 omnilex-key=us-nj-statutes--title-17--17:48C-16}
16. A dental service corporation may also issue to a policyholder a group contract, covering at least one employee other than a proprietor, a partner in a partnership or a shareholder that owns more than two percent of the shares of a Subchapter S corporation, or at least 10 members of any other eligible group, as well as immediate family members of those individuals at the date of issue, if it conforms to the following description:
(a) A contract issued to an employer or to the trustees of a fund established by one or more employers, or issued to a labor union, or issued to an association formed for purposes other than obtaining such contract, or issued to the trustees of a fund established by one or more labor unions or by one or more employers and one or more labor unions, covering employees and members of associations or labor unions.
(b) A contract issued to cover any other group which the commissioner determines may be covered in accordance with sound underwriting principles.
Benefits may be provided for one or more members of the families or one or more dependents of persons who may be covered under a group contract referred to in (a) or (b) above.
The contract may provide that the term "employees" shall include as employees of a single employer the employees of one or more subsidiary corporations and the employees, individual proprietors and partners of affiliated corporations, proprietorships and partnerships if the business of the employer and such corporations, proprietorships or partnerships is under common control through stock ownership, contract or otherwise. The contract may provide that the term "employees" shall include the individual proprietor or partners of an individual proprietorship or a partnership. The contract may provide that the term "employees" shall include retired employees. A contract issued to trustees may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship. A contract issued to the trustees of a fund established by the members of an association of employers may provide that the term "employees" shall include the employees of the association.
##### **§ 17:48C-17** Application of act to group contracts; "subscriber" defined {#sec-17-48c-17 omnilex-key=us-nj-statutes--title-17--17:48C-17}
The provisions of this act shall apply to group contracts except that sections 7, 8, 11 and 14 of this act shall not apply. The word "subscriber" as used in this act means the policyholder under a group contract where the context so requires.
##### **§ 17:48C-18** Written group contracts; statements. {#sec-17-48c-18 omnilex-key=us-nj-statutes--title-17--17:48C-18}
18. Every group contract entered into by a dental service corporation with any policyholder shall be in writing and a contract form stating the terms and conditions thereof shall be furnished to the policyholder to be kept by him. No group contract form shall be used unless it contains the following provisions:
(a) A statement of the contract rate payable to the dental service corporation for the original period of coverage, the time or times at which, the manner in which, the contract rate due is to be paid, and the basis, if any, on which the rate may subsequently be adjusted;
(b) A provision that all contract rates due under the contract shall be paid to the dental service corporation on or before the due date thereof or within such period of grace as may be specified therein;
(c) A statement of the nature of the dental services to be paid for and the period during which such payments will be made, and if there are any services to be excepted, a detailed statement of such exceptions;
(d) A provision that the contract, any endorsements or riders thereto, the application of the policyholder in whose name the contract is issued, a copy of which shall be attached to the contract, and the individual applications, if any, of the employees or members shall constitute the entire contract between the parties and that all statements contained in any such application for coverage shall be deemed representations and not warranties;
(e) A provision that there shall be issued to the policyholder, for delivery to the employee or member, a certificate or other document which sets forth or summarizes the essential features of the coverage including the time, place and method for making claims for benefits;
(f) A provision that all new employees or new members, as the case may be, in the groups or classes eligible for the coverage must be added to the eligible groups or classes;
(g) A statement of the terms and conditions, if any, upon which the contract may be terminated or amended. Any notice to the policyholder shall be effective if sent by mail to the policyholder's address as shown at the time on the corporation's records. The notice to the policyholder as herein required shall be sent at least 30 days before the termination or amendment of the contract takes effect.
Any such group contract may contain a provision that all dental services paid for by a dental service corporation shall be in accordance with the accepted dental practices in the community at the time, but the corporation shall not be liable for injuries resulting from negligence, misfeasance, malfeasance, nonfeasance or malpractice on the part of any officer or employee or on the part of any dentist or others engaged by him in the course of rendering dental services to persons covered.
Any dental service corporation may classify persons covered whereby under specified circumstances a covered person may pay a participating dentist for dental services an amount in addition to that payable by the corporation for dental services and the group contract shall contain the provisions thereof and specify such circumstances.
##### **§ 17:48C-18.1** Alternative dental coverage; original coverage restricted to limited number of providers {#sec-17-48c-18.1 omnilex-key=us-nj-statutes--title-17--17:48C-18.1}
Each employer or other organization which employs or has 25 or more employees or members during the full preceding calendar year and which contributes to a dental service corporation contract which restricts the covered persons in selecting the providers of dental services to a single provider or limited number of providers, shall also offer its employees and their eligible dependents and members and members' eligible dependents at the time a dental benefits plan is offered or renewed the option of selecting alternative coverage which permits covered persons to obtain dental services from any licensed dentist.
##### **§ 17:48C-18.2** Employer contribution {#sec-17-48c-18.2 omnilex-key=us-nj-statutes--title-17--17:48C-18.2}
An employer or other organization shall be required to pay for or contribute towards the provision of alternative coverage an amount equal to the premium or cost which it pays or contributes to the dental service corporation contract which limits the number of providers of dental services.
##### **§ 17:48C-18.3** Rules and regulations {#sec-17-48c-18.3 omnilex-key=us-nj-statutes--title-17--17:48C-18.3}
Within 120 days of the effective date of this act, the Commissioner of the Department of Insurance shall promulgate rules and regulations necessary to effectuate the purpose of this act, including procedures for notice to covered persons, employers and other organizations of the provisions of this act.
##### **§ 17:48C-19.1** Adjustment of rate of premium for dental service corporations, certain circumstances. {#sec-17-48c-19.1 omnilex-key=us-nj-statutes--title-17--17:48C-19.1}
1. a. A group contract covering at least 10 employees or members may provide for the adjustment of the rate of premium based on past or projected experience, and may include those claim costs and utilization trend factors which the dental service corporation deems necessary in its discretion. No dental service corporation shall use any form of prospective or retrospective experience rating plan until it shall have filed with the Commissioner of Banking and Insurance the formulas to be used and the classes or groups to which they are to apply. The commissioner may disapprove the formulas or classes at any time if the commissioner finds that the rates produced thereby are excessive, inadequate or unfairly discriminatory or that the formulas or classes are such as to prejudice the interests of persons who are eligible for coverage under contracts with the dental service corporation which are not subject to experience rating.
b. An experience rating formula used pursuant to this section may provide for the allowance of an equitable discount if the policyholder agrees to perform certain administrative and recordkeeping functions in connection with the routine maintenance of the group contract.
c. Nothing in this section shall preclude a dental service corporation from incorporating in the rating formulas those claim cost and utilization trend factors which it deems necessary in its discretion, so long as the rates produced are self-supporting in the aggregate, not excessive, and the formulas for classes do not prejudice the interests of persons who are eligible for coverage under contracts with the dental service corporation which are not subject to experience rating.
d. The commissioner may, by regulation, prohibit or limit the experience rating of contracts covering groups of fewer than 50 employees or members if the commissioner determines that experience rating of those contracts is not in the public interest.
##### **§ 17:48C-20** Agreements for participation with other corporations for issuance of group contracts. {#sec-17-48c-20 omnilex-key=us-nj-statutes--title-17--17:48C-20}
20. A dental service corporation of this State may enter into agreements to participate with other corporations in the issuance of group contracts to policyholders whose employees or members are located in more than one state. Without regard to the limitations specified in section 1 of P.L.2003, c.154 (C17:48C-19.1), the agreements may provide for experience rating, for a sharing of the premium, claims, and expenses by the participating corporations or for acceptance or ceding of the whole or portions of group risks on a reinsurance basis. No such agreements shall, however, prejudice the interests of persons who are eligible for dental services under other contracts with the dental service corporation. Such agreements shall be filed with and approved by the commissioner before becoming effective.
##### **§ 17:48C-21** Experience rates, commissioner's determination. {#sec-17-48c-21 omnilex-key=us-nj-statutes--title-17--17:48C-21}
21. No dental service corporation shall issue group contracts which are not experience rated pursuant to section 20 of this act, if the commissioner has determined that those rates are excessive, inadequate or unfairly discriminatory. A dental service corporation shall furnish any schedule of rates to the commissioner upon request. It shall be unlawful for any corporation to effect any such group contract according to rates which have been disapproved by the commissioner.
##### **§ 17:48C-22** Practices, rules and procedures subject to review; orders; disapproval; judicial review {#sec-17-48c-22 omnilex-key=us-nj-statutes--title-17--17:48C-22}
All practices, rules and procedures of a dental service corporation, involving termination or refusal to renew coverage, modification of coverage or rates in the case of persons classified as left-group, selection of risks, and underwriting classifications, shall be subject to review at any time by the commissioner and upon his request for information relative to any such practice, rule or procedure the dental service corporation shall furnish such information in writing without delay. If in the opinion of the commissioner any such practice, rule or procedure, is unjust, unfair, or inequitable, taking into consideration the nonprofit and tax-exempt status of the dental service corporation, he shall so notify the dental service corporation and fix a time and place for hearing before him or his designated representative at which the dental service corporation may be heard.
Following such hearing, the commissioner may make an order based on the record of the proceeding. If such order be one of disapproval, it shall be unlawful for the corporation to continue such practice, rule, or procedure. Such disapproval by the commissioner shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48C-23** Fees {#sec-17-48c-23 omnilex-key=us-nj-statutes--title-17--17:48C-23}
Every corporation to which this act shall be applicable shall pay the following fees to the commissioner for enforcement of the provisions of this act, viz.: for filing its application and charter, $10.00; for filing each annual statement, $20.00; for each copy of any paper filed in the Department of Banking and Insurance, $0.20 a sheet or folio of 100 words and $1.00 for certifying the same. In addition, such corporation shall pay on April 1 of each year a general supervisory fee to the commissioner in the amount of $0.02 per subscriber at the end of the preceding year under subscription contracts other than group contracts, plus $0.02 per member or employee covered under group contracts at the end of the preceding year.
##### **§ 17:48C-24** Disbursements by corporation {#sec-17-48c-24 omnilex-key=us-nj-statutes--title-17--17:48C-24}
If the commissioner shall determine that the amount disbursed during any 12-month period by a dental service corporation as expenses of operation is excessive in proportion to the amount it received from subscribers during that period, the corporation shall reduce its expenses during the 12-month period next following notification of the commissioner's determination to the proportion directed by the commissioner. In making his determination the commissioner shall give consideration to the number of subscribers enrolled, the aggregate payments by subscribers, the length of time the corporation has been certified as a dental service corporation, the expense rates of hospital, medical and dental service corporations of this and other States under similar conditions and any other relevant facts. In no event shall a dental service corporation disburse an amount during any 12-month period for expenses of operation greater than 30% of the amount it receives from subscribers during that period.
##### **§ 17:48C-25** Investments; surplus {#sec-17-48c-25 omnilex-key=us-nj-statutes--title-17--17:48C-25}
The funds of any dental service corporation may be invested only in accordance with the requirements now or hereafter provided by law for the investment of funds of life insurance companies. Every dental service corporation after the first full calendar year of doing business after the effective date of this act, shall accumulate and maintain a special contingent surplus over and above its reserves and liabilities at the rate of 2% annually of its net contract and certificate income until such surplus shall be not less than $100,000.00, except that no such corporation shall be required to maintain a special contingent surplus exceeding 55% of its average annual contract and certificate income for the previous 5 years.
##### **§ 17:48C-26** Statement of financial condition; inquiries by commissioner {#sec-17-48c-26 omnilex-key=us-nj-statutes--title-17--17:48C-26}
Every dental service corporation transacting business in this State shall file annually, on or before March 1, in the Department of Banking and Insurance, a statement in such form and detail as the commissioner shall prescribe, subscribed and sworn to by its president and secretary, or in their absence by 2 of its principal officers, showing its financial condition at the close of business on December 31 of the year last preceding, its business transacted during that year, and such other matters as the commissioner shall prescribe. The commissioner may also address inquiries to any such corporation or its officers in relation to its condition or affairs, or any matter connected with its transactions, and it shall be the duty of the officers of such corporation to reply promptly in writing to all such inquiries; for good cause shown the commissioner may extend the time within which any such statement may be filed.
##### **§ 17:48C-27** Failure to file statement or answer inquiries; penalty {#sec-17-48c-27 omnilex-key=us-nj-statutes--title-17--17:48C-27}
Any dental service corporation neglecting to make and file its annual statement as required by section 26 of this act, or neglecting to reply in writing to inquiries of the commissioner within such reasonable time as may be specified by him, shall forfeit $25.00 for each day's neglect, to be recovered in a civil action; and upon notice by the commissioner to such effect, its authority to do new business in this State shall cease while such default continues.
##### **§ 17:48C-28** Examination of assets and affairs {#sec-17-48c-28 omnilex-key=us-nj-statutes--title-17--17:48C-28}
(a) The commissioner shall have the power, whenever he deems the same expedient, to make or cause to be made an examination of the assets and liabilities, method of conducting business and all other affairs of every dental service corporation authorized or which has made application for authority to transact business under the provisions of this act. For the purpose of such examination the commissioner may commission and employ such persons to conduct the same or to assist therein as he may deem advisable, which examination may be conducted in any State in which the corporation examined has an office, agent or place of business.
(b) The reasonable expense of such examination shall be fixed and determined by the commissioner and he shall collect the same from the corporation examined, which shall pay same on presentation of a detailed account of such expense. In case any corporation, after such examination, shall be adjudged by the Superior Court to be insolvent, the expense of such examination, if unpaid, shall be ordered paid out of the assets of the corporation. No dental service corporation shall, either directly or indirectly, pay, by way of gift, credit or otherwise, any other or further sum to the commissioner or to any person in the employ of the Department of Banking and Insurance, for extra service or for purposes of legislation, or for any other purpose whatsoever.
(c) It shall be the duty of the officers, agent and employees of any such corporation to exhibit all its books, records and accounts for the purpose of such examination and otherwise to facilitate the same so far as it may be in their power to do so, and for that purpose the commissioner and his deputies, assistants, and employees shall have the power to examine, under oath, the officers, agents and employees of any such corporation relative to its business and affairs.
##### **§ 17:48C-28.1** Definitions. {#sec-17-48c-28.1 omnilex-key=us-nj-statutes--title-17--17:48C-28.1}
21. As used in sections 21 through 25 of P.L.2014, c.81 (C.17:48C-28.1 through C.17:48C-28.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Dental service corporation" means an entity authorized to transact business in this State pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.).
##### **§ 17:48C-28.2** Increase in amount of capital or surplus required of dental service corporation. {#sec-17-48c-28.2 omnilex-key=us-nj-statutes--title-17--17:48C-28.2}
22. The commissioner may increase the amount of capital or surplus required of a dental service corporation, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the dental service corporation's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a dental service corporation's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section shall be made only after a departmental hearing, unless that hearing is waived by the affected dental service corporation. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the dental service corporation. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular dental service corporation, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the dental service corporation charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the dental service corporation charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the dental service corporation, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the dental service corporation's financial condition.
##### **§ 17:48C-28.3** Determination of increase, revision or redetermination; factors. {#sec-17-48c-28.3 omnilex-key=us-nj-statutes--title-17--17:48C-28.3}
23. In determining any increase, revision or redetermination in the capital or surplus of a dental service corporation pursuant to the provisions of section 22 of P.L.2014, c.81 (C.17:48C-28.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 22 of P.L.2014, c.81 (C.17:48C-28.2);
c. The extent to which risks described in section 22 of P.L.2014, c.81 (C.17:48C-28.2) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the dental service corporation has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the dental service corporation's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48C-28.4** Suspension, revocation of authority to do business. {#sec-17-48c-28.4 omnilex-key=us-nj-statutes--title-17--17:48C-28.4}
24. The commissioner may suspend or revoke the authority to do business in this State of any dental service corporation that does not comply with the provisions of sections 21 through 25 of P.L.2014, c.81 (C.17:48C-28.1 through C.17:48C-28.5).
##### **§ 17:48C-28.5** Rules, regulations. {#sec-17-48c-28.5 omnilex-key=us-nj-statutes--title-17--17:48C-28.5}
25. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of sections 21 through 25 of P.L.2014, c.81 (C.17:48C-28.1 through C.17:48C-28.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48C-30** Violations of chapter; penalty and recovery thereof; misdemeanors {#sec-17-48c-30 omnilex-key=us-nj-statutes--title-17--17:48C-30}
Any dental service corporation which shall have violated any of the provisions of, or shall have neglected, failed or refused to comply with, any of the requirements of this act, except the failure to file an annual statement and the failure to reply in writing to inquiries of the commissioner, shall be liable to a penalty of $500.00, to be sued for and collected by the commissioner in a civil action in the name of the State. The penalties when recovered shall be paid by the commissioner into the State Treasury for the use of the State. Any officer, agent, employee or member of any such corporation or any other person who shall issue, circulate or cause or permit to be circulated, any estimate, illustration, circular of any sort misrepresenting the terms of any contract issued by such corporation or misrepresent the benefits or advantages promised thereby, or use any name or title of any contract or class of contracts misrepresenting the true nature thereof shall be guilty of a misdemeanor.
##### **§ 17:48C-31** Grants or allocation of funds {#sec-17-48c-31 omnilex-key=us-nj-statutes--title-17--17:48C-31}
A dental service corporation may receive and accept from any governmental agencies, Federal, State or local, any grant or allocation of funds for the purpose of providing payment for dental services to eligible persons under such terms or conditions as shall be specified by such agency. Any dental service corporation may in its discretion accept the grant of funds from private agencies, corporations, associations, groups of individuals or individuals for the purpose of providing dental services to needy persons under such conditions as shall be satisfactory to such persons or organizations and to the corporation. All funds received under such grants shall be segregated in a separate fund or funds to be used for the purposes agreed upon. Neither the income from subscribers to the corporation, nor the assets accumulated from income received from subscribers shall be available for the payment of any obligations assumed by the corporation under such grants, nor shall any funds received through such grants be available for the payment of the obligations assumed by the corporation under its subscription certificates. The authority of the commissioner under the provisions of this act shall not extend to funds received under such grants except to such extent as is necessary to satisfy him that the requirements of this act have been complied with.
##### **§ 17:48C-32** Corporation as charitable and benevolent institution; tax exemption {#sec-17-48c-32 omnilex-key=us-nj-statutes--title-17--17:48C-32}
Every dental service corporation is hereby declared to be a charitable and benevolent institution, and its funds and property shall be exempt from taxation by the State or any political subdivision thereof.
##### **§ 17:48C-33** Partial invalidity {#sec-17-48c-33 omnilex-key=us-nj-statutes--title-17--17:48C-33}
Should any provision or section of this act be held invalid for any reason, such holding shall not be construed as affecting the validity of any remaining portion of such section or of this act, it being intent of the Legislature that this act shall stand notwithstanding the invalidity of any such provision or section.
##### **§ 17:48C-34** Application of act {#sec-17-48c-34 omnilex-key=us-nj-statutes--title-17--17:48C-34}
No person, association or corporation shall engage in any activity provided for in this act unless organized and authorized in accordance with its provisions; but this shall not preclude activities authorized under other enabling acts, nor shall it apply to any arrangement or activity which is subject to regulation under other applicable law of this State or of the United States.
##### **§ 17:48C-35** Liberal construction {#sec-17-48c-35 omnilex-key=us-nj-statutes--title-17--17:48C-35}
This act shall be liberally construed to the end that its objectives may be achieved with maximum flexibility and variety.
##### **§ 17:48C-36** Short title {#sec-17-48c-36 omnilex-key=us-nj-statutes--title-17--17:48C-36}
This act shall be known and may be referred to by its short title as the "Dental Service Corporation Act of 1968."
## **Chapter 48D** {#struct-chapter-48d}
##### **§ 17:48D-1** Title of act {#sec-17-48d-1 omnilex-key=us-nj-statutes--title-17--17:48D-1}
This act shall be known and may be cited as the "Dental Plan Organization Act."
##### **§ 17:48D-2** Definitions. {#sec-17-48d-2 omnilex-key=us-nj-statutes--title-17--17:48D-2}
2. In this act, unless the context otherwise requires:
"Capitation" means a method of compensation by a dental plan organization to its contracted dentists for dental services and supplies provided to covered persons of the dental plan organization on the basis of a fixed periodic payment per covered person or enrollee;
"Commissioner" means the Commissioner of Banking and Insurance;
"Consultant" means a person who holds himself out as an advisor or renders advice on the organization, financing, administration or operation of a dental plan to any employer, union, trust fund or dental plan organization;
"Covered person" means any person eligible to receive covered benefits or services and supplies under the terms of a dental plan;
"Dental plan" means any contractual arrangement for dental services and supplies to covered persons where contracted dentists are compensated by means of capitation, salary or a method authorized, submitted to and approved by the commissioner;
"Dental plan organization" or "DPO" means any person who undertakes to provide directly or to arrange for or administer one or more dental plans providing dental services and supplies;
"Dental services" means services included in the practice of dentistry as defined in R.S.45:6-19;
"Enrollee" means an individual whose employment or other status, except family dependency, is the basis for eligibility for enrollment in the dental plan, or in the case of an individual contract, the person in whose name the contract is issued;
"Evidence of coverage" means any certificate, agreement or contract issued to an enrollee, setting out the dental services and supplies to which the enrollee and his dependents are entitled;
"Finder" means a person who brings together a dental plan organization with an employer, union or trust fund for the purpose of establishing a contractual relationship to provide dental services, or facilities or equipment related to the operation of the dental plan or dental plan organization;
"National Association of Insurance Commissioners" or "NAIC" means the National Association of Insurance Commissioners, its affiliates, or subsidiaries, or any agency or committee thereof, or any successor organization.
##### **§ 17:48D-3** Application for certificate of authority. {#sec-17-48d-3 omnilex-key=us-nj-statutes--title-17--17:48D-3}
3. a. No person may establish, operate or administer a dental plan organization, or sell or offer to sell, or solicit offers to purchase, or receive advance or periodic consideration in conjunction with any dental plan organization, utilizing in the aggregate the services of more than one full-time equivalent dentist, without obtaining and maintaining a certificate of authority pursuant to this act.
b. Within 90 days after the effective date of this act, every dental plan organization utilizing in the aggregate the services of more than one full-time equivalent dentist shall submit an application for a certificate of authority to the commissioner. A dental plan organization may continue to operate until the commissioner acts upon the application. If the application is denied, the dental plan organization shall be treated as if its certificate of authority has been revoked.
c. An application for a certificate of authority shall be in a form prescribed by the commissioner, shall be verified by an officer or authorized representative of the dental plan organization and shall include the following:
(1) All basic organizational documents of the dental plan organization, such as the articles of incorporation, articles of association, partnership agreement, trade name certificate, trust agreement, shareholder agreement or other applicable documents and all amendments to those documents;
(2) The bylaws, rules and regulations or similar documents regulating the conduct or the internal affairs of the dental plan organization;
(3) The names, addresses, official positions and a biographical affidavit (NAIC form) of the persons who are responsible for the conduct of the affairs of the dental plan organization, including all members of the board of directors, board of trustees, executive committee or other governing board or committee, the principal officers, in the case of a corporation, and the partners or members, in the case of a partnership or association;
(4) The form of all contracts or agreements made between any dentist and the dental plan organization;
(5) All contracts or agreements made between any person listed in paragraph (3) of this subsection and any dentist, consultant, finder, supplier of administrative services or business manager;
(6) A description of the dental plan organization, its dental plan or plans, facilities and personnel;
(7) The form of the evidence of coverage to be issued to the enrollees;
(8) The form of any group contract which is issued to employers, unions, trustees or others;
(9) A financial statement prepared by an independent certified public accountant, setting forth the applicant's present or anticipated assets, liabilities and sources of funds. The statement shall set forth the terms and conditions of all current liabilities and any outstanding loans made from the funds of the applicant, and shall be attested to by the applicant or an authorized officer thereof. If the commissioner requires an audit of the financial records of the applicant by an independent certified public accountant, the financial statement shall be prepared and certified by the certified public accountant having conducted the audit;
(10) The proposed method of marketing the plan, a financial plan with a 3-year projection of the initial operating results and a statement of the sources of working capital and any other sources of funding. The justifications and assumptions for the marketing and financial plan shall also be disclosed;
(11) A power of attorney duly executed by the dental plan organization, if not domiciled in this State, appointing the commissioner, the commissioner's successors in office and duly authorized deputies as the true and lawful attorney of the dental plan organization in and for this State, upon whom lawful process in any legal action or proceeding against the dental plan organization on a cause of action arising in this State may be served;
(12) A description of the geographic area or areas to be served, by county and zip code (first 3 digits);
(13) A description of the procedures and programs to be implemented to achieve an effective dental plan as required in section 5 a.(2) of this act; and
(14) Such other information as the commissioner may require.
d. The dental plan organization shall pay a fee of $1,000 to the commissioner, upon filing an application for a certificate of authority.
e. The commissioner shall act on an application for a certificate of authority within 90 days following receipt of the application.
##### **§ 17:48D-3.1** Consultants {#sec-17-48d-3.1 omnilex-key=us-nj-statutes--title-17--17:48D-3.1}
No person shall be employed as a consultant by an employer, union, trust fund or dental plan organization or applicant, except in accordance with the provisions of this section.
A consultant, entering into a contract or agreement to provide consulting services on a dental plan, shall provide a copy of the contract or agreement to the commissioner for his approval. In addition to the contract or agreement, the consultant shall provide the commissioner with a list of all sources and amounts of income received from consulting work within the preceding 5 years, and income received or anticipated to be received in the year the contract or agreement is submitted for approval, and such other information as may be required by the commissioner.
No person shall be employed as a consultant who:
a. Within 7 years of his employment as a consultant has been convicted of a crime listed in N.J.S. 2C:41-1; or
b. At any time has been convicted of engaging in a pattern of racketeering activity, as defined in N.J.S. 2C:41-1 and 2C:41-2.
In accordance with standards established by the commissioner, the commissioner may disapprove the contract or agreement within 90 days following receipt thereof.
Any person employed as a consultant on the operative date of this act shall, within 30 days thereof, satisfy the requirements of this section. Unless the commissioner disapproves the contract or agreement as herein provided, the consultant shall continue to render consulting services under the terms and conditions of the contract or agreement insofar as its terms and conditions are not inconsistent with the provisions of this act.
##### **§ 17:48D-3.2** Fiduciary capacity of consultants; compensation {#sec-17-48d-3.2 omnilex-key=us-nj-statutes--title-17--17:48D-3.2}
A consultant shall be a fiduciary of the employer, union, trust fund or dental plan organization with which employed and shall not be entitled to:
a. Any compensation in excess of the amount specified in the contract or agreement for consulting services; or
b. Any compensation whatsoever, either as a consultant or in any other capacity, from any person associated with the dental plan, other than with whom the contract or agreement for consulting services has been entered into.
##### **§ 17:48D-3.3** Report regarding finders {#sec-17-48d-3.3 omnilex-key=us-nj-statutes--title-17--17:48D-3.3}
A dental plan organization, employer, union or trust fund shall report to the commissioner the name and address of, and the amount of any fee paid to a finder within 30 days of the use or employment of the finder or within 30 days of the operative date of this act, whichever is later.
##### **§ 17:48D-4** Notice of modification of information. {#sec-17-48d-4 omnilex-key=us-nj-statutes--title-17--17:48D-4}
4. Sixty days prior to any significant modification of information submitted with the application for a certificate of authority or a subsequent modification, a dental plan organization shall file notice of the modification with the commissioner.
##### **§ 17:48D-5** Conditions for issuance; notice of disapproval. {#sec-17-48d-5 omnilex-key=us-nj-statutes--title-17--17:48D-5}
5. a. The commissioner shall issue a certificate of authority if he is satisfied that the following conditions are met:
(1) The persons responsible for conducting the affairs of the dental plan organization are competent and trustworthy and are professionally capable of providing, arranging for or administering the services offered by the plan;
(2) The dental plan organization constitutes an appropriate mechanism to achieve an effective dental plan, as determined by the commissioner;
(3) The dental plan organization has demonstrated the potential to provide dental services in a manner that will assure both availability and accessibility of adequate personnel and facilities;
(4) The dental plan organization has arrangements for an ongoing quality of dental care assurance program;
(5) The dental plan organization has a procedure to establish and maintain uniform systems of cost accounting and reports and audits that meet the requirements of the commissioner;
(6) The dental plan organization is financially responsible and may reasonably be expected to meet its obligations to covered persons. In making this determination the commissioner shall consider:
(a) The financial soundness of the dental plan's arrangements for services and the schedule of premiums used;
(b) Any arrangement with an insurer or medical or dental service corporation for continuation of coverage in the event of discontinuance of the plan, on an indemnity basis through a group vehicle to the end of the period for which premiums were paid to the discontinued dental plan organization; and
(c) The sufficiency of an agreement with dentists for the provision of dental services;
(7) A general surplus is maintained as required in section 6 of this act;
(8) A contingent surplus is accumulated and maintained as required in section 7 of this act;
(9) The condition or methods of operation of the dental plan organization are not such as would render its operations hazardous to its enrollees or the public; and
(10) The persons responsible for conducting the affairs of the dental plan organization are: (a) of good moral character, and (b) have not been convicted, within 7 years of the filing of the application for a certificate of authority, of a crime listed in N.J.S.2C:41-1 or, at any time, of engaging in a pattern of racketeering activity, as defined in N.J.S.2C:41-1 and 2C:41-2.
b. When the commissioner disapproves an application for a certificate of authority, he shall notify the dental plan organization in writing of the reasons for the disapproval.
c. (Deleted by amendment, P.L.2005, c.38).
##### **§ 17:48D-6** General surplus of plan {#sec-17-48d-6 omnilex-key=us-nj-statutes--title-17--17:48D-6}
The commissioner may determine, at his discretion, the amount of a general surplus, if any, that the dental plan organization shall be required to maintain.
##### **§ 17:48D-7** Special contingent surplus for organizations using more than 20 full-time dentists {#sec-17-48d-7 omnilex-key=us-nj-statutes--title-17--17:48D-7}
A dental plan organization utilizing in the aggregate the services of more than 20 full-time equivalent dentists shall accumulate and maintain a special contingent surplus in excess of its assets over liabilities at the rate of 2% annually of its net contract and certificate income until the surplus totals $100,000.00.
##### **§ 17:48D-8** Fidelity bonding of officers, etc., malpractice insurance of dentists. {#sec-17-48d-8 omnilex-key=us-nj-statutes--title-17--17:48D-8}
8. a. Any director, officer, employee or partner of a dental plan organization who receives, collects, reimburses or invests moneys in connection with the activities of the organization shall be bonded for his fidelity, or maintain crime insurance or its equivalent, in an amount which shall be determined by the commissioner.
b. Each dentist employed by a dental plan organization shall be insured against professional liability or malpractice by an insurer licensed to conduct business in this State for such minimum amounts as shall be determined by the commissioner.
##### **§ 17:48D-9** Evidence of coverage. {#sec-17-48d-9 omnilex-key=us-nj-statutes--title-17--17:48D-9}
9. a. An enrollee shall be entitled to receive evidence of coverage or a certificate indicating specifically the nature and extent of coverage, and evidence of the total amount or percentage of payment, if any, which the enrollee is obligated to pay for dental services. If an individual enrollee obtains coverage through an insurance policy or through a contract issued by a medical or dental service corporation, whether by option or otherwise, the insurer or medical or dental service corporation shall issue the evidence of coverage. Otherwise, the dental plan organization shall issue the evidence of coverage.
b. No evidence of coverage or amendment thereto shall be issued or delivered to any person until a copy of the form of evidence of coverage or amendment thereto has been filed with the commissioner.
c. Evidence of coverage shall contain a clear and complete statement if a contract, or a reasonably complete summary if a certificate, of:
(1) The dental services and the insurance or other benefits, if any, to which covered persons are entitled;
(2) Any limitations on the services, kind of services, benefits, or kind of benefits to be provided, including any charge, deductible or co-payment feature;
(3) Where and in what manner information is available as to how services may be obtained; and
(4) A clear and understandable description of the dental plan organization's method for resolving covered persons' complaints.
d. Any subsequent change in the evidence of coverage or the amount or percentage of payment which the enrollee is obligated to pay, shall be evidenced in a separate document issued to the enrollee.
##### **§ 17:48D-9.1** Alternative dental coverage; original coverage restricted to limited number of providers {#sec-17-48d-9.1 omnilex-key=us-nj-statutes--title-17--17:48D-9.1}
Each employer or other organization which employs or has 25 or more employees or members during the full preceding calendar year and which contributes to a dental plan organization contract which restricts the covered persons in selecting the providers of dental services to a single provider or limited number of providers, shall also offer its employees and their eligible dependents and members and members' eligible dependents at the time a dental benefits plan is offered or renewed the option of selecting alternative coverage which permits covered persons to obtain dental services from any licensed dentist.
##### **§ 17:48D-9.2** Employer contribution {#sec-17-48d-9.2 omnilex-key=us-nj-statutes--title-17--17:48D-9.2}
An employer or other organization shall be required to pay for or contribute towards the provision of alternative coverage an amount equal to the premium or cost which it pays or contributes to the dental plan organization contract which limits the number of providers of dental services.
##### **§ 17:48D-9.3** Rules and regulations {#sec-17-48d-9.3 omnilex-key=us-nj-statutes--title-17--17:48D-9.3}
Within 120 days of the effective date of this act, the Commissioner of the Department of Insurance shall promulgate rules and regulations necessary to effectuate the purpose of this act, including procedures for notice to covered persons, employers and other organizations of the provisions of this act.
##### **§ 17:48D-9.4** Dental plan organization to receive, transmit transactions electronically. {#sec-17-48d-9.4 omnilex-key=us-nj-statutes--title-17--17:48D-9.4}
9. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a dental plan organization, or a subsidiary that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to a dental plan organization, its subsidiary or its covered persons.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a dental plan organization or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all group and individual contracts issued, delivered, executed or renewed in this State.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a dental plan organization shall require that health care providers file all claims for payment for dental services. A covered person who receives dental services shall not be required to submit a claim for payment, but notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the contract.
d. (1) Effective 180 days after the effective date of P.L.1999, c.154, a dental plan organization or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a covered person or that covered person's agent or assignee if the contract provides for assignment of benefits, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42 U.S.C. s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the claim is an eligible claim for a health care service provided by an eligible health care provider to a covered person under the contract;
(b) the claim has no material defect or impropriety, including, but not limited to, any lack of required substantiating documentation or incorrect coding;
(c) there is no dispute regarding the amount claimed;
(d) the payer has no reason to believe that the claim has been submitted fraudulently; and
(e) the claim requires no special treatment that prevents timely payments from being made on the claim under the terms of the contract.
(2) If all or a portion of the claim is denied by the payer because:
(a) the claim is an ineligible claim;
(b) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(c) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(d) the payer disputes the amount claimed; or
(e) the claim requires special treatment that prevents timely payments from being made on the claim under the terms of the contract, the payer shall notify the covered person, or that covered person's agent or assignee if the contract provides for assignment of benefits, in writing or by electronic means, as appropriate, within 30 days, of the following: if all or a portion of the claim is denied, all the reasons for the denial; if the claim lacks the required substantiating documentation, including incorrect coding, a statement as to what substantiating documentation or other information is required to complete adjudication of the claim; if the amount of the claim is disputed, a statement that it is disputed; and if the claim requires special treatment that prevents timely payments from being made, a statement of the special treatment to which the claim is subject.
(3) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(4) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider or covered person, no later than two working days following receipt of the transmission of the claim.
(5) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(6) Payment of an eligible claim pursuant to paragraphs (1) and (3) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (b) of paragraph (2) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or modification of an initial submission.
(7) An overdue payment shall bear simple interest at the rate of 10% per annum.
e. As used in this subsection, "insured claim" or "claim" means a claim by a covered person for payment of benefits under an insured dental plan organization contract for which the financial obligation for the payment of a claim under the contract rests upon the dental plan organization.
##### **§ 17:48D-9.5** Dental plan organization to offer coverage for domestic partner. {#sec-17-48d-9.5 omnilex-key=us-nj-statutes--title-17--17:48D-9.5}
56. Every dental plan organization contract that is delivered, issued, executed or renewed in this State pursuant to P.L.1979, c.478 (C.17:48D-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2003, c.246 (C.26:8A-1 et al.), under which dependent coverage is available, shall offer dependent coverage to an enrollee for an enrollee's domestic partner. For the purposes of this section, "domestic partner" means a domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3).
This section shall apply to all contracts in which the dental plan organization has reserved the right to change the premium.
##### **§ 17:48D-9.6** Payment of out-of-network benefits by dental plan organization. {#sec-17-48d-9.6 omnilex-key=us-nj-statutes--title-17--17:48D-9.6}
2. a. (1) Except as provided in subsection e. of this section, a dental plan organization that makes a dental benefit payment to an enrollee for services rendered by an out-of-network dentist shall issue the payment to the enrollee in accordance with the time frames set forth in section 9 of P.L.1999, c.154 (C.17:48D-9.4), and shall, within three days of issuing the payment, provide a notification to the out-of-network dentist of the amount and date of the payment and the services for which the payment was made.
(2) In the case of a dental plan organization that supplies an administrative services only contract and makes a dental benefit payment to an enrollee for services rendered by an out-of-network dentist under that contract, paragraph (1) of this subsection shall not apply, but the dental plan organization shall, within three days of issuing the payment, provide a notification to the out-of-network dentist of the amount and date of the payment.
b. An enrollee may enter into an agreement with an out-of-network dentist to sign over the dental benefit payment received from the dental plan organization to the dentist. The agreement shall:
(1) be in writing;
(2) be signed by the person who is entitled to receive the dental benefit payment from the dental plan organization;
(3) be retained by the dentist for at least six years following the date of the most recent payment from the enrollee; and
(4) give the enrollee at least 10 business days within which to sign over the dental benefit to the dentist.
c. An enrollee who agrees to sign over a dental benefit payment in accordance with this section shall comply with the terms of the agreement; except that if the enrollee owes the out-of-network dentist less than the amount of the dental benefit payment, the enrollee shall pay the dentist the balance owed to the dentist.
d. An enrollee who fails to sign over the dental benefit payment in accordance with subsections b. and c. of this section shall be liable to the out-of-network dentist for payment of attorney fees and costs reasonably incurred by the dentist in enforcing the agreement established pursuant to those subsections.
e. (1) With respect to a dental plan organization that makes a dental benefit payment to an enrollee for services rendered by an out-of-network dentist, if the enrollee assigns, through an assignment of benefits, his right to receive reimbursement to an out-of-network dentist, the dental plan organization shall issue the payment for the reimbursement directly to the dentist, or in the alternative, to the dentist and the enrollee as joint payees, with a signature line for each of the payees. Payment shall be made in accordance with section 9 of P.L.1999, c.154 (C.17:48D-9.4). Any payment made only to the enrollee rather than the dentist while such an assignment of benefits is in effect shall be considered unpaid, and unless issued to the dentist within the time frames established by section 9 of P.L.1999, c.154 (C.17:48D-9.4), shall be considered overdue and subject to interest charges as provided in that section.
(2) Nothing in this subsection shall be construed to apply to a dental plan organization that supplies a self-funded dental services plan or an administrative services only contract for a self-funded dental services plan, when making a dental benefit payment to an enrollee for services rendered by an out-of-network dentist under that plan or contract.
##### **§ 17:48D-10** Schedule of premiums, approval by commissioner; establishment of premiums. {#sec-17-48d-10 omnilex-key=us-nj-statutes--title-17--17:48D-10}
10. a. No schedule of premiums for coverage for dental services, or amendment thereto, may be used by a dental plan organization until a copy of such schedule, or amendment thereto, has been filed with the commissioner. The commissioner may disapprove the schedule of premiums at any time if he finds that the premiums are excessive, inadequate or unfairly discriminatory. If the commissioner disapproves the schedule of premiums he shall notify the dental plan organization within 5 days of the date of disapproval and specify in the notice, the reason for his disapproval. A hearing shall be granted within 20 days after a request in writing by the filer. It shall be unlawful for any dental plan organization whose schedule of premiums has been disapproved to effect any contract or issue any subscription certificate which uses the disapproved schedule of premiums until a revised schedule of premiums has been filed.
b. Premiums shall be established in accordance with actuarial principles, but premiums applicable to a covered person shall not be individually determined based on the status of his health.
##### **§ 17:48D-11** Books, records; examination, inspection by commissioner. {#sec-17-48d-11 omnilex-key=us-nj-statutes--title-17--17:48D-11}
11. a. The commissioner or the commissioner's designee may, as often as the commissioner may reasonably determine, investigate the business and examine the books, accounts, records, and files of every dental plan organization. For that purpose the commissioner or the commissioner's designee shall have reasonably free access to the offices and places of business, books, accounts, papers, records, and files of all dental plan organizations. A dental plan organization shall keep and use in its business such books, accounts, and records as will enable the commissioner to determine whether the dental plan organization is complying with the provisions of this act and with the rules and regulations promulgated pursuant to it. A dental plan organization shall preserve its books, accounts, and records for at least 7 years; except that preservation by photographic reproduction or records in photographic form shall constitute compliance with this act.
b. For the purpose of the examination, the commissioner may, within the limits of funds appropriated for such purpose, contract with such persons as the commissioner may deem advisable to conduct the same or assist therein.
c. At the discretion of the commissioner, the Commissioner of Health and the New Jersey State Board of Dentistry may participate in the investigations and examinations described in this section to verify the existence of an effective dental plan.
d. The expenses incurred in making any examination pursuant to this section shall be assessed against and paid by the dental plan organization so examined. A dental plan organization having direct premiums written in this State of less than $2,000,000 in any calendar year shall be subject to a limited scope examination with expenses for that examination not to exceed $5,000. Upon written notice by the commissioner of the total amount of an assessment, a dental plan organization shall become liable for and shall pay the assessment to the commissioner.
##### **§ 17:48D-11.1** Definitions. {#sec-17-48d-11.1 omnilex-key=us-nj-statutes--title-17--17:48D-11.1}
26. As used in sections 26 through 30 of P.L.2014, c.81 (C.17:48D-11.1 through C.17:48D-11.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Dental plan organization" means an entity authorized to transact business in this State pursuant to P.L.1979, c.478 (C.17:48D-1 et seq.).
##### **§ 17:48D-11.2** Increase in amount of capital or surplus required of dental plan organization. {#sec-17-48d-11.2 omnilex-key=us-nj-statutes--title-17--17:48D-11.2}
27. The commissioner may increase the amount of capital or surplus required of a dental plan organization, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the dental plan organization's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a dental plan organization's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section shall be made only after a departmental hearing, unless that hearing is waived by the affected dental plan organization. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the dental plan organization. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular dental plan organization, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the dental plan organization charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the dental plan organization charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the dental plan organization, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the dental plan organization's financial condition.
##### **§ 17:48D-11.3** Determination of increase, revision or redetermination; factors. {#sec-17-48d-11.3 omnilex-key=us-nj-statutes--title-17--17:48D-11.3}
28. In determining any increase, revision or redetermination in the capital or surplus of a dental plan organization pursuant to the provisions of section 27 of P.L.2014, c.81 (C.17:48D-11.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 27 of P.L.2014, c.81 (C.17:48D-11.2);
c. The extent to which risks described in section 27 of P.L.2014, c.81 (C.17:48D-11.2) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the dental plan organization has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the dental plan organization's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48D-11.4** Suspension, revocation of authority to do business. {#sec-17-48d-11.4 omnilex-key=us-nj-statutes--title-17--17:48D-11.4}
29. The commissioner may suspend or revoke the authority to do business in this State of any dental plan organization that does not comply with the provisions of sections 26 through 30 of P.L.2014, c.81 (C.17:48D-11.1 through C.17:48D-11.5).
##### **§ 17:48D-11.5** Rules, regulations. {#sec-17-48d-11.5 omnilex-key=us-nj-statutes--title-17--17:48D-11.5}
30. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of sections 26 through 30 of P.L.2014, c.81 (C.17:48D-11.1 through C.17:48D-11.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48D-12** Complaint system, records. {#sec-17-48d-12 omnilex-key=us-nj-statutes--title-17--17:48D-12}
12. a. A dental plan organization shall establish and maintain a complaint system to provide reasonable procedures for the resolution of written complaints initiated by covered persons concerning dental plan services. The dental plan organization shall maintain records of all written complaints initiated by covered persons.
b. The commissioner may examine the complaint system and if he determines that the system is not adequate he may require a revision of the complaint system.
##### **§ 17:48D-13** Annual report; filing; forms. {#sec-17-48d-13 omnilex-key=us-nj-statutes--title-17--17:48D-13}
13. a. Every dental plan organization annually on or before March 1 shall file with the commissioner a report covering its activities for the preceding calendar year.
b. The reports shall be on forms prescribed by the commissioner and shall include:
(1) A financial statement of the dental plan organization, prepared by an independent certified public accountant and attested to by an officer of the dental plan organization, which statement shall include full disclosure of all assets and liabilities of the dental plan organization, the terms and conditions thereof, and the sources and disposition of all funds. If the dental plan organization's records have been audited by an independent certified public accountant, the financial statement shall be certified by the certified public accountant having conducted the audit;
(2) Any significant modification of information submitted with the application for a certificate of authority;
(3) The number of persons who became covered persons during the year, the number of covered persons as of the end of the year and the number of enrollments terminated during the year;
(4) A description of the covered persons complaint system, including the procedures of the complaint system, the total number of written complaints handled through the system, a summary of causes underlying the complaints filed, and the number, amount and disposition of malpractice claims settled during the year by the dental plan organization and any of the dentists used by it; and
(5) Any other information relating to the performance of the dental plan organization as required by the commissioner.
##### **§ 17:48D-14** Percentage of premiums used for payments. {#sec-17-48d-14 omnilex-key=us-nj-statutes--title-17--17:48D-14}
14. At least 70 percent of every dental plan organization's earned premium in the first year of operation, 75 percent in the second year, and 80 percent in all subsequent years shall be used for payments to dentists for dental services and supplies provided to covered persons.
##### **§ 17:48D-15** False or misleading advertising; enforcement. {#sec-17-48d-15 omnilex-key=us-nj-statutes--title-17--17:48D-15}
15. a. No dental plan organization, or representative thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. For purposes of this act:
(1) A statement or item of information shall be deemed to be untrue if it does not conform to fact in any respect which is or may be significant to an enrollee of, or person considering enrollment in, a dental plan;
(2) A statement or item of information shall be deemed to be misleading, whether or not it may be literally untrue, if, in the total context in which the statement is made or the item of information is communicated, the statement or item of information may be reasonably understood by a person who does not possess special knowledge regarding dental plan coverage, as indicating any benefit or advantage or the absence of any exclusion, limitation, or disadvantage of possible significance to a covered person of, or person considering enrollment in, a dental plan, if the benefit or advantage or absence of exclusion, limitation, or disadvantage does not in fact exist;
(3) Evidence of coverage shall be deemed to be deceptive if the evidence of coverage taken as a whole, and with consideration given to typography, format and language, may cause a person who does not possess special knowledge regarding dental plans and evidences of coverage therefor, to expect benefits, services, charges, or other advantages which the evidence of coverage does not provide or which the dental plan organization issuing the evidence of coverage does not regularly make available for persons covered under such evidence of coverage.
b. The unfair trade practice provisions contained in chapter 30 of Title 17B of the New Jersey Statutes shall apply to dental plan organizations, dental plans and evidences of coverage, except to the extent that the commissioner determines that the nature of dental plan organizations, dental plans and evidences of coverage render these sections clearly inappropriate.
c. No dental plan organization, unless licensed as an insurer, may use in its name, evidence of coverage or literature any of the words "insurance," "assurance," "casualty," "surety," "mutual" or any other words descriptive of the insurance, casualty, or surety business or deceptively similar to the name or description of any insurer licensed to do business in this State.
The provisions of this subsection shall be enforced by the Division of Consumer Affairs in the Department of Law and Public Safety and, where applicable, the commissioner. Nothing in this act shall limit the powers of the Attorney General and the procedures with respect to consumer fraud in P.L.1960, c.39 (C.56:8-1 et seq.).
##### **§ 17:48D-16** Suspension, revocation of certificate of authority. {#sec-17-48d-16 omnilex-key=us-nj-statutes--title-17--17:48D-16}
16. a. The commissioner may suspend or revoke any certificate of authority issued to a dental plan organization pursuant to this act, if he finds that any of the following conditions exist:
(1) The dental plan organization is operating in a manner significantly contrary to that described in sections 3 and 4 of this act;
(2) The dental plan organization issues an evidence of coverage which does not comply with the requirements of section 9 of this act;
(3) The dental plan organization does not provide or arrange for an effective dental plan, as determined by the commissioner;
(4) The dental plan organization can no longer be expected to meet its obligations to covered persons;
(5) The dental plan organization, or any authorized person on its behalf, has advertised or merchandised its services in an untrue or misleading manner;
(6) The dental plan organization has failed to comply with this act or any rules and regulations promulgated thereunder;
(7) Any person responsible for conducting the affairs of the dental plan organization is: (a) not of good moral character, or (b) has been convicted, within 7 years of the filing of the application for a certificate of authority, of a crime listed in N.J.S.2C:41-1 or, at any time, of engaging in a pattern of racketeering activity, as defined in N.J.S.2C:41-1 and 2C:41-2.
b. When the commissioner has cause to believe that grounds for the suspension or revocation of a certificate of authority exist, he shall notify the dental plan organization in writing, specifically stating the grounds for suspension or revocation. A hearing on the matter shall be granted by the commissioner within 20 days after a request in writing by the dental plan organization. After the hearing, or upon failure of the dental plan organization to appear at the hearing, the commissioner shall take action on his findings.
c. If the commissioner suspends the certificate of authority, the dental plan organization shall not accept any additional covered persons, except newborn children, new employees and new dependents of current employees, or engage in any advertising or solicitation during the period of the suspension.
d. If the commissioner revokes the certificate of authority, the dental plan organization shall proceed to dissolve its structure immediately following the effective date of the order of revocation, and shall conduct no further business, except as may be essential to the orderly conclusion of the affairs of the dental plan organization. The commissioner by written order, however, may permit such further operation of the dental plan organization as he finds to be in the best interest of covered persons to the end that covered persons shall be afforded the greatest practical opportunity to obtain continuing dental plan coverage.
e. Notwithstanding the provisions of subsections c. and d. of this section, a dental plan organization which has had its certificate of authority suspended or revoked, or has suffered an adverse decision by the commissioner, shall be entitled to a hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
##### **§ 17:48D-17** Cease and desist orders {#sec-17-48d-17 omnilex-key=us-nj-statutes--title-17--17:48D-17}
a. The commissioner may issue an order directing a dental plan organization or a representative of a dental plan organization to cease and desist from engaging in any act or practice in violation of the provisions of this act.
b. Within 20 days after service of the order of cease and desist, the respondent may request a hearing on the question of whether acts or practices in violation of this act have occurred. The hearings shall be conducted pursuant to the "Administrative Procedure Act," P.L.1968, c. 410 (C. 52:14B-1 et seq.) and judicial review shall be available as provided therein.
##### **§ 17:48D-18** Violations; civil penalty. {#sec-17-48d-18 omnilex-key=us-nj-statutes--title-17--17:48D-18}
18. Any dental plan organization which violates any provisions of this act, or neglects, fails or refuses to comply with any of the requirements of this act shall be liable for a civil penalty of not less than $500.00 nor more than $10,000.00 for each violation. The failure to file an annual report and the failure to reply promptly in writing to inquiries of the commissioner may result in an administrative penalty in an amount not less than $50 nor more than $500 for each day that the dental plan organization fails to file that report or response. The penalty may be sued for and recovered by the commissioner in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
A purposeful or knowing misstatement or omission of material fact required to be supplied to the commissioner is a crime of the fourth degree.
##### **§ 17:48D-20** Applications, filings and reports treated as public documents {#sec-17-48d-20 omnilex-key=us-nj-statutes--title-17--17:48D-20}
Applications, filings and reports required under this act except contracts referred to in section 3. c. (4) and 3. c. (5) of this act, shall be treated as public documents and shall not be considered confidential.
##### **§ 17:48D-21** Confidentiality of diagnostic, treatment information. {#sec-17-48d-21 omnilex-key=us-nj-statutes--title-17--17:48D-21}
21. Data or information pertaining to the diagnosis, treatment or health of any covered person obtained by the dental plan organization from the covered person or any dentist shall be confidential and shall not be disclosed to any person except to the extent that it may be necessary to carry out the purposes of this act, or upon the express consent of the covered person, or pursuant to statute or court order for the production of evidence or the discovery thereof, or in the event of claim or litigation between the covered person and the dental plan organization wherein the data or information is pertinent. A dental plan organization shall be entitled to claim any statutory privileges against such disclosure which the dentist who furnished the information to the dental organization is entitled to claim.
##### **§ 17:48D-23** Rules and regulations {#sec-17-48d-23 omnilex-key=us-nj-statutes--title-17--17:48D-23}
The commissioner may promulgate such rules and regulations as he may deem necessary to effectuate the purposes of this act.
##### **§ 17:48D-24** Severability {#sec-17-48d-24 omnilex-key=us-nj-statutes--title-17--17:48D-24}
If any section, term or provision of this act shall be adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this act, and the remaining sections, terms and provisions shall be and remain in full force and effect.
## **Chapter 48E** {#struct-chapter-48e}
##### **§ 17:48E-1** Definitions. {#sec-17-48e-1 omnilex-key=us-nj-statutes--title-17--17:48E-1}
1. As used in this act:
a. "Commissioner" means the Commissioner of Banking and Insurance.
b. "Board" and "board of directors" means the board of directors of the health service corporation.
c. "Elective surgical procedure" means any nonemergency surgical procedure which may be scheduled at the convenience of the patient or the surgeon without jeopardizing the patient's life or causing serious impairment to the patient's bodily functions.
d. "Eligible physician" means a physician licensed to practice medicine and surgery who holds the rank of Diplomate of an American Board (M.D.) or Certified Specialist (D.O.) in the surgical or medical specialty for which surgery is proposed.
e. "Health service corporation" means a health service corporation established pursuant to the provisions of this act, which is organized, without capital stock and not for profit, for the purpose of (1) establishing, maintaining, and operating a nonprofit health service plan and (2) supplying services in connection with (a) the providing of health care or (b) conducting the business of insurance as provided for in this act.
f. "Health service plan" means a plan under which contracts are issued providing complete or partial prepayment or postpayment of health care services and supplies eligible under the contracts for a given period to persons covered under the contracts where arrangements are made for payment for health care services and supplies directly to the provider thereof or to a covered person under those contracts.
g. "Hospital service corporation" means a hospital service corporation established pursuant to the provisions of P.L.1938, c.366 (C.17:48-1 et seq.).
h. "Medical service corporation" means a medical service corporation established pursuant to the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.).
i. "Provider of health care services" shall include, but not be limited to: (1) a health service corporation, a hospital service corporation or medical service corporation; (2) a hospital or health care facility under contract with a health service corporation to provide health care services or supplies to persons who become subscribers under contracts with the health service corporation; (3) a hospital or health care facility which is maintained by a state or any of its political subdivisions; (4) a hospital or health care facility licensed by the Department of Health; (5) other hospitals or health care facilities, as designated by the Department of Health to provide health care services; (6) a registered nursing home providing convalescent care; (7) a nonprofit voluntary visiting nurse organization providing health care services other than in a hospital; (8) hospitals or other health care facilities located in other states, which are subject to the supervision of those states, which if located in this State would be eligible to be licensed or designated by the Department of Health; (9) nonprofit hospital, medical or health service plans of other states approved by the commissioner; (10) physicians licensed to practice medicine and surgery; (11) licensed chiropractors; (12) licensed dentists; (13) licensed optometrists; (14) licensed pharmacists; (15) licensed podiatrists; (16) registered bio-analytical laboratories; (17) licensed psychologists; (18) registered physical therapists; (19) certified nurse-midwives; (20) registered professional nurses; (21) licensed health maintenance organizations; (22) licensed audiologists; (23) licensed speech-language pathologists; and (24) providers of other similar health care services or supplies as are approved by the commissioner.
j. "Second surgical opinion" means an opinion of an eligible physician based on that physician's examination of a person for the purpose of evaluating the medical advisability of that person undergoing an elective surgical procedure, but prior to the performance of the surgical procedure.
k. "Subscriber" means a person to whom a subscription certificate is issued by a health service corporation, and the term shall also include "policyholder," "member," or "employer" under a group contract where the context requires.
##### **§ 17:48E-2** Establishment of health service corporation {#sec-17-48e-2 omnilex-key=us-nj-statutes--title-17--17:48E-2}
a. A health service corporation may be established:
(1) By incorporating and obtaining a certificate of authority in accordance with the provisions of this act; or
(2) By the merger of a hospital service corporation and a medical service corporation.
b. A health service corporation shall be incorporated under and shall conduct its business pursuant to the provisions of Title 15A of the New Jersey Statutes, except that where the provisions of that title are inconsistent with the provisions of this act, the provisions of this act shall govern.
L. 1985, c. 236, s. 2, eff. July 15, 1985.
##### **§ 17:48E-3** Health service corporations. {#sec-17-48e-3 omnilex-key=us-nj-statutes--title-17--17:48E-3}
3. a. A health service corporation shall not be established as a corporation organized for pecuniary profit. Every health service corporation established pursuant to the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.) shall be operated for the benefit of its subscribers. The mission of the health service corporation shall be to:
(1) provide affordable and accessible health insurance to its subscribers; and
(2) promote the integration of the health care system to meet the needs of its subscribers.
A health service corporation shall develop goals, objectives, and strategies for carrying out, in accordance with this section, its statutory mission.
b. No person, firm, association or corporation, other than a health service corporation or an insurance company authorized to transact life or health insurance in accordance with Title 17B of the New Jersey Statutes, shall establish, maintain or operate a health service plan. No person, firm, association or corporation, other than a hospital service corporation, a medical service corporation, a dental service corporation to the extent permitted by P.L.1968, c.305 (C.17:48C-1 et seq.), or an insurance company authorized to transact life or health insurance business or the kinds of insurance specified in subsection d. of R.S.17:17-1, shall otherwise contract in this State with persons to pay for or to provide for health services on the basis of premiums or other valuable considerations to be collected by the person, firm, association or corporation from any persons for the issuance of the contracts. This section shall not be construed as preventing the exercise of any authority or privilege granted to any corporation by a certificate of authority issued by the commissioner pursuant to any law of this State, or as preventing any person, firm, association or corporation from furnishing health services required under any workers' compensation law, or law pertaining to health maintenance organizations, or as otherwise provided by law.
c. A health service corporation shall, unless prohibited by the commissioner, offer as an option medical-surgical contracts and dental subscriber contracts which afford subscribers prepaid or postpaid benefits pursuant to which payment is made to participating providers for medical-surgical and dental services rendered by a participating provider network with agreements granting an aggregate differential allowance or discount on charges, as well as a limit on total allowances which may or may not be related to the subscriber's income level, where the aggregate differential or discount on charges and limit on total allowances may be achieved by payment of either the individual provider's actual charge or the health service corporation's allowance on the charge, whichever is less.
d. A health service corporation shall maintain an open enrollment period for coverage to persons who are otherwise unable to obtain hospital, medical-surgical, or major medical coverage in accordance with the provisions of P.L.1992, c.161 (C.17B:27A-2 et al.).
e. No health service corporation shall have the power to underwrite life insurance as defined in Title 17B of the New Jersey Statutes directly, but a health service corporation may, at such time as the aggregate special contingent surplus is greater than 0%, own stock in, control, or otherwise become affiliated with a life, health or accident insurance company organized pursuant to Title 17B of the New Jersey Statutes or under the laws of any other state, provided that the company is admitted in this State.
f. No health service corporation shall solicit subscribers or enter into any contract with any subscriber until it has received from the commissioner a certificate of authority to do so, but if a health service corporation is established by means of the merger of a medical service corporation into a hospital service corporation, which hospital service corporation possesses a valid certificate of authority issued prior to the effective date of P.L.1985, c.236 (C.17:48E-1 et seq.), the health service corporation thus established need not reapply for a new certificate of authority, but the corporation shall file in the Department of Banking and Insurance any documents relating to the merger, including, but not limited to, information concerning the operation of the health service corporation as set forth in subsection a. of this section, which the commissioner may require.
g. Nothing in P.L.1985, c.236 (C.17:48E-1 et seq.) shall be deemed to prohibit a health service corporation from contracting with, or paying commissions to, any duly licensed affiliated or independent insurance producer, to the extent permitted by the laws applicable to those producers.
h. A health service corporation shall, on an annual basis, and in a form and manner prescribed by the Department of Banking and Insurance, file with the department information relating to the health service corporation's operations, including but not limited to the following: the health service corporation's mission, activities, revenues, expenses, assets, liabilities, and total compensation provided to officers, directors, trustees and the five other highest compensated employees who are not an officer, director or trustee, which information shall be posted on the department's website.
i. On or before June 30, 2019, and annually thereafter, the commissioner shall report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), on the compliance of a health service corporation with the provisions of P.L.2017, c.100 (C.17:48E-17.3 et al.).
##### **§ 17:48E-4** Certificate of authority {#sec-17-48e-4 omnilex-key=us-nj-statutes--title-17--17:48E-4}
a. A health service corporation, other than a health service corporation which is formed as the result of a merger of a medical service corporation and a hospital service corporation, which seeks a certificate of authority shall file in the Department of Insurance a certified copy of its certificate of incorporation, a copy of its bylaws and a statement of its financial condition in the form and detail required by the commissioner, signed and sworn to by its president and secretary or other proper officers. The certificate of authority shall be issued if the commissioner is satisfied, on the basis of examination or otherwise, that the health service corporation has complied with the requirements of this act, that its condition or methods of operation are not such as would render its operations hazardous to the public or to its subscribers, and that the issuance of the certificate of authority would not be contrary to the public interest. No change in, amendment to, alteration in, addition to, or substitution for any document, instrument, or other paper so filed shall become operative or effective until it shall also have been filed in the manner required by this section. No certificate of authority shall be issued to any health service corporation not incorporated under the laws of this State.
b. No certificate of authority shall be issued to any health service corporation except on receipt of evidence by the commissioner that the corporation is in possession of unencumbered funds of not less than $1,250,000.00 to be held in cash or in a federally insured depository institution to the credit of the corporation.
c. No certificate of authority shall be issued to any health service corporation and no health service corporation which is established as a result of a merger of a hospital service corporation and a medical service corporation shall commence business unless the board of directors of the corporation is constituted in accordance with the provisions of this act.
##### **§ 17:48E-5** Merger procedure {#sec-17-48e-5 omnilex-key=us-nj-statutes--title-17--17:48E-5}
Upon the merger of a medical service corporation into a hospital service corporation, the surviving corporation shall qualify as a health service corporation, and the surviving corporation need not obtain a new charter or certificate of authority to act as a health service corporation, provided that:
a. The board of directors of the surviving corporation is constituted pursuant to the provisions of section 6 of this act; and
b. The certificate of incorporation of the hospital service corporation is amended, within 30 days of the merger, in accordance with the provisions of this act; and
c. The bylaws of the hospital service corporation are amended, within 30 days of the merger, in accordance with the provisions of this act; and
d. Evidence of compliance with subsections a., b., and c. of this section is filed with the Commissioner of Insurance.
##### **§ 17:48E-6** Board of health service corporation formed through merger. {#sec-17-48e-6 omnilex-key=us-nj-statutes--title-17--17:48E-6}
6. The board of a health service corporation which is formed as the result of a merger between a medical service corporation and a hospital service corporation shall be composed of not more than 17 members as provided in this section. Initially, after the merger has been effected, the board shall be constituted of 15 members as follows:
a. Four members of the board shall be public members, who shall be appointed by the Governor with the advice and consent of the Senate. The public members so appointed shall be persons whose background and experience indicate that they are qualified to act in the broad public interest, who may or may not have coverage under a contract or contracts issued by the corporation, its subsidiaries or affiliates, and who, or whose spouses or minor children, are not officers, directors or owners of more than 10% of the stock of a corporation whose aggregate sales to hospitals, other health care facilities or other providers of health care services exceed 5% of its total sales. The remaining 11 members shall be selected by the board of directors of the health service corporation in accordance with the provisions of its certificate of incorporation and bylaws.
b. Of the initial members of the board, as provided for in subsection a. of this section, one public member and three members selected by the board of the health service corporation shall serve for a term of one year; one public member and three members selected by the board of the health service corporation shall serve for a term of two years; and two public members and five members selected by the board of the health service corporation shall serve for a term of three years. Thereafter, all members of the board shall serve for a term of three years, and shall hold office until their successors are appointed or elected and qualified.
c. After the constitution of the initial board as provided in subsection b. of this section, and as the initial terms expire as provided for in that section, the board shall be constituted of 17 members as follows:
(1) Four members shall be public members of the board appointed by the Governor with the advice and consent of the Senate;
(2) Eleven members shall be elected by the board of directors, as provided in the bylaws; and
(3) One member shall be a public member appointed by the Senate President and one member shall be a public member appointed by the Speaker of the General Assembly, each of whom shall have experience in either finance, insurance, or health care delivery.
d. The provisions of subsection c. of this section shall not be construed to preclude the reappointment or reelection of any member appointed or elected pursuant to subsection a. of this section.
##### **§ 17:48E-7** Board of directors of health service corporation. {#sec-17-48e-7 omnilex-key=us-nj-statutes--title-17--17:48E-7}
7. The board of directors of a health service corporation which is established in accordance with paragraph (1) of subsection a. of section 2 of P.L.1985, c.236 (C.17:48E-2) shall have four public members appointed by the Governor with the advice and consent of the Senate, one public member appointed by the Senate President who shall have experience in either finance, insurance, or health care delivery, one public member appointed by the Speaker of the General Assembly who shall have experience in either finance, insurance, or health care delivery, and 11 members elected as provided in the bylaws.
##### **§ 17:48E-8** Vacancy procedure {#sec-17-48e-8 omnilex-key=us-nj-statutes--title-17--17:48E-8}
Within 10 days after a vacancy in the board of directors of a health service corporation has occurred, the corporation shall notify the commissioner in writing that a vacancy exists. If the vacancy is in one of the positions on the board which has been appointed by the Governor, the commissioner shall so notify the Governor, who shall appoint a candidate to serve for the remaining term. If the vacancy occurs in a position which is elected by the board, the vacancy shall be filled in accordance with the bylaws. Not more than 10 days after the selection of a person by the board to fill the vacancy, the corporation shall furnish, in writing, the following information to the commissioner: the name and address of the person so elected; whether the person is representative of the participating providers of health care services of the corporation, and is qualified to serve under the provisions of this act. If the commissioner finds, after a hearing, that the composition of the board of directors of the health service corporation, with respect to the members elected by the board, is not in compliance with the provisions of this act, he may direct that the board be reconstituted in accordance with his findings.
##### **§ 17:48E-9** Executive committee {#sec-17-48e-9 omnilex-key=us-nj-statutes--title-17--17:48E-9}
The board of directors of a health service corporation may, by resolution, elect an executive committee of the board, one-fourth of which shall be members appointed by the Governor. Vacancies in the executive committee shall be filled by the board of directors in accordance with the bylaws.
To the extent provided in the resolution of the board, or in the bylaws, the executive committee shall have and may exercise all the authority of the board, except that no executive committee shall:
a. Make, alter or repeal any bylaw of the corporation;
b. Elect or appoint any director, or remove any officer or director;
c. Submit to members any action that requires members' approval; or
d. Amend or repeal any resolution previously adopted by the board.
##### **§ 17:48E-10** Agreements with service providers {#sec-17-48e-10 omnilex-key=us-nj-statutes--title-17--17:48E-10}
a. A health service corporation may enter into agreements with providers of health care services whereby the providers become participating providers of health care services of that health service plan. Copies of agreements proposed to be entered into with participating physicians shall be filed with the commissioner. Every agreement shall provide: (1) for coverage of eligible health care services rendered to subscribers and covered dependents to the end of the subscription certificate year; (2) that 30 days' written notice of termination of the agreement may be given to the health service corporation at any time by any participating provider of health care services, but shall not apply to any subscription certificate in force at the time of notice until the first date thereafter when the subscription certificate may properly be terminated by the health service corporation; and (3) that the agreement of the provider of health care services to render services to the end of any certificate year shall not be affected by cessation of the transaction of business by the health service corporation. This requirement shall not apply to any subscription certificate which is not maintained in force by the payment of premiums required thereby.
b. A participating provider of health care services is one who agrees in writing to render health care services to or for persons covered by a contract or contracts issued by a health service corporation in return for which the health service corporation agrees to make payment directly to the participating provider. No person or facility shall become a participating provider of health care services unless he or it shall be legally authorized to provide health care services or supplies in this State. The board shall approve reimbursement rates paid to physicians.
c. A health service corporation may enter into agreements with other similar nonprofit health service corporations, hospital service corporations, or medical service corporations licensed under the laws of other states to provide for reciprocal payment of health care services to their respective subscribers and covered dependents rendered in the area served by the other corporation, provided that payments to participating physicians shall be at a rate not exceeding the same rate paid participating physicians under the certificate of the subscriber.
d. A health service corporation may establish criteria and standards for providers of health care services with which it desires to contract, and may establish its own contracting criteria for the providers as it shall determine, but contractual rates of payment to any hospital or health care facility shall be approved as to reasonableness by the Hospital Rate Setting Commission pursuant to section 18 of P.L. 1971, c. 136 (C.26:2H-18). The maximum rate of payment to eligible hospitals and institutions not under contract with the health service corporation shall not exceed those hospitals' or institutions' regular charges to the general public for the same services and shall be set forth in the certificate issued by the health service corporation to any subscriber. The basis and extent of payment, if any, by the health service corporation under agreements with nonprofit hospital service, medical service, or health service plans of other states shall be subject to the approval of the commissioner. e. Any dispute arising between a health service corporation and any provider of health care services with which the health service corporation has a contract for provision of health care services may be submitted to the commissioner for his determination with respect thereto, which determination shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ pursuant to section 43 of this act.
##### **§ 17:48E-10.1** Health service corporation to receive, transmit transactions electronically; standards. {#sec-17-48e-10.1 omnilex-key=us-nj-statutes--title-17--17:48E-10.1}
4. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a health service corporation or its agent or a subsidiary that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to a health service corporation, or its agent, its subsidiary or its covered persons.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a health service corporation or its agent or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all group and individual contracts issued, delivered, executed or renewed in this State.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a health service corporation or its agent shall require that health care providers file all claims for payment for health care services. A covered person who receives health care services shall not be required to submit a claim for payment, but notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the contract.
d. For the purposes of this subsection, "substantiating documentation" means any information specific to the particular health care service provided to a covered person.
(1) Effective 180 days after the effective date of P.L.1999, c.154, a health service corporation or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a covered person or health care provider, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42 U.S.C. s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the health care provider is eligible at the date of service;
(b) the person who received the health care service was covered on the date of service;
(c) the claim is for a service or supply covered under the health benefits plan;
(d) the claim is submitted with all the information requested by the payer on the claim form or in other instructions that were distributed in advance to the health care provider or covered person in accordance with the provisions of section 5 of P.L.2023, c.296 (C.17B:30-55.4); and
(e) the payer has no reason to believe that the claim has been submitted fraudulently.
(2) If all or a portion of the claim is not paid within the time frames provided in paragraph (1) of this subsection because:
(a) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(b) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(c) the payer disputes the amount claimed; or
(d) there is strong evidence of fraud by the provider and the payer has initiated an investigation into the suspected fraud,
the payer shall notify the health care provider, by electronic means and the covered person in writing within 30 days of receiving an electronic claim, or notify the covered person and health care provider in writing within 40 days of receiving a claim submitted by other than electronic means, that:
(i) the claim is incomplete with a statement as to what substantiating documentation is required for adjudication of the claim;
(ii) the claim contains incorrect information with a statement as to what information must be corrected for adjudication of the claim;
(iii) the payer disputes the amount claimed in whole or in part with a statement as to the basis of that dispute; or
(iv) the payer finds there is strong evidence of fraud and has initiated an investigation into the suspected fraud in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(3) If all or a portion of an electronically submitted claim cannot be adjudicated because the diagnosis coding, procedure coding or any other data required to be submitted with the claim was missing, the payer shall electronically notify the health care provider or its agent within seven days of that determination and request any information required to complete adjudication of the claim.
(4) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(5) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider, no later than two working days following receipt of the transmission of the claim.
(6) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(7) Payment of an eligible claim pursuant to paragraphs (1) and (4) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
If payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of paragraph (2) or paragraph (3) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or information or modification of an initial submission.
If payment is withheld on all or a portion of a claim by a payer pursuant to paragraph (2) or (3) of this subsection and the provider is not notified within the time frames provided for in those paragraphs, the claim shall be deemed to be overdue.
(8) (a) No payer that has reserved the right to change the premium shall deny payment on all or a portion of a claim because the payer requests documentation or information that is not specific to the health care service provided to the covered person.
(b) No payer shall deny payment on all or a portion of a claim while seeking coordination of benefits information unless good cause exists for the payer to believe that other insurance is available to the covered person. Good cause shall exist only if the payer's records indicate that other coverage exists. Routine requests to determine whether coordination of benefits exists shall not be considered good cause.
(c) In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of this paragraph, the claims payment shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means or on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
(9) An overdue payment shall bear simple interest at the rate of 12% per annum. The interest shall be paid to the health care provider at the time the overdue payment is made. The amount of interest paid to a health care provider for an overdue claim shall be credited to any civil penalty for late payment of the claim levied by the Department of Human Services against a payer that does not reserve the right to change the premium.
(10) With the exception of claims that were submitted fraudulently or submitted by health care providers that have a pattern of inappropriate billing or claims that were subject to coordination of benefits, no payer shall seek reimbursement for overpayment of a claim previously paid pursuant to this section later than 18 months after the date the first payment on the claim was made. No payer shall seek more than one reimbursement for overpayment of a particular claim. At the time the reimbursement request is submitted to the health care provider, the payer shall provide written documentation that identifies the error made by the payer in the processing or payment of the claim that justifies the reimbursement request. No payer shall base a reimbursement request for a particular claim on extrapolation of other claims, except under the following circumstances:
(a) in judicial or quasi-judicial proceedings, including arbitration;
(b) in administrative proceedings;
(c) in which relevant records required to be maintained by the health care provider have been improperly altered or reconstructed, or a material number of the relevant records are otherwise unavailable; or
(d) in which there is clear evidence of fraud by the health care provider and the payer has investigated the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), and referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(11) (a) In seeking reimbursement for the overpayment from the health care provider, except as provided for in subparagraph (b) of this paragraph, no payer shall collect or attempt to collect:
(i) the funds for the reimbursement on or before the 45th calendar day following the submission of the reimbursement request to the health care provider;
(ii) the funds for the reimbursement if the health care provider disputes the request and initiates an appeal on or before the 45th calendar day following the submission of the reimbursement request to the health care provider and until the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section are exhausted; or
(iii) a monetary penalty against the reimbursement request, including but not limited to, an interest charge or a late fee.
The payer may collect the funds for the reimbursement request by assessing them against payment of any future claims submitted by the health care provider after the 45th calendar day following the submission of the reimbursement request to the health care provider or after the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section have been exhausted if the payer submits an explanation in writing to the provider in sufficient detail so that the provider can reconcile each covered person's bill.
(b) If a payer has determined that the overpayment to the health care provider is a result of fraud committed by the health care provider and the payer has conducted its investigation and reported the fraud to the Office of the Insurance Fraud Prosecutor as required by law, the payer may collect an overpayment by assessing it against payment of any future claim submitted by the health care provider.
(12) No health care provider shall seek reimbursement from a payer or covered person for underpayment of a claim submitted pursuant to this section later than 18 months from the date the first payment on the claim was made, except if the claim is the subject of an appeal submitted pursuant to subsection e. of this section or the claim is subject to continual claims submission. No health care provider shall seek more than one reimbursement for underpayment of a particular claim.
e. (1) A health service corporation or its agent, hereinafter the payer, shall establish an internal appeal mechanism to resolve any dispute raised by a health care provider regardless of whether the health care provider is under contract with the payer regarding compliance with the requirements of this section or compliance with the requirements of sections 5 through 15 of P.L.2023, c.296 (C.17B:30-55.4 through 17B:30-55.14). No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of an appeal pursuant to this subsection. The payer shall conduct the appeal at no cost to the health care provider.
A health care provider may initiate an appeal on or before the 90th calendar day following receipt by the health care provider of the payer's claims determination, which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance which shall describe the type of substantiating documentation that must be submitted with the form. The payer shall conduct a review of the appeal and notify the health care provider of its determination on or before the 30th calendar day following the receipt of the appeal form. If the health care provider is not notified of the payer's determination of the appeal within 30 days, the health care provider may refer the dispute to arbitration as provided by paragraph (2) of this subsection.
If the payer issues a determination in favor of the health care provider, the payer shall comply with the provisions of this section and pay the amount of money in dispute, if applicable, with accrued interest at the rate of 12% per annum, on or before the 30th calendar day following the notification of the payer's determination on the appeal. Interest shall begin to accrue on the day the appeal was received by the payer.
If the payer issues a determination against the health care provider, the payer shall notify the health care provider of its findings on or before the 30th calendar day following the receipt of the appeal form and shall include in the notification written instructions for referring the dispute to arbitration as provided by paragraph (2) of this subsection.
The payer shall report annually to the Commissioner of Banking and Insurance the number of appeals it has received and the resolution of each appeal.
(2) Any dispute regarding the determination of an internal appeal conducted pursuant to paragraph (1) of this subsection may be referred to arbitration as provided in this paragraph. The Commissioner of Banking and Insurance shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings.
Any party may initiate an arbitration proceeding on or before the 90th calendar day following the receipt of the determination which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance. No dispute shall be accepted for arbitration unless the payment amount in dispute is $1,000 or more, except that a health care provider may aggregate his own disputed claim amounts for the purposes of meeting the threshold requirements of this subsection. No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of arbitration pursuant to this subsection.
(3) The arbitrator shall conduct the arbitration proceedings pursuant to the rules of the arbitration entity, including rules of discovery subject to confidentiality requirements established by State or federal law.
(4) An arbitrator's determination shall be:
(a) signed by the arbitrator;
(b) issued in writing, in a form prescribed by the Commissioner of Banking and Insurance, including a statement of the issues in dispute and the findings and conclusions on which the determination is based; and
(c) issued on or before the 30th calendar day following the receipt of the required documentation.
The arbitration shall be nonappealable and binding on all parties to the dispute.
(5) If the arbitrator determines that a payer has withheld or denied payment in violation of the provisions of this section, the arbitrator shall order the payer to make payment of the claim, together with accrued interest, on or before the 10th business day following the issuance of the determination. If the arbitrator determines that a payer has withheld or denied payment on the basis of information submitted by the health care provider and the payer requested, but did not receive, this information from the health care provider when the claim was initially processed pursuant to subsection d. of this section or reviewed under internal appeal pursuant to paragraph (1) of this subsection, the payer shall not be required to pay any accrued interest.
(6) If the arbitrator determines that a health care provider has engaged in a pattern and practice of improper billing and a refund is due to the payer, the arbitrator may award the payer a refund, including interest accrued at the rate of 12% per annum. Interest shall begin to accrue on the day the appeal was received by the payer for resolution through the internal appeals process established pursuant to paragraph (1) of this subsection.
(7) The arbitrator shall file a copy of each determination with and in the form prescribed by the Commissioner of Banking and Insurance.
f. As used in this section, "insured claim" or "claim" means a claim by a covered person for payment of benefits under an insured health service corporation contract for which the financial obligation for the payment of a claim under the contract rests upon the health service corporation.
g. Any person found in violation of this section with a pattern and practice as determined by the Commissioner of Banking and Insurance shall be liable to a civil penalty as set forth in section 17 of P.L.2005, c.352 (C.17B:30-55).
##### **§ 17:48E-10.2** Payment of out-of-network dental benefits by health service corporation. {#sec-17-48e-10.2 omnilex-key=us-nj-statutes--title-17--17:48E-10.2}
3. a. (1) Except as provided in subsection e. of this section, a health service corporation that makes a dental benefit payment to a covered person for services rendered by an out-of-network dentist shall issue the payment to the covered person in accordance with the time frames set forth in section 4 of P.L.1999, c.154 (C.17:48E-10.1), and shall, within three days of issuing the payment, provide a notification to the out-of-network dentist of the amount and date of the payment and the services for which the payment was made.
(2) In the case of a health service corporation that supplies an administrative services only contract and makes a dental benefit payment to a covered person for services rendered by an out-of-network dentist under that contract, paragraph (1) of this subsection shall not apply, but the health service corporation shall, within three days of issuing the payment, provide a notification to the out-of-network dentist of the amount and date of the payment.
b. A covered person may enter into an agreement with an out-of-network dentist to sign over the dental benefit payment received from the health service corporation to the dentist. The agreement shall:
(1) be in writing;
(2) be signed by the person who is entitled to receive the dental benefit payment from the health service corporation;
(3) be retained by the dentist for at least six years following the date of the most recent payment from the covered person; and
(4) give the covered person at least 10 business days within which to sign over the dental benefit to the dentist.
c. A covered person who agrees to sign over a dental benefit payment in accordance with this section shall comply with the terms of the agreement; except that, if the covered person owes the out-of-network dentist less than the amount of the dental benefit payment, the covered person shall pay the dentist the balance owed to the dentist.
d. A covered person who fails to sign over the dental benefit payment in accordance with subsections b. and c. of this section shall be liable to the out-of-network dentist for payment of attorney fees and costs reasonably incurred by the dentist in enforcing the agreement established pursuant to those subsections.
e. (1) With respect to a health service corporation that makes a dental benefit payment to a covered person for services rendered by an out-of-network dentist, if the covered person assigns, through an assignment of benefits, his right to receive reimbursement to an out-of-network dentist, the health service corporation shall issue the payment for the reimbursement directly to the dentist in the form of a check payable to the dentist, or in the alternative, to the dentist and the covered person as joint payees, with a signature line for each of the payees. Payment shall be made in accordance with section 4 of P.L.1999, c.154 (C.17:48E-10.1). Any payment made only to the covered person rather than the dentist while such an assignment of benefits is in effect shall be considered unpaid, and unless issued to the dentist within the time frames established by section 4 of P.L.1999, c.154 (C.17:48E-10.1), shall be considered overdue and subject to interest charges as provided in that section.
(2) Nothing in this subsection shall be construed to apply to a health service corporation that supplies a self-funded dental services plan or an administrative services only contract for a self-funded dental services plan, when making a dental benefit payment to a covered person for services rendered by an out-of-network dentist under that plan or contract.
##### **§ 17:48E-11** Professional Advisory Committee {#sec-17-48e-11 omnilex-key=us-nj-statutes--title-17--17:48E-11}
a. There is created a Professional Advisory Committee which shall be elected by the directors in a manner provided by the bylaws, which shall advise and make recommendations to the board with respect to professional practice and health care issues, including, but not limited to, (1) the eligibility of and reimbursement for medical, surgical, or other health care procedures or services; and (2) the establishing of guidelines for the utilization of health care services and procedures.
b. The advisory committee created pursuant to subsection a. of this section shall be composed of at least five physicians, of whom not less than two shall also be directors, and all of whom shall be participating providers. In the case of a merger of a hospital service corporation and a medical service corporation, the initial advisory committee shall be elected by the board of the merging medical service corporation. Thereafter, all members of the advisory committee shall be elected by the directors, in a manner provided by the bylaws.
##### **§ 17:48E-12** Eligible providers' services. {#sec-17-48e-12 omnilex-key=us-nj-statutes--title-17--17:48E-12}
12. In any contract entered into by a health service corporation, which includes coverage for health care services provided by a physician, coverage shall be deemed to include health care services provided by a registered bio-analytic laboratory or physical therapist, a certified nurse-midwife, a registered professional nurse, or a licensed podiatrist, dentist, optometrist, psychologist or chiropractor, when the provider performs an eligible service within the scope of his practice and for which he is not being compensated by a hospital or other health care facility. The practices of the providers of health care services shall be deemed to be within the provisions of this act and the providers shall have the privileges and benefits in the scope of their practices under this act afforded hereunder to other approved providers of health care services in the scope of their practices.
##### **§ 17:48E-13** Approval of forms {#sec-17-48e-13 omnilex-key=us-nj-statutes--title-17--17:48E-13}
13. No health service corporation shall enter into any contract with a subscriber unless it has filed with the commissioner a copy of the contract or certificate and copies of all applications, riders, and endorsements for use in connection with the issuance or renewal thereof in accordance with the provisions of section 12 of P.L.1995, c.73 (C.17:48E-13.2).
Contract forms shall not be unfair, inequitable, misleading or contrary to law, nor shall they produce rates that are excessive, inadequate or unfairly discriminatory.
##### **§ 17:48E-13.1** Health service corporation contract; compliance {#sec-17-48e-13.1 omnilex-key=us-nj-statutes--title-17--17:48E-13.1}
11. No health service corporation contract subject to the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.) or application for that contract, if a written application is required and is to be made a part of that contract, or a printed rider or an endorsement for use with that contract, shall be delivered or issued for delivery in this State unless its provisions comply with all of the applicable requirements P.L.1985, c.236 (C.17:48E-1 et seq.) and any regulations adopted or guidelines published by the commissioner consistent with the requirements thereof. Any contract, application, rider, or endorsement issued or delivered in this State that is not in compliance with that law or regulations or guidelines shall be deemed to be in compliance with the requirements and shall be interpreted by the courts and among the persons affected by the contract as if that contract form were in compliance with the requirements; except that this provision shall not relieve the health service corporation from any penalty that may be imposed for violation of this act or any other applicable provision of P.L.1985, c.236 (C.17:48E-1 et seq.).
##### **§ 17:48E-13.2** Filing of contract or related form {#sec-17-48e-13.2 omnilex-key=us-nj-statutes--title-17--17:48E-13.2}
12. a. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), any contract subject to the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.), including any application, rider, or endorsement which is made a part of that contract, shall be filed with the commissioner for approval as provided in this section. Any such contract, and any related form, except those certified pursuant to section 13 of this act, shall be filed with the commissioner for approval pursuant to this section.
b. Any contract or related form filed with the commissioner for approval pursuant to this section shall be deemed approved upon the expiration of 60 days after the submission of the form unless disapproved in writing by the commissioner within that time. Any such disapproval shall be based only on the specific provisions of applicable statutes, regulations adopted by the commissioner, or guidelines published by the commissioner as of the effective date of this act, with regard to forms of that type. A disapproved contract or related form may be resubmitted.
c. Any contract or related form submitted for approval pursuant to this section and disapproved by the commissioner before the expiration of 60 days after its submission shall be deemed withdrawn at the expiration of 60 days after the transmittal of the commissioner's specific objections unless the filer submits a complete written response to all of the commissioner's objections regarding the submission within the 60 day period.
d. A contract or related form, resubmitted in response to the commissioner's objections pursuant to subsection b. of this section, shall be deemed approved upon the expiration of 30 days after its resubmission unless disapproved in writing by the commissioner within that time. No disapproval by the commissioner of a resubmission shall be based on any objection not specified by the commissioner in his initial disapproval of the filing, except that the commissioner may disapprove such form based upon any new provisions introduced in the resubmission or if in addressing the specified objections cited in the commissioner's disapproval transmission, the health service corporation changes or modifies any substantive provisions of the form. Any contract or related form resubmitted for approval pursuant to this section and disapproved by the commissioner before the expiration of 30 days after its submission shall be deemed withdrawn at the expiration of 30 days after the transmittal of the commissioner's specific objections, unless the filer submits a complete written response to all of the commissioner's objections regarding the submission within the 30 day period.
e. With respect to all types of contracts or related forms required to be filed pursuant to this section and currently on file with and approved by the commissioner upon enactment of this act, the commissioner shall propose regulations, which may be amended or modified by the commissioner from time to time after adoption, concerning any actuarial or form requirements consistent with applicable statutory provisions but not specified therein, not later than 180 days after enactment of this act. Any such regulation shall be adopted not later than 180 days after it is proposed. With respect to any type of form not then on file with the commissioner but filed subsequent to the enactment of this act, the commissioner shall propose regulations, which may be amended or modified by the commissioner from time to time after adoption, concerning any actuarial or form requirements consistent with applicable statutory provisions but not specified therein, within 120 days after the form is approved or deemed approved by the commissioner pursuant to this section. Any such regulation shall be adopted not later than 180 days after it is proposed. The commissioner may issue bulletins which are interpretive of existing regulations consistent with statutory provisions, with respect to any type of form that may be certified pursuant to section 13 of this act. Nothing in this section shall preclude a health service corporation from filing a certifiable contract or related form for approval by the commissioner.
f. Any such form which is filed with the commissioner or deemed filed may be so delivered or issued for delivery until such time as any subsequent withdrawal of the filing by the commissioner, following an opportunity for a hearing held in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, becomes final in accordance therewith.
g. For purposes of this section, "days" means calendar days, except that when the last day of any specified time period is a Saturday, Sunday, or State holiday, then the time period shall end on the next following business day. With respect to any specified time period pertaining to correspondence between a health service corporation and the commissioner, the time period shall commence on the date that such correspondence is postmarked or submitted to a private delivery service.
##### **§ 17:48E-13.3** Contract forms; certification memorandum {#sec-17-48e-13.3 omnilex-key=us-nj-statutes--title-17--17:48E-13.3}
13. a. Pursuant to the provisions of this section, a health service corporation authorized to do business in this State may file with the commissioner and use, in accordance with subsection d. of this section, any contract, endorsement or related form that is stipulated by the commissioner to be of a kind or type eligible for file and use pursuant to subsection b. of this section. The form shall be accompanied by a certification memorandum which includes a statement that it is filed in accordance with the provisions of this section, and which is executed by a responsible officer of the health service corporation who certifies that the form being filed is in conformance with the law or regulation applicable to that type or kind of form as specified in a certification form to be determined by the commissioner. If the commissioner determines that the form being filed does not conform with the law or regulation applicable to that type or kind of form, the commissioner shall notify the health service corporation of his objections in writing and may disapprove that form for further use in New Jersey.
b. Contract forms, including related endorsements, riders and application forms, eligible for certification pursuant to this section shall include, but not be limited to, certain categories of individual and group health service corporation contracts which the commissioner shall define by regulation.
c. The certification memorandum shall be signed and acknowledged by a responsible officer of the health service corporation. The acknowledgment by that officer shall be done in the same manner in which documents for recording instruments conveying or affecting interests in real estate in this State must be acknowledged to be eligible for recording, or in such other manner as specified by the commissioner by regulation from time to time.
d. Upon receipt of an acknowledgment from the commissioner that the form and a certification memorandum which conforms to the requirements of this section have been received, the form so submitted may be used by the health service corporation.
e. (1) Improper certification shall subject a health service corporation submitting such improper certification to a fine not to exceed $50,000 and, in addition, a maximum penalty of $1,000 per contract issued on a form determined to be improperly certified pursuant to the provisions of this section. The commissioner shall promulgate a schedule of penalties to be applied pursuant to this section. In determining the amount of any penalty to be imposed, the commissioner shall consider the severity of the violation based upon the potential adverse impact to the public and whether it is the filer's first violation of this section.
(2) If, after notice and a hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), a health service corporation is found by the commissioner to be in violation of this section, the form may be disapproved, and in addition to any other penalties that may be imposed under P.L.1985, c.236 (C.17:48E-1 et seq.), the commissioner may bar that health service corporation from participating in the certification process pursuant to this section for a period not to exceed one year.
f. The commissioner shall hold a hearing annually, or more often, for the purpose of adopting regulations to define the specific forms eligible for certification pursuant to this section. Initial regulations shall be adopted pursuant to this section no later than 180 days after enactment of this act.
g. For purposes of this section:
(1) "a responsible officer of the health service corporation" means a corporate officer of the level of vice president or higher, or of equivalent title within the health service corporation's structure, who is either the actuary of the health service corporation with responsibility for the type of form filed, or the individual with responsibility for managing the form filing process for the health service corporation with regard to the type of form filed; and
(2) "improper certification" means providing any misrepresentation or false statement material to a certification form required pursuant to subsection a. of this section.
##### **§ 17:48E-14** Individual contract requirements {#sec-17-48e-14 omnilex-key=us-nj-statutes--title-17--17:48E-14}
In every individual contract made, issued or delivered in this State:
a. All printed portions shall be plainly printed in type of which the face is not smaller than 10 point;
b. There shall be a brief description of the contract on its first page and on its filing back in type of which the face is not smaller than 14 point;
c. The exceptions of the contract shall appear with the same prominence as the benefits to which they apply; and
d. If the contract contains any provision purporting to make any portion of the articles, constitution or bylaws of the corporation a part of the contract, that portion shall be set forth in full.
##### **§ 17:48E-15** Classification permitted {#sec-17-48e-15 omnilex-key=us-nj-statutes--title-17--17:48E-15}
A health service corporation may classify subscribers whereby under specified circumstances a subscriber or covered dependents may pay a participating provider of health care services an amount in addition to that payable by the corporation for those services, and the subscription certificate issued to any subscriber affected thereby shall contain the provisions thereof and shall specify the circumstances.
##### **§ 17:48E-15.1** Eligibility for enrollment in health service corporation {#sec-17-48e-15.1 omnilex-key=us-nj-statutes--title-17--17:48E-15.1}
3. Notwithstanding any other provision of law to the contrary, a health service corporation shall not consider a person's eligibility for medical assistance pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), or the equivalent statute in another state, when determining the person's eligibility for enrollment in, or the provision of benefits under, a health service corporation contract providing hospital or medical expense benefits delivered, issued or executed in this State, or approved for issuance in this State by the Commissioner of Insurance.
##### **§ 17:48E-15.2** Health service corporation contract, exclusion, rates, terms based on genetic information prohibited {#sec-17-48e-15.2 omnilex-key=us-nj-statutes--title-17--17:48E-15.2}
13. Every individual or group health service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall not exclude any person or eligible dependent and shall not establish any rates or terms therefor on the basis of an actual or expected health condition or on the basis of any genetic characteristic. For the purposes of this section, "genetic characteristic" means any inherited gene or chromosome, or alteration thereof, that is scientifically or medically believed to predispose an individual to a disease, disorder or syndrome, or to be associated with statistically increased risk of development of a disease, disorder or syndrome.
##### **§ 17:48E-16** Joint ventures {#sec-17-48e-16 omnilex-key=us-nj-statutes--title-17--17:48E-16}
a. A health service corporation of this State may, (1) with the participation of any other corporation licensed pursuant to Title 17 of the Revised Statutes, Title 17B of the New Jersey Statutes, or P.L. 1973, c. 337 (C. 26:2J-1 et seq.), or licensed pursuant to similar statutes of other states, jointly issue individual or group contracts for health care and other benefits, including complete employee welfare and other employee benefit programs, or (2) with the participation of any other corporation, jointly enter into contracts to provide or receive services in connection with the providing of health care or conducting the business of insurance in accordance with the provisions of this act or as permitted by the commissioner. The commissioner may establish any policy nonforfeiture requirements or reserve requirements as he deems necessary. Agreements between a health service corporation and other corporations pursuant to this section may provide for experience rating, if the experience rating is done on an equitable basis between the health service corporation and the other corporations; or for a sharing of the premiums, claims, and expenses by the participating corporations; or subject to regulation by the commissioner, for acceptance or ceding of the whole or portions of risks on a reinsurance basis, except that a health service corporation may not accept risks on a reinsurance basis which it may not accept on a primary basis pursuant to its powers as a health service corporation and may not, under any circumstances, act as a reinsurer of life insurance. Agreements made pursuant to this section shall be filed with and approved by the commissioner before becoming effective.
b. In the case of any joint venture for the sale of insurance with other than an insurer or hospital, medical, or health service corporation licensed to do business in this or any other state, the other partner or partners in the venture shall be licensed to sell insurance as producers pursuant to P.L. 1987, c. 293 (C. 17:22A-1 et seq.).
##### **§ 17:48E-17** Expense limits; investments; administrative services {#sec-17-48e-17 omnilex-key=us-nj-statutes--title-17--17:48E-17}
17. a. No health service corporation shall during any one year disburse more than 10% of the aggregate amount of the payments received from subscribers during that year as expenditures for the soliciting of subscribers, except that during the first year after the issuance of a certificate of authority a health service corporation may so disburse not more than 20% of that amount and during the second year, not more than 15%.
b. No health service corporation shall, during any one year, disburse a sum greater than 20% of the payments received from subscribers during that year as administrative expenses. The term "administrative expenses," as used in this section, shall include all expenditures for nonprofessional services and in general all expenses not directly connected with the furnishing of services or benefits, but not including expenses of soliciting subscribers.
c. The funds of any health service corporation may be invested to the same extent now or hereafter permitted by law for the investment of funds of domestic life insurance companies, including investments as provided in subsection e. of section 3 of P.L.1985, c.236 (C.17:48E-3) in life, health or accident insurance companies or other for-profit subsidiaries such as insurance agencies, suppliers of administrative services only, or any other subsidiaries permitted pursuant to N.J.S.17B:20-4, and for the purpose of engaging in any aspect of its business directly or through one or more subsidiaries or affiliates, including life, health or accident insurance companies.
In calculating the amount of such investments pursuant to N.J.S. 17B:20-4, investments in health maintenance organizations shall be excluded.
d. A health service corporation may supply administrative services only, and may supply administrative services either directly or through a subsidiary or affiliate.
e. (Deleted by amendment, P.L.1988, c.71.)
f. (Deleted by amendment, P.L.1988, c.71.)
##### **§ 17:48E-17.1** Two special contingent surplus accounts {#sec-17-48e-17.1 omnilex-key=us-nj-statutes--title-17--17:48E-17.1}
5. a. Every health service corporation shall accumulate and maintain during each calendar year two separate special contingent surplus accounts, one for its individual contracts and one for its other activities.
b. Every health service corporation shall accumulate and maintain a special contingent surplus for each account over and above its reserves and liabilities at the rate of 2% annually of its net premium income until that surplus is not less than $1,250,000.00 in each account. The special contingent surplus in each account shall be accumulated to and maintained at an amount not less than 2 1/2% of the net premium income received during that year, as determined by reference to the statement of financial condition filed pursuant to section 36 of P.L.1985, c.236 (C.17:48E-36). The commissioner may increase the minimum amount of special contingent surplus which shall be maintained pursuant to this subsection to an amount not exceeding 5% of the net premium income received during the preceding year. No method of accumulation as herein provided shall be deemed to supersede any provision of subsection c. of this section. In the case of any health service corporation which was created by the merger of a medical service corporation established pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.) and a hospital service corporation created pursuant to P.L.1938, c.366 (C.17:48-1 et seq.), in calculating the proportional allocation of any deficit or surplus between group and individual contracts at the time the separate surplus accounts are created, the corporation shall allocate based on its determination of the proportional contributions of individual and group business to any surplus or deficit during the period between January 1 of the calendar year in which the health service corporation commenced doing business as a health service corporation until the effective date of P.L.1988, c.71. The assumptions upon which the allocations are based shall be certified as reasonable by an independent actuary.
c. Every health service corporation established as of the effective date of P.L.1988, c.71 shall file a recovery plan with the commissioner for meeting the surplus amount requirements established by subsection b. of this section and which establishes a time period within which the corporation will meet those requirements. The time period established in the plan shall not exceed eight years and shall provide for the reduction to 0% of the deficit in the special contingent surplus account for its group and other activities by the end of four years from the effective date of P.L.1988, c.71; and for the reduction to 0% of the special individual contingent surplus account by the end of five years from the effective date of P.L.1991, c.208 through the dedication of five approximately equal amounts annually during each year of the five-year period. The commissioner shall take all necessary action to assure that individual rates are actuarially adequate to achieve this purpose. The plan shall be subject to the approval of the commissioner, who shall approve it within 60 days after it has been filed if he believes it to be reasonable. If the commissioner does not approve a plan filed under this subsection within 60 days of its submission, he shall issue findings and conclusions with respect to the reasonableness of the plan.
d. Whenever the special contingent surplus for either group contracts or individual contracts is an amount which is less than 2 1/2% to 5% of the earned premium of the group or individual business, as the case may be, at the discretion of the commissioner, the health service corporation shall, without regard to any other rate increase provided for or required by law or any rate increase which may have previously been taken pursuant to this subsection, and with the approval of the commissioner, commence within 90 days the implementation of rate increases for the group or individual contracts, as the case may be, which increases shall be sufficient to cause the amount of the special contingent surplus to equal an amount which is not less than 5% of the earned premium of the group or individual business within one year of the increase.
e. After the end of the recovery plan for the reduction to 0% of the deficit on the individual special contingent surplus account pursuant to subsection c. of this section, a health service corporation, which was created by the merger of a medical service corporation and a hospital service corporation, shall not be required to augment the surplus account allocable to individual contracts with any monies from the surplus account of group contracts, or from any corporate assets or any other source other than net earnings from individual contracts, nor shall it be required to augment the surplus account allocable to group contracts with any monies from the surplus account of individual contracts or from any corporate assets or any other source other than net earnings from group contracts, except that the commissioner may require the health service corporation to augment the earnings or surplus account allocable to individual contracts in the amount of any provider differential furnished for this purpose approved by the Hospital Rate Setting Commission pursuant to section 18 of P.L.1971, c.136 (C.26:2H-18).
f. Nothing in this section nor in P.L.1985, c.236 (C.17:48E-1 et seq.) shall abrogate the responsibilities of corporate officers with regard to the reporting of financial condition pursuant to section 36 of P.L.1985, c.236 (C.17:48E-36), nor shall any provision of P.L.1988, c.71 or P.L.1985, c.236 (C.17:48E-1 et seq.) be construed to limit the authority of the commissioner to require compliance with statutory capital, surplus or reserve requirements for a subsidiary or affiliate of a health service corporation, or for any reinsurance activities to be undertaken by a health service corporation.
##### **§ 17:48E-17.2** Special contingent surplus required for health service corporation {#sec-17-48e-17.2 omnilex-key=us-nj-statutes--title-17--17:48E-17.2}
8. Notwithstanding the provisions of section 5 of P.L.1988, c.71 (C.17:48E-17.1) or any other provision of law to the contrary, on or after December 31, 1996 or the date on which the commissioner deems that health service corporations have met the purpose of section 5 of P.L.1988, c.71 (C.17:48E-17.1) on its group and other activities, excluding individual business, whichever date is earlier, no health service corporation shall commence or continue to transact group business or other activities, excluding individual business, in this State unless its special contingent surplus for its group and other activities, excluding contingent surplus for individual contracts, meets the financial requirements set forth in sections 2 through 4 of P.L.1993, c.235 (C.17B:18-68 through C.17B:18-70). For purposes of this section, "special contingent surplus" shall have the same meaning as surplus in applying the requirements set forth in sections 2 through 4 of P.L.1993, c.235 (C.17B:18-68 through C.17B:18-70).
##### **§ 17:48E-17.3** Examination of annual regulatory filings; annual audit. {#sec-17-48e-17.3 omnilex-key=us-nj-statutes--title-17--17:48E-17.3}
4. a. The commissioner shall, on an annual basis, examine a health service corporation's annual regulatory filings to determine whether the health service corporation's risk-based capital ratio is within 550% to 725%. If at any time the commissioner determines that a health service corporation surplus results in a ratio that exceeds this range, the department shall notify the health service corporation and the health service corporation shall, within 30 days of notice from the commissioner, file a report with the commissioner to reduce the surplus to be within the range. The report shall include a plan to benefit subscribers, which may include but not be limited to proposals to lessen potential rate increases in the future. The commissioner shall review the plan to affirm that it meets the requirements of P.L.2017, c.100 (C.17:48E-17.3 et al.).
b. The department shall annually audit the financial statements and surplus of the health service corporation to verify risk-based capital. In order to implement the provisions of this section, the department may engage independent actuaries, as necessary, at the expense of the health service corporation.
##### **§ 17:48E-17.4** Health service corporation, aggregate benefits. {#sec-17-48e-17.4 omnilex-key=us-nj-statutes--title-17--17:48E-17.4}
3. a. Beginning with the calendar year starting on January 1, 2020, and in each calendar year thereafter, a health service corporation providing health benefits plans to a large employer shall return, in the form of aggregate benefits for all large group health benefits plans offered by the health service corporation, at least 85 percent of the aggregate premiums collected for all of those plans.
b. A health service corporation shall annually report to the Commissioner of Banking and Insurance no later than August 1 of each year, the loss ratio calculated for all of the health benefits plans for the previous calendar year. In each case in which the loss ratio fails to substantially comply with the 85 percent loss ratio requirement, the health service corporation shall issue a dividend or credit against future premiums for all contract holders in an amount sufficient to assure that the aggregate benefits paid in the previous calendar year plus the amount of the dividends and credits shall equal 85 percent of the premiums collected. The health service corporation shall distribute all dividends and credits by December 31 of the year following the calendar year in which the loss ratio requirements were not satisfied. The health service corporation's annual report shall include the health service corporation's calculation of the dividends and credits applicable to all health benefits plans, as well as an explanation of the health service corporation's plan to issue dividends or credits.
c. The commissioner shall specify by regulation:
(1) any informational filings required to be submitted by a health service corporation to the commissioner in order to determine whether the health service corporation is in compliance with the loss ratio requirements;
(2) the instructions and format for calculating and reporting loss ratios and issuing dividends or credits;
(3) procedures for the distribution of a dividend or credit in the event of cancellation or termination by a contract holder; and
(4) the instructions and format for submitting annual reports.
d. As used in this section, "large employer" means an employer with more than 50 employees, who is not a small employer as defined in section 1 of P.L.1992, c.162 (C.17B:27A-17).
##### **§ 17:48E-18** Annual contract, renewal; family coverage {#sec-17-48e-18 omnilex-key=us-nj-statutes--title-17--17:48E-18}
a. Every individual contract made by a health service corporation shall provide coverage for a specified period of not less than one year, and no contract shall be made providing for the inception of coverage at a date later than one year after the actual date of the making of the contract, without the prior approval of the commissioner. The contract may provide that it shall be automatically renewed from year to year unless there shall have been at least 30 days' prior written notice of termination by either the subscriber or the health service corporation. In the absence of fraud or material misrepresentation in the application for a contract or for reinstatement, no contract with an individual subscriber shall be terminated by the health service corporation unless all contracts of the same type, in the same group or covering the same classification of persons are terminated under the same conditions.
b. No contract between a health service corporation and a subscriber shall entitle more than one person to coverage, except that a contract issued as a family contract may provide that coverage will be furnished to a husband and wife, or husband, wife and their dependent child or children, or the subscriber and his, or her, dependent child or children. Adult dependents of a subscriber may also be included for coverage under the contract of the subscriber.
##### **§ 17:48E-19** Provisions of subscription certificates {#sec-17-48e-19 omnilex-key=us-nj-statutes--title-17--17:48E-19}
Every individual contract entered into between a health service corporation and a subscriber shall be in writing and a certificate stating the terms and conditions thereof shall be furnished to the subscriber to be kept by him. No subscription certificate shall be made, issued or delivered in this State unless it contains the following provisions:
a. A statement of the contract rate, or amount payable to the health service corporation by or on behalf of the subscriber for the period of coverage and of the time or times at which, and the manner in which, the amount is to be paid; and a provision requiring 30 days' written notice to the subscriber before any change in the contract, including a change in the amount of the subscription rate, shall take effect;
b. A statement of the nature of the health services to be furnished or paid for and the period during which they will be furnished or paid for; and, if there are any services to be excepted, or any benefits to be limited, a detailed statement of the exceptions or limitations printed as hereinafter specified;
c. A statement of the terms and conditions, if any, upon which the contract may be amended on approval of the commissioner or canceled, or otherwise terminated, at the option of either party. Any notice to the subscriber shall be sent by mail to the subscriber's address as shown at the time on the health service plan's records, except that, in the case of persons for whom payment under their contracts is made through a remitting agent, notice may be sent to the remitting agent, in which case it shall be the responsibility of the remitting agent to notify the subscriber. The notice shall be sent at least 30 days before the amendment, cancellation or termination of the contract takes effect. A rider or endorsement accompanying the notice, and amending the rates or other provisions of the contract, shall be deemed to be a part of the contract as of the effective date of the rider or endorsement;
d. A statement that the contract includes the endorsements thereon and attached papers, if any, and contains the entire contract;
e. A statement that no statement by the subscriber in his application for a contract shall void the contract or be used in any legal proceeding thereunder, unless the application or an exact copy thereof is included in or attached to the contract, and that no agent or representative of the health service corporation, other than an officer or officers designated therein, is authorized to change the contract or waive any of its provisions;
f. A statement that if the subscriber defaults in making any payment under the contract, the subsequent acceptance of a payment by the health service corporation or by one of its duly authorized agents shall reinstate the contract, but with respect to sickness and injury may cover any sickness as may be first manifested more than 10 days after the date of the acceptance;
g. A statement of the period of grace, which shall not be less than 10 days, allowed the subscriber for making any payment due under the contract; and
h. A contract may contain a provision that all health services furnished or paid for by a hospital service corporation shall be in accordance with the accepted medical practices in the community at the time, but the health service corporation shall not be liable for injuries resulting from negligence, misfeasance, malfeasance, nonfeasance or malpractice on the part of any provider of health care services in the course of rendering health care services to subscribers.
##### **§ 17:48E-20** Coverage for newborn child. {#sec-17-48e-20 omnilex-key=us-nj-statutes--title-17--17:48E-20}
20. a. Family type individual contracts shall provide that the coverage applicable for children shall be payable with respect to a newly born child of the subscriber, or his or her spouse, from the moment of birth. Coverage for newly born children shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities. If a subscription payment is required to provide coverage for a child, the contract may require that notification of birth of a newly born child and the required payment must be furnished to the health service corporation within 90 days after the date of birth in order to have the coverage continue beyond such 90-day period.
b. Nonfamily type individual contracts which provide for coverage to the subscriber, but not to family members or dependents of that subscriber, shall also provide coverage to newly born children of the subscriber, which shall commence with the moment of birth of each child and shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital abnormalities, if application therefor and payment of the required subscription amount are made to include in the contract the coverage described in subsection a. of this section within 90 days from the date of birth of a newborn child.
##### **§ 17:48E-21** Coverage for former spouse {#sec-17-48e-21 omnilex-key=us-nj-statutes--title-17--17:48E-21}
Whenever, pursuant to the provisions of an individual contract issued by a health service corporation, the former spouse of a named subscriber under a contract is no longer entitled to coverage as an eligible dependent by reason of divorce, separate coverage for the former spouse shall be made available by the health service corporation on an individual basis under the following conditions:
a. Application for coverage shall be made to the health service corporation by or on behalf of the former spouse no later than 31 days following the date his or her coverage under the prior contract terminated.
b. No new evidence of insurability shall be required in connection with the application for coverage but any health exception, limitation or exclusion applicable to the former spouse under the prior coverage may, at the option of the health service corporation, be carried over to the new coverage.
c. The effective date of the new coverage shall be the day following the date on which the former spouse's coverage under the prior contract terminated.
d. The benefits provided under the coverage offered to the former spouse shall be at least equal to the basic benefits provided in contracts then being offered by the health service corporation to new individual nongroup applicants of the same age and family status.
##### **§ 17:48E-22** Coverage for child with intellectual disability, physical handicap. {#sec-17-48e-22 omnilex-key=us-nj-statutes--title-17--17:48E-22}
22. Coverage of an unmarried child, covered prior to attainment of age 19 by an individual contract under which coverage terminates at a specified age, who is incapable of self-sustaining employment by reason of intellectual disability or physical handicap and who became so incapable prior to attainment of age 19 and who is chiefly dependent upon the subscriber for support and maintenance, shall not terminate while the contract remains in force and the dependent remains in that condition, if the subscriber has within 31 days of the dependent's attainment of the termination age submitted proof of the dependent's incapacity as described herein. The provisions of this section shall not apply retrospectively or prospectively to require a health service corporation to insure as a covered dependent any child with an intellectual disability or physical handicap of the applicant where the contract is underwritten on evidence of insurability based on health factors required to be set forth in the application. A contract heretofore or hereafter issued may, however, specifically exclude such child with an intellectual disability or physical handicap from coverage.
##### **§ 17:48E-23** Group contracts {#sec-17-48e-23 omnilex-key=us-nj-statutes--title-17--17:48E-23}
a. A health service corporation may issue to a policyholder a group contract, covering at least two employees or members at the date of issue, if it conforms to the following description:
(1) A contract issued to an employer or to the trustees of a fund established by one or more employers, or issued to a labor union or to an association formed for purposes other than obtaining a group contract, or issued to the trustees of a fund established by one or more labor unions, or by one or more employers and one or more labor unions, covering employees and members of associations and labor unions; or
(2) A contract issued to cover any other group which the commissioner determines may be covered in accordance with sound underwriting principles.
b. Benefits may be provided for one or more members of the families or one or more dependents of persons who may be covered under a group contract referred to in paragraph (1) or (2) of subsection a. of this section.
##### **§ 17:48E-24** Provisions of group contract forms {#sec-17-48e-24 omnilex-key=us-nj-statutes--title-17--17:48E-24}
a. Every group contract entered into by a health service corporation with any policyholder shall be in writing and a contract form stating the terms and conditions thereof shall be furnished to the policyholder to be kept by him. No group contract form shall be used unless it contains the following provisions:
(1) A statement of the contract rate payable to the health service corporation by or on behalf of the policyholder for the original period of coverage, the time or times at which, and the manner in which the contract rate due is to be paid, and the basis, if any, on which the rate may subsequently be adjusted;
(2) A provision that all contract rates due under the contract shall be paid by the policyholder, or by the designated representative of the policyholder, to the health service corporation on or before the due date thereof or within a period of grace as may be specified therein;
(3) A statement of the nature of the coverage to be provided and the period during which it will be provided, and, if there are any exclusions from coverage, a detailed statement of these exclusions;
(4) A provision that the contract, any endorsements or riders thereto, the application of the policyholder in whose name the contract is issued, a copy of which shall be attached to the contract, and the individual applications, if any, of the employees or members shall constitute the entire contract between the parties and that all statements contained in any application for coverage shall be deemed representations and not warranties;
(5) A provision that there shall be issued to the policyholder, for delivery to the employee or member, a certificate or other document which sets forth or summarizes the essential features of the coverage, including the time, place and method for making claims for benefits;
(6) A provision that all new employees or new members, as the case may be, in the groups or classes eligible for the coverage shall be added to the eligible groups or classes; and
(7) A statement of the terms and conditions, if any, upon which the contract may be terminated or amended. Any notice to the policyholder shall be effective if sent by mail to the policyholder's address as shown at the time on the corporation's records. The notice to the policyholder as herein required shall be sent at least 30 days before the termination or amendment of the contract takes effect.
b. A group contract may contain a provision that all health services furnished or paid for by a health service corporation shall be in accordance with the accepted medical practices in the community at the time, but the health service corporation shall not be liable for injuries resulting from negligence, misfeasance, malfeasance, nonfeasance or malpractice on the part of any provider of health care services in the course of rendering health care services to covered persons.
c. A health service corporation may classify employees or members under a group contract whereby under specified circumstances the employee or member or their covered dependents may pay a participating provider of health care services an amount in addition to that payable by the corporation for those services, and the group contract issued to the policyholder whose employees or members are affected thereby shall contain the provisions thereof and shall specify the circumstances.
##### **§ 17:48E-25** "Employee" coverage {#sec-17-48e-25 omnilex-key=us-nj-statutes--title-17--17:48E-25}
The group contract may provide that the term "employee" shall include as employees of a single employer the employees of one or more subsidiary corporations and the employees, individual proprietors and partners of affiliated corporations, proprietorships and partnerships, if the business of the employer and those corporations, proprietorships or partnerships is under common control through stock ownership, contract or otherwise. The contract may provide that the term "employees" includes the individual proprietor or partners of an individual proprietorship or a partnership. The contract may provide that the term "employees" shall include retired employees. A contract issued to trustees may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with the trusteeship. A contract issued to the trustees of a fund established by the members of an association of employers may provide that the term "employees" shall include the employees of the association.
##### **§ 17:48E-26** Experience rating {#sec-17-48e-26 omnilex-key=us-nj-statutes--title-17--17:48E-26}
a. A group contract, covering at least two employees or members, may provide for the adjustment of the rate of premium of insurance based on past or projected experience, and may include those claim costs and utilization trend factors which the health service corporation deems necessary in its discretion. No health service corporation shall use any form of experience rating plan until it shall have filed with the commissioner the formulas to be used and the classes or groups to which they are to apply. The commissioner may disapprove the formulas or classes at any time if he finds that the rates produced thereby are excessive, inadequate or unfairly discriminatory or that the formulas or classes are such as to prejudice the interests of persons who are eligible for coverage under contracts with the health service corporation which are not subject to experience rating.
b. Except for those rating formulas applicable to groups the employees or members of which are located in more than one state and which are underwritten in participation with other corporations of other states, no rating formula shall be approved by the commissioner, unless it provides that the experience rated groups will be assessed a reasonable charge for all individual contracts. This assessment will continue to apply as long as any reduced payment rate calculated and approved for the purpose of this subsection applies to the corporation pursuant to the provisions of subparagraph (2) of subsection b. of section 18 of P.L. 1971, c. 136 (C. 26:2H-18). A rating formula may provide for the allowance of an equitable discount in the event that the policyholder agrees to perform certain administrative and record keeping functions in connection with the routine maintenance of the group account.
c. Nothing in this section shall preclude a health service corporation from incorporating in the rating formulas those claim cost and utilization trend factors which it deems necessary in its discretion, so long as the rates produced are self-supporting and the formulas for classes do not prejudice the interests of persons who are eligible for coverage under contracts with the health service corporation which are not subject to experience rating.
d. Notwithstanding the provisions of subsection c. of this section, a health service corporation may increase rates for hospitalization benefits under all individual or group contracts issued by the corporation which are not experience rated at any time following an increase in hospital payment rates by the Hospital Rate Setting Commission established pursuant to section 5 of P.L. 1978, c. 83 (C. 26:2H-4.1). The contract rate increases permitted pursuant to this subsection shall reflect the increases in hospital payment rates which are not reflected or anticipated in the contract rates for the increases and which are not offset by savings in other benefit provisions under the contract. Beginning 180 days following the effective date of this act and at the end of every calendar quarter thereafter, a health service corporation shall file notice with the commissioner, in a form approved by the commissioner, of any proposed change in its rates for coverage under individual contracts issued by the corporation. Unless the rates are disapproved by the commissioner on or before the day the rates are to become effective, which shall be no later than 20 days following the filing, they shall be deemed to be approved. In his discretion, the commissioner may waive the 20 day period, or any portion thereof.
##### **§ 17:48E-27** Rate schedule filing {#sec-17-48e-27 omnilex-key=us-nj-statutes--title-17--17:48E-27}
27. No health service corporation shall issue individual contracts until it has made an informational filing with the commissioner, pursuant to the provisions of this act, of a full schedule of rates which are to apply to those contracts. The rates shall be formulated so that the anticipated minimum loss ratio for a contract form shall not be less than 75% of the premium. The health service corporation shall submit with its rate filing supporting data that the corporation is in compliance with the anticipated loss ratio requirement. The supporting data and certification required pursuant to subsection e. of section 8 of P.L.1992, c.161 (C.17B:27A-9) shall satisfy the requirements of this section.
##### **§ 17:48E-27.1** Individual contract rate changes {#sec-17-48e-27.1 omnilex-key=us-nj-statutes--title-17--17:48E-27.1}
7. A health service corporation shall make an informational filing of any change in its rates for coverage under individual contracts which are not experience rated, along with supporting information as required pursuant to subsection e. of section 8 of P.L.1992, c.161 (C.17B:27A-9), prior to the rates becoming effective.
##### **§ 17:48E-28** Group coverage for newborn child. {#sec-17-48e-28 omnilex-key=us-nj-statutes--title-17--17:48E-28}
28. a. Family type group coverage shall provide that the coverage applicable for children shall be payable with respect to a newly born child of the subscriber, or his or her spouse, from the moment of birth. The coverage for newly born children shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities. If a subscription payment is required to obtain coverage for a child, the contract may require that notification of birth of a newly born child and the required payment shall be furnished to the health service corporation within 90 days after the date of birth in order to have the coverage continue beyond that 90-day period.
b. Non-family type group coverage, other than under contracts which provide no dependent coverage whatsoever for the subscriber's class, shall also provide coverage for newly born children of the subscriber, which coverage shall commence with the moment of birth of each child and shall consist of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and abnormalities, if application therefor and payment of the required subscription amount are made to include in the contract the coverage described in subsection a. of this section within 90 days from the date of birth of a newborn child.
##### **§ 17:48E-29** Nongroup coverage for former spouse {#sec-17-48e-29 omnilex-key=us-nj-statutes--title-17--17:48E-29}
Whenever, pursuant to the provisions of a group contract issued by a health service corporation, the former spouse of an employee or member of a policyholder under a group contract is no longer entitled to coverage as an eligible dependent by reason of divorce, separate coverage for the former spouse shall be made available by the health service corporation on an individual nongroup basis under the following conditions:
a. Application for the nongroup coverage shall be made to the health service corporation by or on behalf of the former spouse no later than 31 days following the date his or her coverage under the prior group contract terminated.
b. No new evidence of insurability shall be required in connection with the application for the nongroup coverage but any health exception, limitation or exclusion applicable to the former spouse under the prior coverage may, at the option of the health service corporation, be carried over to the new nongroup coverage.
c. The effective date of the new coverage shall be the day following the date on which the former spouse's coverage under the prior group contract terminated.
d. The benefits provided under the nongroup coverage issued to the former spouse shall be at least equal to the basic benefits provided in contracts then being issued by the health service corporation to new nongroup applicants of the same age and family status.
##### **§ 17:48E-30** Group coverage for child with intellectual disability, physical handicap. {#sec-17-48e-30 omnilex-key=us-nj-statutes--title-17--17:48E-30}
30. Coverage of an unmarried child, covered prior to attainment of age 19 by a group contract under which coverage terminates at a specified age, who is incapable of self-sustaining employment by reason of intellectual disability or physical handicap and who became so incapable prior to attainment of age 19 and who is chiefly dependent upon the covered employee or member for support and maintenance, shall not terminate while the coverage of the employee or member remains in force and the dependent remains in that condition, if the employee or member has within 31 days of the dependent's attainment of the termination age submitted proof of the dependent's incapacity as described herein. The provisions of this section shall not apply retrospectively or prospectively to require a health service corporation to insure as a covered dependent any child with an intellectual disability or physical handicap of the applicant where the contract is underwritten on evidence of insurability based on health factors required to be set forth in the application. Any contract heretofore or hereafter issued may, however, specifically exclude a child with an intellectual disability or physical handicap from coverage.
##### **§ 17:48E-30.1** Coverage for certain dependents until age 31 by health service corporation. {#sec-17-48e-30.1 omnilex-key=us-nj-statutes--title-17--17:48E-30.1}
3. a. As used in this section, "dependent" means a subscriber's child by blood or by law who:
(1) is 30 years of age or younger;
(2) is unmarried;
(3) has no dependent of his own;
(4) is a resident of this State or is enrolled as a full-time student at an accredited public or private institution of higher education; and
(5) (a) is not actually provided coverage as a named subscriber, insured, enrollee, or covered person under any other group or individual health benefits plan, group health plan, church plan or health benefits plan, or entitled to benefits under Title XVIII of the Social Security Act, Pub.L.74-271 (42 U.S.C. s.1395 et seq.) at the time the dependent coverage pursuant to this section begins or will begin; and
(b) there is evidence of prior, creditable coverage or receipt of benefits under a benefits plan or by law as set forth in subparagraph (a) of this paragraph.
b. (1) A health service corporation contract that provides coverage for a subscriber's dependent under which coverage of the dependent terminates at a specific age on or before the dependent's 30th birthday, and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et al.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this section of P.L.2008, c.38, shall, upon application of the dependent as set forth in subsection c. of this section, provide coverage to the dependent after that specific age, until the dependent's 31st birthday.
(2) Nothing herein shall be construed to require:
(a) coverage for services provided to a dependent before the effective date of this section of P.L.2008, c.38; or
(b) that an employer or other group policyholder pay all or part of the cost of coverage for a dependent as provided pursuant to this section.
c. (1) A dependent covered by a subscriber's contract, which coverage under the contract terminates at a specific age on or before the dependent's 30th birthday, may make a written election for coverage as a dependent pursuant to this section, until the dependent's 30th birthday:
(a) within 30 days prior to the termination of coverage at the specific age provided in the contract;
(b) within 30 days after meeting the requirements for dependent status as set forth in subsection a. of this section, when coverage for the dependent under the contract previously terminated; or
(c) during an open enrollment period, as provided pursuant to the contract, if the dependent meets the requirements for dependent status as set forth in subsection a. of this section during the open enrollment period.
(2) (Deleted by amendment, P.L.2008, c.38)
d. (1) Coverage for a dependent who makes a written election for coverage pursuant to subsection c. of this section shall consist of coverage which is identical to the coverage provided to that dependent prior to the termination of coverage at the specific age provided in the contract. If coverage is modified under the contract for any similarly situated dependents for coverage prior to the termination of coverage at the specific age provided in the contract, the coverage shall also be modified in the same manner for the dependent.
(2) Coverage for a dependent who makes a written election for coverage pursuant to subsection c. of this section shall not be conditioned upon, or discriminate on the basis of, lack of evidence of insurability.
e. (1) The subscriber's contract may require payment of a premium by the subscriber or dependent, as appropriate, subject to the approval of the Commissioner of Banking and Insurance, for any period of coverage relating to a dependent's written election for coverage pursuant to subsection c. of this section. The premium shall not exceed 102% of the applicable portion of the premium previously paid for that dependent's coverage under the contract prior to the termination of coverage at the specific age provided in the contract.
(2) The applicable portion of the premium previously paid for the dependent's coverage under the contract shall be determined pursuant to regulations promulgated by the Commissioner of Banking and Insurance, based upon the difference between the contract's rating tiers for adult and dependent coverage or family coverage, as appropriate, and single coverage, or based upon any other formula or dependent rating tier deemed appropriate by the commissioner which provides a substantially similar result.
(3) Payments of the premium may, at the election of the payor, be made in monthly installments.
f. Coverage for a dependent provided pursuant to this section shall be provided until the earlier of the following:
(1) the date upon which the dependent is disqualified for dependent status as set forth in subsection a. of this section;
(2) the date upon which coverage ceases under the contract by reason of a failure to make a timely payment of any premium required under the contract by the subscriber or dependent for coverage provided pursuant to this section. The payment of any premium shall be considered to be timely if made within 30 days after the due date or within a longer period as may be provided for by the contract; or
(3) the date upon which the contract, under which coverage is provided to a dependent, ceases to provide coverage to the subscriber.
Nothing herein shall be construed to permit a health service corporation to refuse a written election for coverage by a dependent pursuant to subsection c. of this section, based upon the dependent's prior disqualification pursuant to paragraph (1) of this subsection, other than a disqualification based on age or lack of evidence of prior, creditable coverage or receipt of benefits.
g. Notice regarding coverage for a dependent as provided pursuant to this section shall be provided to a subscriber by the health service corporation:
(1) in the certificate of coverage or other equivalent document prepared for subscribers and delivered on or about the date of commencement of the subscribers' coverage; and
(2) (Deleted by amendment, P.L.2008, c.38)
(3) in a notice delivered to subscribers on a quarterly basis.
h. This section shall apply to those contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-31** Family coverage after member's death {#sec-17-48e-31 omnilex-key=us-nj-statutes--title-17--17:48E-31}
Any group contract which contains provisions for the payment by the insurer of benefits for members of the family or dependents of a person in the insured group shall provide that, subject to payment of the appropriate premium, family members or dependents are permitted to have coverage continued for at least 180 days after the death of the person in the insured group.
##### **§ 17:48E-32** Continuation of coverage for totally disabled {#sec-17-48e-32 omnilex-key=us-nj-statutes--title-17--17:48E-32}
A group contract or individual group certificate delivered or issued for delivery in this State which covers employees or members and their dependents for health services on an expense incurred or service basis, other than for specific diseases or for accidental injuries only, shall provide that employees or members, whose coverage under the group contract or individual group certificate would otherwise terminate because of termination of employment or membership due to total disability of the employee or member, shall be entitled to continue their health services coverage under that group contract or individual group certificate for themselves and their eligible dependents, subject to all of the group contract's or individual group certificate's terms and conditions applicable to that coverage and subject to the following conditions:
a. Continuation shall only be available to any employee or member who has been continuously covered under the group contract or individual group certificate during the entire three month period ending with the termination.
b. Continuation shall be available for any person who is covered by or eligible for Medicare, subject to any nonduplication of benefits provisions of the group contract or individual group certificate.
c. In addition to hospital, medical-surgical, or major medical benefits, continuation shall include any other health care expense benefits, including dental, vision care, or prescription drug benefits, available through the insured group.
d. An employee or member electing continuation shall pay to the group contract holder or his employer, on a monthly basis in advance, the amount of contribution required by the contract holder or employer, but not more than the group rate for the coverage being continued under the group contract or individual group certificate on the due date of each payment. The employee's or member's written election for continuation, together with the first contribution required to establish contributions on a monthly basis in advance, shall be given to the contract holder or employer within 31 days of the date the employee's or member's coverage would otherwise terminate.
e. Continuation of coverage under the group contract or individual group certificate for any person shall terminate at the first to occur of the following:
(1) Failure of the former employee or member to make timely payment of a required contribution. Termination shall occur at the end of the period for which contributions were made.
(2) The date the employee again becomes employed and eligible for benefits under another group plan providing health care expense benefits, or in the case of a qualified eligible dependent, the date the dependent becomes employed and eligible for those benefits.
(3) The date on which the group contract or individual group certificate is terminated or, in the case of any employee, the date his employer terminates participation under the group contract or individual group certificate; except that: (a) The employee or member shall have the right to become covered under any new group contract or individual group certificate contracted for by the employer, for the balance of the period that he would have remained covered under the prior group certificate in accordance with this act had a termination of a group not occurred;
(b) The minimum level of benefits to be provided by the other group contract or individual group certificate shall be the applicable level of benefits of the prior group contract or individual group certificate reduced by any benefits payable under that prior group contract or individual group certificate; and
(c) The prior group contract or individual group certificate shall continue to provide benefits to the extent of its accrued liability and extension of benefits, but only when replacement occurred.
f. A notification of the continuation privilege shall be included in any individual group certificate or employee booklet.
g. For the purposes of this section, "total disability of an employee or member" exists only while the employee or member (1) is not engaged in and (2) is completely unable, due to sickness or injury or both, to engage in any and every gainful occupation for which the person is reasonably fitted by education, training or experience.
##### **§ 17:48E-32.1** Coverage provided by health service corporation for subscriber's child. {#sec-17-48e-32.1 omnilex-key=us-nj-statutes--title-17--17:48E-32.1}
5. a. A health service corporation contract which provides hospital or medical expense benefits under which dependent coverage is available shall continue to make that coverage available for an adult child until the child turns 26 years of age. A contract shall not deny coverage for a subscriber's child on the grounds that:
(1) The child was born out of wedlock;
(2) The child is not claimed as a dependent on the subscriber's federal tax return;
(3) The child does not reside with the subscriber or in the health service corporation's service area, provided that, in the case of a managed care plan, the child complies with the terms and conditions of the contract with respect to the use of specified providers;
(4) The child is married;
(5) The child has or adopts a child; or
(6) The child starts or leaves school.
b. If a child has coverage through a health service corporation contract of a noncustodial parent, the health service corporation shall:
(1) Provide such information to the custodial parent as may be necessary for the child to obtain benefits through the child's noncustodial parent's coverage;
(2) Permit the custodial parent, or the health care provider with the authorization of the custodial parent, to submit claims for covered services without the approval of the noncustodial parent; and
(3) Make payments on claims submitted in accordance with paragraph (2) of this subsection directly to the custodial parent, the health care provider or the Division of Medical Assistance and Health Services in the Department of Human Services which administers the State Medicaid program, as appropriate.
c. When a parent who is the subscriber is eligible for dependent coverage and is required by a court or administrative order to provide health insurance coverage for his child, the health service corporation shall:
(1) Permit the parent to enroll his child as a dependent, without regard to any open enrollment restrictions;
(2) Permit the child's other parent, or the Division of Medical Assistance and Health Services as the State Medicaid agency or the Division of Family Development as the State IV-D agency, in the Department of Human Services, to enroll the child under the contract if the parent who is the subscriber fails to enroll the child; and
(3) Not terminate coverage of the child unless the parent who is the subscriber provides the health service corporation with satisfactory written evidence that: the court or administrative order is no longer in effect; or the child is or will be enrolled in a comparable health benefits plan whose coverage will be effective on the date of the termination of coverage.
##### **§ 17:48E-32.2** Requirements applicable to State Medicaid {#sec-17-48e-32.2 omnilex-key=us-nj-statutes--title-17--17:48E-32.2}
6. A health service corporation shall not impose requirements on the Division of Medical Assistance and Health Services in the Department of Human Services which has been assigned the rights of an individual who is eligible for medical assistance under the State Medicaid program, that are different from requirements applicable to an agent or assignee of any other subscriber.
##### **§ 17:48E-33** Second, third surgical opinions {#sec-17-48e-33 omnilex-key=us-nj-statutes--title-17--17:48E-33}
a. A health service corporation issuing a group or individual contract in accordance with this act, which provides payment for surgical services rendered to a person while confined in a hospital as an inpatient, shall make available benefits for a second surgical opinion for elective surgical procedures which would require an inpatient admission to a hospitaL. In the case of a group contract, benefits for a second surgical opinion shall be available only if requested by the group policyholder.
b. A second surgical opinion program shall provide for payment for the second surgical opinion of an eligible physician and for essential laboratory and x-ray services incidental thereto.
c. If a second surgical opinion does not confirm that the proposed elective surgical procedure is medically advisable, the program shall cover a third surgical opinion in the same manner as the second opinion.
d. A second surgical opinion program may exclude benefits (1) while a patient is confined in a hospital as an inpatient for any surgical procedure not covered by the group or individual contract, and (2) for surgical procedures in the following categories: cosmetic surgery, pregnancy-related surgery, dental surgery, podiatric surgery, and sterilization.
e. If a physician who furnishes a second or third surgical opinion also performs the surgical procedure, the second surgical opinion program need not provide payment for the second or third opinion services.
##### **§ 17:48E-35** Reconstructive breast surgery benefits {#sec-17-48e-35 omnilex-key=us-nj-statutes--title-17--17:48E-35}
35. Every subscription certificate and group and individual contract providing health service coverage, delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the commissioner on or after the effective date of this act, shall provide benefits, following a mastectomy on one breast or both breasts, for reconstructive breast surgery, surgery to restore and achieve symmetry between the two breasts, and the cost of prostheses and, under any contract providing outpatient x-ray or radiation therapy, benefits for outpatient chemotherapy following surgical procedures in connection with the treatment of breast cancer, which shall be included as a part of the outpatient x-ray or radiation therapy benefit. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium. These benefits shall be provided to the same extent as for any other sickness under the contract.
##### **§ 17:48E-35.1** Benefits for home treatment of hemophilia {#sec-17-48e-35.1 omnilex-key=us-nj-statutes--title-17--17:48E-35.1}
Every group or individual contract providing hospital expense benefits to any subscriber or other person covered thereunder for expenses incurred in connection with the treatment of routine bleeding episodes associated with hemophilia shall provide benefits for expenses incurred in connection with the purchase of blood products and blood infusion equipment required for home treatment of routine bleeding episodes associated with hemophilia when the home treatment program is under the supervision of a State approved hemophilia treatment center. The benefits shall be provided to the same extent as any other sickness under the contract.
As used in this act, "blood product" includes, but is not limited to, Factor VIII, Factor IX and cryoprecipitate; and "blood infusion equipment" includes, but is not limited to, syringes and needles.
Participation in a home treatment program shall not preclude further or additional treatment or care at any eligible facility if the number of home treatments, in accordance with a ratio of home treatments to benefit days established by regulation by the Commissioner of Insurance, does not exceed the total number of benefit days provided for any other sickness under the contract.
##### **§ 17:48E-35.2** Health service corporation insurance benefits for preexisting condition. {#sec-17-48e-35.2 omnilex-key=us-nj-statutes--title-17--17:48E-35.2}
3. a. Notwithstanding any other provision of law to the contrary, no group health insurance contract issued by a health service corporation pursuant to the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.), shall contain any provision which denies benefits for a preexisting condition to any person becoming a member of that group. A health service corporation shall not include a preexisting condition as a factor in calculating the premium.
b. Nothing in this section shall be construed to operate to add any benefit, to increase the scope of any benefit, or to increase any benefit level under any group contract.
c. This section shall apply to every group contract or policy in which the corporation or insurer has the right to change the premium.
##### **§ 17:48E-35.3** Health service corporation to pay benefits for treatment of Wilm's tumor {#sec-17-48e-35.3 omnilex-key=us-nj-statutes--title-17--17:48E-35.3}
Every group or individual health service corporation contract providing hospital or medical expense benefits shall provide benefits to any subscriber or other person covered thereunder for expenses incurred in the treatment of Wilm's tumor, including autologous bone marrow transplants when standard chemotherapy treatment is unsuccessful, notwithstanding that any such treatment may be deemed experimental or investigational. These benefits shall be provided to the same extent as for any other sickness under the contract.
##### **§ 17:48E-35.4** Health service corporation contract, mammogram examination benefits. {#sec-17-48e-35.4 omnilex-key=us-nj-statutes--title-17--17:48E-35.4}
3. a. No group or individual health service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred in conducting:
(1) one baseline mammogram examination for women who are 40 years of age; a mammogram examination every year for women age 40 and over; and, in the case of a woman who is under 40 years of age and has a family history of breast cancer or other breast cancer risk factors, a mammogram examination at such age and intervals as deemed medically necessary by the woman's health care provider; and
(2) an ultrasound evaluation, a magnetic resonance imaging scan, a three-dimensional mammography, or other additional testing of an entire breast or breasts, after a baseline mammogram examination, if the mammogram demonstrates extremely dense breast tissue, if the mammogram is abnormal within any degree of breast density including not dense, moderately dense, heterogeneously dense, or extremely dense breast tissue, or if the patient has additional risk factors for breast cancer including but not limited to family history of breast cancer, prior personal history of breast cancer, positive genetic testing, extremely dense breast tissue based on the Breast Imaging Reporting and Data System established by the American College of Radiology, or other indications as determined by the patient's health care provider. The coverage required under this paragraph may be subject to utilization review, including periodic review, by the health service corporation of the medical necessity of the additional screening and diagnostic testing.
b. These benefits shall be provided to the same extent as for any other sickness under the contract.
c. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.5** Health service corporation, benefits for "off-label" drugs required {#sec-17-48e-35.5 omnilex-key=us-nj-statutes--title-17--17:48E-35.5}
4. a. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et al.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), no group or individual health service corporation contract which provides benefits for expenses incurred in prescribing drugs approved by the federal Food and Drug Administration shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred in prescribing a drug for a treatment for which it has not been approved by the Food and Drug Administration if the drug is recognized as being medically appropriate for the specific treatment for which it has been prescribed in one of the following established reference compendia:
(1) the American Medical Association Drug Evaluations;
(2) the American Hospital Formulary Service Drug Information;
(3) the United States Pharmacopoeia Drug Information;
or, it is recommended by a clinical study or review article in a major-peer reviewed professional journal.
b. Notwithstanding the provisions of this section, coverage shall not be required for any experimental or investigational drug or any drug which the Food and Drug Administration has determined to be contraindicated for the specific treatment for which the drug has been prescribed. The benefits provided pursuant to this section shall be provided to the same extent as other benefits under the contract for drugs prescribed for a treatment approved by the Food and Drug Administration.
c. This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
d. Any coverage of a drug required by this section shall also include medically necessary services associated with the administration of the drug.
##### **§ 17:48E-35.6** Health service corporation, benefits for health promotion {#sec-17-48e-35.6 omnilex-key=us-nj-statutes--title-17--17:48E-35.6}
5. a. Every health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.1999, c.339, shall provide benefits to any subscriber or other person covered thereunder for expenses incurred in a health promotion program through health wellness examinations and counselling, which program shall include, but not be limited to, the following tests and services:
(1) For all persons 20 years of age and older, annual tests to determine blood hemoglobin, blood pressure, blood glucose level, and blood cholesterol level or, alternatively, low-density lipoprotein (LDL) level and blood high-density lipoprotein (HDL) level;
(2) For all persons 35 years of age or older, a glaucoma eye test every five years;
(3) For all persons 40 years of age or older, an annual stool examination for presence of blood;
(4) For all persons 45 years of age or older, a left-sided colon examination of 35 to 60 centimeters every five years;
(5) For all women 20 years of age or older, a pap smear pursuant to the provisions of section 1 of P.L.1995, c.415 (C.17:48E-35.12);
(6) For all women 40 years of age or older, a mammogram examination pursuant to the provisions of section 3 of P.L.1991, c.279 (C.17:48E-35.4);
(7) For all adults, recommended immunizations; and
(8) For all persons 20 years of age or older, an annual consultation with a health care provider to discuss lifestyle behaviors that promote health and well-being including, but not limited to, smoking control, nutrition and diet recommendations, exercise plans, lower back protection, weight control, immunization practices, breast self-examination, testicular self-examination and seat belt usage in motor vehicles.
Notwithstanding the provisions of this subsection to the contrary, if a physician or other health care provider recommends that it would be medically appropriate for a covered person to receive a different schedule of tests and services than that provided for under this subsection, the health service corporation shall provide payment for the tests or services actually provided, within the limits of the amounts listed in subsection b. of this section.
b. Every individual or group health care contract offered for sale in this State by a health service corporation pursuant to subsection a. of this section shall provide payment for the benefits set forth in subsection a. of this section in an amount which shall not exceed: $125 a year for each person between the ages of 20 to 39, inclusive; $145 a year for each man age 40 and over; and $235 a year for each woman age 40 and over; except that for persons 45 years of age or older, the cost of a left-sided colon examination shall not be included in the above amount; however, no health service corporation shall be required to provide payment for benefits for a left-sided colon examination in excess of $150.
c. The Commissioner of Banking and Insurance, in consultation with the Department of the Treasury, shall annually adjust the threshold amounts provided by subsection b. of this section in direct proportion to the increase or decrease in the consumer price index for all urban consumers in the New York City and Philadelphia areas as reported by the United States Department of Labor. The adjustment shall become effective on July 1 of the year in which the adjustment is made.
d. This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
e. The provisions of this section shall not apply to a health benefits plan subject to the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.).
##### **§ 17:48E-35.7** Requirements for health service corporation providing benefits for pharmacy services. {#sec-17-48e-35.7 omnilex-key=us-nj-statutes--title-17--17:48E-35.7}
3. a. Notwithstanding any other provisions of law to the contrary, no group or individual health service corporation contract which provides benefits for pharmacy services, prescription drugs, or for participation in a prescription drug plan, shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, unless the contract:
(1) Permits the subscriber, at the time of issuance, amendment or renewal, to select benefit coverage allowing the subscriber to choose a pharmacy or pharmacist for the provision of prescription drugs or pharmacy services, provided that any pharmacist or pharmacy selected by the subscriber is registered pursuant to R.S.45:14-1 et seq.;
(2) Provides that no pharmacy or pharmacist shall be denied the right to participate as a preferred provider or as a contracting provider, under the same terms and conditions currently applicable to all other preferred or contracting providers, if the contract provides for coverage by contracted or preferred providers for pharmaceutical services, provided the pharmacy or pharmacist is registered pursuant to R.S.45:14-1 et seq., and accepts the terms and conditions of the contract;
(3) Provides that no copayment, fee, or other condition shall be imposed upon a subscriber selecting a participating or contracting pharmacist or pharmacy that is not also equally imposed upon all subscribers selecting a participating or contracting pharmacist or pharmacy;
(4) (a) Provides that no subscriber shall be required to obtain pharmacy services and prescription drugs from a mail service pharmacy;
(b) Provides for no differential in any copayment applicable to any prescription drug of the same strength, quantity and days' supply, whether obtained from a mail service pharmacy or a non-mail service pharmacy, provided that the non-mail service pharmacy agrees to the same terms, conditions, price and services applicable to the mail service pharmacy; and
(c) Provides that the limit on days' supply is the same whether the prescription drug is obtained from a mail service pharmacy or a non-mail service pharmacy, and that the limit shall not be less than 90 days;
(5) Sets forth the auditing procedures to be used by the health service corporation and includes a provision that any audit shall take place at a time mutually agreeable to the pharmacy or pharmacist and the auditor. No audit by a health service corporation shall include a review of any document relating to any person or prescription plan other than those reimbursable by the health service corporation;
(6) Provides that the health service corporation, or any agent or intermediary thereof, including a third party administrator, shall not restrict or prohibit, directly or indirectly, a pharmacy from charging the subscriber for services rendered by the pharmacy that are in addition to charges for the drug, for dispensing the drug or for prescription counseling. Services rendered by the pharmacy for which additional charges are imposed shall be subject to the approval of the Board of Pharmacy. A pharmacy shall disclose to the purchaser the charges for the additional services and the purchaser's out-of-pocket cost for those services prior to dispensing the drug. A pharmacy shall not impose any additional charges for patient counseling or for other services required by the Board of Pharmacy or State or federal law;
(7) The provisions of P.L.1999, c.395 shall apply to all contracts delivered. issued or renewed on or after the effective date of P.L.1999, c.395.
b. Nothing in this section shall be construed to operate to add any benefit, to increase the scope of any benefit, or to increase any benefit level under any contract.
c. This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the subscriber charge.
##### **§ 17:48E-35.8** Benefits for certain cancer treatments {#sec-17-48e-35.8 omnilex-key=us-nj-statutes--title-17--17:48E-35.8}
3. In addition to benefits provided under regulations adopted pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), a health service corporation shall offer under every group or individual health service corporation contract providing hospital or medical expense benefits delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance, on or after the effective date of this act to provide benefits for the treatment of cancer by dose-intensive chemotherapy/autologous bone marrow transplants and peripheral blood stem cell transplants when performed by institutions approved by the National Cancer Institute or pursuant to protocols consistent with the guidelines of the American Society of Clinical Oncologists. Benefits for such treatment shall be provided to the same extent as for any other illness under the contract.
The offer required pursuant to this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium. Nothing in this section shall be construed to limit a health service corporation in adjusting premium amounts, or providing for reasonable deductibles or copayments, with respect to benefits provided pursuant to this section.
##### **§ 17:48E-35.9** Coverage for birth and natal care; health service corporation {#sec-17-48e-35.9 omnilex-key=us-nj-statutes--title-17--17:48E-35.9}
3. a. Every individual or group contract that provides maternity benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act shall provide coverage for a minimum of 48 hours of in-patient care following a vaginal delivery and a minimum of 96 hours of in-patient care following a cesarean section for a mother and her newly born child in a health care facility licensed pursuant to P.L.1971, c.136 (C.26:2H-1 et seq.). The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
b. Notwithstanding the provisions of subsection a. of this section, a health service corporation contract that provides coverage for post-delivery care to a mother and her newly born child in the home shall not be required to provide for a minimum of 48 hours and 96 hours, respectively, of in-patient care unless such in-patient care is determined to be medically necessary by the attending physician or is requested by the mother. For the purposes of this section, attending physician shall include the attending obstetrician, pediatrician or other physician attending the mother or newly born child.
c. Every health service corporation shall provide notice to policyholders regarding the coverage required by this section in accordance with this subsection and regulations promulgated by the Commissioner of Health pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The notice shall be in writing and prominently positioned in any literature or correspondence and shall be transmitted at the earliest of: (1) the next mailing to the policyholder; (2) the yearly informational packet sent to the policyholder; or (3) January 1, 1996.
##### **§ 17:48E-35.10** Health service corporation contracts, child screening, blood lead, hearing loss; immunizations. {#sec-17-48e-35.10 omnilex-key=us-nj-statutes--title-17--17:48E-35.10}
1. No health service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons shall be delivered, issued, executed, or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.), unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in the following:
a. Screening by blood lead measurement for lead poisoning for children, including confirmatory blood lead testing as specified by the Department of Health pursuant to section 7 of P.L.1995, c.316 (C.26:2-137.1); and medical evaluation and any necessary medical follow-up and treatment for lead poisoned children.
b. All childhood immunizations as recommended by the Department of Health, which shall consider the recommendations of the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention in the federal Department of Health and Human Services and, as appropriate, the recommendations of the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Physicians. A health service corporation shall notify its subscribers, in writing, of any change in coverage with respect to childhood immunizations and any related changes in premium. The notification shall be in a form and manner to be determined by the Commissioner of Banking and Insurance.
c. Screening for newborn hearing loss by appropriate electrophysiologic screening measures and periodic monitoring of infants for delayed onset hearing loss, pursuant to P.L.2001, c.373 (C.26:2-103.1 et al.). Payment for this screening service shall be separate and distinct from payment for routine new baby care in the form of a newborn hearing screening fee as negotiated with the provider and facility.
The benefits provided pursuant to this section shall be provided to the same extent as for any other medical condition under the contract, except that a deductible shall not be applied for benefits provided pursuant to this section; however, with respect to a contract that qualifies as a high deductible health plan for which qualified medical expenses are paid using a health savings account established pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223), a deductible shall not be applied for any benefits provided pursuant to this section which represent preventive care as permitted by that federal law, and shall not be applied as provided pursuant to section 3 of P.L.2005, c.248 (C.17:48E-35.28). This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.11** Coverage for diabetes treatment by individual group health service corporation. {#sec-17-48e-35.11 omnilex-key=us-nj-statutes--title-17--17:48E-35.11}
3. a. Every individual or group health service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall provide benefits to any subscriber or other person covered thereunder for expenses incurred for the following equipment and supplies for the treatment of diabetes, if recommended or prescribed by a physician or nurse practitioner/clinical nurse specialist: blood glucose monitors and blood glucose monitors for the legally blind; test strips for glucose monitors and visual reading and urine testing strips; insulin; injection aids; cartridges for the legally blind; syringes; insulin pumps and appurtenances thereto; insulin infusion devices; and oral agents for controlling blood sugar. Coverage for the purchase of a short-acting, intermediate-acting, rapid-acting, long-acting, and pre-mixed insulin product shall not be subject to any deductible, and no copayment or coinsurance for the purchase of insulin shall exceed $35 per 30-day supply. The provisions of this subsection shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this subsection shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this subsection shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
b. Each individual or group health service corporation contract shall also provide benefits for expenses incurred for diabetes self-management education to ensure that a person with diabetes is educated as to the proper self-management and treatment of their diabetic condition, including information on proper diet. Benefits provided for self-management education and education relating to diet shall be limited to visits medically necessary upon the diagnosis of diabetes; upon the diagnosis by a physician or nurse practitioner/clinical nurse specialist of a significant change in the subscriber's or other covered person's symptoms or conditions which necessitate changes in that person's self-management; and upon determination of a physician or nurse practitioner/clinical nurse specialist that reeducation or refresher education is necessary. Diabetes self-management education shall be provided by a dietitian registered by a nationally recognized professional association of dietitians or a health care professional recognized as a Certified Diabetes Educator by the American Association of Diabetes Educators or a registered pharmacist in the State qualified with regard to management education for diabetes by any institution recognized by the board of pharmacy of the State of New Jersey.
c. The benefits required by this section shall be provided to the same extent as for any other sickness under the contract.
d. This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
e. The provisions of this section shall not apply to a health benefits plan subject to the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) or P.L.1992, c.162 (C.17B:27A-17 et seq.).
f. The Commissioner of Banking and Insurance may, in consultation with the Commissioner of Health, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate and periodically update a list of additional diabetes equipment and related supplies that are medically necessary for the treatment of diabetes and for which benefits shall be provided according to the provisions of this section.
##### **§ 17:48E-35.12** Health service corporation contract, Pap smear benefits {#sec-17-48e-35.12 omnilex-key=us-nj-statutes--title-17--17:48E-35.12}
1. No health service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting a Pap smear. The benefits shall be provided to the same extent as for any other medical condition under the contract.
As used in this section, and notwithstanding the provisions of this section to the contrary, "Pap smear" means an initial Pap smear and any confirmatory test when medically necessary and as ordered by the covered person's physician and includes all laboratory costs associated with the initial Pap smear and any such confirmatory test.
This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.13** Health service corporation contract, prostate cancer testing {#sec-17-48e-35.13 omnilex-key=us-nj-statutes--title-17--17:48E-35.13}
1. No health service corporation contract providing hospital or medical expense benefits for groups with greater than 49 persons shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Insurance on or after the effective date of this act, unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting an annual medically recognized diagnostic examination including, but not limited to, a digital rectal examination and a prostate-specific antigen test for men age 50 and over who are asymptomatic and for men age 40 and over with a family history of prostate cancer or other prostate cancer risk factors.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.14** Coverage for minimum inpatient care following mastectomy by individual, group health service corporation {#sec-17-48e-35.14 omnilex-key=us-nj-statutes--title-17--17:48E-35.14}
3. a. Every individual or group health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act shall provide coverage for a minimum of 72 hours of inpatient care following a modified radical mastectomy and a minimum of 48 hours of inpatient care following a simple mastectomy. The contract shall not require a health care provider to obtain authorization from the health service corporation for prescribing 72 or 48 hours, as appropriate, of inpatient care as provided for in this section.
The provisions of this section shall not be construed to: require a patient to receive inpatient care for 72 or 48 hours, as appropriate, if the patient in consultation with the patient's physician determines that a shorter length of stay is medically appropriate; or relieve a patient or a patient's physician, if appropriate, of any notification requirements to the health service corporation under the contract.
The benefits shall be provided to the same extent as for any other sickness under the contract.
The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
b. The Commissioner of Banking and Insurance shall adopt regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to implement the provisions of this section.
##### **§ 17:48E-35.15** Applicability of Health Care Quality Act {#sec-17-48e-35.15 omnilex-key=us-nj-statutes--title-17--17:48E-35.15}
27. Notwithstanding the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L.1997, c.192 (C.26:2S-1 et al.) and regulations adopted thereto. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.16** Coverage for treatment of inherited metabolic diseases by health service corporation. {#sec-17-48e-35.16 omnilex-key=us-nj-statutes--title-17--17:48E-35.16}
3. No group or individual health service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, unless the contract provides benefits to each person covered thereunder for expenses incurred in the therapeutic treatment of inherited metabolic diseases, including the purchase of medical foods and low protein modified food products, when diagnosed and determined to be medically necessary by the covered person's physician.
For the purposes of this section, "inherited metabolic disease" means a disease caused by an inherited abnormality of body chemistry for which testing is mandated pursuant to P.L.1977, c.321 (C.26:2-110 et seq.); "low protein modified food product" means a food product that is specially formulated to have less than one gram of protein per serving and is intended to be used under the direction of a physician for the dietary treatment of an inherited metabolic disease, but does not include a natural food that is naturally low in protein; and "medical food" means a food that is intended for the dietary treatment of a disease or condition for which nutritional requirements are established by medical evaluation and is formulated to be consumed or administered enterally under direction of a physician.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.17** Health service corporation to cover certain audiology, speech-language pathology services. {#sec-17-48e-35.17 omnilex-key=us-nj-statutes--title-17--17:48E-35.17}
2. A health service corporation shall offer to provide group contracts covering audiology and speech-language pathology services rendered by a physician or a licensed audiologist or licensed speech-language pathologist where these services are determined to be medically necessary and are performed or rendered within the scope of practice. Notwithstanding this option for group contracts, all group health insurance contracts shall retain current coverage for audiology and speech-language pathology services. Any reimbursement to licensed audiologists and speech-language pathologists for audiology and speech-language pathology services shall be provided to the same extent that the contract authorizes payment for these services to physicians licensed to practice medicine and surgery.
##### **§ 17:48E-35.18** Coverage for treatment of domestic violence injuries by health service corporation. {#sec-17-48e-35.18 omnilex-key=us-nj-statutes--title-17--17:48E-35.18}
3. Except as otherwise provided in P.L.1992, c.161 (C.17B:27A-2 et seq.) and P.L.1992, c.162 (C.17B:27A-17 et seq.), no group or individual health service corporation contract providing hospital or medical expense benefits shall contain any provision which denies benefits for expenses incurred in the treatment of an injury or injuries sustained as the result of domestic violence as defined in section 3 of P.L.1991, c.261 (C.2C:25-19), to a subscriber or other person covered thereunder. Benefits shall be provided to the same extent as for any other treatment under the contract. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.19** Coverage for certain dental procedures for the severely disabled or child age five or under by health service corporation {#sec-17-48e-35.19 omnilex-key=us-nj-statutes--title-17--17:48E-35.19}
3. a. No group or individual health service corporation contract providing hospital or medical benefits shall be delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this amendatory and supplementary act, unless the contract provides benefits to any person covered thereunder who is severely disabled or a child age five or under for expenses incurred for: (1)general anesthesia and hospitalization for dental services; or (2) a medical condition covered by the contract which requires hospitalization or general anesthesia for dental services rendered by a dentist regardless of where the dental services are provided.
b. A group or individual health service corporation contract may require prior authorization of hospitalization for dental services in the same manner that prior authorization is required for hospitalization for other covered diseases or conditions.
c. This section shall apply to all group or individual health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.20** Health service corporation to provide coverage for mental health conditions, substance use disorders; collaborative care model. {#sec-17-48e-35.20 omnilex-key=us-nj-statutes--title-17--17:48E-35.20}
3. a. (1) Every individual and group health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act shall provide coverage for mental health conditions and substance use disorders under the same terms and conditions as provided for any other sickness under the contract and shall meet the requirements of the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 42 U.S.C. s.18031(j), and any amendments to, and federal guidance or regulations issued under that act, including 45 C.F.R. Parts 146 and 147 and 45 C.F.R. s.156.115(a)(3).
Coverage provided pursuant to this section shall include benefits delivered through the psychiatric Collaborative Care Model.
(2) As used in this section:
"Mental health condition" means a condition defined to be consistent with generally recognized independent standards of current medical practice referenced in the current version of the Diagnostic and Statistical Manual of Mental Disorders.
"Psychiatric Collaborative Care Model" means the evidence-based, integrated behavioral health service delivery method wherein a primary care provider and a care manager collaborate with a psychiatric consultant to provide care to a patient. "Psychiatric Collaborative Care Model" shall include those benefits that are billed using the following list of Current Procedural Terminology (CPT) codes, which list shall be updated by the Commissioner of Banking and Insurance whenever the codes are altered or supplemented:
(a) 99492 - Initial psychiatric collaborative care management;
(b) 99493 - Subsequent psychiatric collaborative care management; and
(c) 99494 - Initial or subsequent psychiatric collaborative care management, additional time.
"Same terms and conditions" means that the health service corporation cannot apply more restrictive non-quantitative limitations, such as utilization review and other criteria or more quantitative limitations such as copayments, deductibles, aggregate or annual limits or benefit limits to mental health condition and substance use disorder benefits than those applied to substantially all other medical or surgical benefits.
"Substance use disorder" means a disorder defined to be consistent with generally recognized independent standards of current medical practice referenced in the most current version of the Diagnostic and Statistical Manual of Mental Disorders.
b. (Deleted by amendment, P.L.2019, c.58)
c. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
d. Nothing in this section shall reduce the requirement for a health service corporation to provide benefits pursuant to section 3 of P.L.2017, c.28 (C.17:48E-35.38).
##### **§ 17:48E-35.21** Coverage for hemophilia services by health service corporation {#sec-17-48e-35.21 omnilex-key=us-nj-statutes--title-17--17:48E-35.21}
9. Notwithstanding the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of P.L.2000, c.121 (C.26:2S-10.1 et al.) unless the contract meets the requirements of sections 1 and 2 of P.L.2000, c.121 (C.26:2S-10.1 and C.26:2S-10.2) and the regulations adopted thereto. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.22** Health service corporation to provide coverage for treatment of infertility. {#sec-17-48e-35.22 omnilex-key=us-nj-statutes--title-17--17:48E-35.22}
3. a. A health service corporation contract which provides hospital or medical expense benefits for groups with more than 50 persons, which includes pregnancy-related benefits, shall not be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act unless the contract provides coverage for persons covered under the contract for medically necessary expenses, as determined by a physician, incurred in the diagnosis and treatment of infertility as provided pursuant to this section. The health service corporation contract shall provide coverage for any services related to infertility in accordance with American Society for Reproductive Medicine guidelines and as determined by a physician, which includes, but is not limited to: diagnosis and diagnostic tests; medications; surgery; intrauterine insemination; in vitro fertilization, including in vitro fertilization using donor eggs and in vitro fertilization where the embryo is transferred to a gestational carrier or surrogate; genetic testing; artificial insemination; intracytoplasmic sperm injection; four completed egg retrievals; unlimited embryo transfers, in accordance with guidelines from the American Society for Reproductive Medicine, using single embryo transfer when recommended and deemed medically appropriate by a physician; and medical costs of egg or sperm donors, including office visits, medications, laboratory and radiological procedures, and retrieval, shall be covered until the donor is released from treatment by the reproductive endocrinologist. The health service corporation may provide that coverage for in vitro fertilization shall be limited to a covered person who has used all reasonable, less expensive, and medically appropriate treatments, as determined by a licensed physician, and is still unable to become pregnant or carry a pregnancy to a live birth. Coverage for infertility services provided to partners of persons who have successfully reversed a voluntary sterilization shall not be excluded. A contract shall not impose any restriction concerning the coverage of infertility services based on age.
As used in this section:
"Infertility" means a disease, condition, or status characterized by any of the following:
(1) the inability to achieve a successful pregnancy based on a patient's medical, sexual, and reproductive history, age, physical findings, diagnostic testing, or any combination of those factors;
(2) the need for medical intervention, including, but not limited to, the use of donor gametes or donor embryos in order to achieve a successful pregnancy either as an individual or with a partner; or
(3) in patients having regular, unprotected intercourse and without any known etiology for either partner suggestive of impaired reproductive ability, evaluation should be initiated at 12 months when the female partner is under 35 years of age and at 6 months when the female partner is 35 years of age or older.
Nothing in this definition shall be used to deny or delay treatment to any individual, regardless of relationship status or sexual orientation.
"Treatment of infertility" means the recommended treatment plan or prescribed procedures, services, and medications as directed by a licensed physician for fertility as defined in this section.
The benefits shall be provided to the same extent as for other medical conditions under the contract, except that the services provided for in this section shall be performed at facilities that conform to standards established by the American Society for Reproductive Medicine or the American College of Obstetricians and Gynecologists. The same copayments, deductibles and benefit limits shall apply to the diagnosis and treatment of infertility pursuant to this section as those applied to other medical or surgical benefits under the contract. Infertility resulting from a voluntary unreversed sterilization procedure may be excluded if the voluntary unreversed sterilization is the sole cause of infertility, provided, however, that coverage for infertility services shall not be excluded if the voluntary sterilization is successfully reversed.
b. A religious employer may request, and a hospital service corporation shall grant, an exclusion under the contract for the coverage required by this section for in vitro fertilization, embryo transfer, artificial insemination, zygote intra fallopian transfer, and intracytoplasmic sperm injection if the required coverage is contrary to the religious employer's bona fide religious tenets. The hospital service corporation that issues a contract containing such an exclusion shall provide written notice thereof to each prospective subscriber or subscriber, which shall appear in not less than 10 point type, in the contract, application and sales brochure. For the purposes of this subsection, "religious employer" means an employer that is a church, convention or association of churches, or any group or entity that is operated, supervised, or controlled by or in connection with a church or a convention or association of churches as defined in 26 U.S.C. s.3121(w)(3)(A), and that qualifies as a tax-exempt organization under 26 U.S.C. s.501(c)(3).
c. This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
d. The provisions of this section shall not apply to a health service corporation contract which, pursuant to a contract between the health service corporation and the Department of Human Services, provides benefits to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.), the NJ FamilyCare Program established pursuant to P.L.2005, c.156 (C.30:4J-8 et al.), or any other program administered by the Division of Medical Assistance and Health Services in the Department of Human Services.
e. Nothing in this section shall preclude the health service corporation from performing utilization review, including periodic review of the medical necessity of a particular service, provided all utilization review decisions are consistent with American Society for Reproductive Medicine guidelines.
##### **§ 17:48E-35.23** Health service corporation to provide coverage for colorectal cancer screening. {#sec-17-48e-35.23 omnilex-key=us-nj-statutes--title-17--17:48E-35.23}
3. a. Every health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits to any named subscriber or other person covered thereunder for expenses incurred in conducting a colorectal cancer screening in accordance with United States Preventive Services Task Force recommendations. The method and frequency of screening to be utilized shall be in accordance with the most recently published recommendations of the United States Preventive Services Task Force and as determined medically necessary by the covered person's physician, in consultation with the covered person.
b. No deductible, coinsurance, copayment, or any other cost-sharing requirement shall be imposed for a colonoscopy performed following a positive result on a non-colonoscopy, colorectal cancer screening test recommended by the United States Preventive Services Task Force.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.24** Health service corporation prescription drug plans to cover certain infant formulas. {#sec-17-48e-35.24 omnilex-key=us-nj-statutes--title-17--17:48E-35.24}
3. A health service corporation which provides hospital or medical expense benefits for expenses incurred in the purchase of prescription drugs under a contract that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide benefits under the contract for expenses incurred in the purchase of specialized non-standard infant formulas, when the covered infant's physician has diagnosed the infant as having multiple food protein intolerance and has determined such formula to be medically necessary, and when the covered infant has not been responsive to trials of standard non-cow milk-based formulas, including soybean and goat milk. The coverage may be subject to utilization review, including periodic review, of the continued medical necessity of the specialized infant formula.
The benefits shall be provided to the same extent as for any other prescribed items under the contract.
This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.25** Contract issued under C.17:48E-1 et seq. required to cover certain out-of-network services. {#sec-17-48e-35.25 omnilex-key=us-nj-statutes--title-17--17:48E-35.25}
9. Notwithstanding the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L.2001, c.367 (C.26:2S-6.1 et al.). The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.26** Health service corporation to offer coverage for domestic partner. {#sec-17-48e-35.26 omnilex-key=us-nj-statutes--title-17--17:48E-35.26}
49. A health service corporation that provides hospital or medical expense benefits under a contract that is delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2003, c.246 (C.26:8A-1 et al.), under which dependent coverage is available, shall offer dependent coverage to a covered person for a covered person's domestic partner. For the purposes of this section, "domestic partner" means a domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3).
This section shall apply to those contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.27** Health service corporation, high deductible, coverage for preventive care. {#sec-17-48e-35.27 omnilex-key=us-nj-statutes--title-17--17:48E-35.27}
2. No health service corporation contract providing hospital or medical expense benefits for groups with greater than 50 persons, that qualifies as a high deductible health plan for which qualified medical expenses are paid using a health savings account established pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223), shall be delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.), unless the contract provides benefits to any named subscriber or other person covered thereunder for expenses incurred in connection with any medically necessary benefits provided in-network that represent preventive care as permitted by that federal law.
The benefits provided pursuant to this section shall be provided to the same extent as for any other medical condition under the contract, except that a deductible shall not be applied for benefits provided pursuant to this section. This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.28** Health service corporation, high deductible, deductible inapplicable, certain circumstances. {#sec-17-48e-35.28 omnilex-key=us-nj-statutes--title-17--17:48E-35.28}
3. Notwithstanding the provisions of section 1 of P.L.1995, c.316 (C.17:48E-35.10) regarding deductibles for a high deductible health plan, a contract offered by a health service corporation providing hospital or medical expense benefits for groups with greater than 50 persons, that qualifies as a high deductible health plan for which qualified medical expenses are paid using a health savings account established pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223), and that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.), shall not apply a deductible for any benefits for which a deductible is not applicable pursuant to any law enacted after the effective date of P.L.2005, c.248 (C.17:48E-35.27 et al.).
This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.29** Health service corporation, coverage for contraceptives. {#sec-17-48e-35.29 omnilex-key=us-nj-statutes--title-17--17:48E-35.29}
3. a. A health service corporation that provides hospital or medical expense benefits shall provide coverage under every contract delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, for expenses incurred in the purchase of prescription female contraceptives, and the following services, drugs, devices, products, and procedures on an in-network basis:
(1) Any contraceptive drug, device or product approved by the United States Food and Drug Administration, which coverage shall be subject to all of the following conditions:
(a) If there is a therapeutic equivalent of a contraceptive drug, device or product approved by the United States Food and Drug Administration, coverage shall be provided for either the requested contraceptive drug, device or product or for one or more therapeutic equivalents of the requested drug, device or product.
(b) Coverage shall be provided without a prescription for all contraceptive drugs available for over-the-counter sale that are approved by the United States Food and Drug Administration.
(c) Coverage shall be provided without any infringement upon a subscriber's choice of contraception and medical necessity shall be determined by the provider for covered contraceptive drugs, devices or other products approved by the United States Food and Drug Administration.
(2) Voluntary male and female sterilization.
(3) Patient education and counseling on contraception.
(4) Services related to the administration and monitoring of drugs, devices, products and services required under this section, including but not limited to:
(a) Management of side effects;
(b) Counseling for continued adherence to a prescribed regimen;
(c) Device insertion and removal;
(d) Provision of alternative contraceptive drugs, devices or products deemed medically appropriate in the judgment of the subscriber's health care provider; and
(e) Diagnosis and treatment services provided pursuant to, or as a follow-up to, a service required under this section.
b. The coverage provided shall include prescriptions for dispensing contraceptives for:
(1) (Deleted by amendment, P.L.2021, c.376)
(2) up to a 12-month period at one time.
c. (1) Except as provided in paragraph (2) of this subsection, the benefits shall be provided to the same extent as for any other service, drug, device, product, or procedure under the contract, except no deductible, coinsurance, copayment, or any other cost-sharing requirement on the coverage shall be imposed.
(2) In the case of a high-deductible health plan, benefits for male sterilization or male contraceptives shall be provided at the lowest deductible and other cost-sharing permitted for a high-deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
d. This section shall apply to those contracts in which the health service corporation has reserved the right to change the premium.
e. Nothing in this section shall limit coverage of any additional preventive service for women, as identified or recommended by the United States Preventive Services Task Force or the Health Resources and Services Administration of the United States Department of Health and Human Services pursuant to the provisions of 42 U.S.C. 300gg-13.
##### **§ 17:48E-35.30** Health service corporation to provide benefits for orthotic and prosthetic appliances. {#sec-17-48e-35.30 omnilex-key=us-nj-statutes--title-17--17:48E-35.30}
3. a. Every health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2007, c.345 (C.17:48-6ff et al.), shall provide benefits to any person covered thereunder for expenses incurred in obtaining:
(1) an orthotic or prosthetic appliance from any licensed orthotist or prosthetist, licensed podiatrist, or any certified pedorthist, as determined medically necessary by the covered person's physician; and
(2) an additional orthotic or prosthetic appliance from any licensed orthotist or prosthetist, licensed podiatrist, or any certified pedorthist, if the covered person's physician determines that the additional appliance is necessary to enable the covered person to engage in physical and recreational activities, including running, bicycling, swimming, climbing, skiing, snowboarding, and team and individual sports.
As used in this section, "orthotic appliance," "prosthetic appliance," "licensed orthotist" and "licensed prosthetist" have the meaning assigned to them in section 3 of P.L.1991, c.512 (C.45:12B-3), "licensed podiatrist" has the meaning assigned to it in R.S.45:5-1 et seq., and "certified pedorthist" has the meaning assigned to it in subsection j. of section 18 of P.L.1991, c.512 (C.45:12B-18).
b. On and after the effective date of P.L.2007, c.345 (C.17:48-6ff et al.), a health service corporation contract shall reimburse for orthotic and prosthetic appliances at the same rate as reimbursement for such appliances under the federal Medicare reimbursement schedule.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.31** Health service corporation to provide coverage for hearing aids, cochlear implant for covered persons. {#sec-17-48e-35.31 omnilex-key=us-nj-statutes--title-17--17:48E-35.31}
4. a. A health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et al.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for medically necessary expenses incurred in the purchase of a hearing aid or cochlear implant for a covered person, as provided in this section.
b. A health service corporation contract shall provide coverage that includes the purchase of a hearing aid for each ear, when medically necessary and as prescribed or recommended by a licensed physician or audiologist. A health service corporation may limit the benefit provided in this section to one hearing aid for each hearing-impaired ear every 24 months.
c. A health service corporation contract shall provide coverage of the cost of treatment related to cochlear implants, including procedures for the implantation of cochlear devices and costs for any parts, attachments, or accessories of the device, including replacement of obsolete external cochlear implant processors.
d. The benefits shall be provided to the same extent as for any other condition under the contract.
e. This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.32** Individual, group health service corporation to provide installment payments to obstetrical provider for maternity services. {#sec-17-48e-35.32 omnilex-key=us-nj-statutes--title-17--17:48E-35.32}
3. a. Every individual or group health service corporation contract that provides benefits for maternity services, and that is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of this act, shall provide for reimbursement in installments to an obstetrical provider licensed in New Jersey for maternity services rendered during the term of a covered person's pregnancy.
b. For the purposes of this section, "obstetrical provider licensed in New Jersey" means:
(1) an obstetrician/gynecologist licensed by the State Board of Medical Examiners; or
(2) a midwife licensed by the State Board of Medical Examiners as a certified midwife or a certified nurse midwife.
c. This section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.33** Health service corporation to provide benefits for treatment of autism or other developmental disability. {#sec-17-48e-35.33 omnilex-key=us-nj-statutes--title-17--17:48E-35.33}
3. Notwithstanding any other provision of law to the contrary, every health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage pursuant to the provisions of this section.
a. The health service corporation shall provide coverage for expenses incurred in screening and diagnosing autism or another developmental disability.
b. When the covered person's primary diagnosis is autism or another developmental disability, the health service corporation shall provide coverage for expenses incurred for medically necessary occupational therapy, physical therapy, and speech therapy, as prescribed through a treatment plan. Coverage of these therapies shall not be denied on the basis that the treatment is not restorative.
c. When the covered person is under 21 years of age and the covered person's primary diagnosis is autism, the health service corporation shall provide coverage for expenses incurred for medically necessary behavioral interventions based on the principles of applied behavioral analysis and related structured behavioral programs, as prescribed through a treatment plan, subject to the provisions of this subsection.
(1) Except as provided in paragraph (3) of this subsection, the benefits provided pursuant to this subsection shall be provided to the same extent as for any other medical condition under the contract, but shall not be subject to limits on the number of visits that a covered person may make to a provider of behavioral interventions.
(2) The benefits provided pursuant to this subsection shall not be denied on the basis that the treatment is not restorative.
(3) (a) The maximum benefit amount for a covered person in any calendar year through 2011 shall be $36,000.
(b) Commencing on January 1, 2012, the maximum benefit amount shall be subject to an adjustment, to be promulgated by the Commissioner of Banking and Insurance and published in the New Jersey Register no later than February 1 of each calendar year, which shall be equal to the change in the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor, for the calendar year preceding the calendar year in which the adjustment to the maximum benefit amount is promulgated.
(c) The adjusted maximum benefit amount shall apply to a contract that is delivered, issued, executed, or renewed, or approved for issuance or renewal, in the 12-month period following the date on which the adjustment is promulgated.
(d) Notwithstanding the provisions of this paragraph to the contrary, a health service corporation shall not be precluded from providing a benefit amount for a covered person in any calendar year that exceeds the benefit amounts set forth in subparagraphs (a) and (b) of this paragraph.
d. The treatment plan required pursuant to subsections b. and c. of this section shall include all elements necessary for the health service corporation to appropriately provide benefits, including, but not limited to: a diagnosis; proposed treatment by type, frequency, and duration; the anticipated outcomes stated as goals; the frequency by which the treatment plan will be updated; and the treating physician's signature. The health service corporation may only request an updated treatment plan once every six months from the treating physician to review medical necessity, unless the health service corporation and the treating physician agree that a more frequent review is necessary due to emerging clinical circumstances.
e. The provisions of subsections b. and c. of this section shall not be construed as limiting benefits otherwise available to a covered person.
f. The provisions of subsections b. and c. of this section shall not be construed to require that benefits be provided to reimburse the cost of services provided under an individualized family service plan or an individualized education program, or affect any requirement to provide those services; except that the benefits provided pursuant to those subsections shall include coverage for expenses incurred by participants in an individualized family service plan through a family cost share.
g. The coverage required under this section may be subject to utilization review, including periodic review, by the health service corporation of the continued medical necessity of the specified therapies and interventions.
h. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.34** Health service corporation to provide coverage for oral anticancer medications. {#sec-17-48e-35.34 omnilex-key=us-nj-statutes--title-17--17:48E-35.34}
3. a. A health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells on a basis no less favorable than the contract provides for intravenously administered or injected anticancer medications.
b. Pursuant to subsection a. of this section, coverage for expenses for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells shall not be subject to any prior authorization, dollar limit, copayment, deductible or coinsurance provision that does not apply to intravenously administered or injected anticancer medications.
c. A health service corporation contract shall not achieve compliance with the provisions of this section by imposing an increase in patient cost sharing, including any copayment, deductible or coinsurance, for anticancer medications, whether intravenously administered or injected or orally administered, that are covered under the contract as of the effective date of this act.
d. This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.35** Health service corporation to provide coverage for sickle cell anemia. {#sec-17-48e-35.35 omnilex-key=us-nj-statutes--title-17--17:48E-35.35}
3. Every health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for medical expenses incurred by a covered person for the treatment of sickle cell anemia and, if the contract provides benefits for expenses incurred in the purchase of outpatient prescription drugs, then the contract shall provide coverage for prescription drug expenses incurred by a covered person for the treatment of sickle cell anemia.
The benefits shall be provided to the same extent as for any other medical condition under the contract.
This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.36** Health service corporation to provide coverage for prescription eye drops. {#sec-17-48e-35.36 omnilex-key=us-nj-statutes--title-17--17:48E-35.36}
3. a. A health service corporation which provides hospital or medical expense benefits that include coverage for prescription eye drops under a contract delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred for refills of prescription eye drops in accordance with the Guidance for Early Refill Edits of Topical Ophthalmic Products provided to Medicare Part D plan sponsors by the Centers for Medicare & Medicaid Services of the U.S. Department of Health and Human Services, provided that:
(1) the prescribing health care practitioner indicates on the original prescription that additional quantities of the prescription eye drops are needed; and
(2) the refill requested by the subscriber or covered person does not exceed the number of additional quantities indicated on the original prescription by the prescribing health care practitioner.
b. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.37** Health service corporation contract, coverage for synchronization of prescribed medications. {#sec-17-48e-35.37 omnilex-key=us-nj-statutes--title-17--17:48E-35.37}
3. a. Every group or individual health service corporation contract delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State on or after the effective date of this act, which provides benefits for pharmacy services, prescription drugs, or for participation in a prescription drug plan, shall, on at least one occasion per year for each covered person:
(1) apply a prorated daily cost-sharing rate to prescriptions that are dispensed by a network pharmacy for less than a 30 days' supply if the prescriber or pharmacist indicates the fill or refill is in the best interest of the covered person or is for the purpose of synchronizing the covered person's chronic medications;
(2) provide coverage for a drug prescribed for the treatment of a chronic illness dispensed in accordance with a plan among the covered person, the prescriber and the pharmacist to synchronize the refilling of multiple prescriptions for the covered person; and
(3) determine dispensing fees based exclusively on the total number of prescriptions dispensed; dispensing fees shall not be prorated or based on the number of the days' supply of medication prescribed or dispensed.
b. This section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
c. This section shall not apply to prescriptions for opioid analgesics. "Opioid analgesic" means a drug in the opioid analgesic drug class prescribed to treat moderate to severe pain or other conditions, whether in immediate release or extended release form, and whether or not combined with other drug substances to form a single drug product or dosage form.
##### **§ 17:48E-35.38** Health service corporation to provide benefits for treatment of substance use disorder. {#sec-17-48e-35.38 omnilex-key=us-nj-statutes--title-17--17:48E-35.38}
3. a. A health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act shall provide unlimited benefits for inpatient and outpatient treatment of substance use disorder at in-network facilities. The services for the treatment of substance use disorder shall be prescribed by a licensed physician, licensed psychologist, or licensed psychiatrist and provided by licensed health care professionals or licensed or certified substance use disorder providers in licensed or otherwise State-approved facilities, as required by the laws of the state in which the services are rendered.
b. The benefits for the first 180 days per plan year of inpatient and outpatient treatment of substance use disorder shall be provided when determined medically necessary by the covered person's physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements. The facility shall notify the health service corporation of both the admission and the initial treatment plan within 48 hours of the admission or initiation of treatment. If there is no in-network facility immediately available for a covered person, a health service corporation shall provide necessary exceptions to its network to ensure admission in a treatment facility within 24 hours.
c. Providers of treatment for substance use disorder to persons covered under a covered contract shall not require pre-payment of medical expenses during this 180 days in excess of applicable co-payment, deductible, or co-insurance under the contract.
d. The benefits for outpatient visits shall not be subject to concurrent or retrospective review of medical necessity or any other utilization management review.
e. (1) The benefits for the first 28 days of an inpatient stay during each plan year shall be provided without any retrospective review or concurrent review of medical necessity and medical necessity shall be as determined by the covered person's physician.
(2) The benefits for days 29 and thereafter of inpatient care shall be subject to concurrent review as defined in this section. A request for approval of inpatient care beyond the first 28 days shall be submitted for concurrent review before the expiration of the initial 28-day period. A request for approval of inpatient care beyond any period that is approved under concurrent review shall be submitted within the period that was previously approved. No health service corporation shall initiate concurrent review more frequently than at two-week intervals. If a health service corporation determines that continued inpatient care in a facility is no longer medically necessary, the health service corporation shall within 24 hours provide written notice to the covered person and the covered person's physician of its decision and the right to file an expedited internal appeal of the determination pursuant to an expedited process pursuant to sections 11 through 13 of P.L.1997, c.192 (C.26:2S-11 through 26:2S-13) and N.J.A.C.11:24A-3.5, as applicable. The health service corporation shall review and make a determination with respect to the internal appeal within 24 hours and communicate such determination to the covered person and the covered person's physician. If the determination is to uphold the denial, the covered person and the covered person's physician have the right to file an expedited external appeal with the Independent Health Care Appeals Program in the Department of Banking and Insurance pursuant to sections 11 through 13 of P.L.1997, c.192 (C.26:2S-11 through 26:2S-13) and N.J.A.C.11:24A-3.6, as applicable. An independent utilization review organization shall make a determination within 24 hours. If the health service corporation's determination is upheld and it is determined continued inpatient care is not medically necessary, the health service corporation shall remain responsible to provide benefits for the inpatient care through the day following the date the determination is made and the covered person shall only be responsible for any applicable co-payment, deductible and co-insurance for the stay through that date as applicable under the policy. The covered person shall not be discharged or released from the inpatient facility until all internal appeals and independent utilization review organization appeals are exhausted. For any costs incurred after the day following the date of determination until the day of discharge, the covered person shall only be responsible for any applicable cost-sharing, and any additional charges shall be paid by the facility or provider.
f. (1) The benefits for the first 28 days of intensive outpatient or partial hospitalization services shall be provided without any retrospective review of medical necessity and medical necessity shall be as determined by the covered person's physician.
(2) The benefits for days 29 and thereafter of intensive outpatient or partial hospitalization services shall be subject to a retrospective review of the medical necessity of the services.
g. Benefits for inpatient and outpatient treatment of substance use disorder after the first 180 days per plan year shall be subject to the medical necessity determination of the health service corporation and may be subject to prior authorization or, retrospective review and other utilization management requirements.
h. Medical necessity review shall utilize an evidence-based and peer reviewed clinical review tool to be designated through rulemaking by the Commissioner of Human Services in consultation with the Department of Health.
i. The benefits for outpatient prescription drugs to treat substance use disorder shall be provided when determined medically necessary by the covered person's physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements.
j. The first 180 days per plan year of benefits shall be computed based on inpatient days. One or more unused inpatient days may be exchanged for two outpatient visits. All extended outpatient services such as partial hospitalization and intensive outpatient, shall be deemed inpatient days for the purpose of the visit to day exchange provided in this subsection.
k. Except as stated above, the benefits and cost-sharing shall be provided to the same extent as for any other medical condition covered under the contract.
l. The benefits required by this section are to be provided to all covered persons with a diagnosis of substance use disorder. The presence of additional related or unrelated diagnoses shall not be a basis to reduce or deny the benefits required by this section.
m. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
n. The Attorney General's Office shall be responsible for overseeing any violations of law that may result from P.L.2017, c.28 (C.17:48-6nn et al.), including fraud, abuse, waste, and mistreatment of covered persons. The Attorney General's office is authorized to adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to implement any of the provisions of P.L.2017, c.28 (C.17:48-6nn et al.).
o. The provisions of this section shall not apply to a health service corporation contract which, pursuant to a contract between the health service corporation and the Department of Human Services, provides benefits to persons who are eligible for medical assistance under P.L.1968, c.413 (C.30:4D-1 et seq.), the "Family Health Care Coverage Act," P.L.2005, c.156 (C.30:4J-8 et seq.) or any other program administered by the Division of Medical Assistance and Health Services in the Department of Human Services.
p. As used in this section:
"Concurrent review" means inpatient care is reviewed as it is provided. Medically qualified reviewers monitor appropriateness of the care, the setting, and patient progress, and as appropriate, the discharge plans.
"Substance use disorder" is as defined by the American Psychiatric Association in the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition and any subsequent editions and shall include substance use withdrawal.
##### **§ 17:48E-35.39** Health service corporation to provide coverage regardless of gender identity, expression. {#sec-17-48e-35.39 omnilex-key=us-nj-statutes--title-17--17:48E-35.39}
3. a. Notwithstanding any other law or regulation to the contrary, a health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State, by the Commissioner of Banking and Insurance on or after the effective date of this act, shall not contain any provision that discriminates, and the health service corporation shall not discriminate, on the basis of a covered person's or prospective covered person's gender identity or expression or on the basis that the covered person or prospective covered person is a transgender person.
b. The discrimination prohibited by this section shall include:
(1) denying, cancelling, limiting or refusing to issue or renew a contract on the basis of a covered person's or prospective covered person's gender identity or expression, or for the reason that the covered person or prospective covered person is a transgender person;
(2) demanding or requiring a payment or premium that is based in whole or in part on a covered person's or prospective covered person's gender identity or expression, or for the reason that the covered person or prospective covered person is a transgender person;
(3) designating a covered person's or prospective covered person's gender identity or expression, or the fact that a covered person or prospective covered person is a transgender person, as a preexisting condition for which coverage will be denied or limited; or
(4) denying or limiting coverage, or denying a claim, for services including but not limited to the following, due to a covered person's gender identity or expression or for the reason that the covered person is a transgender person:
(a) health care services related to gender transition if coverage is available for those services under the contract when the services are not related to gender transition, including but not limited to hormone therapy, hysterectomy, mastectomy, and vocal training; or
(b) health care services that are ordinarily or exclusively available to individuals of one sex when the denial or limitation is due only to the fact that the covered person is enrolled as belonging to the other sex or has undergone, or is in the process of undergoing, gender transition.
c. For the purposes of this section:
"Gender expression" means a person's gender-related appearance and behavior, whether or not stereotypically associated with the person's assigned sex at birth.
"Gender identity" means a person's internal sense of their own gender, regardless of the sex the person was assigned at birth.
"Gender transition" means the process of changing a person's outward appearance, including physical sex characteristics, to accord with the person's actual gender identity.
"Transgender person" means a person who identifies as a gender different from the sex assigned to the person at birth.
d. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
e. Nothing in this section shall preclude the health service corporation from performing utilization review, including periodic review of the medical necessity of a particular service.
##### **§ 17:48E-35.40** Health service corporation contract to cover digital tomosynthesis of the breast. {#sec-17-48e-35.40 omnilex-key=us-nj-statutes--title-17--17:48E-35.40}
3. a. A health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in conducting digital tomosynthesis to detect or screen for breast cancer in women 40 years of age and over; and for diagnostic purposes in women of any age.
b. In the case of digital tomosynthesis conducted to detect or screen for breast cancer in women 40 years of age and over, no deductible, coinsurance or other cost sharing shall be applied; and in the case of digital tomosynthesis conducted for diagnostic purposes in women of any age, the same deductibles, coinsurance, and other cost sharing as apply to similar services under the contract shall be applied.
c. This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.41** Health service corporation to provide coverage for donated human breast milk. {#sec-17-48e-35.41 omnilex-key=us-nj-statutes--title-17--17:48E-35.41}
3. a. A health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in the provision of pasteurized donated human breast milk, which may include human milk fortifiers if indicated by the prescribing licensed medical practitioner, provided that:
(1) the covered person is an infant under the age of six months;
(2) the milk is obtained from a human milk bank that meets quality guidelines established by the Department of Health ; and
(3) a licensed medical practitioner has issued an order for an infant who is medically or physically unable to receive maternal breast milk or participate in breast feeding or whose mother is medically or physically unable to produce maternal breast milk in sufficient quantities or participate in breast feeding despite optimal lactation support; or
(4) a licensed medical practitioner has issued an order for an infant who meets any of the following conditions:
(a) a body weight below healthy levels determined by the licensed medical practitioner;
(b) a congenital or acquired condition that places the infant at a high risk for development of necrotizing enterocolitis; or
(c) a congenital or acquired condition that may benefit from the use of donor breast milk as determined by the Department of Health.
b. The provisions of this section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
c. Nothing in this section shall preclude the health service corporation from performing utilization review, including periodic review of the medical necessity of a particular service.
d. The benefits shall be provided to the same extent as for any other prescribed items under the contract.
e. If there is no supply of human breast milk that meets the requirements of paragraph (2) of subsection a. of this section, the health service corporation shall not be required to provide coverage of expenses pursuant to this section.
##### **§ 17:48E-35.42** Health service corporation to provide coverage for standard fertility preservation services. {#sec-17-48e-35.42 omnilex-key=us-nj-statutes--title-17--17:48E-35.42}
3. a. A health service corporation contract which provides hospital or medical expense benefits for groups with more than 50 persons and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act shall provide coverage for standard fertility preservation services when a medically necessary treatment may directly or indirectly cause iatrogenic infertility.
For the purposes of this section:
"Iatrogenic infertility" means an impairment of fertility caused by surgery, radiation, chemotherapy, or other medical treatment affecting reproductive organs or processes.
"May directly or indirectly cause" means a medical treatment with a likely side effect of iatrogenic infertility as established by the American Society for Reproductive Medicine, the American Society of Clinical Oncology, or as defined by the New Jersey Department of Health.
"Standard fertility preservation services" means procedures consistent with established medical practices and professional guidelines published by the American Society for Reproductive Medicine, the American Society of Clinical Oncology, or as defined by the New Jersey Department of Health. "Standard fertility preservation services" shall not include the storage of sperm or oocytes.
The benefits shall be provided to the same extent as for any other medical condition under the contract. The same copayments, deductibles, and benefit limits shall apply to the provision of standard fertility preservation services pursuant to this section as those applied to other medical or surgical benefits under the contract.
b. A health service corporation providing coverage under this section shall not determine the provision of standard fertility preservation services based on a covered person's expected length of life, present or predicted disability, degree of medical dependency, perceived quality of life, or other health conditions, or based on personal characteristics, including age, sex, sexual orientation, marital status, or gender identity.
c. This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.43** Health service corporation to provide coverage for breastfeeding support. {#sec-17-48e-35.43 omnilex-key=us-nj-statutes--title-17--17:48E-35.43}
3. a. A health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of P.L.2019, c.343 (C.17:48-6ss et al.), shall provide coverage for comprehensive lactation support, counseling, and consultation, and the costs for renting or purchasing breastfeeding equipment, in conjunction with each birth, for the duration of breastfeeding for health plan enrollees, with no cost-sharing.
b. Coverage of breastfeeding equipment shall include:
(1) Purchase of a single-user breast pump, subject to the following conditions:
(a) A contract shall cover the purchase of a double electric breast pump. If an enrollee requests a manual pump in lieu of the double electric breast pump, the health plan shall cover the purchase of a manual pump.
(b) A double electric breast pump provided pursuant to this paragraph shall be of sufficient power and durability to establish and maintain milk supply for the duration of breastfeeding.
(c) A contract shall not require documentation of medical necessity, prior authorization, or a prescription for a breast pump provided pursuant to this paragraph.
(d) Coverage shall be available at any time during pregnancy and the postpartum period, and shall continue for the duration of breastfeeding as defined by the plan enrollee.
(e) Coverage for breast pumps shall include repair or replacement if necessary.
(2) Rental or purchase of a multi-user breast pump, on the recommendation of a licensed health care provider, subject to the following conditions:
(a) When recommended by a licensed health care provider, a contract shall provide coverage for a multi-user breast pump.
(b) A health service corporation may determine whether a rental or purchase is covered.
(c) Coverage for a multi-user breast pump shall be covered without regard to coverage or acquisition of a single-user breast pump.
(d) A health service corporation may require a letter of medical necessity from a lactation consultant or other health care provider for coverage of a multi-user pump. The letter shall not interfere with the timely acquisition of a multi-user pump.
(3) Coverage of breastfeeding equipment pursuant to this section shall include two breast pump kits per birth event, as well as appropriate size breast pump flanges, or other lactation accessories recommended by a health care provider.
(4) Breastfeeding equipment specified in paragraphs (1) and (3) of this subsection shall be furnished: within 48 hours of notification of need, if requested after the birth of the child; or by the later of two weeks before the enrollee's expected due date or 72 hours after notification, if requested prior to the birth of the child. If the health service corporation cannot ensure an enrollee receives breastfeeding equipment within 48 hours, an enrollee may purchase the equipment and the health plan shall reimburse all out-of-pocket expenses incurred by the enrollee, including any balance billing amounts.
(5) Breastfeeding equipment specified in paragraph (2) of this subsection shall be made available within 12 hours of notification of need. If equipment is not available within 12 hours of notification of need, the health service corporation shall reimburse all out-of-pocket rental expenses incurred by an enrollee, including any balance billing amounts, until the enrollee receives breastfeeding equipment.
c. Coverage of comprehensive lactation counseling and lactation consultation shall include:
(1) In-person, one-on-one lactation counseling and lactation consultation, subject to the following conditions:
(a) Coverage shall include visits that occur inside and outside a hospital or office setting. In-person lactation counseling and lactation consultation shall be covered regardless of location of service provision and shall include home visits.
(b) Lactation counseling and lactation consultation shall be made available within 24 hours of notification of need.
(2) Telephonic lactation assistance shall be covered in addition to, and not as a substitute for, in-person, one-on-one lactation counseling or lactation consultation, when an enrollee requests one-on-one, in-person lactation counseling or lactation consultation. The telephonic lactation assistance shall be provided within 12 hours of notification of need.
(3) Group lactation counseling shall be covered in addition to, and not as a substitute for, one-on-one, in-person lactation counseling or lactation consultation, if an enrollee requests one-on-one, in-person lactation counseling or lactation consultation. Group counseling shall include educational classes and support groups.
(4) A contract shall not require prior authorization, prescription or referral for any lactation counseling or lactation consultation, regardless of provider type or setting.
(5) A health service corporation shall not impose medical management techniques not described in this section.
d. Except as otherwise authorized pursuant to this section, a health service corporation shall not impose restrictions on the coverage provided pursuant to this section, including, but not limited to, limitations on reimbursement to allowable amounts or reasonable and customary charges, documentation requests, or delays on the coverage provided.
e. As used in this section:
"Cost-sharing" means deductible, co-insurance or co-payments, or similar charges.
"Breast pump kit" means a collection of tubing, valves, flanges, collection bottles, or other parts required to extract human milk using a breast pump.
"Lactation consultant" means an individual who is an International Board Certified Lactation Consultant.
"Lactation consultation" means the clinical application by a lactation consultant or other licensed health care provider of scientific principles and a multidisciplinary body of evidence for evaluation, problem identification, treatment, education, and consultation to child-bearing families utilizing lactation care and services.
Lactation care and services shall include, but not be limited to:
(1) lactation assessment through the systematic collection of subjective and objective data;
(2) analysis of data and creation of a plan of care;
(3) implementation of a lactation care plan with demonstration and instruction to parents and communication to the primary health care provider;
(4) evaluation of outcomes;
(5) provision of lactation education to parents and health care providers; and
(6) the recommendation and use of assistive devices.
"Lactation counseling" means breastfeeding education and support services provided by a lactation counselor, such as:
(1) educating women, families, health care professionals, and the community about the impact of breastfeeding and human lactation on health and what to expect in the normal course of breastfeeding;
(2) acting as an advocate for breastfeeding as the norm for feeding infants and young children;
(3) providing breastfeeding support, encouragement, and care from preconception to weaning in order to help women and their families meet their breastfeeding goals;
(4) using principles of adult education when teaching clients, health care providers, and others in the community; and
(5) identifying and referring high-risk mothers and babies and those requiring clinical treatment appropriately.
"Lactation counselor" means an individual, other than an International Board Certified Lactation Consultant or a licensed health care provider, who is:
(1) licensed or certified to practice lactation counseling under any law, or who is an accredited member belonging to another profession or occupation, who provides breastfeeding education and support services for which that person is licensed, regulated, accredited, or certified; or
(2) a community-based lactation supporter who has received at least 40 hours of specialty education in breastfeeding and lactation, and who works within a lactation counselor's scope of practice.
"Telephonic lactation assistance" means lactation counseling or consultation with a lactation counselor or lactation consultant conducted remotely through live voice communication.
f. This section shall apply to those contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.44** Health service corporation to cover preventive services. {#sec-17-48e-35.44 omnilex-key=us-nj-statutes--title-17--17:48E-35.44}
3. a. A health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State, or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage, without requiring any cost sharing, for the following preventive services:
(1) evidence-based items or services that have in effect a rating of "A" or "B" in the current recommendations of the United States Preventive Services Task Force;
(2) immunizations that have in effect a recommendation from the Department of Health, which shall in making its recommendations consider the recommendations of the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention in the federal Department of Health and Human Services and, as appropriate, the recommendations of the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Physicians;
(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration; and
(4) with respect to women, any additional preventive care and screenings not described in paragraph (1) as provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.
b. (1) Except as provided in paragraph (2) of this subsection, nothing in this section shall:
(a) require a contract which has a network of providers to provide benefits for items or services described in subsection a. of this section that are delivered by an out-of-network provider; or
(b) preclude a contract which has a network of providers from imposing cost-sharing requirements for items or services described in subsection a. of this section that are delivered by an out-of-network provider.
(2) If a contract does not have in its network a provider who can provide an item or service described in subsection a. of this section, the contract shall cover the item or service when performed by an out-of-network provider and shall not impose cost sharing with respect to that item or service.
c. (1) A contract shall provide coverage for an item or service described in subsection a. of this section for plan years that begin on or after the date that is one year after the date the recommendation or guideline is issued.
(2) (a) Except as provided in subparagraph (b) of this paragraph, a contract that is required to provide coverage for an item or service described in subsection a. of this section on the first day of a plan year shall provide coverage for that item or service through the last day of the plan year.
(b) The commissioner may remove a coverage requirement for an item or service during a plan year if the recommendation or guideline changes or is no longer described in subsection a. of this section.
d. The provisions of this section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
e. With respect to an annual wellness visit for a covered member who is over three years of age, a carrier is required to cover only one wellness visit per plan year or calendar year, as provided for under the health benefits plan contract, but may not impose a waiting period for the wellness visit.
##### **§ 17:48E-35.45** Health service corporation to provide certain coverage for prescription drugs. {#sec-17-48e-35.45 omnilex-key=us-nj-statutes--title-17--17:48E-35.45}
3. a. Notwithstanding any other provision of law to the contrary, a health service corporation that offers a contract that provides benefits for expenses incurred in the purchase of prescription drugs and is delivered, issued, executed, or renewed in this State, shall ensure that at least 25 percent of all plans, or at least one plan if the corporation offers less than four plans, offered by the corporation in each rating area and in each of the bronze, silver, gold, and platinum levels of coverage, in the individual market pursuant to P.L.1992, c.161 (C.17B:27A-2 et seq.), and in the small employer market pursuant to P.L.1992, c.162 (C.17B:27A-17), shall conform with the following:
(1) (a) a contract that provides a silver, gold, or platinum level of coverage, as defined in 45 C.F.R. s.156.140, shall limit a covered person's cost-sharing, including any copayment or coinsurance, for prescription drugs, including specialty drugs, to no more than $150 per month for each prescription drug for up to a 30-day supply of any single drug;
(b) a contract that provides a bronze level of coverage, as defined in 45 C.F.R. s.156.140, shall ensure that any required covered person's cost-sharing, including any copayment or coinsurance, does not exceed $250 per month for each prescription drug for up to a 30-day supply of any single drug;
(c) a contract that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, shall be exempt from the requirements of subparagraphs (a) and (b) of this paragraph;
(2) except as provided in paragraph (3) of this subsection, the limits described in paragraph (1) of this subsection shall apply at any point in the benefit design, including before and after any applicable deductible is reached; and
(3) for prescription drug benefits offered in conjunction with a high-deductible health plan, the contract shall not provide prescription drug benefits until the expenditures applicable to the deductible under the plan have met the amount of the minimum annual deductibles in effect for self-only and family coverage under section 223(c)(2)(A)(i) of the federal Internal Revenue Code (26 U.S.C. s.223(c)(2)(A)(i)) for self-only and family coverage, respectively. Once the foregoing expenditure amount has been met under the plan, coverage for prescription drug benefits shall begin, and the limit on out-of-pocket expenditures for prescription drug benefits shall be as specified in paragraph (1) of this subsection.
b. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.46** Health service corporation to cover adolescent depression screenings. {#sec-17-48e-35.46 omnilex-key=us-nj-statutes--title-17--17:48E-35.46}
3. A health service corporation contract that provides hospital and medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for expenses incurred in screening adolescents between the ages of 12 and 18 for major depressive disorder, so long as screening for major depressive disorder in adolescents continues to receive a rating of "A" or "B" from the United States Preventative Services Task Force. Coverage shall not be denied solely on the basis that the screening is provided in conjunction with any other health care evaluation, treatment, or service.
The benefits shall be provided to the same extent as for any other condition under the contract, except that the health service corporation shall not impose on covered persons receiving these services any form of cost sharing, including, but not limited to, copayments, deductibles, or coinsurance.
This section shall apply to those health service corporation contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.47** Health service corporation to cover newborn home nurse visitations. {#sec-17-48e-35.47 omnilex-key=us-nj-statutes--title-17--17:48E-35.47}
7. a. No group or individual health service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159). The contract shall:
(1) provide coverage for the services provided by the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159);
(2) notify a covered person of the services provided by the newborn home nurse visitation program, upon application by the covered person for coverage of a newborn infant;
(3) ensure that the contract does not contain any provision that requires a covered person to receive the services provided by the newborn home nurse visitation program as a condition of coverage, or that denies or limits benefits to the covered person if that person declines the services provided under the program; and
(4) have the discretion to determine how best to reimburse for the expenses incurred for services provided under the newborn home nurse visitation program, including, but not limited to, utilizing:
(a) a value-based payment methodology;
(b) an invoice claim process;
(c) a capitated payment arrangement;
(d) a payment methodology that takes into account the need for an agency or organization providing services under the program to expand its capacity to provide services and address health disparities; or
(e) any other payment arrangement agreed to by the health service corporation and an agency or organization providing services under the program.
b. Any copayment, coinsurance, or deductible that may be required pursuant to the contract for such services shall be waived.
c. Every group or individual health service corporation that is subject to the provisions of this section shall submit to the Department of Banking and Insurance, in a form and manner prescribed by the department, a report on the claims submitted for services provided under the newborn home nurse visitation program.
The information contained in the report shall be shared with the Department of Children and Families and used by that department to assess the newborn home nurse visitation program pursuant to subsection a. of section 4 of P.L.2021, c.187 (C.26:2H-161).
d. (1) Except as provided in paragraphs (2) and (3) of this subsection, the contract shall specify that no deductible, coinsurance, copayment, or any other cost-sharing requirement may be imposed on the coverage required pursuant to this section.
(2) A contract offered by a group or individual health service corporation that qualifies as a high deductible health plan shall provide benefits for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159) at the lowest deductible and other cost-sharing requirement permitted for a high deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
(3) A contract offered by a group or individual health service corporation that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, shall provide benefits for expenses incurred for services provided under the newborn home nurse visitation program established pursuant to section 2 of P.L.2021, c.187 (C.26:2H-159) at the lowest deductible and other cost-sharing requirement to the extent permitted for a catastrophic plan under federal law.
e. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
##### **§ 17:48E-35.48** Individual, group health service corporation contract, coverage, epinephrine auto-injector device. {#sec-17-48e-35.48 omnilex-key=us-nj-statutes--title-17--17:48E-35.48}
8. An individual or group health service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2023, c.105 (C.17:48-6xx et al.) shall provide coverage for at least one epinephrine auto-injector device, if recommended or prescribed by a participating physician or participating nurse practitioner/clinical nurse specialist. Coverage for the purchase of an epinephrine auto-injector device shall not be subject to any deductible, and no copayment or coinsurance for the purchase of an epinephrine auto-injector device shall exceed $25 per 30-day supply. The provisions of this section shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this section shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this section shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
Nothing in this section shall prevent a health service corporation from reducing a subscriber's or other covered person's cost-sharing requirement by an amount greater than the amount specified in this section.
##### **§ 17:48E-35.49** Individual, group health service corporation contract, coverage, prescription asthma inhaler. {#sec-17-48e-35.49 omnilex-key=us-nj-statutes--title-17--17:48E-35.49}
9. An individual or group health service corporation contract providing hospital or medical expense benefits that is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2023, c.105 (C.17:48-6xx et al.) shall provide benefits to a subscriber or other person covered thereunder for expenses incurred for a prescription asthma inhaler, if recommended or prescribed by a participating physician or participating nurse practitioner/clinical nurse specialist. Coverage for the purchase of a covered prescription asthma inhaler shall not be subject to any deductible, and no copayment or coinsurance for the purchase of a covered prescription asthma inhaler shall exceed $50 per 30-day supply. The provisions of this section shall apply to a high-deductible health plan to the maximum extent permitted by federal law, except if the plan is used to establish a medical savings account pursuant to section 220 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.220) or a health savings account pursuant to section 223 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.223). The provisions of this section shall apply to the plan to the maximum extent that is permitted by federal law and does not disqualify the account for the deduction allowed under section 220 or 223, as applicable. The provisions of this section shall apply to a plan that meets the requirements of a catastrophic plan, as defined in 45 C.F.R. s.156.155, to the maximum extent permitted by federal law.
Nothing in this section shall prevent a health service corporation contract from reducing a subscriber's or other covered person's cost-sharing requirement by an amount greater than the amount specified in this section.
##### **§ 17:48E-35.50** Biomarker precision medical testing coverage, health service corporation contracts. {#sec-17-48e-35.50 omnilex-key=us-nj-statutes--title-17--17:48E-35.50}
3. a. Each health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) or is approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, shall provide coverage for biomarker precision medical testing, as defined by subsection g. of this section.
b. Biomarker precision medical testing shall be covered for the purposes of diagnosis, treatment, appropriate management, or ongoing monitoring of a disease or condition, excluding asymptomatic screening, to guide treatment decisions of a subscriber when the efficacy and appropriateness of biomarker precision medical testing for the diagnosis, treatment, appropriate management, or guiding treatment decisions for a subscriber's disease or condition is recognized by:
(1) labeled indications for an FDA-approved or -cleared test;
(2) indicated tests for an FDA-approved drug;
(3) actions to address warnings and precautions on FDA-approved drug labels;
(4) Centers for Medicare and Medicaid Services National Coverage Determinations or Medicare Administrative Contractor Local Coverage Determinations; or
(5) nationally recognized clinical practice guidelines.
c. Coverage, pursuant to subsection b. of this section, shall be provided in a manner that limits disruption, including multiple biopsies or biospecimen samples, in the care of a subscriber.
d. (1) If utilization review is required, a health service corporation shall provide a decision pursuant to the guidelines and timeframes set forth in P.L.2023, c.296 (C.17B:30-55.1 et al.).
(2) The subscriber and the treating health care provider or treating health care entity prescribing biomarker precision medical testing for the subscriber shall have access to clear, readily accessible, and conspicuous information on the process to submit an appeal to an adverse determination.
e. The benefits shall be provided to the same extent as for any other medical condition under the contract, including determinations of clinical review criteria used for utilization review of health care services along with copayment, deductible, and coinsurance provisions.
f. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
g. As used in this section:
"Biomarker" means a characteristic that is objectively measured and evaluated as an indicator of normal biological processes, pathogenic processes, or pharmacologic responses to a specific therapeutic intervention, including known gene-drug interactions for medications being considered for use or already being administered. Biomarkers shall also include, but not be limited to, gene mutations, characteristics of genes, or protein expression.
"Biomarker precision medical testing" means the analysis of tissue, blood, or other biospecimen for the presence of a biomarker. Biomarker precision medical testing includes, but is not limited to, single-analyte tests, multiplex panel tests, protein expression, and whole exome, whole genome, and whole transcriptome sequencing.
"Nationally recognized clinical practice guidelines" means evidence-based clinical practice guidelines developed by independent organizations or medical professional societies utilizing a transparent methodology and reporting structure and with a conflict of interest policy. The guidelines establish standards of care informed by a systematic review of evidence and an assessment of the benefits and risks of alternative care options and include recommendations intended to optimize patient care.
##### **§ 17:48E-35.51** Group, individual health service corporation contracts, HIV preexposure prophylaxis, HIV postexposure prophylaxis. {#sec-17-48e-35.51 omnilex-key=us-nj-statutes--title-17--17:48E-35.51}
5. a. (1) Except as provided in paragraph (2) of this subsection, no group or individual health service corporation contract providing hospital or medical expense benefits shall be delivered, issued, executed, or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, unless the contract provides benefits to any subscriber or other person covered thereunder for HIV preexposure prophylaxis and HIV postexposure prophylaxis furnished without an individual prescription pursuant to the requirements of section 2 of P.L.2025, c.196 (C.45:14-67.13) without requiring prior authorization or step therapy.
(2) If the federal Food and Drug Administration has authorized or approved one or more therapeutic equivalents of a drug, device, or product for the prevention of HIV and AIDS, paragraph (1) of this subsection shall not be construed to require the contract to cover all therapeutically equivalent versions without prior authorization or step therapy, if at least one version is covered without prior authorization or step therapy.
b. Reimbursement issued under this section to a pharmacist shall be at a rate that is no less than the rate provided by the group or individual health service corporation contract to other non-physician practitioners if the reimbursement is for a service or procedure that meets the following criteria:
(1) the service or procedure is within the scope of practice of the treating pharmacist; and
(2) the service or procedure would otherwise be covered under the contract if provided by a healthcare provider, including a physician, advanced practice nurse, or physician assistant.
c. A contract offered by a group or individual health service corporation shall grant a licensed pharmacist receiving reimbursement under this section the same rights of participation, plan admission, and registration as may be granted by the contract to a healthcare provider, including a physician, advanced practice nurse, or physician assistant, who is reimbursed for an identical service.
d.A contract offered by a group or individual health service corporation shall not:
(1) prohibit, or permit a delegated pharmacy benefits manager to prohibit, a pharmacist from dispensing HIV preexposure prophylaxis or HIV postexposure prophylaxis; and
(2) be required to cover HIV preexposure prophylaxis that has been furnished by a pharmacist without an individual prescription pursuant to pursuant to section 2 of P.L.2025, c.196 (C.45:14-67.13) in excess of a 90-day supply for a single patient within a given two year period.
e. Nothing in this section shall be construed to require a contract offered by a health service corporation to provide coverage for HIV preexposure prophylaxis or HIV postexposure prophylaxis furnished by a pharmacist at an out-of-network pharmacy, unless the contract has an out-of-network pharmacy benefit.
f. The provisions of this section shall apply to all contracts in which the health service corporation has reserved the right to change the premium.
g. As used in this section:
“HIV preexposure prophylaxis” means the same as that term is defined in section 1 of P.L.2025, c.196 (C.45:14-67.12).
“HIV postexposure prophylaxis” means the same as that term is defined in section 1 of P.L.2025, c.196 (C.45:14-67.12).
“Step therapy” means requiring that a lower-cost alternative to HIV preexposure prophylaxis or HIV postexposure prophylaxis be shown to have been ineffective as a condition of providing prescription benefits coverage for the prophylaxis.
##### **§ 17:48E-35.52** Benefits provided under health service corporation contracts. {#sec-17-48e-35.52 omnilex-key=us-nj-statutes--title-17--17:48E-35.52}
3. a. Every health service corporation contract that provides hospital or medical expense benefits and is delivered, issued, executed, or renewed in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.), or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance on or after the effective date of P.L.2025, c.200 (C. 17:48-6bbb et al.), shall provide benefits to any named subscriber or other person covered thereunder for expenses incurred in obtaining medically necessary treatment for women with a diagnosis of perimenopause, menopause, and symptoms associated with perimenopause and menopause, including, but not limited to:
(1) hormonal therapies such as hormone replacement therapy and bioidentical hormone treatments;
(2) non-hormonal treatments, including medications to manage perimenopause and menopausal symptoms;
(3) behavioral health care services;
(4) pelvic floor physical therapy;
(5) bone health treatments, including screenings and medications due to hormonal changes related to perimenopause and menopause;
(6) preventative services that have a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force for early detection and treatment of health conditions related to perimenopause and menopause such as osteoporosis and cancer; and
(7) counseling and education regarding menopause management.
b. A health service corporation shall provide clear and accessible information to subscribers or covered persons regarding covered perimenopause and menopause treatments.
c. The benefits shall be provided to the same extent as for any other medical condition under the contract.
d. The provisions of this section shall apply to all health service corporation contracts in which the health service corporation has reserved the right to change the premium.
e. As used in this section:
“Menopause” means the permanent end of a female’s menstrual cycle, diagnosed by a licensed medical provider after 12 consecutive months without a menstrual period.
“Perimenopause” means the transitional period leading to menopause, marked by fluctuating hormone levels and changes in menstrual cycles.
##### **§ 17:48E-36** Annual financial statement {#sec-17-48e-36 omnilex-key=us-nj-statutes--title-17--17:48E-36}
a. Every health service corporation transacting business in this State shall annually on or before the first day of March file in the Department of Insurance a statement, subscribed and sworn to by its principal officers, showing its financial condition at the close of business on the thirty-first day of December of the year last preceding, and its business for that year, which statement shall be in that form and contain those matters as the commissioner prescribes. The commissioner may also address inquiries to any health service corporation or its officers in relation to its condition of affairs, or any matter connected with its transactions, and it shall be the duty of the officers of the corporation to promptly reply in writing to all inquiries. For good cause shown, the commissioner may extend the time within which a statement shall be filed.
b. A health service corporation neglecting to make and file its annual statement in the form and within the time provided by subsection a. of this section or neglecting to reply in writing to inquiries of the commissioner within a reasonable time, as specified by the commissioner, shall forfeit $100.00 for each day's neglect, to be recovered in a civil or administrative proceeding, and upon notice by the commissioner to that effect, its authority to do new business in this State shall cease while the default continues.
##### **§ 17:48E-37** Examination authority {#sec-17-48e-37 omnilex-key=us-nj-statutes--title-17--17:48E-37}
a. The commissioner shall have the power, whenever he deems it expedient, to make or cause to be made an examination of the assets and liabilities, method of conducting business and all other affairs of every health service corporation authorized or which has made application for authority to transact business under the provisions of this act. For the purposes of the examination, the commissioner may authorize and employ persons to conduct the examination or to assist therein as he deems advisable, which examination may be conducted in any state in which the corporation examined has an office, agent, or place of business.
b. The reasonable expense of the examination shall be fixed and determined by the commissioner, and he shall recover that expense from the health service corporation examined, which shall make payment on presentation of a detailed account of the expense. If any health service corporation, after examination, shall be adjudged by the Superior Court to be insolvent, the expense of the examination, if unpaid, shall be ordered paid out of the assets of the health service corporation. No health service corporation shall, either directly or indirectly, pay, by way of gift, credit, or otherwise, any other or further sum to the commissioner or to any person in the employ of the Department of Insurance, for extra service or for the purposes of legislation, or for any purpose whatever.
c. It shall be the duty of the officers, agents and employees of a health service corporation to exhibit all its books, records and accounts for the purpose of the examination, and otherwise to facilitate the examination so far as it may be in their power to do so, and for that purpose the commissioner and his deputies, assistants and employees shall have the power to examine, under oath, the officers, agents and employees of the health service corporation relative to its business and affairs.
##### **§ 17:48E-37.1** Definitions. {#sec-17-48e-37.1 omnilex-key=us-nj-statutes--title-17--17:48E-37.1}
31. As used in sections 31 through 35 of P.L.2014, c.81 (C.17:48E-37.1 through C.17:48E-37.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Health service corporation" means an entity authorized to transact business in this State pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.).
##### **§ 17:48E-37.2** Increase in amount of capital or surplus required of health service corporation. {#sec-17-48e-37.2 omnilex-key=us-nj-statutes--title-17--17:48E-37.2}
32. The commissioner may increase the amount of capital or surplus required of a health service corporation, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the health service corporation's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a health service corporation's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section shall be made only after a departmental hearing, unless that hearing is waived by the affected health service corporation. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the health service corporation. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular health service corporation, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the health service corporation charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the health service corporation charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the health service corporation, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the health service corporation's financial condition.
##### **§ 17:48E-37.3** Determination of increase, revision or redetermination; factors. {#sec-17-48e-37.3 omnilex-key=us-nj-statutes--title-17--17:48E-37.3}
33. In determining any increase, revision or redetermination in the capital or surplus of a health service corporation pursuant to the provisions of section 32 of P.L.2014, c.81 (C.17:48E-37.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 32 of P.L.2014, c.81 (C.17:48E-37.2);
c. The extent to which risks described in section 32 of P.L.2014, c.81 (C.17:48E-37.2) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the health service corporation has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the health service corporation's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48E-37.4** Suspension, revocation of authority to do business. {#sec-17-48e-37.4 omnilex-key=us-nj-statutes--title-17--17:48E-37.4}
34. The commissioner may suspend or revoke the authority to do business in this State of any health service corporation that does not comply with the provisions of sections 31 through 35 of P.L.2014, c.81 (C.17:48E-37.1 through C.17:48E-37.5).
##### **§ 17:48E-37.5** Rules, regulations. {#sec-17-48e-37.5 omnilex-key=us-nj-statutes--title-17--17:48E-37.5}
35. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of sections 31 through 35 of P.L.2014, c.81 (C.17:48E-37.1 through C.17:48E-37.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48E-38** Fee schedule {#sec-17-48e-38 omnilex-key=us-nj-statutes--title-17--17:48E-38}
A health service corporation shall pay the following fees to the commissioner for enforcement of the provisions of this act:
a. For filing its application and charter, $10.00;
b. For filing each annual statement, $20.00;
c. For each copy of any paper filed in the Department of Insurance, $0.20 a sheet or folio of 100 words and $1.00 for certifying the same.
In addition, a health service corporation shall pay on April 1 of each year a general supervisory fee to the commissioner of $0.02 per subscriber or member covered under individual or group contracts for hospital coverage; a general supervisory fee of $0.02 per subscriber or member covered under individual or group contracts for medical coverage; and a general supervisory fee of $0.04 per subscriber or member covered under individual or group contracts for both hospital and medical coverage; and the first general supervisory fees shall be due as of December 31, 1985, payable April 1, 1986. The provisions of this section shall not be construed to preclude, in the case of a joint venture, any insurer from owing any premium tax due pursuant to P.L. 1945, c. 182 (C. 54:18A-1 et seq.).
##### **§ 17:48E-39** Penalties for violations {#sec-17-48e-39 omnilex-key=us-nj-statutes--title-17--17:48E-39}
Any health service corporation of this or any other state, country or province which shall have violated any of the provisions of, or shall have neglected, failed or refused to comply with any of the requirements of, this act, except the failure to file an annual statement, shall be liable to a penalty of $500.00, to be sued for and collected by the commissioner in a summary manner in a civil action in the name of the State. The penalties when recovered shall be paid by the commissioner into the State Treasury for the use of the State. Any officer, agent, employee or member of any health service corporation doing business in this State who shall issue, circulate or cause or permit to be circulated, any estimate, illustration, or circular of any sort misrepresenting the terms of any contract issued by the health service corporation or any other such corporation, or misrepresent the benefits or advantages promised thereby, or use any name or title of any contract or class of contracts misrepresenting the true nature thereof, or who shall solicit, negotiate or effect the issue of any contract of any health service corporation which has neglected, failed, or refused to procure a certificate of authority as provided for by this act, or who accepts any premiums, dues, deposits, contributions, fees, assessments or things of value of any kind in consideration for a contract or certificate on behalf of the health service corporation, shall be guilty of a crime of the fourth degree. The provisions of this section shall not preclude enforcement of chapter 30 of Title 17B of the New Jersey Statutes, concerning unfair trade practices and discrimination.
##### **§ 17:48E-41** Health service corporation, exemption from taxes {#sec-17-48e-41 omnilex-key=us-nj-statutes--title-17--17:48E-41}
A health service corporation subject to the provisions of this act is hereby declared to be a charitable and benevolent institution and all of its funds shall be exempt from every State, county, district, municipal and school tax other than taxes on real estate and equipment and taxes on premiums pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.) as provided by section 16 of that act (C.54:18A-9).
##### **§ 17:48E-42** For-profit corporations excluded {#sec-17-48e-42 omnilex-key=us-nj-statutes--title-17--17:48E-42}
The provisions of this act shall not apply to any corporation carrying on the business of life, health or accident insurance, for profit or gain, or to fraternal beneficiary associations as defined in section 1 of P.L. 1959, c. 167 (C. 17:44A-1). A health service corporation authorized to transact business pursuant to this act shall be exempt from all other provisions of Title 17B of the New Jersey Statutes, except as herein specified, but the unfair trade practices provisions of N.J.S. 17B:30-1 et seq. shall apply to health service corporations except to the extent: a. expressly excepted in this act, or b. the commissioner determines that any provisions of N.J.S. 17B:30-1 et seq. are inappropriate as applied to health service corporations.
##### **§ 17:48E-43** Subject to review {#sec-17-48e-43 omnilex-key=us-nj-statutes--title-17--17:48E-43}
All determinations of the commissioner made under the provisions of this act shall be subject to review by the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:48E-44** Rules, regulations {#sec-17-48e-44 omnilex-key=us-nj-statutes--title-17--17:48E-44}
The commissioner, pursuant to the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), shall promulgate rules and regulations as are necessary to effectuate the provisions of this act.
##### **§ 17:48E-45** Definitions relative to conversion {#sec-17-48e-45 omnilex-key=us-nj-statutes--title-17--17:48E-45}
> 1. As used in sections 2 through 4 of this act:
"Commissioner" means the Commissioner of Insurance.
"Conversion" means the conversion of a health service corporation to a domestic mutual insurer in accordance with the provisions of sections 2 through 4 of P.L.1995, c.196 (C.17:48E-46 through C.17:48E-48).
"Domestic mutual insurer" means an insurer as defined pursuant to N.J.S.17B:18-3.
"Health maintenance organization" means a health maintenance organization as defined pursuant to section 2 of P.L.1973, c.337 (C.26:2J-2).
##### **§ 17:48E-46** Conversion of health service corporation to domestic mutual insurer {#sec-17-48e-46 omnilex-key=us-nj-statutes--title-17--17:48E-46}
2. A health service corporation which is organized pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) may convert to a domestic mutual insurer by complying with the provisions of sections 2 through 4 of this act.
a. The board of directors of a health service corporation shall adopt a resolution to become a domestic mutual insurer at a meeting of the board by a two-thirds affirmative vote of the total number of directors of the health service corporation. A copy of the minutes of the meeting at which that resolution is adopted shall be filed with the commissioner. The resolution shall include a plan for conversion to domestic mutual insurer, including a proposed certificate of incorporation and bylaws. The plan shall include:
(1) the purpose of the conversion;
(2) the effect of conversion on existing subscriber contracts issued by the health service corporation;
(3) a business plan;
(4) a provision that each policyholder shall receive any rights with respect to the mutual insurer as may be prescribed by the commissioner, provided that such rights shall not exceed the rights provided to policyholders of other domestic mutual insurers authorized to transact the business of health insurance;
(5) a provision that each policyholder shall be notified of the conversion, which notification process shall be approved by the commissioner; and
(6) a provision incorporating the recovery plan established pursuant to section 5 of P.L.1988, c.71 (C.17:48E-17.1).
b. No director, officer, agent or employee of any health service corporation shall receive any fee, commission, compensation or other valuable consideration for aiding, promoting or assisting in the conversion of the health service corporation to a domestic mutual insurer except as set forth in the plan for such conversion as required pursuant to subsection a. of this section and as approved by the commissioner.
##### **§ 17:48E-46.1** Findings, declarations relative to the reorganization of a health service corporation {#sec-17-48e-46.1 omnilex-key=us-nj-statutes--title-17--17:48E-46.1}
1. The Legislature finds and declares that:
a. It is in the interest of the subscribers of the health service corporation and the State of New Jersey that the health service corporation be afforded the ability to modernize its corporate structure, subject to appropriate standards, oversight, and approval, in order to meet the evolving health care needs of its subscribers, while continuing its statutory mission, and maintaining its status as a charitable and benevolent institution as declared in section 41 of P.L.1985, c.236 (C.17:48E-41).
b. Ensuring that the health service corporation statutes provide the opportunity for the health service corporation to reorganize itself efficiently and effectively in the form and manner authorized by P.L.2020, c.145 (C.17:48E-46.1 et al.) will facilitate increased utilization of 21st century technologies and tools to better address current challenges, improving both the State's healthcare infrastructure and its readiness to address future crises such as those resulting from the ongoing COVID-19 pandemic. Such a reorganization, if undertaken, approved, and completed consistent with the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.), also will promote vital investments and growth in health services and diversified businesses for the benefit of its members and the State.
c. Current law governing the health service corporation expressly permits the health service corporation to engage in certain actions that effectuate a corporate reorganization, subject to certain conditions, including potential conversion to a for-profit domestic stock insurer or other actions constituting a material change in its form, subject to the approval of the Commissioner of Banking and Insurance in the Commissioner's capacity as regulator of the business of insurance and the Attorney General in furtherance of the Attorney General's statutory and common law responsibilities as protector, supervisor, and enforcer of charitable trusts and charitable corporations. The current statutes do not, however, prescribe a clear path for the health service corporation to update and improve its corporate structure for the benefit of its members and the State while, at the same time, maintaining its non-profit status, continuing to adhere to the statutory mission to provide affordable and accessible health insurance and promote the integration of the health care system to meet the needs of its members, and fulfilling the health care obligations of a health service corporation as they exist prior to the reorganization.
d. Other states have authorized similarly situated nonprofit health insurance carriers to reorganize their corporate forms while maintaining their nonprofit legal status and purposes of the entities for the benefit of their subscribers and respective regional health care marketplaces.
e. Because a reorganization authorized pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) does not constitute a conversion or material change in form as defined pursuant to P.L.2001, c.131 (C.17:48E-49 et seq.), the currently existing statutory mission of the health service corporation to provide affordable and accessible health insurance and promote the integration of the health care system to meet the needs of its members shall continue unabated regardless of whether the health service corporation reorganizes in the manner authorized by P.L.2020, c.145 (C.17:48E-46.1 et al.) or not.
f. It is also in the interest of the subscribers of the health service corporation and the State of New Jersey that the important statutory mission of the health service corporation continues to be upheld following any reorganization pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.); provided, however, that it is appropriate to expand and modernize that mission to encourage further innovation as well as improvement and diversification of services.
##### **§ 17:48E-46.2** Definitions relative to the reorganization of a health service corporation {#sec-17-48e-46.2 omnilex-key=us-nj-statutes--title-17--17:48E-46.2}
2. As used in P.L.2020, c.145 (C.17:48E-46.1 et al.):
"Assessment" means an initial and a limited duration assessment made upon the mutual holding company system pursuant to section 13 of P.L.2020, c.145 (C.17:48E-46.13).
"Commissioner" means the Commissioner of Banking and Insurance.
"Control" has the meaning set forth in section 1 of P.L.1970, c.22 (C.17:27A-1).
"Effective time" means the date and time at which the reorganization into a mutual holding company is effective, as provided in subsection d. of section 5 of P.L.2020, c.145 (C.17:48E-46.5).
"Health service corporation" means an entity organized pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.).
"Insurance company" means any entity, other than the reorganized insurer, that engages in the business of insurance.
"Intermediate holding company" means an entity of which at least a majority of the voting shares of the capital stock are at all times owned directly or indirectly through other intermediate holding companies by a mutual holding company.
"Majority of the voting shares of the capital stock" means, with respect to any entity, shares of the capital stock of that entity which carry the right to cast a majority of the votes entitled to be cast by all of the outstanding shares of the capital stock of that entity for the election of directors.
"Member" means the holder of a membership interest in a mutual holding company, pursuant to the articles of incorporation or bylaws of that mutual holding company.
"Mutual holding company" means a non-insurance, nonprofit entity without permanent capital stock organized pursuant to the laws of this State in accordance with the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.) for the purpose of holding, directly or indirectly, one hundred percent interest in a reorganized insurer pursuant to a plan of reorganization as provided in P.L.2020, c.145 (C.17:48E-46.1 et al.). A mutual holding company is an insurance holding company system pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.), and shall not be qualified as an insurer licensed to issue insurance policies, insurance contracts or health benefit plans.
"Mutual holding company system" means the structure resulting from the simultaneous formation of a mutual holding company with a reorganized insurer in connection with the mutualization and reorganization of a health service corporation.
"Mutual insurer" means a domestic mutual insurer into which a health service corporation transitions in accordance with the provisions of P.L.1995, c.196 (C.17:48E-45 et seq.).
"Non-insurance subsidiary" means any subsidiary of a mutual holding company system that is not an insurance company or the reorganized insurer.
"Reorganization" means the simultaneous mutualization of a health service corporation to a domestic mutual insurer and transformation from a domestic mutual insurer to a mutual holding company with a reorganized insurer in accordance with the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.). A reorganization pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) in which the mutual holding company remains a charitable and benevolent institution shall not constitute a material change in form as defined in section 1 of P.L.2001, c.131 (C.17:48E-49).
"Reorganized insurer" means a stock insurer authorized pursuant to Title 17B of the New Jersey Statutes to transact health insurance as defined in N.J.S.17B:17-4 and that, pursuant to a plan of reorganization as provided in P.L.2020, c.145 (C.17:48E-46.1 et al.), is a subsidiary of the mutual holding company system that holds the business of the health service corporation mutualizing and reorganizing pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) that is related to policies directly written and issued by the health service corporation. All health insurance or risk-bearing obligations of the health service corporation shall be undertaken by the reorganized insurer pursuant to subsection c. and e. of section 3 of P.L.2020, c.145 (C.17:48E-46.3).
##### **§ 17:48E-46.3** Mutual holding company, not for pecuniary profit, mission {#sec-17-48e-46.3 omnilex-key=us-nj-statutes--title-17--17:48E-46.3}
3. a. A mutual holding company organized pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) shall not be established as a company organized for pecuniary profit and shall retain the designation as a charitable and benevolent institution pursuant to section 41 of P.L.1985, c.236 (C.17:48E-41). A mutual holding company established pursuant to the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.) shall retain the health service corporation's mission while supplementing that mission to promote innovation and delivery of diversified services.
The mission of a mutual holding company shall be to:
(1) provide affordable and accessible health insurance to its members;
(2) promote the integration of the health care system to meet the needs of its members; and
(3) promote innovation and delivery of solutions and diversified services for its members.
b. Other than as provided pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.), all property, assets, rights, liabilities, interest and relations of whatever kind of the health service corporation, and its subsidiaries, shall be that of the mutual holding company system. The mutual holding company shall not be considered a health service corporation. Notwithstanding anything to the contrary, the provisions of section 41 of P.L.1985, c.236 (C.17:48E-41) shall continue to apply to a mutual holding company if the mutual holding company continues to participate in the New Jersey Individual Health Coverage Program pursuant to P.L.1992, c.161 (C.17B-27A-2 et seq.) and the New Jersey Small Employer Health Benefits Program pursuant to P.L.1992, c.162 (C.17B:27A-17 et seq.). If the mutual holding company does not participate in the New Jersey Individual Health Coverage Program pursuant to P.L.1992, c.161 (C.17B-27A-2 et seq.) and the New Jersey Small Employer Health Benefits Program pursuant to P.L.1992, c.162 (C.17B:27A-17 et seq.) the provisions of section 41 of P.L.1985, c.236 (C.17:48E-41) shall no longer apply.
c. The health insurance duties and obligations pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) shall continue and remain in the succeeding reorganized insurer reorganizing pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.), in each case, except as provided pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.). Except as listed below in subsection e. of this section, all references to a "health service corporation" in P.L.1985, c.236 (C.17:48E-1 et seq.), shall refer to a "reorganized insurer" established pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) and shall not refer to the mutual holding company.
d. In addition to the mutual holding company's qualification pursuant to section 2 of P.L.2020, c.145 (C.17:48E-46.2), and for avoidance of doubt, the mutual holding company shall be expressly excluded from insurance operations and reporting, investment limits, and risk-bearing provisions of P.L.1985, c.236 (C.17:48E-1 et seq.), including the following provisions because a mutual holding company is not a risk-bearer:
(1) Subsection e. of section 1, subsection b. of section 2, subsection a. of section 3, sections 6 through 9, and section 11 of P.L.1985, c.236 (C.17:48E-1, C.17:48E-2, C.17:48E-3, C.17:48E-6 through C.17:48E-9, and C.17:48E-11);
(2) Section 16 and subsections a. through c. of section 17 of P.L.1985, c.236 (C.17:48E-16 and C.17:48E-17), section 5 of P.L.1988, c.71 (C.17:48E-17.1), and section 8 of P.L.1993, c.235 (C.17:48E-17.2);
(3) Section 4 of P.L.2017, c.100 (C.17:48E-17.3);
(4) Sections 36 and 37 of P.L.1985, c.236 (C.17:48E-36 and C.17:48E-37); and
(5) Sections 31 through 35 of P.L.2014, c.81 (C.17:48E-37.1 through C.17:48E-37.5).
e. The reorganized insurer shall engage in risk-bearing activities, reporting, investments, financial transactions, including the issuance of dividends or distributions, and insurance trade practices consistent with laws governing stock insurance companies organized under Title 17B of the New Jersey Statutes to transact health insurance as defined in N.J.S.17B:17-4. Notwithstanding the provisions of subsection c. of this section, the following sections of P.L.1985, c.236 (C.17:48E-1 et seq.) shall not apply to the reorganized insurer or any insurance company or risk-bearing entity within the mutual holding company system:
(1) Section 4 of P.L.2017, c.100 (C.17:48E-17.3);
(2) Sections 31 through 35 of P.L.2014, c.81 (C.17:48E-37.1 through C.17:48E-37.5), but subject to the solvency rules set forth pursuant to N.J.S.17B:18-70 et seq.; and
(3) Subsection e. of section 1, subsection b. of section 2, subsection a. of section 3, sections 6 through 9, and section 11 of P.L.1985, c.236 (C.17:48E-1, C.17:48E-2, C.17:48E-3, C.17:48E-6 through C.17:48E-9, and C.17:48E-11).
f. The insurance premium rate tax cap law provided by subsection a. of section 6 of P.L.1945, c.132 (C.54:18A-6) shall apply to the companies within the mutual holding company system that have an insurance premium tax liability, and the exclusion from the tax cap applicable to a health service corporation pursuant to subsection b. of section 6 of P.L.1945, c.132 (C.54:18A-6) shall not apply to the mutual holding company or any entity within the mutual holding company system, including the reorganized insurer, that has an insurance premium tax liability.
g. A mutual holding company system may pursue businesses, assets, or operations through one or more of its insurance subsidiaries and non-insurance subsidiaries without a limit on aggregate revenues from nonconforming affiliates or such pursuits being considered a material change in form as such term is defined pursuant to section 1 of P.L.2001, c.131 (C:17:48E-49). The subsidiaries of the mutual holding company, including the reorganized insurer, shall be permitted to make dividends or distributions to the mutual holding company, any subsidiaries thereof, or both, and shall not be considered a material change in form as such term is defined pursuant to section 1 of P.L.2001, c.131 (C.17:48E-49). Dividends and distributions from domestic insurers, including the reorganized insurer, within the mutual holding company system shall be subject only to the applicable provisions of subsection c. of section 4 of P.L.1970, c.22 (C.17:27A-4).
h. The continuation of the rights, duties and obligations of a health service corporation pursuant to this section following completion of an approved reorganization pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) shall be limited to such rights, duties and obligations pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) as of the effective date of P.L.2020, c.145 (C.17:48E-46.1 et al.); amendments to P.L.1985, c.236 (C.17:48E-1 et seq.) enacted after the effective date of P.L.2020, c.145 (C.17:48E-46.1 et al.) shall not apply. Notwithstanding the above, the reorganized insurer shall be subject to the laws applicable to domestic health insurance companies contained in Title 17B of the New Jersey Statutes and P.L.1970, c.22 (C.17:27A-1 et seq.).
##### **§ 17:48E-46.4** Health service corporation to reorganize into mutual holding company system {#sec-17-48e-46.4 omnilex-key=us-nj-statutes--title-17--17:48E-46.4}
4. a. A health service corporation organized pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.) may reorganize to create a mutual holding company system pursuant to a plan of reorganization at the same time it applies to transition to a mutual insurer pursuant to P.L.1995, c.196 (C.17:48E-45 et seq.). Thereafter, the succeeding mutual holding company system shall be operated in a manner consistent with sections 1 and 3 of P.L.2020, c.145 (C.17:48E-46.1 and C.17:48E-46.3).
b. The mutual holding company system shall consist of a mutual holding company and one or more controlled nonprofit or for-profit subsidiaries, including the reorganized insurer, and shall be operated for the benefit of its members. The mission of a mutual holding company shall be as specified in subsection a. of section 3 of P.L.2020, c.145 (C.17:48E-46.3).
c. The mutual holding company and each of its non-insurance subsidiaries, other than the reorganized insurer and any insurance company subsidiaries, shall not be:
(1) an insurer and therefore shall not be subject to any of the provisions of N.J.S.17B:18-1 et seq. applicable to stock or mutual insurers, or to any laws concerning the writing of insurance, including rules and regulations adopted thereunder, including with respect to governance, stock or other voting or equity interest, the writing of insurance, any investment limitations directly applicable to risk-bearing entities engaged in the writing of insurance such as those pursuant to N.J.S.17B:20-1 et seq., or any capital or surplus requirements;
(2) authorized to transact the business of insurance; or
(3) qualified as an insurer.
The writing of insurance shall be permitted only through the reorganized insurer and other insurance company subsidiaries or investments of the mutual holding company. Nothing herein shall alter the oversight of the commissioner with respect to the mutual holding company and its non-insurance subsidiaries provided for pursuant to applicable laws and rules of this State relating to insurance holding company systems.
d. A mutual holding company shall be a nonprofit entity incorporated under, and shall conduct its business pursuant to, the provisions of Title 15A of the New Jersey Statutes, except that in situations in which the provisions of that title are inconsistent with the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.), the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.) shall govern.
e. At the effective time, members shall receive membership interests of the mutual holding company, and thereafter 100 percent of the membership interests of the mutual holding company shall continue to be held by members, in each case, in the manner set forth in the articles of incorporation and bylaws of the mutual holding company.
f. The shares of the capital stock of the reorganized insurer shall be:
(1) issued to the mutual holding company or one or more intermediate holding companies that are wholly-owned by the mutual holding company; and
(2) at all times owned by the mutual holding company or one or more intermediate holding companies that are wholly-owned by the mutual holding company.
g. The subsidiaries of a mutual holding company system may be formed by any of the following means:
(1) the formation of one or more subsidiaries;
(2) amendment or restatement of the articles of incorporation and bylaws of one or more companies;
(3) transfer of assets and liabilities among two or more companies;
(4) issuance, acquisition or transfer of capital stock of one or more companies; or
(5) merger or consolidation of two or more companies.
h. The mutual holding company shall ensure that any ownership interest in a subsidiary shall be held by the mutual holding company, and that any profits generated by that interest are returned to the mutual holding company.
##### **§ 17:48E-46.5** Health service corporation applicationto form mutual holding company system {#sec-17-48e-46.5 omnilex-key=us-nj-statutes--title-17--17:48E-46.5}
5. a. A health service corporation may submit an application to the commissioner to form a mutual holding company system. Upon submission of an application to the commissioner, a health service corporation shall immediately thereafter provide a copy of the application to the Attorney General. Prior to submission of the application, the board of directors of the health service corporation shall adopt a resolution proposing to transition to a mutual insurer and form a mutual holding company system, at a meeting of the board by a two-thirds affirmative vote of the total number of directors of the health service corporation. A copy of the minutes of the meeting at which that resolution is adopted shall be filed with the commissioner. The resolution shall include a plan to transition to a mutual insurer and form a mutual holding company system, including proposed articles of incorporation and bylaws for the mutual holding company and proposed articles of incorporation, certificates of formation, restatements of, or amendments to, existing articles of incorporation or bylaws, and plans of merger or consolidation, with respect to each entity to be formed, converted or otherwise subject or party to the transition transactions pursuant to the plan of mutualization and reorganization.
In addition to including information required pursuant to section 2 of P.L.1995, c.196 (C.17:48E-46) for the plan of mutualization, with respect to the formation of a mutual holding company system for purposes of this provision, the plan shall include:
(1) A description of the structure of the mutual holding company system consistent with the requirements set forth in P.L.2020, c.145 (C.17:48E-46.1 et al.);
(2) A description of the qualifications for members' membership in, and the rights of members of, the mutual holding company consistent with the requirements set forth in P.L.2020, c.145 (C.17:48E-46.1 et al.);
(3) A description of the transactions, and parties to those transactions, that will affect the mutualization and reorganization, including, but not limited to, transfer and assumption of policies, contracts, assets and liabilities, formation of entities, and the amendment or restatement of certificates of incorporation or bylaws. The plan of reorganization may provide for the transfer of assets of a health service corporation and its subsidiaries to the mutual holding company or one or more subsidiaries of the mutual holding company in connection with the formation of the mutual holding company system;
(4) The identity of those persons who shall serve as directors and officers of the mutual holding company, its intermediate holding companies, if any, and its subsidiaries, including the reorganized insurer, as of the effective time of the mutualization and reorganization. The plan shall specify the members of the board of directors of the health service corporation who shall serve as initial directors of the mutual holding company, as provided in section 15 of P.L.2020, c.145 (C.17:48E-46.15);
(5) Information sufficient to demonstrate that the financial condition of the reorganized insurer and the insurance company subsidiaries of the reorganized insurer shall meet solvency requirements pursuant to applicable laws and rules of this State relating to insurance companies after giving effect to the mutualization and reorganization;
(6) A certification that, following the mutualization and reorganization, the material terms and conditions of insurance coverage of:
(a) policyholders of policies directly written and issued by the health service corporation shall remain in full force and effect under policies transferred to and assumed by the reorganized insurer; and
(b) all other policyholders shall remain in full force and effect under policies transferred to and assumed by insurance company subsidiaries of the mutual holding company;
(7) A certification that, following the mutualization and reorganization, the material terms and conditions of subordinated surplus notes and other contractual obligations, other than those arising pursuant to policies described in paragraph (6) of this subsection, of the health service corporation and its subsidiaries shall, subject to the rights of the health service corporation and its subsidiaries pursuant to applicable law, and to the extent those obligations are not otherwise satisfied or terminated in accordance with their terms, remain in effect upon the transfer of those obligations to, and assumption of those obligations by, the reorganized insurer or one or more other subsidiaries of the mutual holding company; and
(8) A certification that, following the mutualization and reorganization, the mutual holding company shall comply with the employment requirements as provided in section 16 of P.L.2020, c.145 (C.17:48E-46.16).
b. Upon the affirmative vote of the board of directors complying with subsection a. of this section, the plan to form a mutual holding company system pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) shall be filed with the commissioner for approval. Upon filing the plan to form a mutual holding company system, the obligations pursuant to section 4 of P.L.2017, c.100 (C.17:48E-17.3) shall be suspended during the pendency of the commissioner's review process pursuant to this subsection; if the commissioner approves the plan to form a mutual holding company, any obligations arising pursuant to section 4 of P.L.2017, c.100 (C.17:48E-17.3) shall be deemed satisfied by the initial assessment pursuant to subsection a. of section 13 of P.L.2020, c.145 (C.17:48E-46.13). The commissioner shall review the plan to mutualize and reorganize in accordance with the requirements of subsection a. of section 3 of P.L.1995, c.196 (C.17:48E-47). The commissioner shall hold three public hearings on the plan to form a mutual holding company within 90 days after the commissioner determines that the filing is complete, with notice provided by publication in a manner satisfactory to the commissioner. The public hearings shall also address the plan of reorganization to the mutual holding company system required by P.L.2020, c.145 (C.17:48E-46.1 et al.). Consistent with subsection a. of section 3 of P.L.1995, c.196 (C.17:48E-47), the commissioner shall approve a plan of mutualization and reorganization unless the commissioner finds the plan:
(1) is contrary to law;
(2) would be detrimental to the safety or soundness of the proposed reorganized insurer and insurance company subsidiaries of the proposed mutual holding company; or
(3) does not benefit the interests of the policyholders of the health service corporation or treats them inequitably.
The commissioner may engage the services of experts and consultants to advise on any matters related to the application, and if a written study or other expert report is prepared, it shall be made available to the applicant within a reasonable period of time prior to the initial public hearing. The commissioner may also engage the services of a consultant to conduct a health impact study of the effects of the reorganization on the health of the policy holders of the health service corporation, and the general public. The engagement shall not be subject to Chapter 32 of Title 52 of the Revised Statutes and all costs related to such engagement for the examination and deliberations of the application shall be paid by the health service corporation that makes the filing, both for services prior to the effective time and for services after the effective time. At the expiration of 30 days after the final public hearing, the commissioner shall approve or disapprove the plan of mutualization and reorganization and shall set forth the decision in writing and shall state the reasons therefor. The commissioner shall inform the health service corporation of the specific reasons for the disapproval of any plan of mutualization and reorganization and provide a cure period of no shorter than 90 days to cure any deficiencies. Any disapproval shall be subject to judicial review as a final decision of a State administrative agency.
c. A plan of mutualization and reorganization may be amended, terminated, or approved consistent with P.L.2020, c.145 (C.17:48E-46.1 et al.). A plan of mutualization and reorganization adopted by the board of directors of the applicant may be:
(1) Amended by the board of directors of the applicant in response to the comments or recommendations of the commissioner at any time; or
(2) Terminated by the board of directors of the applicant at any time. An applicant that has terminated a plan to form a mutual holding company system shall be deemed to have also terminated the application to transition to a mutual insurer.
d. An approved plan of mutualization and reorganization shall be effective at the effective time specified in the plan of reorganization, or such other time subsequently requested by the applicant and agreed to by the commissioner.
##### **§ 17:48E-46.6** Monitoring mutual holding company's operations {#sec-17-48e-46.6 omnilex-key=us-nj-statutes--title-17--17:48E-46.6}
6. A mutual holding company system shall be considered an insurance holding company system and subject to P.L.1970, c.22 (C.17:27A-1 et seq.). The commissioner shall possess supervisory powers with respect to the insurance holding company system which shall include the authority to monitor the mutual holding company system's financial health, enterprise risk, and examine its operations pursuant to P.L.1970, c.22 (C.17:27A-1 et seq.). Notwithstanding the foregoing, solely with regard to the transactions set forth in the application to form a mutual holding company system filed pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5), a mutual holding company system shall not be required to seek separate approval for an acquisition of controlling stock, ownership interest, assets or control, or for a merger or consolidation, share exchange, organization, or reorganization of insurance companies within the mutual holding company system, or other transactions set forth in the application to form a mutual holding company system. Thereafter, any future transactions not approved as part of the application to form a mutual holding company system, shall be subject to the applicable requirements of P.L.1970, c.22 (C.17:27A-1 et seq.). As an insurance holding company system subject to P.L.1970, c.22 (C.17:27A-1 et seq.), the commissioner shall have the power to order production of any records, books, or other information and papers in the possession of a mutual holding company system as are reasonably necessary to ascertain the financial condition of the mutual holding company system or to determine compliance with P.L.2020, c.145 (C.17:48E-46.1 et al.).
##### **§ 17:48E-46.7** Investments; supplier program; mutualization; reorganization plans {#sec-17-48e-46.7 omnilex-key=us-nj-statutes--title-17--17:48E-46.7}
7. a. A mutual holding company or a non-insurance subsidiary may, alone or together, make any lawful investments including directly or indirectly acquiring or otherwise holding the stock or other ownership interests of any nonprofit or for-profit entities.
b. Insurance company subsidiaries and the reorganized insurer may make investments, including investments in non-insurance entities subject to investment and asset limitations pursuant to applicable laws and rules relating to insurance companies.
c. The mutual holding company and its non-insurance and insurance company subsidiaries shall continue to operate a diverse supplier program that promotes and invests in the utilization of minority-owned and women-owned businesses in the procurement of goods and services, including professional services. The mutual holding company shall include in its annual filing pursuant to subsection b. of section 11 of P.L.2020, c.145 (C.17:48E-46.11) information on this subsection.
##### **§ 17:48E-46.8** Non-obligation of distribution payment to members, policyholders {#sec-17-48e-46.8 omnilex-key=us-nj-statutes--title-17--17:48E-46.8}
8. Neither the adoption nor the implementation of a plan of mutualization and reorganization shall be deemed to give rise to any obligation by or on behalf of any entity in the mutual holding company system or any predecessor entity to make any distribution or payment to any member or policyholder, or to any other person, fund, or entity of any nature whatsoever, in connection with the ownership, control, benefits, policies, purpose, or nature of any entity in the mutual holding company system, any predecessor entity or otherwise.
##### **§ 17:48E-46.9** Membership in mutual holding company {#sec-17-48e-46.9 omnilex-key=us-nj-statutes--title-17--17:48E-46.9}
9. a. Membership in a mutual holding company shall be determined in accordance with the mutual holding company's articles of incorporation and bylaws and may be based upon:
(1) the amount of health insurance policies in force with the reorganized insurer;
(2) the amount of the health insurance premiums paid to the reorganized insurer; or
(3) other reasonable factors.
A mutual holding company may also consider the amount of premiums paid to, or policies in force under, affiliated insurance companies operating under the same brand licensee program as the reorganized insurer and permit entities holding administrative services agreements with the mutual holding company to be members of the mutual holding company. The mutual holding company may provide in its bylaws the basis for the number of votes those entities will have as members of the mutual holding company.
b. Members of a mutual holding company shall be entitled to vote for the election of directors of the mutual holding company in accordance with the mutual holding company's bylaws. Directors of the mutual holding company shall be elected from nominees selected by the nominating and governance committee of the board of directors of the mutual holding company, or a comparably authorized committee, except for public directors serving in accordance with section 15 of P.L.2020, c.145 (C.17:48E-46.15).
c. No member of a mutual holding company shall transfer membership or any right arising therefrom.
d. Except as specified in subsection b. of this section, a membership interest in a mutual holding company shall not be deemed to give rise to any other rights, including any ownership interests in, or ownership rights with respect to, the assets of any entity in the mutual holding company system or any predecessor entity, and shall not be deemed to give rise to any entitlement to receive payment of any dividend or other distribution in connection with the ownership, control, benefits, policies, purpose or nature of any entity in the mutual holding company system or any predecessor entity.
e. A member of a mutual holding company is not personally liable for the acts, debts, liabilities or obligations of the mutual holding company solely because of the member's membership status.
f. No assessments shall be imposed upon the members of a mutual holding company by the directors or members, or because of any liability, act, debt or obligation of the mutual holding company or of any company owned or controlled by the mutual holding company.
g. A membership interest in a mutual holding company shall not constitute a security pursuant to the laws of this state.
##### **§ 17:48E-46.10** Plan of dissolution {#sec-17-48e-46.10 omnilex-key=us-nj-statutes--title-17--17:48E-46.10}
10. Upon any voluntary dissolution of a mutual holding company in accordance with N.J.S.15A:12-2, 15A:12-3, 15A:12-4, 15A:12-5, 15A:12-6, 15A:12-7, or section 19 of P.L.1992, c.65 (C.17B:32-49), the mutual holding company shall adopt a plan of dissolution in accordance with N.J.S.15A:12-8. The plan shall provide that any assets of the mutual holding company remaining after the discharge of all liabilities and obligations, if any, shall be distributed in accordance with N.J.S.15A:12-8.
##### **§ 17:48E-46.11** Annual statements; report to the Governor {#sec-17-48e-46.11 omnilex-key=us-nj-statutes--title-17--17:48E-46.11}
11. a. A mutual holding company shall file with the commissioner an annual statement pursuant to applicable laws of this State.
b. The mutual holding company shall, on an annual basis, and in a form and manner prescribed by the Department of Banking and Insurance, file with the department information relating to the mutual holding company's operations, including but not limited to the following: the mutual holding company's mission, activities, revenues, expenses, assets, liabilities, and total compensation provided to officers, directors, trustees and the five other highest compensated employees who are not an officer, director or trustee, which information shall be posted on the department's website.
c. The commissioner shall report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), on the compliance of the mutual holding company with the provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.).
##### **§ 17:48E-46.12** Public records {#sec-17-48e-46.12 omnilex-key=us-nj-statutes--title-17--17:48E-46.12}
12. a. The application submitted pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5) shall be a public record, except for the following documents, which shall be confidential and not public records:
(1) documents deemed confidential by statute or regulation;
(2) the business plan, capitalization plan, financial projections, and market competitive data; and
(3) any other information the commissioner determines could result in harm to the health service corporation, mutual holding company, reorganized insurer or other insurance entity within the mutual holding company system, or the public interest, if disclosed.
b. The commissioner shall provide the public with prompt and reasonable access to public records relating to the proposed reorganization of the health service corporation. The commissioner shall make the public records received pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) available for inspection at no cost to the public. These public records shall be made available to the public in connection with the public hearing to be held pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.).
##### **§ 17:48E-46.13** Initial and annual assessments {#sec-17-48e-46.13 omnilex-key=us-nj-statutes--title-17--17:48E-46.13}
13. a. Following regulatory approval pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5) and the establishment of a mutual holding company, the mutual holding company, or any affiliates benefiting from the establishment of a mutual holding company, shall pay an initial assessment to the State Treasury in the amount of $600,000,000 by June 1, 2022 if the effective time precedes June 1, 2022. If the effective time is later than June 1, 2022, the initial assessment shall be due by June 1 of the calendar year following the effective time. The initial assessment shall be a one-time, nonrecurring State business tax on the mutual holding company and its affiliates.
b. Following the initial assessment, and subject to subsections c. and d. of this section, the mutual holding company, or any affiliates benefiting from the establishment of a mutual holding company, shall pay a limited duration business tax by June 1 of each calendar year beginning with the calendar year following the initial assessment, and for a period of seventeen years. The total assessment, including both the initial and annual assessments, shall not exceed $1,250,000,000. The annual assessments represent a limited duration state business tax on the mutual holding company and its affiliates' business payable by the mutual holding company or any affiliates benefiting from the establishment of a mutual holding company, and shall be based on the following schedule with earned premiums defined consistent with 45 C.F.R. 158.130:
(1) For annual assessment 1, 20 percent of the reorganized insurer's earned premiums for the calendar year preceding that assessment, with the assessment not to exceed $100,000,000.
(2) For annual assessments 2 through 11, 5 percent of the reorganized insurer's earned premiums for the calendar year preceding a given year's assessment, with each year's assessment not to exceed $25,000,000.
(3) For annual assessments 12 through 17, 10 percent of the reorganized insurer's earned premiums for the calendar year preceding a given year's assessment, with each year's assessment not to exceed $50,000,000.
c. The mutual holding company shall not pay any portion of the annual assessment for a given calendar year if the mutual holding company's system-wide health risk-based capital authorized control level would fall below 550 percent based on the standards for risk based capital for health organizations as adopted by the National Association of Insurance Commissioners following the payment as applied against the prior calendar year's risk based capital, or if in the opinion of any nationally recognized statistical rating organization, the group credit rating of the mutual holding company would not be considered investment grade. The commissioner shall determine that the mutual holding company's system-wide health risk-based capital authorized control level would fall below 550 percent before payments shall be deferred pursuant to this subsection and paragraph (1) of subsection d. of this section. Neither the insurance company subsidiaries nor the reorganized insurer shall make dividends or distributions to the mutual holding company or any subsidiaries thereof until such time as the annual assessment deferred pursuant to paragraph (1) of subsection d. of this section is satisfied.
d. (1) If the mutual holding company does not pay the annual assessment for a given calendar year pursuant to subsection c. of this section, the annual assessment that was not paid shall be deferred to the subsequent calendar year, which shall be the deferral date for the deferred annual assessment, with all subsequent annual assessments pursuant to subsection b. of this section also deferred by another calendar year so that no two annual assessments are due in the same calendar year. If an annual assessment is deferred, that annual assessment shall not be required by law to be paid until the deferral date.
(2) Notwithstanding the provisions of paragraph (1) of this subsection to the contrary, the assessment years pursuant to subsection b. of this section shall not be extended beyond, and the payment obligation pursuant to this section shall cease to exist after, the date that is 25 years from the effective time.
e. The initial assessment is a one-time business tax imposed on the mutual holding company system and the annual assessment is a limited duration business tax imposed on the mutual holding company system based on the reorganized insurer's business. The assessment of additional taxes, penalties and interest shall be as provided by the "State Uniform Tax Procedure Law," R.S.54:48-1 et seq.; provided that no interest shall accrue or penalty shall be levied on a deferred annual assessment.
##### **§ 17:48E-46.14** Mutual holding company {#sec-17-48e-46.14 omnilex-key=us-nj-statutes--title-17--17:48E-46.14}
14. A mutual holding company formed pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.) shall not convert to a for-profit stock holding company. The provisions of P.L.2001, c.131 (C.17:48E-49 et seq.) providing for conversion of a health service corporation to a domestic stock insurer shall not apply to a mutual holding company formed pursuant to P.L.2020, c.145 (C.17:48E-46.1 et al.).
##### **§ 17:48E-46.15** Board of the mutual holding company; membership, transitional period, diversity {#sec-17-48e-46.15 omnilex-key=us-nj-statutes--title-17--17:48E-46.15}
15. a. The board of the mutual holding company shall be constituted of 22 directors as follows:
(1) 13 directors shall be elected, as provided in the bylaws, one of whom shall be the chair;
(2) 5 directors shall be public directors appointed by the Governor with the advice and consent of the Senate;
(3) 2 directors shall be public directors appointed by the Senate President; and
(4) 2 directors shall be public directors appointed by the Speaker of the General Assembly.
b. Upon the effective time, the term of office of the public directors of the reorganized insurer shall not immediately expire but rather shall be temporarily continued and each such director shall continue in holdover status until such time as the appointing authority reappoints or renames such director or appoints or names another director. The initial board of directors of the mutual holding company shall be:
(1) the elected directors of the reorganized insurer supplemented by additional elected directors nominated and elected by the mutual holding company's board after the effective time for a total number of elected directors specified in paragraph (1) of subsection a. of this section;
(2) 5 public directors appointed by the Governor with the advice and consent of the Senate;
(3) 2 public directors named by the Senate President; and
(4) 2 public directors named by the Speaker of the General Assembly.
c. Each elected director shall have a term of three years with up to two successive three-year terms following the initial term for up to a total of three successive terms, and as provided for in the bylaws, with such other term and term limits specifically applying to the individual directors. The chief executive officer or president of the mutual holding company shall be an elected director at all times and shall not be subject to any term limit or election pursuant to section 9 of P.L.2020, c.145 (C.17:48E-46.9). The board of directors, as provided by the bylaws, shall elect a chair, who shall be a member of the board elected pursuant to paragraph (1) of subsection a. of this section. Each director elected pursuant to paragraph (1) of subsection a. of this section shall meet the statutory and regulatory qualifications for the mutual holding company system's businesses and be free from conflicts of interest that would prohibit the person from materially executing the person's duties as a director. Each public director shall have a term of three years with up to two successive three-year terms following the initial term, for a total of up to three successive terms. Upon the effective time, the terms of office of the public directors of the reorganized insurer shall continue until their respective successors are appointed and qualified. No period during which a public director holds over shall be deemed to be an extension of the public director's term of office for the purpose of determining the date on which a successor's term expires.
d. There shall be a transitional period of 18 months following the effective time before elected directors of the mutual holding company are subject to election by its members pursuant to section 9 of P.L.2020, c.145 (C.17:48E-46.9). The first election shall occur at the first annual meeting following the transitional period, and in accordance with the mutual holding company's bylaws.
e. To the extent practicable, the mutual holding company shall make best efforts to reflect the racial, ethnic, and gender diversity of the communities that it serves throughout the organization, including the board of directors and executive leadership, to achieve its mission.
##### **§ 17:48E-46.16** Full-time employees maintained for 36 months following transition {#sec-17-48e-46.16 omnilex-key=us-nj-statutes--title-17--17:48E-46.16}
16. a. Upon the formation of a mutual holding company, the total number of full-time employees that were employed within a mutual holding company system shall be maintained for a transition period of 36 months following that formation based on the full-time employee count of the health service corporation as of September 30, 2019, except as provided in subsection b. of this section.
b. This section shall not:
(1) supersede the terms of any collective bargaining agreement; or
(2) require a mutual holding company system to replace headcount lost due to voluntary attrition or terminations for cause, including for performance, or replace any loss of headcount attributable to a decline in enrollment, market share, or loss of a major account.
c. This section shall expire following the transition period of 36 months following the formation of a mutual holding company.
##### **§ 17:48E-46.17** Severability {#sec-17-48e-46.17 omnilex-key=us-nj-statutes--title-17--17:48E-46.17}
19. a. The provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.) shall be severable; and if any phrase, clause, sentence, or provision is deemed unenforceable, the remaining provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.) shall be enforceable.
b. The provisions of P.L.2020, c.145 (C.17:48E-46.1 et al.) shall be liberally construed to effectuate its purposes.
##### **§ 17:48E-47** Filing, approval of conversion plan {#sec-17-48e-47 omnilex-key=us-nj-statutes--title-17--17:48E-47}
3. a. Upon the affirmative vote of the board of directors, the plan for conversion to domestic mutual insurer shall be filed with the commissioner for approval. A public hearing thereon shall be held within 30 days after the filing, with notice provided by publication in a manner satisfactory to the commissioner. At the expiration of 30 days after the public hearing, the commissioner shall approve the plan for filing or disapprove the plan. The commissioner shall approve the plan unless he finds the plan:
(1) is contrary to law
(2) would be detrimental to the safety or soundness of the proposed domestic mutual insurer; or
(3) prejudices the interests of the subscribers of the health service corporation or treats them inequitably.
The commissioner shall set forth his decision in writing and shall state the reasons therefor. A disapproval shall be subject to judicial review.
b. Upon approval of such a plan by the commissioner and the issuance of a certificate of authority to transact the business of health insurance as a domestic mutual insurer, the health service corporation shall be deemed to be a domestic mutual insurer subject to the provisions of Title 17B of the New Jersey Statutes. All the rights, franchises and interests of the health service corporation in and to every species of property, real, personal and mixed, and choses in action thereunto belonging, shall be deemed transferred to and vested in the domestic mutual insurer, without another deed or transfer and simultaneously therewith the domestic mutual insurer shall be deemed to have assumed all of the obligations and liabilities of the health service corporation and shall hold and enjoy the same to the same extent as if the health service corporation had continued to retain title and transact business.
c. No action or proceedings pending at the time of the conversion of the health service corporation to a domestic mutual insurer to which the health service corporation may be a party shall be abated or discontinued by reason of such conversion, but the same may be prosecuted to final judgment in the same manner as if the conversion had not taken place, or the domestic mutual insurer may be substituted in place of such health service corporation by order of the court in which the action or proceedings may be pending.
d. The contracts of the health service corporation shall be converted to the policies of the domestic mutual insurer without any further action on the part of the domestic mutual insurer. The conversion to a domestic mutual insurer shall not cause any individual health benefits plan issued prior to November 30, 1992 and still in effect to be subject to the provisions of sections 3 through 8 of P.L.1992, c.161 (C.17B:27A-4 through 17B:27A-9), except as specified in those sections, or any small employer health benefits plan issued prior to November 30, 1992 and still in effect to be subject to the provisions of section 3 of P.L.1992, c.162 (C.17B:27A-19).
e. A domestic mutual insurer that has converted from a health service corporation may apply to the commissioner for a temporary waiver of the capital and surplus requirements pursuant to sections 2 through 6 of P.L.1993, c.235 (C.17B:18-68 through 17B:18-72). The commissioner may grant such a waiver for a period not to extend beyond December 31, 1999.
##### **§ 17:48E-48** Directors and officers, terms {#sec-17-48e-48 omnilex-key=us-nj-statutes--title-17--17:48E-48}
4. a. Public members of the board of directors of the health service corporation shall serve as directors of the domestic mutual insurer to the end of the term for which they were appointed and thereafter may be elected as directors of the domestic mutual insurer in accordance with the provisions of N.J.S.17B:18-11 through 17B:18-17. Members of the board of directors of the health service corporation, other than such public members, shall be designated in the proposed certificate of incorporation and upon expiration of their designated terms may be elected in accordance with the provisions of N.J.S.17B:18-11 through 17B:18-17.
b. The bylaws of the domestic mutual insurer shall provide for the appointment of officers, and may provide that the officers of the health service corporation serve to the end of the term to which they were appointed under the bylaws of the health service corporation.
##### **§ 17:48E-49** Definitions relative to conversion of health service corporation to domestic stock insurer. {#sec-17-48e-49 omnilex-key=us-nj-statutes--title-17--17:48E-49}
1. As used in this act:
"Affiliate" or "affiliated" has the meaning set forth in subsection a. of section 1 of P.L.1970, c. 22 (C.17:27A-1).
"Alternative foundation plan" means the plan submitted to the Attorney General and the commissioner pursuant to section 18 of this act.
"Application" means the application for approval of a plan of conversion filed with the commissioner pursuant to section 3 of this act.
"Attorney General" means the Attorney General of the State of New Jersey.
"Commissioner" means the Commissioner of Banking and Insurance.
"Control" has the meaning set forth in subsection c. of section 1 of P.L.1970, c. 22 (C.17:27A-1).
"Conversion" means the process by which a health service corporation converts to a domestic stock insurer in accordance with the provisions of sections 2 through 14 and section 19 of this act. "Converted insurer" means the domestic stock insurer into which a health service corporation converts in accordance with the provisions of sections 2 through 14 and section 19 of this act.
"Domestic stock insurer" means a for-profit stock insurer authorized pursuant to Title 17B of the New Jersey Statutes to transact health insurance as defined in N.J.S.17B: 17-4.
"Effective time" means the date and time at which the conversion of a health service corporation is effective, as provided in section 11 of this act.
"Foundation" means the foundation or foundations established under section 18 or 19 of this act.
"Foundation plan" means the plan submitted to the Attorney General pursuant to section 19 of this act.
"Health service corporation" means a health service corporation established pursuant to P.L.1985, c. 236 (C.17:48E-1 et seq.).
"Material change in form" means any action or series of actions that effect a fundamental corporate change which involves a transfer of ownership or control of assets of the health service corporation or a change of the mission or purpose of the health service corporation, including, without limitation, the purchase, lease, exchange, conversion, restructuring, merger, division, consolidation or transfer of control, bulk reinsurance or other disposition or transfer of a substantial amount of business, line of business, assets or operations of the health service corporation, including the transfer, directly or indirectly, of a substantial amount of the health service corporation's business, line of business, assets or operations to one or more nonconforming affiliates. A material change in form by the transfer, directly or indirectly, of a substantial amount of the health service corporation's business, line of business, assets or operations to one or more nonconforming affiliates shall not be deemed to occur so long as, during the most recent four prior consecutive calendar quarters: (1) the aggregate revenues of all nonconforming affiliates do not exceed 50 percent of the aggregate revenues for the health service corporation and all affiliates; (2) the aggregate revenues of all nonconforming affiliates derived from providing individual or group health coverage to residents of New Jersey equal or exceed 50 percent of the aggregate revenues from all nonconforming affiliates; and (3) the aggregate assets of all nonconforming affiliates do not exceed 50 percent of the aggregate assets of the health service corporation and all affiliates. Notwithstanding the above, a reorganization approved by the commissioner pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5), whereby the mutual holding company is a charitable and benevolent institution as provided in section 41 of P.L.1985, c.236 (C.17:48E-41), shall not constitute a material change in form for purposes of P.L.2001, c.131 (C.17:48E-49 et seq.).
"Nonconforming affiliate" means any affiliate of a health service corporation that: (1) operates on a for-profit basis, or (2) operates on a nonprofit basis and does not have a purpose the same as or substantially similar to that of the health service corporation.
"Parent corporation" means a stock corporation incorporated under the laws of this State that is or has been organized for the purpose of acquiring, directly or indirectly, control of the converted insurer pursuant to the plan of conversion.
"Petition" means the petition for approval of a foundation plan submitted to the Attorney General pursuant to subsection a. of section 19 of this act.
"Plan of conversion" means the written plan of conversion adopted by the health service corporation in compliance with section 2 of this act.
"Policy" means an individual or group policy or contract of insurance, including, without limitation, any certificate, rider, endorsement, plan or product offering issued by or binding upon the health service corporation.
"Subscriber" means a person covered by or entitled to benefits under any policy, including, but not limited to, the persons described in subsection k. of section 1 of P.L.1985, c.236 (C.17:48E-1).
##### **§ 17:48E-50** Procedure for conversion. {#sec-17-48e-50 omnilex-key=us-nj-statutes--title-17--17:48E-50}
2. a. A health service corporation may convert to a domestic stock insurer by complying with the provisions of sections 2 through 14 and section 19 of this act.
b. To convert to a domestic stock insurer, the board of directors of a health service corporation shall adopt a resolution to become a domestic stock insurer at a meeting of the board by a two-thirds affirmative vote of the total number of directors of the health service corporation. A copy of the minutes of the meeting at which that resolution is adopted shall be filed with the commissioner and with the Attorney General at least 120 days before the proposed effective time of the conversion. The resolution shall include a written plan of conversion to a domestic stock insurer. The plan shall include:
(1) The purposes of the conversion and the manner in which the proposed conversion will occur.
(2) The proposed certificate of incorporation of the converted insurer and any parent corporation.
(3) The proposed bylaws of the converted insurer and any parent corporation. The bylaws of the converted insurer shall provide for the appointment of officers, and may provide that the officers of the health service corporation shall serve to the end of the term to which they were appointed under the bylaws of the health service corporation.
(4) A description of any proposed changes in the converted insurer's mode of operations after conversion.
(5) A statement describing the manner in which the plan of conversion provides for the protection of all existing contractual rights of subscribers under the policies in effect at the effective time, including the payment of claims for reimbursement for those services.
(6) A statement that the health service corporation's subscribers shall have no right to receive any assets, surplus, capital or other distribution, or to receive any stock or other ownership interest in the converted insurer or parent corporation in connection with the conversion.
(7) A statement that the legal existence of the health service corporation does not terminate and that the converted insurer is subject to all of the liabilities, obligations and relations of whatever kind of the health service corporation and succeeds to all property, assets, rights, interests and relations of the health service corporation.
(8) An explanation of how policies to be offered by the converted insurer will comply with section 8 of this act.
(9) The manner and form in which the fair market value of the health service corporation will be transferred, without consideration, to the foundation.
##### **§ 17:48E-51** Filing of application. {#sec-17-48e-51 omnilex-key=us-nj-statutes--title-17--17:48E-51}
3. a. The health service corporation shall file with the commissioner an application pursuant to subsection b. of this section for approval of, and permission to convert pursuant to, a plan of conversion. Concurrent with the filing of the application with the commissioner, the health service corporation shall submit a petition to the Attorney General pursuant to section 19 of this act and submit a copy of the petition to the commissioner. The health service corporation shall file a copy of the application with the Attorney General at the time the health service corporation files the application with the commissioner.
b. The application shall include the following:
(1) The plan of conversion and exhibits thereto.
(2) A business plan of the converted insurer and any parent corporation, including five-year financial projections and the number of shares of capital stock that the converted insurer and any parent corporation is authorized to issue, together with estimates of the capital which might be raised by the sales of the capital stock or securities convertible into capital stock.
(3) A certification by the secretary of the health service corporation that the plan of conversion has been duly adopted by action of not less than two-thirds of the total number of directors of the board of the health service corporation. Subscribers of the health service corporation shall not have the right to vote on or approve the plan of conversion, any amendments to the health service corporation's certificate of incorporation or bylaws, or the certificate of incorporation or bylaws of the converted insurer or parent corporation, notwithstanding any provision to the contrary in the certificate of incorporation or bylaws of the health service corporation.
(4) The proposed forms of the notice of hearing required by subsection e. of this section and any other notices required by the plan of conversion or by the commissioner.
(5) Any information provided to the board of directors of the health service corporation in connection with its review and approval of the plan of conversion, except materials that are protected by attorney-client privilege.
(6) A comparative premium rate analysis of all the policies of the health service corporation, comparing actual premium rates for the three-year period preceding the filing of the plan of conversion and projected premium rates for the three-year period following the proposed conversion. The rate analysis shall address the projected impact, if any, of the proposed conversion upon the cost to subscribers as well as the projected impact, if any, of the proposed conversion upon the health service corporation's underwriting profit, investment income, tax liability and loss and claim reserves, including the effect, if any, of adverse market or risk selection on reserves.
(7) Any conditions, other than approval of the plan of conversion by the commissioner, to be fulfilled on or before the effective time.
(8) Any proposed agreement between or among the foundation and the converted insurer or its parent corporation, if applicable, including, but not limited to, any agreement relating to the voting or registration for sale of any capital stock issued to the foundation by the converted insurer or any parent corporation.
(9) Any other additional information that the health service corporation believes is necessary.
(10) Any other additional information that the commissioner in his sole discretion deems appropriate.
c. If required pursuant to section 6 of this act, the plan of conversion shall include an appraisal of the fair market value, or range of values, of the aggregate equity of the converted insurer to be outstanding upon completion of the plan of conversion and, if a range of values, the methodology for fixing a final value coincident with the completion of the transactions provided for in the plan of conversion.
(1) The appraisal shall enable determinations of value of:
(a) the amount of cash or other assets that the foundation will be entitled to receive, without consideration, under the provisions of the plan of conversion; and
(b) the price of any shares to be issued pursuant to the optional provisions of a plan of conversion permitted by subsection e. of section 6 of this act;
(2) The appraisal required by this subsection c. shall be prepared by persons independent of the health service corporation, experienced and expert in the area of corporate appraisals and acceptable to the commissioner. The appraisal shall be in a form and content acceptable to the commissioner and contain a complete and detailed description of the elements that make up the appraisal, justification for the methodology employed and sufficient support for the conclusions reached in the appraisal. The commissioner may also require the appraisal to include an analysis of fair market value based on actuarial considerations, as well as other methods for determining fair market value.
(3) To the extent that the appraisal is based on a capitalization of the pro forma income of the converted insurer, the appraisal shall indicate the basis for determination of the income to be derived from any proceeds of the sale of stock and demonstrate the appropriateness of the earnings-multiple used, including assumptions made regarding future earnings growth.
(4) To the extent that the appraisal is based on the comparison of the capital stock of the converted insurer with outstanding capital stock of existing stock entities offering comparable insurance products, the existing stock entities shall be reasonably comparable to the converted insurer in terms of factors such as size, market area, competitive conditions, profit history and expected future earnings.
(5) In those instances in which the commissioner determines that the appraisal is materially deficient or substantially incomplete, the commissioner may declare the entire application materially deficient or substantially incomplete and decline to further process or may reject the application.
(6) The health service corporation shall submit to the commissioner information demonstrating to the satisfaction of the commissioner the independence and expertise of any person preparing the appraisal or related materials under this subsection.
(7) The appraiser shall not serve as an underwriter or selling agent under the plan of conversion. With the prior written approval of the commissioner, an affiliate of the appraiser may act as an underwriter or selling agent if procedures are followed and representations and warranties are made to ensure that the appraiser is separate from the underwriter or selling agent affiliate and the underwriter or selling agent affiliate does not make recommendations or in any way have an impact on the appraisal.
(8) An appraiser may not receive any other fee except the fee for services rendered in connection with the appraisal.
d. The commissioner in his sole discretion: (1) shall determine, within 60 days of submission of the application, whether the application is complete and, if not, shall specify what additional information is required; and (2) shall further determine when an application is complete. The commissioner may request additional information from the health service corporation which the commissioner determines is necessary to review the application and plan of conversion. The commissioner may also conduct an examination under section 37 of P.L.1985, c.236 (C.17:48E-37) to obtain any information the commissioner determines necessary in connection with the application or transaction or series of transactions, that the commissioner determines constitute, or may constitute, a material change in form. The failure of the health service corporation to provide the information or cooperate in the examination, in addition to other applicable penalties, constitutes grounds for denial of the application.
e. Upon determining that the application is complete and the forms of notice are adequate, the commissioner shall designate a date for a public hearing on the plan of conversion. The public hearing may be held on one or more days, the first commencing within 90 days after the date on which the commissioner determines the application is complete, unless the health service corporation requests, and the commissioner agrees to, a longer period for the purpose of preparing and distributing the notices required by this subsection. The public hearing may, if the commissioner and Attorney General so agree, be conducted jointly as part of the public hearing required under subsection e. of section 19 of this act. The hearing shall be in the nature of a legislative hearing and shall not constitute or be considered a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The health service corporation shall provide the public with at least 45 days' notice of the hearing, the notice to be in the form, and provided in the manner, that the commissioner approves. The health service corporation shall cause notice of the time and place of the public hearing to be published at least two times at intervals of not less than one week, the first publication to be not more than 45 days and the last publication not less than 15 days prior to the public hearing in at least two newspapers of general circulation in New Jersey. The notice of the hearing shall state the purpose thereof and the time and the place where the hearing will occur. The purpose of the hearing shall be to receive comments and information for the purpose of aiding the commissioner in making a decision as to whether to approve the plan of conversion. Persons wishing to make comments and submit information may submit written statements to the commissioner prior to the public hearing and may appear and be heard at the hearing.
f. The hearing shall be conducted by the commissioner or, at the commissioner's discretion, his designee, who shall report to and advise the commissioner on the matter, in which case the determination or order issued by the commissioner shall have the same force and effect as if the commissioner had conducted the hearing personally. The commissioner's order or determination on the application pursuant to section 4 of this act shall be issued within 45 days after the closing of the record of the hearing by the commissioner or his designee, as applicable. The commissioner shall issue a written decision detailing the reasons for the approval or disapproval of the plan of conversion. The commissioner may, for good cause, extend the time within which he shall issue an order or determination on the application.
g. The commissioner may engage the services of advisors and consultants, which may include, but are not limited to, lawyers, actuaries, accountants, investment bankers, compensation and employee benefit plan consultants or any combination thereof, to advise him on any matters related to the conversion. All reasonable costs related to the development and examination of, and deliberations concerning, a plan of conversion and other related matters, including, but not limited to, those reasonable costs attributable to the use by the commissioner of advisors and consultants, shall be paid by the health service corporation that makes the filing or initiates the discussions about a plan of conversion, both for services prior to the effective time and for services after the effective time.
##### **§ 17:48E-52** Approval of plan, certificate of authority. {#sec-17-48e-52 omnilex-key=us-nj-statutes--title-17--17:48E-52}
4. a. The commissioner shall approve the plan of conversion and issue a certificate of authority to the converted insurer to transact business in this State as a domestic stock insurer only if the commissioner finds all of the following:
(1) The plan of conversion meets the requirements of sections 2 and 3 of this act.
(2) Upon conversion, the converted insurer will meet the applicable standards and conditions under this section, including applicable minimum capital and surplus requirements.
(3) The plan of conversion adequately protects the existing contractual rights of subscribers.
(4) The plan of conversion will promote the best interests of the health service corporation.
(5) The health service corporation has complied with all requirements of sections 2 and 3 of this act.
(6) The plan of conversion is fair and equitable.
(7) The plan provides for the enhancement of the operations of the converted insurer.
(8) The plan provides for the transfer at or before the effective time of the entire fair market value of the health service corporation to the foundation in accordance with section 6 of this act.
(9) The plan is consistent with the foundation plan.
(10) The plan does not adversely affect the distribution of the health service corporation's value to the foundation.
(11) The plan is not contrary to law.
(12) The plan promotes the public interest.
(13) The Attorney General has concurred:
(a) with any findings of the commissioner pursuant to paragraph (8) of this subsection and section 6 of this act; and
(b) with the actions of the commissioner under subsection c. of section 3 of this act.
b. The commissioner's order approving or disapproving a plan of conversion under this section shall be a final agency decision subject to appeal in accordance with, and within the time periods specified by, the Rules Governing the Courts of the State of New Jersey.
##### **§ 17:48E-53** Issuance of subsequent order. {#sec-17-48e-53 omnilex-key=us-nj-statutes--title-17--17:48E-53}
5. The order of the commissioner issued pursuant to section 4 of this act shall not take effect unless the commissioner issues a subsequent order finding that:
a. the Superior Court has entered an order pursuant to subsection f. of section 19 of this act approving the establishment of the foundation; and
b. the Superior Court has not imposed any terms or conditions that are materially inconsistent with the order of the commissioner issued pursuant to section 4 of this act.
##### **§ 17:48E-54** Transfer of fair market value. {#sec-17-48e-54 omnilex-key=us-nj-statutes--title-17--17:48E-54}
6. a. At or before the effective time, the entire fair market value of the health service corporation, exclusive of any shares of the converted insurer or any parent corporation issued pursuant to subsection e. of this section, shall be transferred to the foundation, without consideration, in a manner and form acceptable to the commissioner. In determining fair market value, consideration shall be given to value as a going concern, market value, investment or earnings value, net asset value and a control premium, if any.
b. If the foundation receives, at the effective time, 100 percent of the shares of the outstanding capital stock of the converted insurer or any parent corporation freely transferable and without restriction, the foundation is presumed to have acquired the entire fair market value of the health service corporation and no appraisal shall be required under subsection c. of section 3 of this act, unless the commissioner finds that the proposed capital structure of the converted insurer does not represent the fair market value of the health service corporation.
c. (1) If the foundation receives, at the effective time, 100 percent of shares of the outstanding capital stock of the converted insurer or any parent corporation and the shares are subject to restrictions the commissioner determines are necessary and reasonable to maintain the value of the assets of the converted insurer, the foundation is presumed to have acquired the entire fair market value of the health service corporation and, subject to paragraph (2) of this subsection, no appraisal shall be required under subsection c. of section 3 of this act, unless the commissioner finds that the proposed capital structure of the converted insurer does not represent the fair market value of the health service corporation.
(2) In determining whether the restrictions are necessary and reasonable, the commissioner may require an appraisal of the diminution in value of the shares as a result of the restrictions, which appraisal shall take into consideration the increase in value of the shares on account of any registration rights granted to the foundation in connection with the shares of capital stock of the converted insurer or parent corporation.
d. If the foundation receives consideration in a form other than as described in subsections b. and c. of this section, the plan of conversion shall include an appraisal of the fair market value of the health service corporation that satisfies the requirements of subsection c. of section 3 of this act.
e. This section does not prohibit the inclusion in the plan of conversion of provisions under which the converted insurer would make a simultaneous offering of shares of its authorized but unissued capital stock for cash to either (1) the public, or (2) its directors, officers and employees as a group, or both, in each case under terms and conditions and pursuant to valuation procedures the commissioner approves and that do not materially dilute the value of the shares distributed to the foundation. In no event may in excess of five percent of the aggregate shares of capital stock to be issued by the converted insurer pursuant to the plan of conversion be offered for purchase by the directors, officers and employees, in the aggregate, of the health service corporation and the shares shall be offered only on terms generally available to the public.
##### **§ 17:48E-55** Continuation of health service corporation. {#sec-17-48e-55 omnilex-key=us-nj-statutes--title-17--17:48E-55}
7. a. The legal existence of the health service corporation shall not terminate, and the converted insurer shall be a continuation of the health service corporation. The conversion shall only be a change in identity and form of organization. All property, assets, rights, liabilities, obligations, interests and relations of whatever kind of the health service corporation, including, but not limited to, any rights, duties and obligations pursuant to a collective bargaining agreement, shall continue and remain in the converted insurer. All actions and legal proceedings to which the health service corporation was a party prior to conversion shall be unaffected by the conversion. The subscribers of the health service corporation shall have no right to receive any assets, surplus, capital or other distribution, or to receive any stock or other ownership interest in the converted insurer or parent corporation in connection with the conversion.
b. So long as the foundation owns at least 10 percent of the shares of stock of the converted insurer or the parent corporation issued to the foundation at the effective time, the converted insurer or its parent corporation shall not issue any shares of capital stock or other securities convertible into shares of capital stock of the converted insurer or the parent corporation without the approval of the commissioner, who may approve the sale of additional shares of stock of the converted insurer or its parent corporation if the converted insurer demonstrates to the commissioner's sole satisfaction that the sale would not materially dilute the value of the shares distributed to the foundation and that all shares and other securities sold pursuant to this subsection b. or subsection e. of section 6 of this act are priced in a manner consistent with the fair market value of the aggregate equity of the converted insurer or any parent corporation at the time of the sale. The sale of capital stock of the converted insurer or its parent corporation in a firm commitment underwritten public offering shall be presumed to satisfy the standards set forth in this subsection, as long as the capital stock is of the same class and series as the stock owned by the foundation.
##### **§ 17:48E-56** Conversion of policies. {#sec-17-48e-56 omnilex-key=us-nj-statutes--title-17--17:48E-56}
8. a. The policies of the health service corporation shall be converted to policies of the converted insurer without any further action on the part of the converted insurer.
b. Policies of the health service corporation that were issued and remain in force prior to the effective time shall be deemed to comply with laws and regulations applicable to a domestic stock insurer.
c. Policies of the converted insurer issued on or after the effective time shall comply with all laws and regulations that apply to a domestic stock insurer; provided, however, that policies issued on and after the effective time shall, for a period not to exceed six months from the effective time, be deemed to comply with all laws and regulations applicable to a domestic stock insurer if the policies comply with the laws and regulations applicable to a health service corporation.
##### **§ 17:48E-57** Receipt of compensation contingent upon approval of plan prohibited. {#sec-17-48e-57 omnilex-key=us-nj-statutes--title-17--17:48E-57}
9. No director, officer, agent or employee of the health service corporation shall receive any fee, commission or other valuable consideration that is contingent upon the plan of conversion becoming approved or effective or is based upon a director, officer, agent or employee aiding, promoting or assisting in the approval or effectuation of the plan of conversion. Subject to the approval of the commissioner, the health service corporation may provide in its plan of conversion for employee benefit and compensation arrangements that are to become effective simultaneously with the plan of conversion. Except for stock issued to employee benefit plans generally available to all employees, no member of the board of directors or officer of the converted insurer or parent corporation may receive any compensation involving the use of stock of the converted insurer or parent corporation until after the first anniversary of the effective time.
##### **§ 17:48E-58** Documents considered public records; exceptions. {#sec-17-48e-58 omnilex-key=us-nj-statutes--title-17--17:48E-58}
10. All applications, reports, plans and other documents to be filed or submitted under section 3 and section 19 shall be public records, except for the following documents, which shall be confidential and not public records:
a. documents deemed confidential by statute or regulation; and
b. the business plan, the financial projections and any other information the commissioner and Attorney General jointly determine could result in harm to the health service corporation, harm to the converted insurer or parent corporation, or harm to the public interest, if disclosed.
The commissioner and Attorney General shall provide the public with prompt and reasonable access to public records relating to the proposed conversion of the health service corporation. The commissioner and Attorney General shall make the public records received pursuant to this act available for inspection at no cost to the public. These public records shall be made available to the public at least 30 days prior to any public hearing to be held pursuant to this act.
##### **§ 17:48E-59** Conversion effective; conditions. {#sec-17-48e-59 omnilex-key=us-nj-statutes--title-17--17:48E-59}
11. The conversion shall be effective at midnight on the date provided for in the certificate of incorporation of the converted insurer or such other time as the commissioner may agree. On or prior to the effective time of the conversion, the health service corporation shall file with the commissioner a certificate stating that:
a. all the conditions set forth in the order of the commissioner issued pursuant to section 4 of this act have been satisfied;
b. he commissioner has issued the order required under section 5 of this act and all the conditions set forth in that order have been satisfied;
c. the board of directors of the health service corporation has not abandoned or amended the plan of conversion pursuant to section 12 of this act; and
d. the foundation has been established in the manner approved by the Superior Court pursuant to section 19 of this act and at least a majority of the directors of the foundation have been appointed.
##### **§ 17:48E-60** Abandonment, amendment of plan of conversion. {#sec-17-48e-60 omnilex-key=us-nj-statutes--title-17--17:48E-60}
12. The health service corporation may, by action of not less than two-thirds of its board of directors, abandon or amend the plan of conversion at any time before the effective time. No amendment made after the public hearing required by subsection e. of section 3 of this act shall change the plan in any manner which the commissioner determines is material unless a further public hearing is held on the plan as amended.
##### **§ 17:48E-61** Directors, officers continue to serve. {#sec-17-48e-61 omnilex-key=us-nj-statutes--title-17--17:48E-61}
13. The directors and officers of the health service corporation, unless otherwise specified in the plan of conversion, shall serve as the directors and officers of the converted insurer until new directors and officers are duly elected pursuant to the articles of incorporation and bylaws of the converted insurer.
##### **§ 17:48E-62** Participation of Attorney General. {#sec-17-48e-62 omnilex-key=us-nj-statutes--title-17--17:48E-62}
14. The Attorney General has the right to participate in any proceeding before the commissioner under this act and has the right to receive any documents or other information received by the commissioner in connection with the proceeding. The Attorney General is subject to all confidentiality provisions that apply to the commissioner.
##### **§ 17:48E-63** Orders, rules, regulations. {#sec-17-48e-63 omnilex-key=us-nj-statutes--title-17--17:48E-63}
15. The commissioner may issue orders as necessary to effect the conversion and promulgate rules and regulations to implement the provisions of this act pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
##### **§ 17:48E-64** Construction of act. {#sec-17-48e-64 omnilex-key=us-nj-statutes--title-17--17:48E-64}
16. a. Nothing in this act shall be construed to limit the existing authority of the Attorney General, except that the procedures set forth in this act shall be exclusive.
b. A health service corporation shall reimburse the Attorney General and the commissioner for the costs of any advisors and consultants, which may include, but are not limited to, lawyers, actuaries, accountants and investment bankers or any combination thereof, to advise either of them in connection with any matter before any court or any administrative agency relating to any matter under this act.
##### **§ 17:48E-65** Requirements prior to action constituting material change in form. {#sec-17-48e-65 omnilex-key=us-nj-statutes--title-17--17:48E-65}
17. A health service corporation shall satisfy the requirements of sections 18 and 19 of this act prior to engaging in any actions that constitutes or may constitute a material change in form. Any material change in form shall be subject to the prior review of the Attorney General and commissioner pursuant to the provisions of sections 18 and 19 of this act. The Attorney General shall review these material changes in form in furtherance of his common law responsibilities as protector, supervisor and enforcer of charitable trusts and charitable corporations.
##### **§ 17:48E-66** Notification of action constituting material change in form, procedure. {#sec-17-48e-66 omnilex-key=us-nj-statutes--title-17--17:48E-66}
18. a. Except for a conversion pursuant to sections 2 through 14 and section 19 of this act, a health service corporation shall notify the Attorney General and the commissioner of the health service corporation's intent to engage in any action that constitutes or may constitute a material change in form at least 120 days prior to engaging in that action, or such shorter time expressly specified by statute or regulation, within which the commissioner is required to issue an approval or disapproval of the action. Upon the Attorney General's or commissioner's determination that the action is a material change in form, notice shall be given to the health service corporation and the Attorney General or commissioner, as applicable.
b. Within 90 days after the Attorney General or commissioner issues a notice of the determination that the action is a material change in form, the health service corporation shall submit to the commissioner and the Attorney General a petition for review of the material change in form if the health service corporation desires to proceed with the proposed action. The petition shall include an alternative foundation plan that contains the provisions set forth in section 19 of this act applicable under the circumstances, together with any additional provisions the Attorney General determines are reasonably required to coordinate the alternative foundation plan with any proceeding instituted or to be instituted by the commissioner in connection with the material change in form. The petition and alternative foundation plan shall be subject to Attorney General review under section 19 of this act and court approval pursuant to subsection f. of section 19 of this act. If the health service corporation does not desire to proceed with the proposed action, the health service corporation shall notify the commissioner and Attorney General and shall withdraw all filings and submissions made with the commissioner and Attorney General and not engage in the proposed action. If the health service corporation fails to comply with this subsection, the commissioner or Attorney General may seek appropriate relief in Superior Court.
c. An action that has been determined to constitute a material change in form shall not be consummated unless the Superior Court has issued its approval in accordance with subsection f. of section 19 of this act and the commissioner has issued an order or orders approving the material change in form and any related transactions, which, if applicable, may include a determination of the fair market value arising in connection with the material change in form with the concurrence of the Attorney General.
d. The commissioner may hold proceedings as the commissioner determines are necessary to permit him to enter an order or orders approving the material change in form and any related transactions. If either the commissioner or Attorney General determine that a valuation of the health service corporation is necessary, the appraisal shall be conducted in accordance with subsection c. of section 3 of this act.
e. Depending on the nature of the material change in form, the commissioner and Attorney General may permit or require the health service corporation, after complying with this section and consummating the material change in form, to continue to operate as a health service corporation, partially convert to for-profit form, or completely convert to for-profit form.
f. This section shall not apply to a conversion subject to sections 2 through 14 and section 19 of this act.
##### **§ 17:48E-67** Petition for review of foundation plan. {#sec-17-48e-67 omnilex-key=us-nj-statutes--title-17--17:48E-67}
19. a. (1) A health service corporation shall submit to the Attorney General a petition for review of a foundation plan at the same time that it submits a plan of conversion to the commissioner. The petition shall include the foundation plan and any other information that the Attorney General requests.
(2) Within 60 days of the health service corporation's submission of the petition to the Attorney General, the Attorney General shall advise the health service corporation in writing whether the petition is complete, and, if not, shall specify what additional information is required.
(3) The Attorney General shall, upon receipt of the information requested, notify the health service corporation in writing of the date of completion of the petition.
b. The Attorney General shall review the petition and may either support the proposed foundation plan, with or without any specific modifications, or, if he finds that it is not in the public interest, oppose the foundation plan in the Superior Court proceeding commenced pursuant to subsection f. of this section.
c. When reviewing the petition, in addition to considering whether the foundation plan meets the requirements of subsection d. of this section, the Attorney General shall consider whether:
(1) the health service corporation exercised due diligence in deciding to effectuate the conversion, selecting any other party to the conversion or related transactions, and negotiating the terms and conditions of the conversion;
(2) the procedures used by the health service corporation in approving the conversion, including whether expert assistance was used, were appropriate;
(3) a conflict of interest was disclosed, including, but not limited to, conflicts of interest related to board members of, employees of, and experts retained by, the health service corporation or any other parties to the conversion;
(4) any management contract under the conversion or any related transaction is for reasonable fair value;
(5) any proceeds of the conversion will be used solely for purposes of expanding access to affordable, quality health care for underserved individuals and promoting fundamental improvements in the health status of New Jerseyans;
(6) the health service corporation established appropriate criteria in deciding to pursue a conversion and considered the proposed conversion as the only alternative or as the best alternative in relation to carrying out its mission and purposes; and
(7) officers, directors, board members or senior management of the health service corporation will receive contracts in any existing, new or affiliated health service corporation, foundation, the converted insurer, any parent corporation or any affiliate of any of the foregoing.
d. The foundation plan shall meet the following requirements:
(1) The foundation plan shall provide for the establishment of one or more foundations that will receive the fair market value of the health service corporation following its conversion to a domestic stock insurer and that meets the following requirements:
(a) The foundation shall be a trust or nonprofit corporation formed under the laws of this State, but shall not include the health service corporation or any person controlled by the health service corporation.
(b) The foundation shall be a charitable entity that qualifies for federal income tax exemption under paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986, 26 U.S.C. s. 501.
(c) The foundation shall have the sole purposes of expanding access to affordable, quality health care for underserved individuals and promoting fundamental improvements in the health status of all New Jerseyans.
(d) The foundation, its directors, officers and trustees and the assets of the foundation, including any stock of the converted insurer or a parent corporation, shall be independent of any influence or control by the converted insurer, its parent corporation, any of their subsidiaries or affiliates, any of their respective directors, officers, trustees or employees, except with the prior approval of the Attorney General and the commissioner.
(e) The foundation shall not have more than one of its directors serve as a director of the converted insurer or its parent corporation.
(f) The foundation shall not have as a director, officer or senior management any person who has been a director, officer, agent, trustee or employee of the health service corporation, the converted insurer, its parent corporation or any affiliate of any of them during the three-year period preceding the date of appointment as a director, officer or senior manager of the foundation.
(g) The foundation shall have a board of directors that when appointed will comply with section 20 of this act.
(2) The foundation shall provide the Attorney General with an annual report which shall include an audited financial statement and a detailed description of its grant-making and other charitable activities related to its use of the charitable assets received pursuant to the conversion. The annual report shall be made available to the public at both the Attorney General's office and the office of the foundation. Nothing contained in this act shall affect the obligations of an entity possessing endowment funds under the "Uniform Management of Institutional Funds Act," P.L.1975, c.26 (C.15:18-15 et seq.).
(3) The governing body of the foundation shall establish or demonstrate that it has in place, as the case may be, a mechanism to avoid conflicts of interest, including those associated with grant-making activities that may benefit the converted insurer, its affiliates, any person who owns or controls any ownership interest in either the converted insurer or any of its affiliates, and any director or officer of the converted insurer or its affiliates.
e. The Attorney General shall, during the course of the review of the foundation plan pursuant to this section, hold at least one public hearing in which any person may file written comments and exhibits or appear and make a statement. The public hearing may, if the Attorney General and the commissioner so agree, be conducted jointly as part of the public hearing on the conversion required pursuant to subsection e. of section 3 of this act. The Attorney General may subpoena additional information or witnesses, including, but not limited to, information about any transaction that is collateral to the proposed conversion and any related documents, require and administer oaths, require sworn statements, take depositions and use related discovery procedures for purposes of the hearing and at any time prior to completing the review of the proposed conversion. The hearing shall be in the nature of a legislative hearing and shall not constitute or be considered a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The public hearing shall be held no later than 90 days after the date that the petition is declared complete by the Attorney General. Public notice of the hearing shall be provided by the health service corporation not more than 45 days and not less than 15 days prior to the public hearing in at least two newspapers of general circulation in New Jersey.
f. Upon completion by the Attorney General of the review of the petition, the health service corporation shall apply to the Superior Court for approval of the establishment of the foundation. In that action, which shall proceed in a summary manner, the Attorney General shall advise the court as to whether he supports or opposes the foundation plan, with or without any specific modifications, and the basis for that position. In considering whether the foundation plan is in the public interest, the court shall consider whether the requirements of paragraph (1) of subsection d. of this section have been satisfied and may consider the criteria established in subsection c. of this section, as applicable. If the health service corporation fails to comply with this subsection, the Attorney General may seek appropriate relief in Superior Court.
##### **§ 17:48E-68** Foundations; board, membership. {#sec-17-48e-68 omnilex-key=us-nj-statutes--title-17--17:48E-68}
20. a. (Deleted by amendment, P.L.2013, c.253)
b. The foundation created pursuant to section 19 of P.L.2001, c.131 (C.17:48E-67) shall have a board of directors consisting of 15 members. Seven members shall be appointed by the Governor, including two public members, one physician licensed to practice medicine in New Jersey, one licensed health care provider other than a physician, one representative of the dental community, one representative of a community based organization that provides or assists in providing health care or health care services to New Jersey residents and one representative of the AFL-CIO. Three members shall be appointed by the President of the Senate, including one public member, one representative of the hospital community and one physician licensed to practice medicine in New Jersey. One public member shall be appointed by the Minority Leader of the Senate. Three members shall be appointed by the Speaker of the General Assembly, including one public member, one representative of the hospital community and one representative of a community based organization that provides or assists in providing health care or health care services to New Jersey residents. One public member shall be appointed by the Minority Leader of the General Assembly. The members of the board of the foundation shall be appointed for a term of three years. Each member shall hold office until reappointed or a successor is appointed and qualified. A vacancy in the membership of the board shall be filled for an unexpired term in the same manner provided for the original appointment. Members shall serve without fee or compensation. The foundation shall commence its activities upon the appointment of at least a majority of its initial board of directors. In the event more than one foundation is established pursuant to P.L.2001, c.131 (C.17:48E-49 et seq.), the board of directors of any such additional foundations shall be appointed in compliance with the requirements of this subsection.
## **Chapter 48F** {#struct-chapter-48f}
##### **§ 17:48F-1** Definitions relative to prepaid prescription service organizations. {#sec-17-48f-1 omnilex-key=us-nj-statutes--title-17--17:48F-1}
1. As used in this act:
"Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the prepaid prescription service organization.
"Commissioner" means the Commissioner of Banking and Insurance.
"Consumer Price Index" means the medical component of the Consumer Price Index for All Urban Consumers, as reported by the United States Department of Labor, shown as an average index for the New York-Northern New Jersey-Long Island region and the Philadelphia-Wilmington-Trenton region combined.
"Contract holder" means the person or organization which contracts with the prepaid prescription service provider.
"Enrollee" means a person and his dependents who are entitled to benefits provided under a prepaid prescription service organization contract.
"Evidence of coverage" means the certificate, agreement or contract issued pursuant to this act which sets forth the benefits or services to which the enrollee or contract holder is entitled.
"Net equity" means the excess of total assets over total liabilities, excluding liabilities which have been subordinated in a manner acceptable to the commissioner.
"Prepaid prescription service organization" or "organization" means any person, corporation, partnership, or other entity which, in return for a prepayment by a contract holder, undertakes to provide or arrange for the provision of prescription services to enrollees or contract holders. Prepaid prescription service organization shall not include: an entity otherwise authorized or licensed pursuant to the laws of this State or an entity that contracts with such an otherwise authorized or licensed entity, to provide a prescription service on a prepayment or other basis in connection with a health benefits plan; an entity licensed under Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes to do the business of insurance in this State; a provider or other entity who provides prescription services pursuant to a contract with a prepaid prescription service organization; or an entity which, for a fee, acts as administrator of a self-insured prescription plan on behalf of the self insurer.
"Prescription service" means any benefit or service to be provided to an enrollee or a contract holder by a provider pursuant to a contract with a prepaid prescription service organization. Prescription service includes, but is not limited to, the provision of prescription drugs, utilization review and durable medical goods.
"Provider" means a pharmacist or pharmacy which provides benefits under a prepaid prescription services contract.
"Tangible net equity" means net equity reduced by the value assigned to intangible assets, including, but not limited to, goodwill, going concern value, organizational expense, start-up costs, long-term prepayments of deferred charges, nonreturnable deposits, and obligations of officers, directors, owners, or affiliates, except short-term obligations of affiliates for goods or services arising in the normal course of business which are payable on the same terms as equivalent transactions with nonaffiliates and which are not past due.
##### **§ 17:48F-2** Prepaid prescription service organization, certificate of authority. {#sec-17-48f-2 omnilex-key=us-nj-statutes--title-17--17:48F-2}
2. a. Beginning one year after the date of enactment of this act, no person, corporation, partnership, or other entity shall operate a prepaid prescription service organization in this State except in accordance with the provisions of this act. No person shall sell, offer to sell or solicit offers to purchase or receive advance or periodic consideration for prescription services without obtaining a certificate of authority pursuant to this act.
b. A prepaid prescription service organization operating in this State on the effective date of this act shall submit an application for a certificate of authority to the commissioner within nine months of the date of enactment of this act. The organization may continue to operate during the pendency of its application, but in no case longer than 18 months after the date of enactment of this act. In the event the application is denied, the applicant shall then be treated as a prepaid prescription service organization whose certificate of authority has been revoked pursuant to section 18 of this act. Nothing in this subsection shall operate to impair any contract which was entered into before the effective date of this act.
c. Any person offering prescription services in a manner substantially provided for in this act shall be presumed to be subject to the provisions of the act unless the person is otherwise regulated under State law.
##### **§ 17:48F-3** Application for certificate of authority, requirements. {#sec-17-48f-3 omnilex-key=us-nj-statutes--title-17--17:48F-3}
3. Each application for a certificate of authority to operate a prepaid prescription service organization shall be made to the commissioner on a form prescribed by the commissioner, shall be certified by an officer or authorized representative of the applicant, and shall include the following:
a. A copy of the applicant's basic organizational document, such as the articles of incorporation, if a corporation, articles of association, partnership agreement, management agreement, trust agreement, or other applicable documents and all amendments to such documents;
b. A copy of the executed bylaws, rules and regulations, or similar documents, regulating the conduct of the applicant's internal affairs;
c. A list, in a form approved by the commissioner, of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including, but not limited to, the members of the board of directors, executive committee or other governing board or committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities of the applicant; in the case of a partnership or association, the names of the partners or members; each person who has loaned funds to the applicant for the operation of its business; and a statement of any criminal convictions or enforcement or regulatory action taken against any person who is a member of the board, the executive committee or other governing board or committee, or the principal officers;
d. A statement generally describing the applicant, its facilities, personnel, and the prescription services to be offered by the organization;
e. A copy of the standard form of any contract made or to be made between the applicant and any providers relative to the provision of prescription services to enrollees or contract holders;
f. A copy of the form of any contract made or to be made between the applicant and contract holders or prospective contract holders;
g. A copy of the applicant's most recent financial statements audited by an independent certified public accountant. If the financial affairs of the applicant's parent company are audited by an independent certified public accountant but those of the applicant are not, then a copy of the most recent audited financial statement of the applicant's parent company, certified by an independent certified public accountant, attached to which are consolidating financial statements of the applicant, shall satisfy this requirement unless the commissioner determines that additional or more recent financial information is required for the proper administration of this act;
h. A copy of the applicant's financial plan, including a three-year projection of anticipated operating results, a statement of the sources of working capital, and any other sources of funding and provisions for contingencies;
i. A list of any affiliate of the applicant which provides services to the applicant in this State and a description of any material transaction between the affiliate and the applicant;
j. A schedule of rates and charges;
k. A description of the proposed method of marketing;
l. A description of the complaint procedures instituted by the applicant;
m. A description of the quality control and utilization review procedures established by the applicant;
n. A power of attorney, if the applicant is not domiciled in this State, duly executed by the applicant, appointing the commissioner and his successors in office as the true and lawful attorney of the applicant in and for this State upon whom all lawful process in any legal action or proceeding against the organization on a cause of action arising in this State may be served;
o. A description of the means which will be utilized to assure the availability and accessibility of the services to enrollees;
p. A plan, in the event of insolvency, for continuation of the benefits to be provided for under the contract; and
q. Such other information as may be required by the commissioner.
##### **§ 17:48F-4** Review of application. {#sec-17-48f-4 omnilex-key=us-nj-statutes--title-17--17:48F-4}
4. Following receipt of an application, the commissioner shall review it and notify the applicant of any deficiencies contained therein.
a. The commissioner shall issue a certificate of authority to an applicant in a timely manner, if the following conditions are met:
(1) All of the material required by section 3 of this act has been filed;
(2) The persons responsible for conducting the applicant's affairs are competent, trustworthy and possess good reputations, and have had appropriate experience, training and education;
(3) The applicant is financially sound and may reasonably be expected to meet its obligations to enrollees and the contract holder. In making this determination, the commissioner shall consider:
(a) The financial soundness of the applicant's arrangements for prescription services and the minimum standard rates, deductibles, copayments and other enrollee charges used in connection therewith;
(b) The adequacy of working capital, other sources of funding and provisions for contingencies;
(c) Whether any deposit of cash or securities, or any other evidence of financial protection submitted meets the requirements set forth in this act or by the commissioner; and
(d) The applicant's rates and rating methodology;
(4) The agreements with providers for the provision of prescription services comply with the provisions of this act;
(5) Any deficiencies identified by the commissioner have been corrected; and
(6) Any other factors determined by the commissioner to be relevant have been addressed to the satisfaction of the commissioner.
b. If the certificate of authority is denied, the commissioner shall notify the applicant and shall set forth the reasons for the denial in writing. The applicant may request a hearing by notice to the commissioner within 30 business days of receiving the notice of denial. Upon such denial, the applicant shall submit to the commissioner a plan for bringing the prepaid prescription service organization into compliance or providing for the closing down of its business.
##### **§ 17:48F-5** Modification of matter, document, filing required; fixing of charges; filing of benefits offered. {#sec-17-48f-5 omnilex-key=us-nj-statutes--title-17--17:48F-5}
5. a. An organization, unless otherwise provided for in this act, shall not materially modify any matter or document furnished to the commissioner pursuant to section 3 of this act, including any change in rates or charges offered or to be offered under the contract, unless the organization files with the commissioner at least 60 days prior to use or adoption of the change, a notice of the change or modification, together with such information as may be required by the commissioner to explain the change or modification. If the commissioner fails to affirmatively approve or disapprove the change or modification within 60 days of submission of the notice, the notice of modification shall be deemed approved. The commissioner may extend the 60-day review period for not more than an additional 30 days by giving written notice of the extension before the expiration of the 60-day period. If a change or modification is disapproved, the commissioner shall notify the organization in writing and specify the reason for the disapproval.
b. Charges under any contract shall be established in accordance with sound actuarial principles and shall not be excessive, inadequate, or unfairly discriminatory. If at any time the commissioner finds that the rates or benefits offered under the plan are inadequate, excessive, or unfairly discriminatory, he may order that they be rescinded or modified. If the commissioner orders that the plans be rescinded or modified, he shall notify the organization and specify the reasons for the order. The organization may, within 30 business days of receiving the order, request a hearing, which shall be held no later than 45 days after the receipt of the request by the commissioner.
c. Prior to entering into any contract with a contract holder, an organization shall file with the commissioner, for his approval, any benefits which are offered or proposed to be offered under the plan, as well as any modifications which may be made thereto. The filing shall be made no later than 60 days prior to the date that the benefits are intended to be in force. The commissioner shall either approve the benefits or state in writing his reasons for their disapproval within 60 days of receipt of the filing.
##### **§ 17:48F-6** Filing for approval by other insurers, etc. {#sec-17-48f-6 omnilex-key=us-nj-statutes--title-17--17:48F-6}
6. Any insurer, hospital, medical or health service corporation or health maintenance organization which is not otherwise authorized to offer prescription services on a fixed prepayment basis may do so by filing for approval with the commissioner such information as shall be required by the commissioner pursuant to section 3 of this act.
##### **§ 17:48F-7** Rights of prepaid prescription service organization. {#sec-17-48f-7 omnilex-key=us-nj-statutes--title-17--17:48F-7}
7. A prepaid prescription service organization may:
a. Purchase, lease, construct, renovate, operate and maintain such facilities, ancillary equipment and property which may be required for its principal office or for any other purposes deemed necessary in the business transactions of the organization;
b. Borrow money;
c. Loan funds to any person for the purpose of acquiring or constructing facilities or in furtherance of a program providing services to enrollees, or for any other purpose reasonably related to the business of the organization;
d. Furnish prescription services to enrollees or contract holders through providers which are under contract with or employed by the organization;
e. Contract with any person for the performance of certain functions such as marketing, enrollment and administration, subject to the provisions of section 8 of this act;
f. Contract with an insurer licensed in this State for the provision of insurance, indemnity coverage, or reimbursement against the cost of services provided by the organization; and
g. In addition to basic services provided by the organization to contract holders and enrollees, may provide:
(1) Additional services as approved by the commissioner;
(2) Indemnity benefits covering urgent care or emergency services;
(3) Coverage for services from providers other than participating providers, when referred in accordance with the terms of the contract; and
(4) Any other function provided by law, in the organization's articles of incorporation or in the certificate of authority.
##### **§ 17:48F-8** Contract for provision of services. {#sec-17-48f-8 omnilex-key=us-nj-statutes--title-17--17:48F-8}
8. A prepaid prescription service organization may contract with any person to provide some or all of the services it normally performs in providing prescription services and supplemental services to its enrollees and contract holders, but no such contract shall be made effective until it has been approved by the commissioner. The services may include consultative and administrative services. In granting approval, the commissioner may impose any limitations he deems necessary for the protection of the organization's enrollees and contract holders, and the actual and potential effect of providing such services on the financial condition of the organization. Before entering into such a contract, the organization shall provide the commissioner with notice of the contract and such supporting documentation as the commissioner determines necessary. If the commissioner does not affirmatively approve or disapprove the contract within 60 days of the date of submission, the contract shall be deemed approved. The commissioner may extend the 60-day review period for not more than 30 additional days by giving written notice of the extension before the expiration of the initial 60-day period. If the contract is disapproved, the commissioner shall notify the organization in writing and specify the reasons for disapproval.
##### **§ 17:48F-9** Issuance of evidence of coverage. {#sec-17-48f-9 omnilex-key=us-nj-statutes--title-17--17:48F-9}
9. Every contract holder and enrollee shall be issued an evidence of coverage, which shall contain a clear and complete statement of:
a. The coverage to which each enrollee is entitled;
b. Any limitation to which covered services are subject, including, but not limited to, exclusions, deductibles, copayments or other charges;
c. Where information is available as to where and how services may be obtained; and
d. The method for resolving complaints.
If any part of the benefits offered under the contract are subcontracted, the document issued to the contract holder by the organization may contain the information required herein on behalf of the subcontractor.
##### **§ 17:48F-10** Prepaid prescription service organization deemed domestic insurer. {#sec-17-48f-10 omnilex-key=us-nj-statutes--title-17--17:48F-10}
10. a. A prepaid prescription service organization which is organized under the laws of this State shall be deemed to be a domestic insurer for the purposes of P.L.1970, c.22 (C.17:27A-1 et seq.).
b. An organization shall be subject to the provisions of N.J.S.17B:30-1 et seq.
c. The capital, surplus and other funds of an organization shall be invested in accordance with the provisions of N.J.S.17B:20-1 et seq. and guidelines established by the commissioner by regulation.
##### **§ 17:48F-11** Complaint system established. {#sec-17-48f-11 omnilex-key=us-nj-statutes--title-17--17:48F-11}
11. A prepaid prescription service organization shall establish and maintain a complaint system providing reasonable procedures for resolving written complaints which are initiated by enrollees and providers, in accordance with minimum standards established by the commissioner by regulation. The complaint procedure shall be in writing and filed with the commissioner, and shall be made available to providers as well as contract holders and enrollees as provided for in this act.
##### **§ 17:48F-12** Examination by commissioner. {#sec-17-48f-12 omnilex-key=us-nj-statutes--title-17--17:48F-12}
12. The commissioner may conduct an examination of a prepaid prescription service organization as often as he deems necessary in order to protect the interests of providers, contract holders, enrollees, and the residents of this State. An organization shall make its relevant books and records available for examination by the commissioner, and retain its records in accordance with a schedule established by the commissioner by regulation. The reasonable expenses of the examination shall be borne by the organization being examined. In lieu of such examination, the commissioner may accept the report of an examination made by the commissioner of another state.
##### **§ 17:48F-13** Terms, conditions required in contracts. {#sec-17-48f-13 omnilex-key=us-nj-statutes--title-17--17:48F-13}
13. All prepaid prescription service organization contracts with providers or with entities subcontracting for the provision of prescription services shall contain the following terms and conditions:
a. In the event that the organization fails to pay for prescription services for any reason whatsoever, including, but not limited to, insolvency or breach of contract, neither the contract holder nor the enrollee shall be liable to the provider for any sums owed to the provider under the contract.
b. No provider, agent, trustee or assignee thereof may maintain an action at law or attempt to collect from the contract holder or enrollee sums owed to the provider by the organization, but this shall not be construed to prohibit collection of uncovered charges consented to or lawfully owed to providers by a contract holder or enrollee.
##### **§ 17:48F-13.1** Prepaid prescription service organization to receive, transmit transactions electronically; standards. {#sec-17-48f-13.1 omnilex-key=us-nj-statutes--title-17--17:48F-13.1}
10. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a prepaid prescription service organization or its agent or a subsidiary that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to a prepaid prescription service organization, or its agent, its subsidiary or its covered enrollees.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a prepaid prescription service organization or its agent or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all contracts issued, delivered, executed or renewed in this State.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), a prepaid prescription service organization or its agent shall require that health care providers file all claims for payment for health care services. A covered person who receives health care services shall not be required to submit a claim for payment, but notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the contract.
d. For the purposes of this subsection, "substantiating documentation" means any information specific to the particular health care service provided to a covered person.
(1) Effective 180 days after the effective date of P.L.1999, c.154, a prepaid prescription service organization or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a covered person or health care provider, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42 U.S.C. s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the health care provider is eligible at the date of service;
(b) the person who received the health care service was covered on the date of service;
(c) the claim is for a service or supply covered under the health benefits plan;
(d) the claim is submitted with all the information requested by the payer on the claim form or in other instructions that were distributed in advance to the health care provider or covered person in accordance with the provisions of section 5 of P.L.2023, c.296 (C.17B:30-55.4); and
(e) the payer has no reason to believe that the claim has been submitted fraudulently.
(2) If all or a portion of the claim is not paid within the time frames provided in paragraph (1) of this subsection because:
(a) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(b) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(c) the payer disputes the amount claimed; or
(d) there is strong evidence of fraud by the provider and the payer has initiated an investigation into the suspected fraud,
the payer shall notify the health care provider, by electronic means and the covered person in writing within 30 days of receiving an electronic claim, or notify the covered person and health care provider in writing within 40 days of receiving a claim submitted by other than electronic means, that:
(i) the claim is incomplete with a statement as to what substantiating documentation is required for adjudication of the claim;
(ii) the claim contains incorrect information with a statement as to what information must be corrected for adjudication of the claim;
(iii) the payer disputes the amount claimed in whole or in part with a statement as to the basis of that dispute; or
(iv) the payer finds there is strong evidence of fraud and has initiated an investigation into the suspected fraud in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(3) If all or a portion of an electronically submitted claim cannot be adjudicated because the diagnosis coding, procedure coding or any other data required to be submitted with the claim was missing, the payer shall electronically notify the health care provider or its agent within seven days of that determination and request any information required to complete adjudication of the claim.
(4) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(5) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider, no later than two working days following receipt of the transmission of the claim.
(6) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(7) Payment of an eligible claim pursuant to paragraphs (1) and (4) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
If payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of paragraph (2) or paragraph (3) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or information or modification of an initial submission.
If payment is withheld on all or a portion of a claim by a payer pursuant to paragraph (2) or (3) of this subsection and the provider is not notified within the time frames provided for in those paragraphs, the claim shall be deemed to be overdue.
(8) (a) No payer that has reserved the right to change the premium shall deny payment on all or a portion of a claim because the payer requests documentation or information that is not specific to the health care service provided to the covered person.
(b) No payer shall deny payment on all or a portion of a claim while seeking coordination of benefits information unless good cause exists for the payer to believe that other insurance is available to the covered person. Good cause shall exist only if the payer's records indicate that other coverage exists. Routine requests to determine whether coordination of benefits exists shall not be considered good cause.
(c) In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (a) or (b) of this paragraph, the claims payment shall be deemed to be overdue if not remitted to the claimant or his agent by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means or on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
(9) An overdue payment shall bear simple interest at the rate of 12% per annum. The interest shall be paid to the health care provider at the time the overdue payment is made. The amount of interest paid to a health care provider for an overdue claim shall be credited to any civil penalty for late payment of the claim levied by the Department of Human Services against a payer that does not reserve the right to change the premium.
(10) With the exception of claims that were submitted fraudulently or submitted by health care providers that have a pattern of inappropriate billing or claims that were subject to coordination of benefits, no payer shall seek reimbursement for overpayment of a claim previously paid pursuant to this section later than 18 months after the date the first payment on the claim was made. No payer shall seek more than one reimbursement for overpayment of a particular claim. At the time the reimbursement request is submitted to the health care provider, the payer shall provide written documentation that identifies the error made by the payer in the processing or payment of the claim that justifies the reimbursement request. No payer shall base a reimbursement request for a particular claim on extrapolation of other claims, except under the following circumstances:
(a) in judicial or quasi-judicial proceedings, including arbitration;
(b) in administrative proceedings;
(c) in which relevant records required to be maintained by the health care provider have been improperly altered or reconstructed, or a material number of the relevant records are otherwise unavailable; or
(d) in which there is clear evidence of fraud by the health care provider and the payer has investigated the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), and referred the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(11) (a) In seeking reimbursement for the overpayment from the health care provider, except as provided for in subparagraph (b) of this paragraph, no payer shall collect or attempt to collect:
(i) the funds for the reimbursement on or before the 45th calendar day following the submission of the reimbursement request to the health care provider;
(ii) the funds for the reimbursement if the health care provider disputes the request and initiates an appeal on or before the 45th calendar day following the submission of the reimbursement request to the health care provider and until the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section are exhausted; or
(iii) a monetary penalty against the reimbursement request, including but not limited to, an interest charge or a late fee.
The payer may collect the funds for the reimbursement request by assessing them against payment of any future claims submitted by the health care provider after the 45th calendar day following the submission of the reimbursement request to the health care provider or after the health care provider's rights to appeal set forth under paragraphs (1) and (2) of subsection e. of this section have been exhausted if the payer submits an explanation in writing to the provider in sufficient detail so that the provider can reconcile each covered person's bill.
(b) If a payer has determined that the overpayment to the health care provider is a result of fraud committed by the health care provider and the payer has conducted its investigation and reported the fraud to the Office of the Insurance Fraud Prosecutor as required by law, the payer may collect an overpayment by assessing it against payment of any future claim submitted by the health care provider.
(12) No health care provider shall seek reimbursement from a payer or covered person for underpayment of a claim submitted pursuant to this section later than 18 months from the date the first payment on the claim was made, except if the claim is the subject of an appeal submitted pursuant to subsection e. of this section or the claim is subject to continual claims submission. No health care provider shall seek more than one reimbursement for underpayment of a particular claim.
e. (1) A prepaid prescription service organization or its agent, hereinafter the payer, shall establish an internal appeal mechanism to resolve any dispute raised by a health care provider regardless of whether the health care provider is under contract with the payer regarding compliance with the requirements of this section or compliance with the requirements of sections 5 through 15 of P.L.2023, c.296 (C.17B:30-55.4 through 17B:30-55.14). No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of an appeal pursuant to this subsection. The payer shall conduct the appeal at no cost to the health care provider.
A health care provider may initiate an appeal on or before the 90th calendar day following receipt by the health care provider of the payer's claims determination, which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance which shall describe the type of substantiating documentation that must be submitted with the form. The payer shall conduct a review of the appeal and notify the health care provider of its determination on or before the 30th calendar day following the receipt of the appeal form. If the health care provider is not notified of the payer's determination of the appeal within 30 days, the health care provider may refer the dispute to arbitration as provided by paragraph (2) of this subsection.
If the payer issues a determination in favor of the health care provider, the payer shall comply with the provisions of this section and pay the amount of money in dispute, if applicable, with accrued interest at the rate of 12% per annum, on or before the 30th calendar day following the notification of the payer's determination on the appeal. Interest shall begin to accrue on the day the appeal was received by the payer.
If the payer issues a determination against the health care provider, the payer shall notify the health care provider of its findings on or before the 30th calendar day following the receipt of the appeal form and shall include in the notification written instructions for referring the dispute to arbitration as provided by paragraph (2) of this subsection.
The payer shall report annually to the Commissioner of Banking and Insurance the number of appeals it has received and the resolution of each appeal.
(2) Any dispute regarding the determination of an internal appeal conducted pursuant to paragraph (1) of this subsection may be referred to arbitration as provided in this paragraph. The Commissioner of Banking and Insurance shall contract with a nationally recognized, independent organization that specializes in arbitration to conduct the arbitration proceedings.
Any party may initiate an arbitration proceeding on or before the 90th calendar day following the receipt of the determination which is the basis of the appeal, on a form prescribed by the Commissioner of Banking and Insurance. No dispute shall be accepted for arbitration unless the payment amount in dispute is $1,000 or more, except that a health care provider may aggregate his own disputed claim amounts for the purposes of meeting the threshold requirements of this subsection. No dispute pertaining to medical necessity which is eligible to be submitted to the Independent Health Care Appeals Program established pursuant to section 11 of P.L.1997, c.192 (C.26:2S-11) shall be the subject of arbitration pursuant to this subsection.
(3) The arbitrator shall conduct the arbitration proceedings pursuant to the rules of the arbitration entity, including rules of discovery subject to confidentiality requirements established by State or federal law.
(4) An arbitrator's determination shall be:
(a) signed by the arbitrator;
(b) issued in writing, in a form prescribed by the Commissioner of Banking and Insurance, including a statement of the issues in dispute and the findings and conclusions on which the determination is based; and
(c) issued on or before the 30th calendar day following the receipt of the required documentation.
The arbitration shall be nonappealable and binding on all parties to the dispute.
(5) If the arbitrator determines that a payer has withheld or denied payment in violation of the provisions of this section, the arbitrator shall order the payer to make payment of the claim, together with accrued interest, on or before the 10th business day following the issuance of the determination. If the arbitrator determines that a payer has withheld or denied payment on the basis of information submitted by the health care provider and the payer requested, but did not receive, this information from the health care provider when the claim was initially processed pursuant to subsection d. of this section or reviewed under internal appeal pursuant to paragraph (1) of this subsection, the payer shall not be required to pay any accrued interest.
(6) If the arbitrator determines that a health care provider has engaged in a pattern and practice of improper billing and a refund is due to the payer, the arbitrator may award the payer a refund, including interest accrued at the rate of 12% per annum. Interest shall begin to accrue on the day the appeal was received by the payer for resolution through the internal appeals process established pursuant to paragraph (1) of this subsection.
(7) The arbitrator shall file a copy of each determination with and in the form prescribed by the Commissioner of Banking and Insurance.
f. As used in this section, "insured claim" or "claim" means a claim by a covered person for payment of benefits under an insured prepaid prescription service organization contract for which the financial obligation for the payment of a claim under the contract rests upon the prepaid prescription service organization.
g. Any person found in violation of this section with a pattern and practice as determined by the Commissioner of Banking and Insurance shall be liable to a civil penalty as set forth in section 17 of P.L.2005, c.352 (C.17B:30-55).
##### **§ 17:48F-13.2** Prepaid prescription service organization; coverage for contraceptives. {#sec-17-48f-13.2 omnilex-key=us-nj-statutes--title-17--17:48F-13.2}
9. a. A prepaid prescription service organization shall provide coverage under every contract delivered, issued, executed or renewed in this State or approved for issuance or renewal in this State by the Commissioner of Banking and Insurance, on or after the effective date of this act, for expenses incurred in the purchase of prescription female contraceptives, and the services, drugs, devices, products, and procedures on an in-network basis as determined to be required to be covered by the commissioner pursuant to subsection b. of this section.
b. The Commissioner of Banking and Insurance shall determine, in the commissioner's discretion, which provisions of the coverage requirements applicable to insurers pursuant to P.L.2019, c.361 shall apply to prepaid prescription organizations, and shall adopt regulations in accordance with the commissioner's determination.
c. The coverage provided shall include prescriptions for dispensing contraceptives for:
(1) (Deleted by amendment, P.L.2021, c.376)
(2) up to a 12-month period at one time.
d. (1) Except as provided in paragraph (2) of this subsection, the benefits shall be provided to the same extent as for any other service, drug, device, product, or procedure under the contract, except no deductible, coinsurance, copayment, or any other cost-sharing requirement on the coverage shall be imposed.
(2) In the case of a high-deductible health plan, benefits for male sterilization or male contraceptives shall be provided at the lowest deductible and other cost-sharing permitted for a high-deductible health plan under section 223(c)(2)(A) of the Internal Revenue Code (26 U.S.C. s.223).
e. This section shall apply to those prepaid prescription contracts in which the prepaid prescription service organization has reserved the right to change the premium.
f. Nothing in this section shall limit coverage of any additional preventive service for women, as identified or recommended by the United States Preventive Services Task Force or the Health Resources and Services Administration of the United States Department of Health and Human Services pursuant to the provisions of 42 U.S.C. 300gg-13.
##### **§ 17:48F-14** Maintenance of tangible net equity. {#sec-17-48f-14 omnilex-key=us-nj-statutes--title-17--17:48F-14}
14. a. Except as provided in subsection b. of this section, each prepaid prescription service organization shall, at all times, have and maintain tangible net equity equal to the greater of:
(1) $50,000; or
(2) 2% of the organization's annual gross premium income, up to a maximum of the required capital and surplus of an admitted health insurer.
b. An organization which has uncovered expenses in excess of $50,000, as reported on the most recent annual financial statement filed with the commissioner, shall maintain tangible net equity equal to 25% of the uncovered expense in excess of $50,000, in addition to the tangible net equity required by subsection a. of this section.
c. The dollar amounts specified in subsections a. and b. of this section shall be adjusted annually by the commissioner, by regulation, in accordance with changes in the Consumer Price Index.
##### **§ 17:48F-15** Deposit of case, securities; net worth requirement. {#sec-17-48f-15 omnilex-key=us-nj-statutes--title-17--17:48F-15}
15. a. A prepaid prescription service organization shall deposit with the commissioner or with an entity or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that is acceptable to the commissioner in an amount equal to $25,000, which amount shall be adjusted annually by the commissioner, by regulation, in accordance with changes in the Consumer Price Index, plus 25% of the tangible net equity required by section 14 of this act; except that the deposit shall not be required to exceed $100,000, which amount may be adjusted by the commissioner annually in accordance with changes in the Consumer Price Index. The deposit shall be deemed an admitted asset of the organization in the determination of tangible net equity.
b. All income from deposits shall be an asset of the organization. An organization may withdraw a deposit or any part thereof after making a substitute deposit of equal amount and value, except that a security may not be substituted unless it has been approved by the commissioner.
c. Amounts on deposit shall be used to protect the interests of the organization's enrollees in the State and to assure continuation of limited health care services to enrollees of an organization which is in rehabilitation or liquidation. If an organization is placed in rehabilitation or liquidation, the deposit shall be treated as an asset subject to the provisions of N.J.S.17B:32-1 et seq.
d. The commissioner may, by regulation, adjust the amount of required net worth that an organization may have in order to provide adequate protection against contingencies affecting the organization's financial position which are not fully covered by reserves and other liabilities and supporting assets.
##### **§ 17:48F-16** Maintenance of fidelity bond. {#sec-17-48f-16 omnilex-key=us-nj-statutes--title-17--17:48F-16}
16. A prepaid prescription service organization shall maintain in force a fidelity bond in its own name on its officers and employees, in an amount established by the commissioner by regulation. In lieu of the bond, the organization may deposit with the commissioner cash or securities or other investments approved by the commissioner.
##### **§ 17:48F-17** Annual report. {#sec-17-48f-17 omnilex-key=us-nj-statutes--title-17--17:48F-17}
17. A prepaid prescription service organization shall file an annual report with the commissioner, on or before March 1 of each year, attested to by at least two principal officers, which covers the preceding calendar year. The report shall be on a form prescribed by the commissioner and shall include:
a. A financial statement of the organization, including its balance sheet, income statement and statement of changes in financial position for the preceding year, certified by an independent public accountant, or a consolidated audited financial statement of its parent company certified by an independent certified public accountant, attached to which shall be consolidating financial statements of the organization;
b. The number of enrollees at the beginning of the year, the number of enrollees as of the end of the year, and the number of enrollments during the year;
c. At the discretion of the commissioner, a statement by a qualified actuary setting forth his opinion as to the adequacy of reserves; and
d. Any other information relating to the performance of the organization as may be required by the commissioner.
The commissioner may assess a fine of up to $100 per day for each day a required report is late. The commissioner may require the submission of additional reports from time to time, as he deems necessary.
##### **§ 17:48F-17.1** Definitions. {#sec-17-48f-17.1 omnilex-key=us-nj-statutes--title-17--17:48F-17.1}
36. As used in sections 36 through 40 of P.L.2014, c.81 (C.17:48F-17.1 through C.17:48F-17.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Prepaid prescription service organization" means an entity authorized to transact business in this State pursuant to P.L.1997, c.380 (C.17:48F-1 et seq.).
##### **§ 17:48F-17.2** Increase in amount of capital or surplus required of prepaid prescription service organization. {#sec-17-48f-17.2 omnilex-key=us-nj-statutes--title-17--17:48F-17.2}
37. The commissioner may increase the amount of capital or surplus required of a prepaid prescription service organization, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the prepaid prescription service organization's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a prepaid prescription service organization's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section shall be made only after a departmental hearing, unless that hearing is waived by the affected prepaid prescription service organization. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the prepaid prescription service organization. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular prepaid prescription service organization, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the prepaid prescription service organization charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the prepaid prescription service organization charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the prepaid prescription service organization, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the prepaid prescription service organization's financial condition.
##### **§ 17:48F-17.3** Determination of increase, revision or redetermination; factors. {#sec-17-48f-17.3 omnilex-key=us-nj-statutes--title-17--17:48F-17.3}
38. In determining any increase, revision or redetermination in the capital or surplus of a prepaid prescription service organization pursuant to the provisions of section 37 of P.L.2014, c.81 (C.17:48F-17.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 37 of P.L.2014, c.81 (C.17:48F-17.2);
c. The extent to which risks described in section 37 of P.L.2014, c.81 (C.17:48F-17.2) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the prepaid prescription services organization has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the prepaid prescription service organization's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48F-17.4** Suspension, revocation of authority to do business. {#sec-17-48f-17.4 omnilex-key=us-nj-statutes--title-17--17:48F-17.4}
39. The commissioner may suspend or revoke the authority to do business in this State of any prepaid prescription services organization that does not comply with the provisions of sections 36 through 40 of P.L.2014, c.81 (C.17:48F-17.1 through C.17:48F-17.5).
##### **§ 17:48F-17.5** Rules, regulations. {#sec-17-48f-17.5 omnilex-key=us-nj-statutes--title-17--17:48F-17.5}
40. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of sections 36 through 40 of P.L.2014, c.81 (C.17:48F-17.1 through C.17:48F-17.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48F-18** Suspension, revocation of certificate of authority. {#sec-17-48f-18 omnilex-key=us-nj-statutes--title-17--17:48F-18}
18. The commissioner may suspend or revoke the certificate of authority issued to a prepaid prescription service organization pursuant to this act upon his determination that:
a. The organization is operating significantly in contravention of its basic organizational document;
b. The organization issues an evidence of coverage or uses rates or charges which do not comply with the requirements of this act;
c. The organization is unable to fulfill its obligations to enrollees or prospective enrollees;
d. The tangible net equity of the organization is less than that required by this act, or the organization has failed to correct any deficiency in its tangible net equity as required by the commissioner;
e. The organization has failed to implement in a reasonable manner the complaint system required to be established by this act;
f. The continued operation of the organization would be hazardous to the health and welfare of its enrollees;
g. The organization has failed to file any report required pursuant to this act; or
h. The organization has otherwise failed to comply with this act.
##### **§ 17:48F-19** Notification of suspension, revocation of certificate of authority. {#sec-17-48f-19 omnilex-key=us-nj-statutes--title-17--17:48F-19}
19. If the commissioner has cause to believe that grounds exist for the suspension or revocation of a certificate of authority, he shall notify the prepaid prescription service organization in writing, specifically stating the grounds for suspension or revocation and fixing a time for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). If a certificate of authority is revoked, the organization shall submit a plan to the commissioner within 15 days of the revocation, for the winding up of its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of its business. The commissioner may, by written order, permit such further operation of the organization as he may find to be in the best interest of enrollees, to the end that enrollees will be afforded the greatest practical opportunity to obtain continuing prescription services.
##### **§ 17:48F-20** Maintenance of insurance to cover insolvency. {#sec-17-48f-20 omnilex-key=us-nj-statutes--title-17--17:48F-20}
20. The commissioner may require, in connection with the plan for insolvency required pursuant to subsection p. of section 3 of this act, that a prepaid prescription service organization maintain insurance to cover the expenses to be paid for continued benefits following a determination of insolvency, or make other arrangements to ensure that benefits are continued for the period determined in the insolvency plan.
##### **§ 17:48F-21** Rehabilitation, liquidation, conservation of prepaid prescription service organization. {#sec-17-48f-21 omnilex-key=us-nj-statutes--title-17--17:48F-21}
21. Any rehabilitation, liquidation or conservation of a prepaid prescription service organization shall be subject to the provisions of N.J.S.17B:32-1 et seq. and shall be conducted under the supervision of the commissioner; except that the commissioner shall have the authority to regulate any prepaid prescription service organization doing business in this State as a domestic insurer. The commissioner may apply for an order directing him to rehabilitate, liquidate, reorganize or conserve an organization upon any one or more applicable grounds as stated for insurers in N.J.S.17B:32-1 et seq. or any other provision of Title 17B of the New Jersey Statutes or when in his opinion the organization fails to satisfy the requirements for the issuance of a certificate of authority relating to solvency or the requirements for solvency protection as set forth in this act.
##### **§ 17:48F-22** Order of rehabilitation. {#sec-17-48f-22 omnilex-key=us-nj-statutes--title-17--17:48F-22}
22. If an order of rehabilitation issued pursuant to this act directs or provides for the continued operation of the prepaid prescription service organization, including the receipt of payments from, and the provision of prescription services to enrollees, the order may authorize the rehabilitator to make the payments necessary for continued operation, including those expenses necessary for the conduct of the rehabilitation.
##### **§ 17:48F-23** Providers enjoined from billing enrollees, beneficiaries under order of rehabilitation. {#sec-17-48f-23 omnilex-key=us-nj-statutes--title-17--17:48F-23}
23. In the event that an order of rehabilitation or liquidation is granted, the order may enjoin providers from billing enrollees and their beneficiaries for health care services provided. In the course of a rehabilitation proceeding, the court may allow reformation of enrollee and provider contracts, or other restructuring of outstanding liabilities, or transfer of the business to another prepaid prescription service organization. A primary goal of the restructuring or transfer shall be the provision of uninterrupted services to enrollees of the organization. In the course of a rehabilitation proceeding, a plan for settling the claims of general creditors shall not be deemed to be inequitable or to constitute preferential treatment if the amount of reimbursement for an outstanding claim depends, in part, on the estimated increase or decrease in future or prior claims of the creditor.
##### **§ 17:48F-24** Inapplicability of C.17B:32A-1 et seq. {#sec-17-48f-24 omnilex-key=us-nj-statutes--title-17--17:48F-24}
24. A prepaid prescription service organization shall not be subject to the "New Jersey Life and Health Insurance Guaranty Association Act," P.L.1991, c.208 (C.17B:32A-1 et seq.), and the New Jersey Life and Health Insurance Guaranty Association established pursuant to that act shall not provide protection to any individuals entitled to receive prescription services from a prepaid prescription service organization.
##### **§ 17:48F-25** Application, examination fees. {#sec-17-48f-25 omnilex-key=us-nj-statutes--title-17--17:48F-25}
25. A prepaid prescription service organization subject to the provisions of this act shall pay to the commissioner such application fees and examination fees for applying for a certificate of authority as established by regulation by the commissioner.
##### **§ 17:48F-26** Violations; penalties. {#sec-17-48f-26 omnilex-key=us-nj-statutes--title-17--17:48F-26}
26. a. The commissioner may, upon notice and hearing, levy an administrative penalty in an amount not less than $1,000 nor more than $30,000 for each violation, per contract or enrollee. Penalties imposed by the commissioner pursuant to this section may be in lieu of, or in addition to, suspension or revocation of a certificate of authority pursuant to this act. A penalty may be recovered in a summary proceeding pursuant to "the penalty enforcement law," N.J.S.2A:58-1 et seq.
b. If the commissioner believes that any violation of this act has occurred or is threatened, the commissioner may give notice to the prepaid prescription service organization, its representatives, or any other persons who appear to be involved in the alleged violation. The commissioner may arrange a conference with the alleged violators or their authorized representatives to ascertain the facts relating to the alleged violation. In the event that it appears that a violation has occurred or is threatened, the commissioner may implement the necessary measures to correct or prevent the violation. Appeals under this section shall be conducted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
##### **§ 17:48F-27** Cease and desist order; injunctive relief. {#sec-17-48f-27 omnilex-key=us-nj-statutes--title-17--17:48F-27}
27. a. The commissioner may issue an order directing a prepaid prescription service organization to cease and desist from engaging in any act or practice which is in violation of the provisions of this act. The order shall be subject to review pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
b. In the event of noncompliance with a cease and desist order issued pursuant to subsection a. of this section, or if the commissioner elects not to issue a cease and desist order in the case of a violation of any provision of this act, the commissioner may institute a proceeding to obtain injunctive relief, in accordance with the applicable procedures provided in the Rules of Court.
##### **§ 17:48F-28** Confidentiality of data, information. {#sec-17-48f-28 omnilex-key=us-nj-statutes--title-17--17:48F-28}
28. Any data or information relating to the diagnosis, treatment or health of an enrollee or prospective enrollee obtained by a prepaid prescription service organization from the contract holder, enrollee, prospective enrollee or any provider shall be confidential and shall not be disclosed to any person except:
a. To the extent that it may be necessary to carry out the purposes of this act;
b. Upon the express consent of the enrollee or prospective enrollee;
c. Pursuant to statute or court order for the production of evidence or the discovery thereof; or
d. In the event of a claim or litigation between an enrollee or a prospective enrollee and the organization wherein such data or information is relevant. An organization shall be entitled to claim any statutory privilege against disclosure which the provider who furnished the information to the organization is entitled to claim.
##### **§ 17:48F-29** Rules, regulations. {#sec-17-48f-29 omnilex-key=us-nj-statutes--title-17--17:48F-29}
29. The commissioner shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.
## **Chapter 48G** {#struct-chapter-48g}
##### **§ 17:48G-1** Definitions relative to dental decision regulation. {#sec-17-48g-1 omnilex-key=us-nj-statutes--title-17--17:48G-1}
1. As used in this act:
"Adverse dental decision" means a dental decision by an insurer or a third party administrator, or any other person acting on its behalf to deny, reduce, or fail to provide payment, in whole or in part, for a covered service based upon a dental decision.
"Board" means the New Jersey State Board of Dentistry.
"Dental decision" means a decision which is based upon a dental diagnosis or a dental judgment related to dental services performed or to be performed in the State of New Jersey, including, but not limited to, any decision relating to: the quality or appropriateness of dental services rendered or proposed to be rendered by a dentist; reasonable necessity for or customary performance of a dental service; or diagnosis or prognosis of a dental condition.
"Insurer" means an insurance company, health service corporation, hospital service corporation, medical service corporation, dental service corporation, dental plan organization or health maintenance organization authorized to issue dental contracts or plans in this State.
"Third party administrator" means "third party administrator" as defined by section 1 of P.L.2001, c.267 (C.17B:27B-1).
##### **§ 17:48G-2** Dental decisions made by insurer. {#sec-17-48g-2 omnilex-key=us-nj-statutes--title-17--17:48G-2}
2. a. An insurer may make dental decisions in connection with the processing or payment of dental claims or otherwise in the course of its dental benefit administration activity. Dental decisions made by an insurer shall be consistent with the following:
(1) an initial adverse dental decision shall be made by a dentist duly licensed in this or another state;
(2) if a treating dentist questions the adverse dental decision and specifies in writing the basis of the disagreement with the adverse dental decision, the insurer, within 30 days shall:
(a) designate a reviewing dentist who is duly licensed in this State or who has been issued a limited registration certificate pursuant to section 4 of this act; and
(b) notify the treating dentist in writing promptly of the name and address where the reviewing dentist can be contacted and the telephone number which can be used to contact the reviewing dentist;
(3) if an agreement is not reached within a reasonable period of time, not to exceed 30 days from the insurer's notice issued pursuant to subparagraph (b) of paragraph (2) of this subsection, the insurer shall make its decision and communicate the results of the reviewing dentist's dental decision to the treating dentist.
b. Within 14 days of a written request by the treating dentist, or the patient or the patient's authorized representative, for the basis of an adverse dental decision by a reviewing dentist, provided to the treating dentist pursuant to paragraph (3) of subsection a. of this section, the insurer shall send a written notice containing the full name, address and telephone number of the reviewing dentist and a narrative statement specifically identifying the basis for the decision.
##### **§ 17:48G-3** Dental decisions made by third party administrator. {#sec-17-48g-3 omnilex-key=us-nj-statutes--title-17--17:48G-3}
3. a. A third party administrator may make dental decisions in connection with the processing or payment of dental claims or otherwise in the course of its dental benefit administration activity. Dental decisions made by a third party administrator shall be consistent with all of the following:
(1) an initial adverse dental decision shall be made by a dentist duly licensed in this or another state;
(2) if a treating dentist questions the adverse dental decision and specifies in writing the basis of the disagreement with the adverse dental decision, the third party administrator within 30 days shall:
(a) designate a reviewing dentist who is duly licensed in this State or who has been issued a limited registration certificate pursuant to section 4 of this act; and
(b) notify the treating dentist in writing promptly of the name and business address where the reviewing dentist can be contacted and telephone number which can be used to contact the reviewing dentist;
(3) if an agreement is not reached within a reasonable period of time, not to exceed 30 days from the third party administrator's notice issued pursuant to subparagraph (b) of paragraph (2) of this subsection, the third party administrator shall make its decision and communicate the results of the reviewing dentist's dental decision to the treating dentist.
b. Within 14 days of a written request by the treating dentist, or the patient or the patient's authorized representative, for the basis of an adverse dental decision by a reviewing dentist, provided to the treating dentist pursuant to paragraph (3) of subsection a. of this section, the third party administrator shall send a written notice containing the full name, address and telephone number of the reviewing dentist and a narrative statement specifically identifying the basis for the decision.
##### **§ 17:48G-4** Inapplicability of act relative to certain decisions of insurers, third party administrators. {#sec-17-48g-4 omnilex-key=us-nj-statutes--title-17--17:48G-4}
7. This act shall not be construed:
a. To regulate insurers' or third party administrators' making any decision, including, but not limited to, a decision concerning benefit or insurance coverage, that does not involve the making of a dental decision;
b. To regulate insurers' or third party administrators' use of a protocol for denying or limiting benefit payments for dental services where the protocol:
(1) has been approved for use by a dentist who is duly licensed in this State or who has been issued a limited registration certificate pursuant to section 4 of this act; and
(2) does not involve evaluation of an individual patient's dental care or condition; or
c. To regulate the application of contract limitations and exclusions, the credentialing of dentists or the conduct of retrospective fraud reviews.
##### **§ 17:48G-5** Applicability of act to dental decisions. {#sec-17-48g-5 omnilex-key=us-nj-statutes--title-17--17:48G-5}
8. This act shall be construed to apply only to insurers and third party administrators or persons acting on their behalf who make dental decisions.
##### **§ 17:48G-6** Construction of act relative to board. {#sec-17-48g-6 omnilex-key=us-nj-statutes--title-17--17:48G-6}
9. Nothing in this act shall be construed to confer jurisdiction upon the board to make any dental benefit coverage determinations or to direct any insurer, benefit plan, administrator or other payor to make any payment or otherwise to regulate the conduct of an insurer or third party administrator.
## **Chapter 48H** {#struct-chapter-48h}
##### **§ 17:48H-1** Definitions relative to organized delivery systems for health care services benefits. {#sec-17-48h-1 omnilex-key=us-nj-statutes--title-17--17:48H-1}
1. As used in this act:
"Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the organized delivery system.
"Capitation" means a fixed per member, per month, payment or percentage of premium payment for which the provider assumes the risk for the cost of contracted services without regard to the type, value or frequency of the services provided.
"Carrier" means an insurer authorized to transact the business of health insurance as defined at N.J.S.17B:17-4, a hospital service corporation authorized to transact business in accordance with P.L.1938, c.366 (C.17:48-1 et seq.), a medical service corporation authorized to transact business in accordance with P.L.1940, c.74 (C.17:48A-1 et seq.), a health service corporation authorized to transact business in accordance with P.L.1985, c.236 (C.17:48E-1 et seq.) or a health maintenance organization authorized to transact business pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).
"Certified organized delivery system" means an organized delivery system that is compensated on a basis which does not entail the assumption of financial risk by the organized delivery system and that is certified in accordance with this act.
"Comprehensive health care services" means the basic benefits provided under a health benefits plan, including medical and surgical services provided by licensed health care providers who may include, but are not limited to, family physicians, internists, cardiologists, psychiatrists, rheumatologists, dermatologists, orthopedists, obstetricians, gynecologists, neurologists, endocrinologists, radiologists, nephrologists, emergency services physicians, ophthalmologists, pediatricians, pathologists, general surgeons, osteopathic physicians, physical therapists and chiropractors. Basic benefits may also include inpatient or outpatient services rendered at a licensed hospital, covered services performed at an ambulatory surgical facility and ambulance services.
"Financial risk" means exposure to financial loss that is attributable to the liability of an organized delivery system for the payment of claims or other losses arising from covered benefits for treatment or services other than those performed directly by the person or organized delivery system liable for payment, including a loss sharing arrangement. A payment method wherein a provider accepts reimbursement in the form of a capitation payment for which it undertakes to provide health care services on a prepayment basis shall not be considered financial risk.
"Health benefits plan" means a hospital and medical expense insurance policy; health service corporation contract; hospital service corporation contract; medical service corporation contract; health maintenance organization subscriber contract; or other plan for medical care delivered or issued for delivery in this State. Health benefits plan shall not include one or more, or any combination of, the following: coverage only for accident, or disability income insurance, or any combination thereof; coverage issued as a supplement to liability insurance; liability insurance, including general liability insurance and automobile liability insurance; stop loss or excess risk insurance; workers' compensation or similar insurance; automobile medical payment insurance; credit-only insurance; coverage for on-site medical clinics; and other similar insurance coverage, as specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits. Health benefits plans shall not include the following benefits if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral part of the plan: limited scope dental or vision benefits; benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; and such other similar, limited benefits as are specified in Federal regulations. Health benefits plan shall not include hospital confinement indemnity coverage if the benefits are provided under a separate policy, certificate or contract of insurance, there is no coordination between the provision of the benefits and any exclusion of benefits under any group health benefits plan maintained by the same plan sponsor, and those benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same plan sponsor. Health benefits plan shall not include the following if it is offered as a separate policy, certificate or contract of insurance: Medicare supplemental health insurance as defined under section 1882(g)(1) of the Federal Social Security Act (42 U.S.C. s.1395ss(g)(1)); and coverage supplemental to the coverage provided under chapter 55 of Title 10, United States Code (10 U.S.C. s.1071 et seq.); and similar supplemental coverage provided to coverage under a group health plan.
"Licensed organized delivery system" means an organized delivery system that is compensated on a basis which entails the assumption of financial risk by the organized delivery system and that is licensed in accordance with this act.
"Limited health care services" means a health service or benefit which a carrier has elected to subcontract for as a separate service, which may include, but shall not be limited to, substance use disorder services, vision care services, mental health services, podiatric care services, chiropractic services, pharmaceutical services or rehabilitation services. Limited health care services shall not include case management services or employee assistance plan services.
"Organized delivery system" or "system" means an organization with defined governance that:
a. is organized for the purpose of and has the capability of contracting with a carrier to provide, or arrange to provide, under its own management substantially all or a substantial portion of the comprehensive health care services or benefits under the carrier's benefits plan on behalf of the carrier, which may or may not include the payment of hospital and ancillary benefits; or
b. is organized for the purpose of acting on behalf of a carrier to provide, or arrange to provide, limited health care services that the carrier elects to subcontract for as a separate category of benefits and services apart from its delivery of benefits under its comprehensive benefits plan, which limited services are provided on a separate contractual basis and under different terms and conditions than those governing the delivery of benefits and services under the carrier's comprehensive benefits plan.
An organized delivery system shall not include an entity otherwise authorized or licensed in this State to provide comprehensive or limited health care services on a prepayment or other basis in connection with a health benefits plan or a carrier.
"Provider" means a physician, health care professional, health care facility, or any other person who is licensed or otherwise authorized to provide health care services or other benefits in the state or jurisdiction in which they are furnished.
##### **§ 17:48H-2** Certification, licensure, required {#sec-17-48h-2 omnilex-key=us-nj-statutes--title-17--17:48H-2}
2. a. Beginning one year after the enactment of this act, no person, corporation, partnership, or other entity shall operate an organized delivery system in this State without obtaining certification or licensure pursuant to this act.
b. Any person, corporation, partnership, or other entity offering health care services to a carrier in a manner substantially provided for in this act shall be subject to the provisions of this act unless the entity is otherwise regulated under P.L.1973, c. 337 (C.26:2J-1 et seq.), Title 17 of the Revised Statutes, Title 17B of the New Jersey Statutes or P.L.1970, c.102 (C.18A:64G-1 et seq.).
##### **§ 17:48H-3** Application for certification. {#sec-17-48h-3 omnilex-key=us-nj-statutes--title-17--17:48H-3}
3. a. An organized delivery system which is not subject to licensure requirements pursuant to this act shall submit an application for certification to the Commissioner of Banking and Insurance. The organized delivery system may continue to operate during the pendency of its application, but in no case longer than 12 months after the date of submission of the application to the Department of Banking and Insurance, unless the commissioner, by regulation, extends the 12-month limitation. In the event the application is denied, the applicant shall be treated as an organized delivery system whose certification has been revoked pursuant to sections 7 and 8 of this act.
Notwithstanding the obligations imposed by this act regarding certification requirements, nothing in this subsection shall operate to impair any contract in force on the effective date of this act, but this act shall apply to any contract renewed on or after the effective date of this act.
b. The certification shall be valid for a period of three years.
c. A certified organized delivery system shall not directly issue health benefits plans.
##### **§ 17:48H-4** Form, contents of application. {#sec-17-48h-4 omnilex-key=us-nj-statutes--title-17--17:48H-4}
4. Application for certification to operate an organized delivery system shall be made to the Commissioner of Banking and Insurance on a form prescribed by the commissioner, shall be certified by an officer or authorized representative of the applicant and shall include the following:
a. A copy of the applicant's basic organizational documents. For purposes of this subsection, "basic organizational documents" means the articles of incorporation, articles of association, partnership agreement, management agreement, trust agreement, or other applicable documents as appropriate to the applicant's form of business entity, and all amendments to those documents;
b. A copy of the executed bylaws, rules, and regulations, or similar documents, regulating the conduct of the applicant's internal affairs;
c. A list, in a form approved by the Commissioner of Banking and Insurance, of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including, but not limited to, the members of the board of directors, executive committee, or other governing board or committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities of the applicant; in the case of a partnership or association, the names of the partners or members; and a statement of any criminal convictions or civil, enforcement, or regulatory action, including actions relating to professional licenses, taken against any person who is a member of the board, the executive committee, or other governing board or committee, the principal officers, or the persons who are responsible for the conduct of the affairs of the applicant;
d. A statement generally describing the applicant, its facilities, personnel, and the health care services to be offered by the organized delivery system;
e. A copy of the standard form of any provider agreement made or to be made between the applicant and any providers relative to the provision of health care services;
f. A copy of the form of any contract made or to be made between the applicant and any carrier for the provision of or arrangement to provide health care services, which contract shall contain provisions establishing the respective duties of the carrier and the applicant with respect to compliance with P.L.1997, c.192 (C.26:2S-1 et seq.);
g. With respect to each contract made or to be made between the applicant and any other person who will provide comprehensive or limited health care services:
(1) A list of the persons who are to provide the health care services, and the geographical area in which they are located and in which the services are to be performed;
(2) A list of any affiliate of the applicant which provides services to the applicant in this State and a description of any material transaction between the affiliate and the applicant;
(3) A description of the health care services or benefits to be offered or proposed to be offered by the applicant;
(4) A description of the means which will be utilized to assure the availability and accessibility of the health care services to enrollees or contract holders; and
(5) A description of the means by which the organized delivery system shall be compensated for each contract entered into with a carrier; and
h. A list of all administrative, civil, or criminal actions and proceedings to which the applicant, or any of its affiliates, or persons who are responsible for the conduct of the affairs of the applicant or affiliate, have been subject and the resolution of those actions and proceedings. If a license, certificate, or other authority to operate has been refused, suspended, or revoked by any jurisdiction, the applicant shall provide a copy of any orders, proceedings, and determinations relating thereto.
In addition to the information required pursuant to this section, the Commissioner of Banking and Insurance may establish additional reporting requirements or make detailed reporting requirements for any class of certified organized delivery system.
##### **§ 17:48H-5** Review of application. {#sec-17-48h-5 omnilex-key=us-nj-statutes--title-17--17:48H-5}
5. Following receipt of an application for certification, the Commissioner of Banking and Insurance shall review it and notify the applicant of any deficiencies contained therein.
a. The Commissioner of Banking and Insurance shall issue a certification to an organized delivery system if the commissioner finds that the system meets the standards provided for in this act, including, but not limited to:
(1) All of the material required by section 4 of this act has been filed;
(2) The persons responsible for conducting the applicant's affairs are competent, trustworthy, and possess good reputations, and have had appropriate experience, training, and education;
(3) The persons who are to perform the health care services are properly qualified;
(4) The organized delivery system has demonstrated the ability to assure that health care services will be provided in a manner which will assure the availability and accessibility of the services;
(5) The standard forms of provider agreements to be used by the organized delivery system are acceptable; and
(6) The organized delivery system's contracts to provide services do not entail or will not result in the assumption of financial risk by the system.
b. The commissioner may deny an application for certification if the applicant fails to meet any of the standards provided in this act or on any other reasonable grounds. If certification is denied, the commissioner shall notify the applicant and shall set forth the reasons for the denial in writing. The applicant may request a hearing by notice to the commissioner within 30 days of receiving the notice of denial. Upon such denial, the applicant shall submit to the commissioner a plan for bringing the organized delivery system into compliance or providing for the closing down of its business.
##### **§ 17:48H-6** Notice of change, modification. {#sec-17-48h-6 omnilex-key=us-nj-statutes--title-17--17:48H-6}
6. a. A certified organized delivery system, unless otherwise provided for in this act, shall not materially modify any matter or document furnished to the Commissioner of Banking and Insurance pursuant to section 4 of this act unless the organized delivery system files with the commissioner, at least 60 days prior to use or adoption of the change, a notice of the change or modification, together with that information required by the commissioner to explain the change or modification. If the commissioner fails to affirmatively approve or disapprove the change or modification within 60 days of submission of the notice, the notice of modification shall be deemed approved. The commissioner may extend the 60-day review period for not more than 30 additional days by giving written notice of the extension before the expiration of the 60-day period. If a change or modification is disapproved, the commissioner shall notify the system in writing and specify the reason for the disapproval.
b. Prior to entering into any contract with a carrier, a certified organized delivery system shall file with the commissioner, for the commissioner's approval, a copy of that contract. The filing shall be made no later than 60 days prior to the date that the contract is intended to be in effect. If the contract is not disapproved prior to the effective date by the commissioner, the contract shall be deemed approved.
##### **§ 17:48H-7** Suspension, revocation of certification, grounds. {#sec-17-48h-7 omnilex-key=us-nj-statutes--title-17--17:48H-7}
7. The Commissioner of Banking and Insurance may suspend or revoke a certification issued to an organized delivery system pursuant to this act upon the commissioner's determination that:
a. The certified organized delivery system is operating in contravention of its basic organizational documents;
b. The certified organized delivery system is unable to fulfill its obligations to the carriers with whom it contracts;
c. The continued operation of the certified organized delivery system would be hazardous to the health and welfare of the enrollees or contract holders to whom it is obligated to provide health care services or detrimental to a carrier with whom it has contracted to provide the services;
d. The certified organized delivery system is unable to maintain the standards as set forth by the commissioner by regulation;
e. The certified organized delivery system has failed, as provided by the contract, to comply with the provisions of P.L.1997, c.192 (C.26:2S-1 et seq.);
f. The certified organized delivery system has failed to provide the health care services for which it has been certified or has provided health care services which are in contravention of the contract or contracts filed with the commissioner;
g. The certified organized delivery system has otherwise failed to comply with this act or with other applicable law; or
h. There are other reasonable grounds that warrant suspension or revocation.
##### **§ 17:48H-8** Notification of grounds for suspension, revocation of certification. {#sec-17-48h-8 omnilex-key=us-nj-statutes--title-17--17:48H-8}
8. a. If the Commissioner of Banking and Insurance has cause to believe that grounds exist for the suspension or revocation of the certification issued to an organized delivery system, the commissioner shall notify the system, in writing, specifically stating the grounds for suspension or revocation and fixing a time for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). If the certification is revoked, the organized delivery system shall submit a plan to the commissioner within 15 days of the revocation, for the winding up of its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of its business. The commissioner may, by written order, permit such further operation of the organized delivery system as the commissioner finds to be in the best interest of individuals receiving health care services from the system.
b. The commissioner shall notify all carriers with contracts with the system that are on file with the Department of Banking and Insurance of the proceedings.
##### **§ 17:48H-9** Fees. {#sec-17-48h-9 omnilex-key=us-nj-statutes--title-17--17:48H-9}
9. A certified organized delivery system shall pay to the Commissioner of Banking and Insurance those application and examination fees as are established by the commissioner by regulation.
##### **§ 17:48H-10** Civil administrative penalty. {#sec-17-48h-10 omnilex-key=us-nj-statutes--title-17--17:48H-10}
10. The Commissioner of Banking and Insurance may, upon notice and hearing, assess a civil administrative penalty in an amount not less than $250 nor more than $10,000 for each day that a certified organized delivery system is in violation of this act. Penalties imposed by the commissioner pursuant to this section may be in lieu of, or in addition to, suspension or revocation of a certification pursuant to this act. A penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
##### **§ 17:48H-11** Application for licensure. {#sec-17-48h-11 omnilex-key=us-nj-statutes--title-17--17:48H-11}
11. a. An organized delivery system which receives compensation on a basis that entails the assumption of financial risk shall submit an application for licensure to the Commissioner of Banking and Insurance. The organized delivery system may continue to operate during the pendency of its application, but in no case longer than 12 months after the date of submission of the application to the Department of Banking and Insurance, unless the commissioner, by regulation, extends the 12-month limitation. In the event the application is denied, the applicant shall be treated as an organized delivery system whose license has been revoked pursuant to sections 23 and 24 of this act.
Notwithstanding the obligations imposed by this act regarding licensure requirements, nothing in this subsection shall operate to impair any contract in force on the effective date of this act, but this act shall apply to any contract renewed on or after the effective date of this act.
b. An organized delivery system which receives compensation on a basis that entails the assumption of financial risk, but meets the criteria set forth in this subsection, may apply to the commissioner for an exemption from the licensure requirements of this act based on the system's current contractual arrangements.
The commissioner may grant the exemption for such period of time that the commissioner determines that the financial risk of the organized delivery system is de minimis because the organized delivery system's exposure to financial loss is limited in amount or likelihood to the degree that it reasonably will not prevent the system from satisfying the liabilities imposed under the terms of its contracts.
The commissioner may revoke the organized delivery system's exemption from licensure, after notice and an opportunity to be heard, if the commissioner determines that the system's contracts no longer meet the requirements for exemption set forth in this subsection. Upon revocation of the exemption, the system shall be required to obtain licensure from the department within 90 days.
c. An organized delivery system that is granted an exemption from licensure shall apply to and obtain certification as an organized delivery system from the Department of Banking and Insurance pursuant to the provisions of this act.
d. A licensed organized delivery system shall not directly issue health benefits plans.
##### **§ 17:48H-12** Form, contents of application. {#sec-17-48h-12 omnilex-key=us-nj-statutes--title-17--17:48H-12}
12. Application for a license to operate an organized delivery system shall be made to the Commissioner of Banking and Insurance on a form prescribed by the commissioner, shall be certified by an officer or authorized representative of the applicant, and shall include the following:
a. A copy of the applicant's basic organizational documents. For purposes of this subsection, "basic organizational documents" means the articles of incorporation, articles of association, partnership agreement, management agreement, trust agreement, or other applicable documents as appropriate to the applicant's form of business entity and all amendments to those documents;
b. A copy of the executed bylaws, rules, and regulations, or similar documents, regulating the conduct of the applicant's internal affairs;
c. A list, in a form approved by the Commissioner of Banking and Insurance, of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including, but not limited to, the members of the board of directors, executive committee or other governing board or committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities of the applicant; in the case of a partnership or association, the names of the partners or members; each person who has loaned funds to the applicant for the operation of its business; and a statement of any criminal convictions or civil, enforcement or regulatory action, including actions relating to professional licenses, taken against any person who is a member of the board, the executive committee or other governing board or committee, or the principal officers, or the persons who are responsible for the conduct of the affairs of the applicant; d. A statement generally describing the applicant, its facilities, personnel, and the health care services to be offered by the organized delivery system;
e. A copy of the standard form of any provider agreement made or to be made between the applicant and any providers relative to the provision of health care services;
f. A copy of the form of any contract made or to be made between the applicant and any carrier for the provision of or arrangement to provide health care services, which contract shall contain provisions establishing the respective duties of the carrier and the applicant with respect to compliance with P.L.1997, c.192 (C.26:2S-1 et seq.);
g. A copy of the applicant's most recent financial statements audited by an independent certified public accountant. If the financial affairs of the applicant's parent company are audited by an independent certified public accountant, but those of the applicant are not, then a copy of the most recent audited financial statement of the applicant's parent company, audited by an independent certified public accountant, shall be submitted. A consolidated financial statement of the applicant and its parent company shall satisfy this requirement unless the Commissioner of Banking and Insurance determines that additional or more recent financial information is required for the proper administration of this act;
h. A copy of the applicant's financial plan, including a three-year projection of anticipated operating results, a statement of the sources of working capital and any other sources of funding and provisions for contingencies;
i. With respect to each contract made or to be made between the applicant and any other person who will provide comprehensive or limited health care services:
(1) A list of the persons who are to provide the health care services, and the geographical area in which they are located and in which the services are to be performed;
(2) A list of any affiliate of the applicant which provides services to the applicant in this State and a description of any material transaction between the affiliate and the applicant;
(3) A description of the health care services or benefits to be offered or proposed to be offered;
(4) A description of the means which will be utilized to assure the availability and accessibility of the health care services to enrollees or contract holders;
(5) A plan, in the event of the insolvency of the organized delivery system, for continuation of the health care services to be provided for under the contract; and
(6) A description of the means by which the organized delivery system shall be compensated for each contract entered into with a carrier;
j. A power of attorney, duly executed by the applicant, if not domiciled in this State, appointing the Commissioner of Banking and Insurance and the commissioner's successors in office as the true and lawful attorney of the applicant in and for this State upon whom all lawful process in any legal action or proceeding against the organized delivery system in a cause of action arising in this State may be served;
k. A list of all administrative, civil, or criminal actions and proceedings to which the applicant, or any of its affiliates, or persons who are responsible for the conduct of the affairs of the applicant or affiliate, have been subject and the resolution of those actions and proceedings. If a license, certificate or other authority to operate has been refused, suspended, or revoked by any jurisdiction, the applicant shall provide a copy of any orders, proceedings and determinations relating thereto; and
l. Other information as may be required by the Commissioner of Banking and Insurance.
##### **§ 17:48H-13** Review of application. {#sec-17-48h-13 omnilex-key=us-nj-statutes--title-17--17:48H-13}
13. Following receipt of an application for licensure, the Commissioner of Banking and Insurance shall review it and notify the applicant of any deficiencies contained therein.
a. The Commissioner of Banking and Insurance shall issue a license to an organized delivery system if the commissioner finds that the system meets the standards provided for in this act, including, but not limited to:
(1) All of the material required by section 12 of this act has been filed;
(2) The persons responsible for conducting the applicant's affairs are competent, trustworthy, and possess good reputations, and have had appropriate experience, training, and education;
(3) The persons who are to perform the health care services are properly qualified;
(4) The organized delivery system has demonstrated the ability to assure that health care services will be provided in a manner which will assure the availability and accessibility of the services;
(5) The standard forms of provider agreements to be used by the organized delivery system are acceptable;
(6) The applicant is financially sound and may reasonably be expected to meet its obligations to enrollees, contract holders and carriers. In making this determination, the commissioner shall consider:
(a) The financial soundness of the applicant's compensation arrangements for the provision of health care services;
(b) The adequacy of working capital, other sources of funding and provisions for contingencies; and
(c) Whether any deposit of cash or securities, or any other evidence of financial protection submitted, meets the requirements set forth in this act or by the commissioner by regulation;
(7) Any deficiencies identified by the commissioner have been corrected; and
(8) Any other factors determined by the commissioner to be relevant have been addressed to the satisfaction of the commissioner.
b. (Deleted by amendment, P.L.2012, c.17).
c. The Commissioner of Banking and Insurance, may deny an application for a license if the applicant fails to meet any of the standards provided in this act or on any other reasonable grounds. If the license is denied, the Commissioner of Banking and Insurance shall notify the applicant and shall set forth the reasons for the denial in writing. The applicant may request a hearing by notice to the commissioner within 30 days of receiving the notice of denial. Upon such denial, the applicant shall submit to the commissioner a plan for bringing the organized delivery system into compliance or providing for the closing down of its business.
##### **§ 17:48H-14** Notice of change, modification {#sec-17-48h-14 omnilex-key=us-nj-statutes--title-17--17:48H-14}
14. a. A licensed organized delivery system, unless otherwise provided in this act, shall not materially modify any matter or document furnished pursuant to section 12 of this act, unless the system files with the Commissioner of Banking and Insurance, at least 60 days prior to use or adoption of the change, a notice of the change or modification, together with that information required by the commissioner to explain the change or modification. If the commissioner fails to affirmatively approve or disapprove the change or modification within 60 days of submission of the notice, the notice of modification shall be deemed approved. The commissioner may extend the 60-day review period for not more than 30 additional days by giving written notice of the extension before the expiration of the 60-day period. If a change or modification is disapproved, the commissioner shall notify the system in writing and specify the reason for the disapproval.
b. Prior to entering into any contract with a carrier, a licensed organized delivery system shall file with the commissioner, for the commissioner's approval, a copy of the contract. The filing shall be made no later than 60 days prior to the date that the contract is intended to be in effect. The commissioner shall either approve the contract or state in writing the commissioner's reasons for disapproval within 60 days of receipt of the filing.
##### **§ 17:48H-15** Services provided by licensed organized delivery system. {#sec-17-48h-15 omnilex-key=us-nj-statutes--title-17--17:48H-15}
15. A licensed organized delivery system may:
a. Contract with an insurer licensed in this State for the provision of indemnity coverage against the cost of services provided by the system or other obligations of the system, either on an individual or aggregate attachment basis; and
b. In addition to comprehensive or limited services, as applicable, provided by the system for enrollees or contract holders, provide:
(1) Additional services as approved by the Commissioner of Banking and Insurance;
(2) Indemnity benefits covering urgent care or emergency services;
(3) Coverage for services from providers, other than participating providers, in accordance with the terms of the contract; and
(4) Any other function provided by law, in the system's organizational documents or in the license.
##### **§ 17:48H-16** Treatment of organized delivery system as domestic insurer {#sec-17-48h-16 omnilex-key=us-nj-statutes--title-17--17:48H-16}
16. a. A licensed organized delivery system which is organized under the laws of this State shall be treated as a domestic insurer for the purposes of P.L.1970, c.22 (C.17:27A-1 et seq.) and P.L.1992, c.65 (C.17B:32-31 et seq.).
b. A licensed organized delivery system shall be subject to the provisions of chapter 30 of Title 17B of the New Jersey Statutes.
c. The capital, surplus and other funds of a licensed organized delivery system shall be invested in accordance with the provisions of chapter 20 of Title 17B of the New Jersey Statutes and guidelines established by the Commissioner of Banking and Insurance by regulation.
##### **§ 17:48H-17** Examination of licensed organized delivery system {#sec-17-48h-17 omnilex-key=us-nj-statutes--title-17--17:48H-17}
17. The Commissioner of Banking and Insurance may conduct an examination of a licensed organized delivery system as often as the commissioner deems necessary in order to protect the interests of providers, contract holders, enrollees, and the residents of this State. A licensed organized delivery system shall make its relevant books and records available for examination by the commissioner, and retain its records in accordance with a schedule established by the commissioner by regulation. The reasonable expenses of the examination shall be borne by the licensed organized delivery system being examined. In lieu of such examination, the commissioner may accept the report of an examination made by the commissioner of another state.
##### **§ 17:48H-18** Contracts with providers, mandatory terms {#sec-17-48h-18 omnilex-key=us-nj-statutes--title-17--17:48H-18}
18. All licensed organized delivery system contracts with providers shall contain the following terms and conditions:
a. In the event that the organized delivery system fails to pay or provide for comprehensive or limited health care services for any reason whatsoever, including, but not limited to, insolvency or breach of contract, neither the contract holder nor the covered person shall be liable to the provider for any sums owed to the provider under the contract.
b. No provider, or agent, trustee or assignee thereof may maintain an action at law or attempt to collect from the contract holder or covered person sums owed to the provider by the licensed organized delivery system, except that this subsection shall not be construed to prohibit collection of uncovered charges consented to or lawfully owed to providers by a contract holder or covered person.
##### **§ 17:48H-19** Minimum net worth {#sec-17-48h-19 omnilex-key=us-nj-statutes--title-17--17:48H-19}
19. a. A licensed organized delivery system shall, at all times, have and maintain a minimum net worth, determined on a statutory accounting basis, in an amount established by the Commissioner of Banking and Insurance by regulation, which amount may vary in accordance with the size of the system, the services provided by the system, and the financial liabilities of the system.
b. With respect to any amounts that may be required by the commissioner pursuant to subsection a. of this section, the commissioner shall take into account any limitation on the organized delivery system's exposure to financial loss that results from a contract with a carrier that provides that any liabilities of the system may be satisfied by means of reductions or offsets against monies due to the system from the carrier, which reductions or offsets will not adversely affect the system's ability to meet its contractual obligations.
##### **§ 17:48H-20** Deposit of cash, securities {#sec-17-48h-20 omnilex-key=us-nj-statutes--title-17--17:48H-20}
20. a. A licensed organized delivery system shall deposit with the Commissioner of Banking and Insurance, or with an entity or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that is acceptable to the commissioner in an amount established by the commissioner, by regulation, which amount shall be adjusted annually by the commissioner in accordance with changes in the Consumer Price Index. The deposit shall be deemed an admitted asset of the system in the determination of net worth.
b. All income from deposits shall be an asset of the licensed organized delivery system. A licensed organized delivery system may withdraw a deposit or any part thereof after making a substitute deposit of equal amount and value, except that a security may not be substituted unless it has been approved by the commissioner.
c. If a licensed organized delivery system is placed in rehabilitation or liquidation, the deposit shall be treated as an asset subject to the provisions of P.L.1992, c.65 (C.17B:32-31 et seq.).
##### **§ 17:48H-21** Maintenance of fidelity bond {#sec-17-48h-21 omnilex-key=us-nj-statutes--title-17--17:48H-21}
21. A licensed organized delivery system shall maintain in force a fidelity bond in its own name on its officers and employees, in an amount established by the Commissioner of Banking and Insurance by regulation.
##### **§ 17:48H-22** Annual report {#sec-17-48h-22 omnilex-key=us-nj-statutes--title-17--17:48H-22}
22. A licensed organized delivery system shall file an annual report with the Commissioner of Banking and Insurance, on or before March 1 of each year, attested to by at least two principal officers, which covers the preceding calendar year. The report shall be on a form prescribed by the commissioner and shall include:
a. A financial statement of the licensed organized delivery system, including its balance sheet, income statement and statement of changes in financial position for the preceding year, certified by an independent public accountant, or a consolidated audited financial statement of its parent company certified by an independent certified public accountant, attached to which shall be consolidating financial statements of the system;
b. At the discretion of the commissioner, a statement by a qualified actuary setting forth the actuary's opinion as to the adequacy of reserves; and
c. Any other information relating to the performance of the licensed organized delivery system as may be required by the commissioner.
The commissioner may assess a civil administrative penalty of up to $100 per day for each day a required report is late. The commissioner may require the submission of additional reports from time to time, as the commissioner deems necessary. A penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
##### **§ 17:48H-22.1** Definitions. {#sec-17-48h-22.1 omnilex-key=us-nj-statutes--title-17--17:48H-22.1}
41. As used in sections 41 through 45 of P.L.2014, c.81 (C.17:48H-22.1 through C.17:48H-22.5):
"Commissioner" means the Commissioner of Banking and Insurance.
"Licensed organized delivery system" means an entity authorized to transact business in this State as a licensed organized delivery system pursuant to P.L.1999, c.409 (C.17:48H-1 et seq.).
##### **§ 17:48H-22.2** Increase in amount of capital or surplus required of licensed organized delivery system. {#sec-17-48h-22.2 omnilex-key=us-nj-statutes--title-17--17:48H-22.2}
42. The commissioner may increase the amount of capital or surplus required of a licensed organized delivery system, or subsequently revise or redetermine that increase, using appropriate methods and procedures established by rules and regulations adopted by the commissioner, in order to provide adequate protection against risks affecting the licensed organized delivery system's financial condition that are not adequately or fully covered by its reserves or other assets, but under no circumstances shall a licensed organized delivery system's capital or surplus be less than the capital or surplus required pursuant to regulation as prescribed by the commissioner; provided, however, that any increase required by a subsequent revision or redetermination pursuant to this section shall be made only after a departmental hearing, unless that hearing is waived by the affected licensed organized delivery system. All matters pertaining to a hearing or to an increase in capital or surplus pursuant to this section shall be confidential and not subject to subpoena or public inspection, except to the extent that the commissioner finds release of that information necessary to protect the public. The hearing shall be initiated within 20 days after written notice to the licensed organized delivery system. Any declaration regarding an increase required by a subsequent revision or redetermination shall contain findings specifying the factors deemed significant in regard to the particular licensed organized delivery system, and shall set forth the reasons supporting the increase of capital or surplus ordered by the commissioner. In determining any increase, revision or redetermination in the amount of capital or surplus, the commissioner shall consider the risks of:
a. Increases or decreases in the frequency and severity of losses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates that the licensed organized delivery system charged for coverage and above or below those reasonably expected under normal conditions;
b. Increases or decreases in expenses under normal operating conditions, as well as increases or decreases in those values, above or below the levels contemplated by the rates the licensed organized delivery system charged for coverage and above or below those reasonably expected under normal conditions;
c. Increases or decreases in the value of, or return on, invested assets under normal operating conditions, as well as increases or decreases in those values, above or below those levels anticipated under normal conditions;
d. Changes in economic, social or market conditions that could adversely or favorably affect the financial condition of the licensed organized delivery system, including conditions that would make liquidity more or less important than contemplated and would prevent or facilitate timely investments or force or prohibit untimely sales of assets; and
e. Any other contingencies, including reinsurance and unfunded or extra contractual obligations, which may affect the licensed organized delivery system's financial condition.
##### **§ 17:48H-22.3** Determination of increase, revision or redetermination; factors. {#sec-17-48h-22.3 omnilex-key=us-nj-statutes--title-17--17:48H-22.3}
43. In determining any increase, revision or redetermination in the capital or surplus of a licensed organized delivery system pursuant to the provisions of section 42 of P.L.2014, c.81 (C.17:48H-22.2) the commissioner shall take into account the following factors:
a. Methods and techniques used to measure risk exposure and variability;
b. The information available relating to the magnitude of the various risks described in section 42 of P.L.2014, c.81 (C.17:48H-22.2);
c. The extent to which risks described in section 42 of P.L.2014, c.81 (C.17:48H-22.2) are independent or interrelated, and whether any dependency is direct or inverse;
d. The extent to which the licensed organized delivery system has provided protection against contingencies in ways other than the establishment of surplus, including, but not limited to: redundancy of premiums; margin in reserves and liabilities; adjustability of contracts pursuant to the terms of the contracts; voluntary or mandatory investment valuation reserves; reinsurance; the use of conservative actuarial assumptions to provide a margin of security; reserve adjustments after rate increases for policies written at earlier and less adequate rates; contingency or catastrophe reserves; and diversification of assets and underwriting risk; and
e. Any other relevant factors, including the National Association of Insurance Commissioners' reports and independent judgments of the soundness of the licensed organized delivery system's financial condition, as evidenced by the rating and reports of reliable professional financial services.
##### **§ 17:48H-22.4** Suspension, revocation of authority to do business. {#sec-17-48h-22.4 omnilex-key=us-nj-statutes--title-17--17:48H-22.4}
44. The commissioner may suspend or revoke the authority to do business in this State of any licensed organized delivery system that does not comply with the provisions of sections 41 through 45 of P.L.2014, c.81 (C.17:48H-22.1 through C.17:48H-22.5).
##### **§ 17:48H-22.5** Rules, regulations. {#sec-17-48h-22.5 omnilex-key=us-nj-statutes--title-17--17:48H-22.5}
45. The commissioner may promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of sections 41 through 45 of P.L.2014, c.81 (C.17:48H-22.1 through C.17:48H-22.5). Such rules and regulations shall be consistent with the standards for risk based capital for health organizations adopted by the National Association of Insurance Commissioners.
##### **§ 17:48H-23** Suspension, revocation of license, grounds {#sec-17-48h-23 omnilex-key=us-nj-statutes--title-17--17:48H-23}
23. The Commissioner of Banking and Insurance may suspend or revoke the license issued to an organized delivery system pursuant to this act upon the commissioner's determination that:
a. The licensed organized delivery system is operating in contravention of its basic organizational documents;
b. The licensed organized delivery system is unable to fulfill its obligations to the carriers with whom it contracts;
c. The net worth of the licensed organized delivery system is less than that required by this act, or the licensed organized delivery system has failed to correct any deficiency in its net worth as required by the commissioner;
d. The continued operation of the licensed organized delivery system would be hazardous to the health and welfare of the enrollees or contract holders with whom it has contracted to provide health care services or detrimental to a carrier with whom it has contracted to provide the services;
e. The licensed organized delivery system has failed to file any report required pursuant to this act;
f. The licensed organized delivery system has failed to provide the health care services for which it has been licensed or has provided health care services which are in contravention of the contract or contracts filed with the commissioner;
g. The licensed organized delivery system is unable to maintain the standards set forth by regulation;
h. The licensed organized delivery system has failed, as provided by the contract, to comply with the provisions of P.L.1997, c.192 (C.26:2S-1 et seq.);
i. The licensed organized delivery system has otherwise failed to comply with this act or with other applicable law; or
j. There are other reasonable grounds that warrant suspension or revocation.
##### **§ 17:48H-24** Notification of grounds for suspension, revocation of license {#sec-17-48h-24 omnilex-key=us-nj-statutes--title-17--17:48H-24}
24. a. If the Commissioner of Banking and Insurance has cause to believe that grounds exist for the suspension or revocation of a license, the commissioner shall notify the licensed organized delivery system, in writing, specifically stating the grounds for suspension or revocation and fixing a time for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). If a license is revoked, the licensed organized delivery system shall submit a plan to the commissioner within 15 days of the revocation, for the winding up of its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of its business. The commissioner may, by written order, permit such further operation of the system as the commissioner finds to be in the best interest of individuals receiving health care services from the system.
b. The commissioner shall notify all carriers with contracts with the system that are on file with the Department of Banking and Insurance of the proceedings.
##### **§ 17:48H-25** Plan for insolvency, insurance {#sec-17-48h-25 omnilex-key=us-nj-statutes--title-17--17:48H-25}
25. The Commissioner of Banking and Insurance may require, in connection with the plan for insolvency required pursuant to paragraph (5) of subsection i. of section 12 of this act, that a licensed organized delivery system maintain insurance to cover the expenses to be paid for continued benefits following a determination of insolvency, or make other arrangements to ensure that benefits are continued for the period determined in the insolvency plan.
##### **§ 17:48H-26** Rehabilitation, liquidation, conservation of licensed organized delivery system {#sec-17-48h-26 omnilex-key=us-nj-statutes--title-17--17:48H-26}
26. Any rehabilitation, liquidation or conservation of a licensed organized delivery system shall be subject to the provisions of P.L.1992, c.65 (C.17B:32-31 et seq.) and shall be conducted under the supervision of the Commissioner of Banking and Insurance; except that the commissioner shall have the authority to regulate any licensed organized delivery system doing business in this State as a domestic insurer. The commissioner may apply for an order directing the commissioner to rehabilitate, liquidate, reorganize or conserve a licensed organized delivery system upon any one or more applicable grounds as stated for insurers in P.L.1992, c.65 (C.17B:32-31 et seq.), or any other provisions of Title 17B of the New Jersey Statutes, or when, in the commissioner's opinion, the licensed organized delivery system fails to satisfy the requirements for the issuance of a license relating to solvency or the requirements for solvency protection as set forth in this act.
##### **§ 17:48H-27** Licensed organized delivery system exempt from guaranty association act, C.17B:32A-1 et seq. {#sec-17-48h-27 omnilex-key=us-nj-statutes--title-17--17:48H-27}
27. A licensed organized delivery system shall not be subject to the "New Jersey Life and Health Insurance Guaranty Association Act," P.L.1991, c.208 (C.17B:32A-1 et seq.), and the New Jersey Life and Health Insurance Guaranty Association established pursuant to that act shall not provide protection to any individuals entitled to receive health care services from a licensed organized delivery system.
##### **§ 17:48H-28** Fees {#sec-17-48h-28 omnilex-key=us-nj-statutes--title-17--17:48H-28}
28. A licensed organized delivery system shall pay to the Commissioner of Banking and Insurance those application and examination fees as are established by the commissioner by regulation in the same manner as established for insurers and health maintenance organizations licensed or authorized to do business in this State.
##### **§ 17:48H-29** Civil administrative penalty {#sec-17-48h-29 omnilex-key=us-nj-statutes--title-17--17:48H-29}
29. The Commissioner of Banking and Insurance may, upon notice and hearing, assess a civil administrative penalty in an amount not less than $250 nor more than $10,000 for each day that a licensed organized delivery system is in violation of this act. Penalties imposed by the commissioner pursuant to this section may be in lieu of, or in addition to, suspension or revocation of a license pursuant to this act. A penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
##### **§ 17:48H-30** Confidentiality of data, information; exceptions {#sec-17-48h-30 omnilex-key=us-nj-statutes--title-17--17:48H-30}
30. Any data or information relating to the diagnosis, treatment or health of an enrollee, prospective enrollee or contract holder obtained by a certified or licensed organized delivery system from the carrier, contract holder, enrollee, prospective enrollee or any provider shall be confidential and shall not be disclosed to any person except:
a. To the extent that it may be necessary to carry out the purposes of this act;
b. Upon the express consent of the enrollee, prospective enrollee or contract holder;
c. Pursuant to statute or court order for the production of evidence or the discovery thereof;
d. In the event of a claim or litigation between an enrollee, a prospective enrollee or a contract holder and the organized delivery system wherein that data or information is relevant. An organized delivery system shall be entitled to claim any statutory privilege against disclosure which the provider who furnished the information to the system is entitled to claim;
e. For epidemiological and outcomes research when the identity of the enrollee, prospective enrollee or contract holder is protected through the use of anonymized information. For the purposes of this subsection, "anonymized information" means information that has been coded or encrypted to protect the identity of the enrollee, prospective enrollee or contract holder in such a manner that decoding or unencryption of the information can occur only with the use of a key that is available only to authorized persons and utilized only as deemed necessary by those persons, and the unauthorized use of which is subject to such penalties as are prescribed by law; or
f. Upon the informed consent of the enrollee, prospective enrollee or contract holder, which is obtained for research that has been approved by an institutional review board, in accordance with federal requirements for informed consent under 21C.F.R.50 et seq. or 45C.F.R.46 et seq.
##### **§ 17:48H-31** Notification of change of means for receipt of compensation. {#sec-17-48h-31 omnilex-key=us-nj-statutes--title-17--17:48H-31}
31. Any certified organized delivery system which intends to change the means by which it receives compensation so that it will be compensated on a basis that entails the assumption of financial risk shall make application for licensure to the Commissioner of Banking and Insurance pursuant to this act.
##### **§ 17:48H-32** Rules, regulations. {#sec-17-48h-32 omnilex-key=us-nj-statutes--title-17--17:48H-32}
32. The Commissioner of Banking and Insurance shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.
The commissioner shall adopt the rules and regulations within 180 days of the date of enactment of this act.
##### **§ 17:48H-33** Applicability of health care quality act. {#sec-17-48h-33 omnilex-key=us-nj-statutes--title-17--17:48H-33}
33. An organized delivery system which is licensed by the Department of Banking and Insurance shall be subject to the "Health Care Quality Act," P.L.1997, c.192 (C.26:2S-1 et seq.) and the regulations promulgated thereunder.
##### **§ 17:48H-33.1** Adoption, implementation of standards by organized delivery system for electronic transactions. {#sec-17-48h-33.1 omnilex-key=us-nj-statutes--title-17--17:48H-33.1}
1. a. Within 180 days of the adoption of a timetable for implementation pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), an organized delivery system which is either certified or licensed pursuant to P.L.1999, c.409 (C.17:48H-1 et seq.), or a subsidiary thereof that processes health care benefits claims as a third party administrator, shall demonstrate to the satisfaction of the Commissioner of Banking and Insurance that it will adopt and implement all of the standards to receive and transmit health care transactions electronically, according to the corresponding timetable, and otherwise comply with the provisions of this section, as a condition of its continued authorization to do business in this State.
The Commissioner of Banking and Insurance may grant extensions or waivers of the implementation requirement when it has been demonstrated to the commissioner's satisfaction that compliance with the timetable for implementation will result in an undue hardship to an organized delivery system, its subsidiary or its covered persons.
b. Within 12 months of the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), an organized delivery system or a subsidiary that processes health care benefits claims as a third party administrator shall use the standard health care enrollment and claim forms in connection with all health benefits plans for which the organized delivery system has contracted with a carrier to provide health care services.
c. Twelve months after the adoption of regulations establishing standard health care enrollment and claim forms by the Commissioner of Banking and Insurance pursuant to section 1 of P.L.1999, c.154 (C.17B:30-23), an organized delivery system shall require that health care providers file all claims for payment for health care services. A covered person who receives health care services shall not be required to submit a claim for payment but, notwithstanding the provisions of this subsection to the contrary, a covered person shall be permitted to submit a claim on his own behalf, at the covered person's option. All claims shall be filed using the standard health care claim form applicable to the health benefits plan contract or policy.
d. (1) An organized delivery system or its agent, hereinafter the payer, shall remit payment for every insured claim submitted by a covered person or that covered person's agent or assignee if the health benefits plan contract or policy provides for assignment of benefits, no later than the 30th calendar day following receipt of the claim by the payer or no later than the time limit established for the payment of claims in the Medicare program pursuant to 42 U.S.C. s.1395u(c)(2)(B), whichever is earlier, if the claim is submitted by electronic means, and no later than the 40th calendar day following receipt if the claim is submitted by other than electronic means, if:
(a) the claim is an eligible claim for a health care service provided by an eligible health care provider to a covered person under the health benefits plan contract or policy;
(b) the claim has no material defect or impropriety, including, but not limited to, any lack of required substantiating documentation or incorrect coding;
(c) there is no dispute regarding the amount claimed;
(d) the payer has no reason to believe that the claim has been submitted fraudulently; and
(e) the claim requires no special treatment that prevents timely payment from being made on the claim under the terms of the health benefits plan contract or policy.
(2) If all or a portion of the claim is denied by the payer because:
(a) the claim is an ineligible claim;
(b) the claim submission is incomplete because the required substantiating documentation has not been submitted to the payer;
(c) the diagnosis coding, procedure coding, or any other required information to be submitted with the claim is incorrect;
(d) the payer disputes the amount claimed; or
(e) the claim requires special treatment that prevents timely payments from being made on the claim under the terms of the health benefits plan contract or policy, the payer shall notify the covered person, or that covered person's agent or assignee if the health benefits plan contract or policy provides for assignment of benefits, in writing or by electronic means, as appropriate, within 30 days, of the following: if all or a portion of the claim is denied, all the reasons for the denial; if the claim lacks the required substantiating documentation, including incorrect coding, a statement as to what substantiating documentation or other information is required to complete adjudication of the claim; if the amount of the claim is disputed, a statement that it is disputed; and if the claim requires special treatment that prevents timely payments from being made, a statement of the special treatment to which the claim is subject.
(3) Any portion of a claim that meets the criteria established in paragraph (1) of this subsection shall be paid by the payer in accordance with the time limit established in paragraph (1) of this subsection.
(4) A payer shall acknowledge receipt of a claim submitted by electronic means from a health care provider or covered person, no later than two working days following receipt of the transmission of the claim.
(5) If a payer subject to the provisions of P.L.1983, c.320 (C.17:33A-1 et seq.) has reason to believe that a claim has been submitted fraudulently, it shall investigate the claim in accordance with its fraud prevention plan established pursuant to section 1 of P.L.1993, c.362 (C.17:33A-15), or refer the claim, together with supporting documentation, to the Office of the Insurance Fraud Prosecutor in the Department of Law and Public Safety established pursuant to section 32 of P.L.1998, c.21 (C.17:33A-16).
(6) Payment of an eligible claim pursuant to paragraphs (1) and (3) of this subsection shall be deemed to be overdue if not remitted to the claimant or his agent or assignee by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, following receipt by the payer of a claim submitted by electronic means and on or before the 40th calendar day following receipt of a claim submitted by other than electronic means.
In the event payment is withheld on all or a portion of a claim by a payer pursuant to subparagraph (b) of paragraph (2) of this subsection, the claims payment shall be overdue if not remitted to the claimant or his agent or a assignee by the payer on or before the 30th calendar day or the time limit established by the Medicare program, whichever is earlier, for claims submitted by electronic means and the 40th calendar day for claims submitted by other than electronic means, following receipt by the payer of the required documentation or modification of an initial submission.
(7) An overdue payment shall bear simple interest at the rate of 10% per annum.
e. As used in this subsection, "insured claim" or "claim" means a claim by a covered person for payment of benefits under an insured health benefits plan contract or policy for which the financial obligation for the payment of a claim under the health benefits plan contract or policy rests upon the organized delivery system.
##### **§ 17:48H-33.2** Organized delivery system subject to regulations under C.17B:30-26 et seq. {#sec-17-48h-33.2 omnilex-key=us-nj-statutes--title-17--17:48H-33.2}
2. An organized delivery system which is either certified or licensed pursuant to P.L.1999, c.409 (C.17:48H-1 et seq.) shall be subject to the provisions of P.L.1999, c.155 (C.17B:30-26 et seq.) and the regulations promulgated thereunder.
##### **§ 17:48H-34** Provision of data, reports {#sec-17-48h-34 omnilex-key=us-nj-statutes--title-17--17:48H-34}
34. a. A carrier that contracts with a licensed organized delivery system shall provide that system with any data or reports required by their contractual arrangement on a timely basis, in accordance with the terms of the contract.
b. If a carrier fails to provide a report required pursuant to subsection a. of this section, the Commissioner of Banking and Insurance may, upon notice and hearing, assess a civil administrative penalty in an amount not less than $250 nor more than $1,000 for each day the carrier is in violation of this section. The penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
##### **§ 17:48H-35** Documents deemed proprietary, confidential. {#sec-17-48h-35 omnilex-key=us-nj-statutes--title-17--17:48H-35}
35. Any documents provided by a organized delivery system to the Department of Banking and Insurance pursuant to this act that are deemed by the Commissioner of Banking and Insurance to be proprietary, shall be confidential and shall not be considered public documents pursuant to P.L.1963, c.73 (C.47:1A-2).
## **Chapter 49** {#struct-chapter-49}
##### **§ 17:49-1** Individual insurance authorized; prerequisites to doing business. {#sec-17-49-1 omnilex-key=us-nj-statutes--title-17--17:49-1}
No person, partnership, or unincorporated association of persons shall engage in the business of insurance in this State except as agent of a person, association, or corporation authorized to do the business of insurance in this State, unless possessed of unencumbered assets in excess of his or their liabilities in a sum equal to the capital stock and surplus required of an insurance corporation of this State organized upon the stock plan, doing the same kind of business, and invested in the same manner; nor unless he or they shall have deposited with the Commissioner of Banking and Insurance securities of the same character and amount required of an insurance company organized upon the stock plan doing business in this State, nor unless the Commissioner of Banking and Insurance shall have granted to him or them a certificate to the effect that he or they have complied with all the provisions of law which an insurance corporation of this State is required to observe, and that the business of insurance specified therein may be safely intrusted to the person, partnership or association to whom the certificate is granted.
##### **§ 17:49-2** Applicability of laws governing insurance corporations {#sec-17-49-2 omnilex-key=us-nj-statutes--title-17--17:49-2}
Every person, partnership or association receiving any such certificate shall be subject to the insurance laws of this State and to the jurisdiction and supervision of the Commissioner of Banking and Insurance in the same manner as if an insurance corporation organized upon the stock plan pursuant to the laws of this State, and authorized to do the business of insurance specified in the certificate.
##### **§ 17:49-3** Designation {#sec-17-49-3 omnilex-key=us-nj-statutes--title-17--17:49-3}
No such person, partnership, or association shall transact business under a corporate or fictitious name, or under any name, style or title other than the true name of such person, or of the persons comprising such partnership or association.
##### **§ 17:49-4** Application of Act {#sec-17-49-4 omnilex-key=us-nj-statutes--title-17--17:49-4}
This act shall not apply to any fraternal beneficiary association, mutual benefit association, Lloyds association, or any association of individuals exempt by law from the operation of the insurance laws of this State, nor shall it operate to permit the transaction of business by inter-insurers or reciprocal underwriters.
##### **§ 17:49-5** Construction of terms {#sec-17-49-5 omnilex-key=us-nj-statutes--title-17--17:49-5}
Construction of terms, for the purposes of this act,
a. the business of insurance shall include the issuance of all kinds of endowment policies and annuity contracts;
b. the legal effect of an undertaking to pay the equivalent of money, or to do some act of value, except the furnishing of services, upon the happening of a certain or contingent event, shall be the same as an undertaking on the part of an insurer to pay a certain or an ascertainable sum of money.
##### **§ 17:49-6** Penalties; restraining violations; receiver {#sec-17-49-6 omnilex-key=us-nj-statutes--title-17--17:49-6}
Any person who shall violate any provision of this act shall be guilty of a misdemeanor and punished accordingly, and, in addition thereto, shall be liable to a penalty in the sum of five hundred dollars ($500.00) for each violation, to be sued for and collected by the Commissioner of Banking and Insurance in a civil action in the name of the State. The Superior Court shall have jurisdiction to restrain any violation of this act in an action brought for that purpose by the Commissioner of Banking and Insurance, and may appoint a receiver for such assets of any person, partnership, or association of persons as are actually employed in the conduct of business in violation of this act.
## **Chapter 49A** {#struct-chapter-49a}
##### **§ 17:49A-1** Short title {#sec-17-49a-1 omnilex-key=us-nj-statutes--title-17--17:49A-1}
This act shall be known, and may be cited as the "Nonprofit Corporation--Keys Amendment Facility Insurance Pooling Act."
##### **§ 17:49A-2** Findings, declarations {#sec-17-49a-2 omnilex-key=us-nj-statutes--title-17--17:49A-2}
The Legislature finds and declares that:
a. The lack of availability and escalating cost of liability insurance, when available, has caused a crisis nationally and in this State. Not-for-profit and nonprofit corporations as well as medical and non-medical facilities that provide residences for the elderly and disabled have been especially hard hit by the liability insurance crisis.
b. It is the public policy of this State that facilities which operate without profit or provide residential settings where significant numbers of elderly or disabled Supplemental Security Income (SSI) recipients reside should have access to adequate and affordable liability insurance coverage.
c. To this end, it is incumbent upon the State to provide a means by which adequate and affordable liability coverage can be obtained by these entities.
##### **§ 17:49A-3** Definitions {#sec-17-49a-3 omnilex-key=us-nj-statutes--title-17--17:49A-3}
3. As used in this act:
a. "Board" means the board of trustees or the group of persons vested with management of the business and affairs of a nonprofit corporation regardless of the name by which the group or persons are designated.
b. "Keys amendment facility" means a medical or non-medical residential setting designated by the State as a facility that meets the requirements of the "Social Security Act," Pub.L. 93-233 (42 U.S.C. 1382e) as implemented by 45 CFR 1397.1 et seq.
c. "Nonprofit corporation" means any corporation organized under the "New Jersey Nonprofit Corporation Act," N.J.S.15A:1-1 et seq., any corporation as defined by N.J.S.15A:1-2e or any corporation organized pursuant to Title 16 of the Revised Statutes.
d. "Owner" means the person or group vested with ownership and management of a Keys amendment facility regardless of the name by which the person or group is designated.
##### **§ 17:49A-4** Joint insurance funds {#sec-17-49a-4 omnilex-key=us-nj-statutes--title-17--17:49A-4}
a. The board of a nonprofit corporation may, by resolution, agree to participate with any other nonprofit corporation or corporations in a joint insurance fund for the purpose of insuring against liability, property damage, and workers' compensation.
b. The owner of a Keys amendment facility may agree, in writing, to participate with any other Keys amendment facility or facilities in a joint insurance fund for the purpose of insuring against liability, property damage, and workers' compensation.
##### **§ 17:49A-5** Insurance fund commission {#sec-17-49a-5 omnilex-key=us-nj-statutes--title-17--17:49A-5}
a. Upon the establishment of a nonprofit corporation joint insurance fund, the chief executive officer or the board of each participating nonprofit corporation shall appoint one of its officers or one member of its board to represent that nonprofit corporation as insurance fund commissioner. Together, they shall constitute an insurance fund commission. Commissioners shall hold office at the pleasure of the chief executive officer or board who appointed them, or as long as they remain a member of the board or a corporate officer, whichever shall be less, and until their successors shall have been duly appointed and qualified. In the event that the number of nonprofit corporations represented is an even number, an additional member shall be annually selected by the participating nonprofit corporations. If the total number of commissioners exceeds seven, the commissioners shall annually meet to select not more than seven commissioners to serve as the executive committee of the fund. The executive committee shall exercise the full power and authority of the commission. Vacancies on the executive committee shall be filled by election of the entire commission. The commissioners shall serve without compensation. Any vacancy in the office of insurance fund commissioner shall be filled by an appointment by the chief executive officer or board of the participating nonprofit corporation as described in this subsection. The commission shall annually elect a chairman and a secretary.
b. Upon the establishment of a Keys amendment facility joint insurance fund, the owner of each participating Keys amendment facility shall represent, or the owners shall appoint one owner to represent that facility as insurance fund commissioner. Together, they shall constitute an insurance fund commission. Commissioners of Keys amendment facility joint insurance funds who represent a facility that has more than one owner shall serve as commissioner as long as they remain an owner of the facility and until their successors shall have been duly appointed and qualified. In the event that the number of facilities is an even number, an additional member shall be annually selected by the participating facilities. If the total number of commissioners exceeds seven, the commissioners shall annually meet to select not more than seven commissioners to serve as the executive committee of the fund. The executive committee shall exercise the full power and authority of the commission. Vacancies on the executive committee shall be filled by election of the entire commission. The commissioners shall serve without compensation. Any vacancy in the office of insurance fund commissioner shall be filled by the owner of a Keys amendment facility as described in this subsection. The commission shall annually elect a chairman and a secretary.
##### **§ 17:49A-6** Bylaws {#sec-17-49a-6 omnilex-key=us-nj-statutes--title-17--17:49A-6}
The commissioners of any joint insurance fund created under the provisions of this act shall prepare and, after the approval by resolution of the board of each participating nonprofit corporation, or approval of the owner of each participating Keys amendment facility, as the case may be, shall adopt bylaws for the joint insurance fund. The bylaws shall include, but not be limited to:
a. Procedures for the organization and administration of the joint insurance fund, the insurance fund commission and, if appropriate, the executive board of the fund. The procedures may include the designation of one participating nonprofit corporation or Keys amendment facility, as the case may be, to serve as the lead agency to be responsible for the custody and maintenance of the assets of the fund and such other duties as may be assigned by the commissioners of the fund;
b. Procedures for the assessment of members for their contributions to the fund and for the collection of contributions in default;
c. Procedures for the maintenance and administration of appropriate reserves in accordance with sound actuarial principles;
d. Procedures for the purchase of commercial direct insurance or reinsurance, if any;
e. Contingency plans for paying losses in the event that the fund is exhausted;
f. Procedures governing loss adjustment and legal fees;
g. Procedures for the joining of the fund by a nonparticipating nonprofit corporation or Keys amendment facility, as the case may be;
h. Procedures for the withdrawal from the fund by a participating nonprofit corporation or Keys amendment facility, as the case may be;
i. Procedures for the expulsion of a participating nonprofit corporation or Keys amendment facility, as the case may be;
j. Procedures for the termination and liquidation of the joint insurance fund and the payment of its outstanding obligations; and
k. Such other procedures and plans as the Commissioner of Insurance may require by rule or regulation.
##### **§ 17:49A-7** Plan of risk management {#sec-17-49a-7 omnilex-key=us-nj-statutes--title-17--17:49A-7}
The commissioners shall prepare, or cause to be prepared, a plan of risk management for the joint insurance fund. The plan shall include, but not be limited to:
a. The perils or liabilities to be insured against;
b. Limits of coverage, whether self-insurance, direct insurance purchased from a commercial carrier, or reinsurance;
c. The amount of risk to be retained by the fund;
d. The amount of reserves to be established;
e. The contributions to be paid by each participating nonprofit corporation or Keys amendment facility, as the case may be;
f. Coverage to be purchased from a commercial insurer, if any;
g. Reinsurance to be purchased, if any, and the amount of premium therefor; and
h. Such other procedures and information as the Commissioner of Insurance may require by rule or regulation.
For purposes of this section "a plan of risk management" is a plan, and activities carried out under the plan, binding upon the participants in a joint insurance fund to reduce risk of loss with respect to a particular line of insurance protection or coverage provided by a fund. Plans of risk management also include the administration of one or more funds, including the processing and defense of claims brought against or on behalf of participants.
##### **§ 17:49A-8** Approval by commissioner {#sec-17-49a-8 omnilex-key=us-nj-statutes--title-17--17:49A-8}
No joint insurance fund shall begin providing insurance coverage to its participants until its bylaws and plan of risk management have been approved as provided in this section.
a. The commissioners of each joint insurance fund shall file with the Commissioner of Insurance for his approval a copy of the fund's bylaws adopted pursuant to section 6 of this act and a copy of the fund's plan of risk management prepared pursuant to section 7 of this act.
b. Within 30 working days of receipt, the Commissioner of Insurance shall either approve or disapprove the bylaws or plan of risk management of any joint insurance fund. If the Commissioner of Insurance fails either to approve or disapprove the bylaws or plan of risk management within that 30 working day period, the bylaws or plan shall be deemed approved.
c. If any bylaws or plan shall be disapproved, the Commissioner of Insurance shall set forth in writing the reason for disapproval. Upon the receipt of the notice of disapproval, the commissioners of the affected joint insurance fund may request a hearing. The hearing shall be convened by the Commissioner of Insurance in a timely manner.
##### **§ 17:49A-9** Insurance coverage {#sec-17-49a-9 omnilex-key=us-nj-statutes--title-17--17:49A-9}
Upon the approval of its bylaws and plan of risk management pursuant to the provisions of section 8 of this act, a joint insurance fund may provide insurance coverage to its participants by self-insurance, the purchase of commercial insurance or reinsurance, or any combination thereof.
##### **§ 17:49A-10** Amendments {#sec-17-49a-10 omnilex-key=us-nj-statutes--title-17--17:49A-10}
The commissioners may, from time to time, amend the bylaws and plan of risk management of the fund; provided, however, that no such amendment shall take effect until approved as provided in this section.
a. The commissioners shall file with the Commissioner of Insurance for his approval a copy of any amendment to the bylaws of the fund upon approval, by resolution, of the board of each participating nonprofit corporation, or written approval signed by the owner of each participating Keys amendment facility, as the case may be, or any amendment to the plan of risk management, upon adoption by the commissioners.
b. Within 30 working days of receipt, the Commissioner of Insurance shall either approve or disapprove any amendment to the bylaws or plan of risk management. If the Commissioner of Insurance fails either to approve or disapprove the amendment within that 30 working day period, the amendment shall be deemed approved.
c. If any amendment shall be disapproved, the Commissioner of Insurance shall set forth in writing the reasons for disapproval. Upon the receipt of the notice of disapproval, the commissioners of the affected joint insurance fund may request a hearing. The hearing shall be convened by the Commissioner of Insurance in a timely manner.
##### **§ 17:49A-11** Suspension, termination of authority {#sec-17-49a-11 omnilex-key=us-nj-statutes--title-17--17:49A-11}
The Commissioner of Insurance shall have the authority to suspend or terminate the authority of any joint insurance fund, or to assume control of the insurance fund, or to direct or take any action he may deem necessary, for good cause, to enable a fund to meet its obligations, cover its expected losses or to liquidate, rehabilitate or otherwise modify its affairs. Such action shall be taken by the Commissioner of Insurance in the event of:
a. Failure to comply with the rules and regulations promulgated by the Commissioner of Insurance or with any of the provisions of this act;
b. A failure to comply with a lawful order of the Commissioner of Insurance; or
c. A deterioration of the financial condition of the fund to the extent that it causes an adverse effect upon the ability of the joint insurance fund to pay expected losses.
##### **§ 17:49A-12** Filing of agreements {#sec-17-49a-12 omnilex-key=us-nj-statutes--title-17--17:49A-12}
The Commissioner of Insurance may, in his discretion, require the commissioners of any fund to file copies of any agreements or contracts entered into by the commissioners of the fund, or any other pertinent documents as he may deem necessary.
##### **§ 17:49A-13** Annual audit {#sec-17-49a-13 omnilex-key=us-nj-statutes--title-17--17:49A-13}
The insurance fund commissioners or the executive board thereof, as the case may be, shall cause an annual audit to be conducted by an independent certified public accountant in accordance with the rules and regulations promulgated by the Commissioner of Insurance pursuant to section 16 of this act. Copies of every audit shall be submitted to the Commissioner of Insurance within 30 working days of its completion.
##### **§ 17:49A-14** Examination {#sec-17-49a-14 omnilex-key=us-nj-statutes--title-17--17:49A-14}
The Commissioner of Insurance may conduct an examination of any joint insurance fund that he deems necessary. The expense of any such examination shall be borne by the fund.
##### **§ 17:49A-15** Not insurance company {#sec-17-49a-15 omnilex-key=us-nj-statutes--title-17--17:49A-15}
A joint insurance fund established pursuant to the provisions of this act is not an insurance company nor an insurer under the laws of this State, and the authorized activities of the fund do not constitute the transaction of insurance nor the conducting of an insurance business. A fund established pursuant to this act shall not be subject to the provisions of Subtitle 3 of Title 17 of the Revised Statutes.
##### **§ 17:49A-16** Rules, regulations {#sec-17-49a-16 omnilex-key=us-nj-statutes--title-17--17:49A-16}
The Commissioner of Insurance shall promulgate rules and regulations, pursuant to the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), to effectuate the purposes of this act. Such rules and regulations shall include, but not be limited to, the establishment, operation, modification and dissolution of joint insurance funds established pursuant to the provisions of this act.
## **Chapter 50** {#struct-chapter-50}
##### **§ 17:50-1** Exchange of contracts authorized; law exclusive {#sec-17-50-1 omnilex-key=us-nj-statutes--title-17--17:50-1}
Individuals, partnerships, trustees and all corporations of this State, herein designated "subscribers," are hereby authorized to exchange reciprocal or interinsurance contracts with each other and with individuals, partnerships, trustees and corporations of other States, districts, provinces and countries, for any or all of the kinds of business for which a company may be formed or authorized to transact under the provisions of chapter seventeen of Title 17 of the Revised Statutes, except life insurance.
Such contracts and the exchange thereof and such subscribers, their attorneys in fact and representatives shall be regulated by this act, and by no other statute of this State relating to insurance, except as herein otherwise provided.
##### **§ 17:50-2** Attorney in fact; exchange {#sec-17-50-2 omnilex-key=us-nj-statutes--title-17--17:50-2}
Such contracts may be executed by an attorney in fact, herein designated "attorney," duly authorized and acting for such subscribers, and such attorney may be a corporation. The office or offices of such attorney, herein defined as an "exchange," shall be maintained at such place or places as may be designated by the subscribers in the power of attorney.
##### **§ 17:50-3** Declaration to be filed by attorney in fact {#sec-17-50-3 omnilex-key=us-nj-statutes--title-17--17:50-3}
Such attorney shall file with the Commissioner of Banking and Insurance of this State a declaration, verified by the oath of such attorney, or when such attorney is a corporation, by the oath of its president or oaths of its treasurer and secretary setting forth:
(a) The name of the attorney and the name or designation of the exchange under which such contracts are to be issued, which name or designation shall not be so similar to any other name or designation theretofore adopted by any attorney or by any insurance organization in this State so as to confuse or deceive;
(b) The kind or kinds of insurance to be effected or exchanged;
(c) A copy of the form of policy contract or agreement under or by which such insurance is to be effected or exchanged and forms of application therefor;
(d) A certified copy of the power of attorney or other authorization of such attorney under or by which such attorney is to effect or exchange such insurance contracts;
(e) The location of the office or offices from which such contracts or agreements are to be issued;
(f) That except as to the kinds of insurance hereinafter specifically mentioned in this paragraph, applications have been made for indemnity upon at least two hundred separate risks aggregating not less than three million dollars ($3,000,000.00) represented by executed contracts or bona fide applications to become concurrently effective. In the case of employers' liability or workmen's compensation insurance, application shall have been made for indemnity upon at least one hundred separate risks covering a total annual payroll of not less than two and one-half million dollars ($2,500,000.00) as represented by executed contracts or bona fide applications to become concurrently effective. In the case of automobile insurance, applications shall have been made for indemnity upon at least one thousand motor vehicles or for insurance aggregating not less than one and one-half million dollars ($1,500,000.00) represented by executed contracts or bona fide applications to become concurrently effective on any or all classes of automobile insurance effected by said subscribers through said attorney;
(g) That there shall be maintained at the exchange, available for the payment of losses, assets conforming to the requirements of section five hereof;
(h) A financial statement under oath in form prescribed by the Commissioner of Banking and Insurance of this State;
(i) An instrument authorizing service of process as provided for in this act, and
(j) Where the principal office of the attorney is located in another State, a certificate from the proper official of the State where the principal office is maintained, that the subscribers and the attorney have complied with all provisions of law and are authorized in that State to transact the classes of business which are sought to be transacted in this State.
##### **§ 17:50-4** Instrument authorizing service of process on Commissioner of Banking and Insurance to be filed; service fee {#sec-17-50-4 omnilex-key=us-nj-statutes--title-17--17:50-4}
Concurrently with the filing of the declaration provided for by the terms of section three hereof, the attorney shall file with the Commissioner of Banking and Insurance of this State an instrument in writing duly executed by him for said subscribers, conditioned that upon the issuance of certificate of authority provided for in section eleven hereof, action may be brought in any county in which the cause of action arises, or where the claimant resides, and service of process may be had upon the Commissioner of Banking and Insurance of this State in all actions or proceedings in this State arising out of any policies, contracts or agreements issued, which service shall be valid and binding upon all subscribers exchanging at any time reciprocal or interinsurance contracts through such attorney. Three copies of such process shall be served and the Commissioner of Banking and Insurance of this State shall file one copy in his office, forward one copy to said attorney, and return one copy with his admission of service. Where the principal office of the attorney is located in this State, service of process may also be had upon all subscribers by serving the attorney at said office. Service of process shall not be had upon subscribers or any of them in any action or proceeding in this State, except in the manner provided in this section, and any action or other proceeding may be begun and prosecuted or defended by them under the name or designation adopted by them. A service fee of two dollars ($2.00) shall accompany each such service and be paid to the Commissioner of Banking and Insurance.
##### **§ 17:50-5** Reinsurance reserve; surplus; claim or loss reserve {#sec-17-50-5 omnilex-key=us-nj-statutes--title-17--17:50-5}
There shall be maintained at all times by the exchange, a reinsurance reserve in cash or securities authorized by the laws of the State in which the principal office of the attorney is located for the investment of similar funds of insurance companies doing the same kind of business, in an amount equal to fifty per centum (50%) of the net annual premium deposits collected and credited to the accounts of subscribers on policies having one year or less to run and pro rata on those for longer periods, or, in lieu thereof, one hundred per centum (100%) of the net unearned premium deposits collected and credited to the accounts of subscribers calculated separately for each policy in force as of any given date. In addition to the reserves provided for in this section, there shall also be maintained at all times at the exchange, as assets, a surplus in cash or such securities as aforesaid of not less than the amount of minimum capital and surplus required of a domestic stock insurance company to do the kind or kinds of insurance which it is authorized to write under section one of this act. There shall also be maintained at all times in the hands of the attorney, as a claim or loss reserve, in cash or such securities as aforesaid, assets sufficient to discharge all liabilities on all outstanding or accrued losses arising under policies issued, which are to be calculated in accordance with the laws of the State relating to similar reserves for companies insuring similar risks. If at any time the amounts on hand are less than the foregoing requirements, the subscribers, or their attorney for them, shall make up the deficiency. Net premium deposits, as used in this act, shall be construed to mean the premium deposits made by subscribers after deducting therefrom the amount paid as return premiums upon canceled contracts and reinsurance in companies or associations licensed to do business in this State. If it appears that the amount of funds required in this section has not been accumulated, then the subscribers, or the attorney for them, shall immediately advance such sums as are needed to comply with the provisions of this section, and the funds so advanced shall not be treated as a liability at the exchange, and shall not be withdrawn except with the approval of the chief insurance officer of the State wherein the exchange is domiciled, and such advances shall be repaid only out of the surplus, over and above the minimum required by this section. If the subscribers, or their attorney for them, shall fail to advance sums necessary for the maintenance of such minimum reserves and surplus, within thirty days after receipt of notice from the Commissioner of Banking and Insurance so to do, then said Commissioner of Banking and Insurance shall take charge of and liquidate such exchange in the manner provided by law in the case of other insurers; and in the case of an exchange of another State said Commissioner of Banking and Insurance may revoke its license to transact business in this State.
##### **§ 17:50-6** General deposit with Commissioner; filing certificate by foreign exchange {#sec-17-50-6 omnilex-key=us-nj-statutes--title-17--17:50-6}
Each domestic exchange transacting business in this State shall keep and maintain with the Commissioner of Insurance a general deposit of cash or securities in the sum of not less than $100,000.00. In the case of foreign exchanges, a certificate of such deposit with the chief insurance officer of the State of domicile shall be filed with the Commissioner of Insurance of this State.
##### **§ 17:50-7** Power of attorney; requisites; policies without contingent liability {#sec-17-50-7 omnilex-key=us-nj-statutes--title-17--17:50-7}
The power of attorney under which any contracts of insurance are exchanged pursuant to this act shall provide for a cash premium deposit and a contingent several liability of the subscriber during each annual period of the term of each contract of insurance issued to him to be fixed in the power of attorney but in an amount not less than one or more than ten times the amount of the annual portion of such cash premium deposit stated in the contract; except that exchanges which have a surplus equal to seven hundred fifty thousand dollars ($750,000.00) or to the minimum capital and surplus required of a stock insurance company transacting the same kind or kinds of business, whichever is greater, may issue policies without contingent liability; provided, however, that any such exchange which shall have issued policies without contingent liability after the acquisition of such surplus may continue to do so only so long as it maintains a surplus in the above amount, and no such exchange shall issue any nonassessable policies, except during such time as it shall continue to maintain such surplus, or in lieu thereof any reciprocal exchange having a surplus equivalent to the capital and surplus required of a stock company authorized to do business in this State and transacting the same kind or kinds of insurance, may issue contracts without contingent liability, provided that the power of attorney contains a provision that the attorney shall accumulate a surplus out of the subscribers deposits for the protection of all subscribers and that no part of such surplus may be returned to any subscriber upon the withdrawal of such subscriber from the exchange.
##### **§ 17:50-8** Report of financial condition to Commissioner; examination of records, affairs and financial condition {#sec-17-50-8 omnilex-key=us-nj-statutes--title-17--17:50-8}
Such attorney shall, within the time limited for filing the annual statement by insurance companies, transacting the same kind of business, make a report, under oath, to the Commissioner of Banking and Insurance of this State for each calendar year in such form as he may prescribe, showing the financial condition of affairs at the office where such contracts are issued, and shall at any reasonable time furnish such additional information and reports as may be required by said commissioner; provided, however, that the attorney shall not be required to furnish the names and addresses of any subscribers, except in the case of unpaid final judgments. The records, affairs and financial condition of the exchange shall be subject to examination by the Commissioner of Banking and Insurance of this State, and such examination shall be at the expense of the office examined. Where the principal office of the attorney is located in another State, the Commissioner of Banking and Insurance of this State may, in lieu of the examination provided for in this section, accept a certified copy of the report of examination made by the insurance department of the State where the principal office is located, or by the insurance department of any other State.
##### **§ 17:50-9** Power to exchange contracts; insurance of trust property {#sec-17-50-9 omnilex-key=us-nj-statutes--title-17--17:50-9}
(a) Any corporation now or hereafter organized under the laws of this State shall, in addition to the rights, powers and franchises specified in its articles of incorporation, have full power and authority as a subscriber to exchange insurance contracts of the kind and character herein mentioned. The right to exchange such contracts is hereby declared to be incidental to the purposes for which such corporations are organized, and as much granted as the rights and powers expressly conferred.
(b) All persons, firms or corporations holding property in trust may insure the same at a reciprocal exchange, and, in their representative capacity, may assume the liabilities and be entitled to the rights of a subscriber, but such trustees by so doing, shall not personally or individually be liable under the power of attorney executed on behalf of the trust.
##### **§ 17:50-10** Misdemeanor; solicitation of powers of attorney and applications for insurance contract; injunction; appointment of receiver {#sec-17-50-10 omnilex-key=us-nj-statutes--title-17--17:50-10}
Any attorney who shall exchange any contracts of insurance of the kind and character specified in this act, or any attorney or representative of such attorney who shall solicit or negotiate any applications for same, without the attorney first complying with the foregoing provisions, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be subjected to a fine of not less than $100.00 nor more than $1,000.00. The Superior Court shall have jurisdiction to restrain any violation of this act in an action brought for that purpose by the Commissioner of Banking and Insurance, and may appoint a receiver for such assets of any person, partnership, or association of persons as are actually employed in the conduct of business in violation of this act.
For the purposes of organization, and upon issuance of permit by the Commissioner of Banking and Insurance of this State, and under such conditions as he may impose, powers of attorney and applications for such insurance contracts may be solicited without compliance with the provisions of this act, but no attorney or other person shall execute or issue any such contracts of insurance until all the provisions of this act shall have been complied with and certificate of authority issued by the Commissioner of Banking and Insurance.
##### **§ 17:50-11** Certificate of authority {#sec-17-50-11 omnilex-key=us-nj-statutes--title-17--17:50-11}
Before issuing any such contracts in this State, the attorney shall procure from the Commissioner of Banking and Insurance of this State a certificate of authority showing that the exchange has complied with all the requirements of this act and is authorized to transact business in this State, which said certificate shall expire on the first day of May of the following year, and shall be renewed each year as of the first day of May thereof. Such certificate shall specify the name or designation under which such contracts of insurance are issued. The Commissioner of Banking and Insurance of this State may, after hearing, revoke or suspend any certificate of authority issued hereunder in the case of violation of any of the provisions of this act, after reasonable notice has been given such attorney in writing, so that he may appear and show cause why such action should not be taken.
##### **§ 17:50-12** Authority of attorney to insert in policy provisions or conditions {#sec-17-50-12 omnilex-key=us-nj-statutes--title-17--17:50-12}
The attorney may insert in any form of policy prescribed by the laws of this State or adopted by this State any provisions or conditions required by the plan of reciprocal or inter-insurance; provided, however, that same shall not be in conflict with the laws of this State.
##### **§ 17:50-13** Fees and taxes {#sec-17-50-13 omnilex-key=us-nj-statutes--title-17--17:50-13}
Such exchanges shall be subject to the same fees and taxes as are provided by the laws of this State, now or hereafter enacted, applicable to insurance companies organized or admitted to do the same kind or kinds of business under the laws of this State.
##### **§ 17:50-14** Application of law as to appointment, licensing, etc., of insurance agents and solicitors {#sec-17-50-14 omnilex-key=us-nj-statutes--title-17--17:50-14}
The provisions of the general insurance laws of this State regarding the appointment, licensing, qualification and regulation of insurance agents and solicitors shall not apply to an exchange or its attorney, or executive officer of such attorney, if a corporation, but shall apply to any other person, partnership or corporation representing any such reciprocal or inter-insurance exchange in soliciting, negotiating or affecting of business in this State.
##### **§ 17:50-15** Application of laws governing insurance rates and licensing of rate making organizations {#sec-17-50-15 omnilex-key=us-nj-statutes--title-17--17:50-15}
The provisions of the laws of this State regulating the making and applying of insurance rates and providing for the licensing of rating organizations, being chapter twenty-seven, laws of one thousand nine hundred and forty-four, approved March ninth, one thousand nine hundred and forty-four, effective March ninth, one thousand nine hundred and forty-four, shall apply to reciprocal or inter-insurance contracts, but nothing therein contained shall be construed to prohibit the return of savings or dividends to subscribers of policyholders.
##### **§ 17:50-16** Workmen's compensation insurance, authority to exchange contracts {#sec-17-50-16 omnilex-key=us-nj-statutes--title-17--17:50-16}
Employers are hereby expressly authorized to exchange contracts of workmen's compensation insurance, at any reciprocal exchange licensed in this State to do that kind of business, but all such exchanges shall be subject to the provisions of the laws of this State relating to the business of workmen's compensation insurance and shall contribute and pay to the funds described in sections 34:15-94, 34:15-112, 34:15-113, 34:15-114 and 34:15-115 of the Revised Statutes in the same manner and to the same extent as mutual carriers engaged in the business of workmen's compensation insurance.
##### **§ 17:50-17** Retaliatory laws {#sec-17-50-17 omnilex-key=us-nj-statutes--title-17--17:50-17}
The retaliatory laws of this State set forth in section 17:32-12 of the Revised Statutes shall be applicable to reciprocal or inter-insurance exchanges.
##### **§ 17:50-18** Conflicting laws repealed {#sec-17-50-18 omnilex-key=us-nj-statutes--title-17--17:50-18}
All laws or parts of laws in conflict herewith are hereby repealed, insofar as they are in conflict with this act.
##### **§ 17:50-19** Partial invalidity {#sec-17-50-19 omnilex-key=us-nj-statutes--title-17--17:50-19}
In the event any section, part or provisions of this act is held to be illegal, the same shall not affect any other section, part or provisions of the act, but the remaining sections, parts and provisions shall be and remain in full force and effect.
## **Chapter 51** {#struct-chapter-51}
##### **§ 17:51-1** Acts which constitute commissioner as attorney for service of process, service {#sec-17-51-1 omnilex-key=us-nj-statutes--title-17--17:51-1}
1. (a) Any of the following acts in this State, by an insurer not authorized to transact business in this State: (1) the issuance or delivery of contracts of insurance to residents of this State or to corporations authorized to do business therein, (2) the solicitation of applications for such contracts, (3) the collection of premiums, membership fees, assessments or other considerations for such contracts, or (4) any other transaction of business in relation to such contracts of insurance, is equivalent to and shall constitute an appointment by such insurer of the Commissioner of Insurance and his successor or successors in office, to be its true and lawful attorney, upon whom may be served all lawful process and a complaint in any action or proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contracts of insurance, and any such act shall be signification of its agreement that such service of process and a complaint is of the same legal force and validity as personal service of the same in this State upon such insurer.
(b) Such service of process and a complaint upon the commissioner shall be made by leaving two copies thereof, with the fee prescribed by law, in the hands of the commissioner or someone designated by him in his office, or the clerk of the court may serve the commissioner by mailing such papers to him by registered mail, with the said fee. The commissioner shall forthwith mail by registered mail one of the copies of such process and complaint to the defendant at its last-known principal place of business, and shall keep a record of all papers so served upon him. The commissioner, upon giving notice to the defendant of the service of process as required by this act, shall file with the clerk of the court his certificate of the notice given. Such service of process and a complaint is sufficient, provided notice of such service and a copy of the papers are sent within ten days thereafter by registered mail by plaintiff or plaintiff's attorney to the defendant at its last-known principal place of business, and the defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiff's attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow.
(c) Service of process and a complaint in any such action or proceeding shall in addition to the manner provided in subsection (b) of this section be valid if served upon any person within this State who, in this State on behalf of such insurer, is
(1) soliciting insurance, or
(2) making, issuing or delivering any contract of insurance, or
(3) collecting or receiving any premium, membership fee, assessment or other consideration for insurance; and a copy of such process and complaint is sent within ten days thereafter by registered mail by the plaintiff or plaintiff's attorney to the defendant at the last-known principal place of business of the defendant, and the defendant's receipt, or the receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiff's attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow.
(d) No plaintiff shall be entitled to a judgment by default under this section until the expiration of thirty days from date of the filing of the affidavit of compliance.
(e) Nothing in this section contained shall limit or abridge the right to serve any process, complaint, notice or demand upon any insurer in any other manner now or hereafter permitted by law.
##### **§ 17:51-2** Actions against unauthorized insurers; deposit or bond required before insurer may file pleading {#sec-17-51-2 omnilex-key=us-nj-statutes--title-17--17:51-2}
(a) Before any insurer not authorized to transact business in this State shall file or cause to be filed any pleading or other paper in any action or proceeding instituted against it, such insurer shall either (1) deposit with the clerk of the court in which such action or proceeding is pending cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action; provided, however, that the court may in its discretion and after reasonable notice to the opposing party and upon a hearing make an order dispensing with such deposit or bond where the insurer shows to the satisfaction of the court that it maintains, in a State of the United States, funds or securities, in trust or otherwise, sufficient and available to satisfy any final judgment which may be entered in such action or proceeding; or (2) procure a certificate of authority to transact the business of insurance in this State.
(b) Nothing in subsection (a) of this section is to be construed to prevent an insurer not authorized to transact business in this State from making a motion for summary judgment, or judgment on the pleadings, or to dismiss the complaint on the ground either (1) that such insurer has not done any of the acts enumerated in subsection (a) of section one, or (2) that the person on whom service was made pursuant to subsection (c) of section one was not doing any of the acts therein enumerated.
##### **§ 17:51-3** Inapplicability of act {#sec-17-51-3 omnilex-key=us-nj-statutes--title-17--17:51-3}
3. The provisions of this act shall not apply to any action or proceeding against any unauthorized insurer arising out of a contract of
(a) Reinsurance effectuated in accordance with the laws of New Jersey;
(b) Insurance placed with an unauthorized insurer made eligible for surplus lines by the commissioner pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45);
(c) Aircraft insurance;
(d) Insurance on property or operations of railroads engaged in interstate commerce;
(e) Insurance against legal liability arising out of the ownership, operation or maintenance of any property having a permanent situs outside of this State; or
(f) Insurance against loss of or damage to any property having a permanent situs outside this State; where such contract contains a provision designating the Commissioner of Insurance to be its true and lawful attorney upon whom may be served all lawful process in any action or proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contract or where the insurer enters a general appearance in any such action or proceeding.
##### **§ 17:51-4** Partial invalidity {#sec-17-51-4 omnilex-key=us-nj-statutes--title-17--17:51-4}
If any section, subsection, subdivision, paragraph, sentence or clause of this act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this act.
##### **§ 17:51-5** Short title {#sec-17-51-5 omnilex-key=us-nj-statutes--title-17--17:51-5}
This act shall be known as the Unauthorized Insurers' Process Act.
## **Chapter 51B** {#struct-chapter-51b}
##### **§ 17:51B-1** Definitions {#sec-17-51b-1 omnilex-key=us-nj-statutes--title-17--17:51B-1}
1. For purposes of this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Insurer" means:
(1) Any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes;
(2) Any medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.);
(3) Any hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.);
(4) Any health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et al.); and
(5) Any dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.).
"NAIC" means the National Association of Insurance Commissioners.
"Qualified United States financial institution," (1) as used in subsection c. of section 3 of this act, means an institution that: (a) is organized or, in the case of a branch or agency office of a foreign banking organization in the United States, licensed, under the laws of the United States or any state thereof; (b) is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies; and (c) has been determined by either the commissioner, or the Securities Valuation Office of the NAIC, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner; or (2) as used elsewhere in this act, means an institution that: (a) is organized or, in the case of a branch or agency office of a foreign banking organization in the United States, licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and (b) is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.
##### **§ 17:51B-2** Credit for reinsurance ceded by certain insurers. {#sec-17-51b-2 omnilex-key=us-nj-statutes--title-17--17:51B-2}
2. Credit for reinsurance ceded by an insurer which is domiciled in New Jersey, or which is either licensed in New Jersey or eligible to write surplus lines insurance in New Jersey and which in either case is domiciled in a state or country which does not employ standards regarding credit for reinsurance substantially similar, as determined by the commissioner, to those applicable under this act, shall be allowed as either an asset or a deduction from liability only when:
a. The reinsurance is ceded to an assuming insurer which is licensed to transact insurance or reinsurance in this State; or
b. The reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this State. An accredited reinsurer is one which:
(1) Files with the commissioner evidence of its submission to this State's jurisdiction;
(2) Submits to this State's authority to examine its books and records;
(3) Is licensed to transact insurance or reinsurance in at least one state, or in the case of a United States branch of an assuming alien insurer, is entered through, and licensed to transact insurance or reinsurance in, at least one state;
(4) Files annually with the commissioner a copy of its annual statement filed with the insurance department or other regulatory authority of its state of domicile and a copy of its most recent audited financial statement; and either:
(a) Maintains a surplus in regard to policyholders in an amount which is not less than $20,000,000 and whose accreditation has not been denied by the commissioner within 120 days of its submission therefor; or
(b) Maintains a surplus in regard to policyholders in an amount less than $20,000,000 and whose accreditation has been approved by the commissioner;
(5) Submits a filing fee in an amount established by the commissioner; and
(6) Provides any additional information, which may include, but may not be limited to, information regarding the concentration of the insurer's exposures, geographic or otherwise, and satisfies such additional requirements as the commissioner deems necessary to ensure that the particular insurer's condition and methods of operation are not such as would render its operations hazardous to the public or policyholders in this State.
No credit shall be allowed a ceding licensed insurer or unauthorized eligible surplus lines insurer if the assuming insurer's accreditation has been revoked by the commissioner after notice and hearing; or
c. The reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a United States branch of an assuming alien insurer, is entered through, a state which employs standards regarding credit for reinsurance substantially similar to those applicable under this act, as determined by the commissioner, and that assuming insurer or United States branch of an assuming alien insurer:
(1) Maintains a surplus in regard to policyholders in an amount of not less than $20,000,000;
(2) Submits to the authority of this State to examine its books and records; and
(3) Provides any additional information, which may include, but may not be limited to, information regarding the concentration of the insurer's exposures, geographic or otherwise, and satisfies such additional requirements as the commissioner deems necessary to ensure that the particular insurer's condition and methods of operation are not such as would render its operations hazardous to the public or policyholders in this State; except that the requirement of paragraph (1) of this subsection shall not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system; or
d. The reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified United States financial institution for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the NAIC Annual Statement form by licensed insurers to enable the commissioner to determine the sufficiency of the trust fund. In addition to the requirements of this subsection, the assuming insurer shall provide any additional information, which may include, but may not be limited to, information regarding the concentration of the insurer's exposures, geographic or otherwise, and satisfy such additional requirements as the commissioner deems necessary to ensure that the particular insurer's condition and methods of operation are not such as would render its operations hazardous to the public or policyholders in this State.
(1) In the case of a single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer's liabilities attributable to business written in the United States and in addition, the assuming insurer shall maintain a trusteed surplus of not less than $20,000,000.
(2) In the case of a group of insurers, which group includes individual unincorporated underwriters, the trust shall consist of a trusteed account representing the group's liabilities attributable to business written in the United States and, in addition, the group shall maintain a trusteed surplus of which not less than $100,000,000 shall be held jointly for the benefit of United States ceding insurers of any member of the group; and the group shall make available to the commissioner an annual certification of the solvency of each underwriter for the fiscal period immediately preceding, which shall not be less than one year, by the group's domiciliary regulator and its independent certified public accountant.
(3) In the case of a group of incorporated insurers under common administration which complies with the filing requirements contained in this section, has continuously transacted an insurance business outside the United States for at least three years immediately prior to making application for accreditation, submits to this State's authority to examine its books and records and bears the expense of the examination, and which has aggregate policyholders' surplus of not less than $10,000,000,000: the trust shall be in an amount equal to the group's several liabilities attributable to business ceded by United States ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of such group; plus a joint trusteed surplus of which not less than $100,000,000 shall be held jointly and exclusively for the benefit of United States ceding insurers of any member of the group as additional security for any such liabilities; and each member of the group shall make available to the commissioner an annual certification of the member's solvency for the fiscal period immediately preceding, which shall not be less than one year, by the member's domiciliary regulator and its independent certified public accountant.
Any trust established pursuant to this subsection shall be in a form approved by the commissioner, and the content, location, legal currency and financial institutions shall be acceptable to the commissioner. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner. The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year the trustees of the trust shall report to the commissioner in writing setting forth the balance of the trust and listing the trust's investments at the preceding year's end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31; or
e. (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth below:
(a) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. "Reciprocal jurisdiction" shall mean a jurisdiction that meets one of the following:
(i) A non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union. For purposes of this subsection, a "covered agreement" is an agreement entered into pursuant to sections 313 and 314 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (31 U.S.C. ss. 313-314) that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this State or for allowing the ceding insurer to recognize credit for reinsurance;
(ii) A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or
(iii) A qualified jurisdiction, as determined by the commissioner pursuant to paragraph g. of this section, which is not otherwise described in subsubparagraphs (i) or (ii) of this subparagraph and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner in regulation.
(b) The assuming insurer shall have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, minimum capital and surplus equivalents (net of liabilities), calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be set forth in regulation.
(c) The assuming insurer shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which will be set forth in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.
(d) The assuming insurer shall agree and provide adequate assurance to the commissioner, in a form specified by the commissioner pursuant to regulation, as follows:
(i) The assuming insurer shall provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subparagraphs (b) or (c) of this paragraph, or if any regulatory action is taken against it for serious noncompliance with applicable law;
(ii) The assuming insurer shall consent in writing to the jurisdiction of the courts of this State and to the appointment of the commissioner as agent for service of process. The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement. Nothing in this provision shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent those agreements are unenforceable under applicable insolvency or delinquency laws;
(iii) The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained;
(iv) Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and
(v) The assuming insurer shall confirm that it is not presently participating in any solvent scheme of arrangement which involves this State's ceding insurers, and agree to notify the ceding insurer and the commissioner and to provide security in an amount equal to 100 percent of the assuming insurer's liabilities to the ceding insurer, should the assuming insurer enter into a solvent scheme of arrangement. The security shall be in a form consistent with the provisions of subsection g. of section 2 of P.L.2021, c.354 (C.17:51B-2) and section 3 of P.L.1993, c.243 (C.17:51B-3) and as specified by the commissioner in regulation.
(e) The assuming insurer or its legal successor shall provide, if requested by the commissioner, on behalf of itself and any legal predecessors, certain documentation to the commissioner, as specified by the commissioner in regulation.
(f) The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth in regulation.
(g) The assuming insurer's supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subparagraphs (b) and (c) of this paragraph.
(h) Nothing in this section precludes an assuming insurer from providing the commissioner with information on a voluntary basis.
(2) The commissioner shall create and publish, in a timely manner, a list of reciprocal jurisdictions.
(a) A list of reciprocal jurisdictions is published through the NAIC committee process. The commissioner's list shall include any reciprocal jurisdiction as defined under subparagraph (a) of paragraph (1) of this subsection, and shall consider any other reciprocal jurisdiction included on the NAIC list. The commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed through regulations issued by the commissioner.
(b) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in regulations issued by the commissioner, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined under subsubparagraphs (i) and (ii) of subparagraph (a) of paragraph (1) of this subsection. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to P.L.1993, c.243 (C.17:51B-1 et al.).
(3) The commissioner shall create and publish a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection. The commissioner may add an assuming insurer to the list if an NAIC accredited jurisdiction has added an assuming insurer to a list of assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subparagraph (d) of paragraph (1) of this subsection and complies with any additional requirements that the commissioner may impose by regulation, except to the extent that the requirements conflict with an applicable covered agreement.
(4) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection in accordance with procedures set forth in regulation.
(a) While the eligibility of an assuming insurer is suspended, no reinsurance agreement issued, amended or renewed after the effective date of the suspension qualifies for credit, except to the extent that the obligation of an assuming insurer under the contract are secured in accordance with section 3 of P.L.1993, c.243 (C.17:51B-3).
(b) If the eligibility of an assuming insurer is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the obligations of the assuming insurer under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of section 3 of P.L.1993, c.243 (C.17:51B-3).
(5) If subject to a legal process of rehabilitation, liquidation or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.
(6) Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in the reinsurance agreement, except as expressly prohibited by this P.L.1993, c.243 (C.17:51B-1 et al.) or other applicable law or regulation.
(7) Credit may be taken under this subsection only for reinsurance agreements entered into, amended, or renewed on or after the effective date of P.L.2021, c.354 (C.17:51B-1 et al.), and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met all eligibility requirements pursuant to paragraph (1) of this subsection, or the effective date of the new reinsurance agreement, amendment, or renewal.
(a) This paragraph shall not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of P.L.1993, c.243 (C.17:51B-1 et al.)
(b) Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.
(c) Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.
f. The commissioner has the discretion to allow credit for reinsurance if the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection a., b., c., d., or e. of this section but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required or provided by applicable law or regulation of that jurisdiction; or
g. The commissioner has the discretion to allow credit for reinsurance if the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection a., b., c. or d. of this section but only if the assuming insurer holds surplus or equivalent in excess of $250 million. In determining whether credit should be allowed, the commissioner shall consider the following: (1) that the reinsurer has a secure financial strength rating from at least two nationally recognized statistical rating organizations deemed acceptable by the commissioner; (2) the domiciliary regulatory jurisdiction of the assuming insurer; (3) the structure and authority of the domiciliary regulator with regard to solvency regulation requirements and the financial surveillance of the reinsurer; (4) the substance of financial and operating standards for reinsurers in the domiciliary jurisdiction; (5) the form and substance of financial reports required to be filed by the reinsurer in the domiciliary jurisdiction or other public financial statements filed in accordance with generally accepted accounting principles; (6) the domiciliary regulator's willingness to cooperate with United States regulators in general and the commissioner, in particular; (7) the history of performance by reinsurers in the domiciliary jurisdiction; (8) the reinsurer's or an affiliate's use of in-State professional service providers related or unrelated to the reinsurance, including, but not limited to, attorneys, accountants, managers, actuaries, brokers or intermediaries; (9) any documented evidence of substantial problems with the enforcement of valid United States judgments in the domiciliary jurisdiction; and (10) any other matters deemed relevant by the commissioner. The commissioner shall give appropriate consideration to insurer group ratings that may have been issued. The commissioner may, in lieu of granting full credit under this subsection, reduce the amount required to be held in trust under subsection d. of this section.
The provisions of this subsection shall apply only to reinsurance contracts entered into or renewed on or after the effective date of P.L.2011, c.39, except that the provisions applicable to life reinsurance contracts shall not become effective until the earlier of 24 months from the effective date of P.L.2011, c.39, or the implementation of principles-based standards of life insurance reserving by the National Association of Insurance Commissioners.
h. If the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this State, the credit permitted by subsections c. and d. of this section shall not be allowed unless the assuming insurer agrees in the reinsurance agreements: (1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, shall comply with all requirements necessary to give such court jurisdiction, and shall abide by the final decision of such court or any appellate court in the event of an appeal; and (2) to designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the ceding company. This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if such an obligation is created in the agreement.
##### **§ 17:51B-3** Reduction in liability for reinsurance ceded {#sec-17-51b-3 omnilex-key=us-nj-statutes--title-17--17:51B-3}
3. A reduction in liability for the reinsurance ceded by an insurer which is domiciled in New Jersey, or which is either licensed in New Jersey or eligible to write surplus lines insurance in New Jersey and which in either case is domiciled in a state or country which does not employ standards regarding credit for reinsurance substantially similar, as determined by the commissioner, to those applicable under this act, shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer and such reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder, if such security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified United States financial institution subject to withdrawal solely by, and under the exclusive control of, the ceding insurer. This security shall be in the form of:
a. Cash;
b. Securities listed by the Securities Valuation Office of the NAIC and qualifying as admitted assets;
c. Clean, irrevocable, evergreen, unconditional letters of credit issued or confirmed by a qualified United States financial institution no later than December 31st of the year for which the filing is being made, and in the possession of the ceding company on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming qualified United States financial institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever occurs first, unless the issuer has been declared insolvent under applicable statutory or regulatory provisions; or
d. Any other form of security acceptable to the commissioner.
##### **§ 17:51B-4** Rules, regulations {#sec-17-51b-4 omnilex-key=us-nj-statutes--title-17--17:51B-4}
5. a. The commissioner may promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), as may be necessary to effectuate the purposes of this act.
b. The commissioner is further authorized to adopt rules and regulations applicable to reinsurance arrangements described in this subsection.
(1) A regulation adopted pursuant to this subsection, shall apply only to reinsurance relating to:
(a) life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits;
(b) universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period;
(c) variable annuities with guaranteed death or living benefits;
(d) long-term care insurance policies; or
(e) other life and health insurance and annuity products as to which the NAIC adopts model regulatory requirements with respect to credit for reinsurance.
(2) A regulation adopted pursuant to subparagraphs (a) or (b) of paragraph (1) of this subsection, may apply to any treaty containing:
(a) policies issued on or after January 1, 2022;
(b) policies issued prior to January 1, 2022, if risk pertaining to those policies is ceded in connection with the treaty, in whole or in part, on or after January 1, 2022; or
(c) a treaty containing policies as described in both (a) and (b) above.
(3) A regulation adopted pursuant to this subsection may require the ceding insurer, in calculating the amounts or forms of security required to be held under regulations promulgated under this authority, to use the Valuation Manual adopted by the NAIC under section 11B(1) of the NAIC Standard Valuation Law, including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable.
(4) A regulation adopted pursuant to this subsection shall not apply to cessions to an assuming insurer that:
(a) meets the conditions set forth in section 2F of the Credit for Reinsurance Model Law in this State or, if this State has not adopted provisions substantially equivalent to section 2F of the Credit for Reinsurance Model Law, the assuming insurer is operating in accordance with provisions substantially equivalent to section 2F of the Credit for Reinsurance Model Law in a minimum of five other states; or
(b) is certified in this State or, if this State has not adopted provisions substantially equivalent to section 2E of the Credit for Reinsurance Model Law, certified in a minimum of five other states; or
(c) maintains at least $250 million in capital and surplus when determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any permitted or prescribed practices; and is
(i) licensed in at least 26 states; or
(ii) licensed in at least 10 states, and licensed or accredited in a total of at least 35 states.
(5) The authority to adopt regulations pursuant to this subsection shall not prohibit the authority of the commissioner to adopt regulations pursuant to subsection a. of this section.
## **Chapter 51A** {#struct-chapter-51a}
##### **§ 17:51A-1** Definitions {#sec-17-51a-1 omnilex-key=us-nj-statutes--title-17--17:51A-1}
1. For the purposes of this act:
"Commissioner" means the Commissioner of Insurance.
"Department" means the Department of Insurance.
"Insurer" means every person engaged as indemnitor, surety or contractor in the business of entering into contracts of insurance or of annuities, and authorized to do business in this State pursuant to Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes. Insurer shall also include any other entity subject to rehabilitation, liquidation, reorganization or conservation by the commissioner under the laws of this State.
"Exceeded its powers" means any of the following conditions:
a. The insurer has refused to permit examination of its books, papers, accounts or affairs by the commissioner, his deputies, employees or duly commissioned examiners;
b. A domestic insurer has unlawfully or willfully removed from this State books, papers, accounts or records necessary for an examination of the insurer;
c. The insurer has failed to promptly comply with the applicable financial reporting statutes or rules and departmental requests relating thereto;
d. The insurer has failed to comply with an order of the commissioner to remedy a prohibited deficiency in its capital, capital stock or surplus;
e. The insurer is continuing to transact insurance or write business after its license has been revoked or suspended by the commissioner;
f. The insurer, by contract or otherwise, has unlawfully:
(1) Totally reinsured its entire outstanding business; or
(2) Merged or consolidated substantially its entire property or business with another insurer;
g. The insurer engaged in any transaction in which it is not authorized to engage under the laws of this State; or
h. The insurer has refused to comply with an order of the commissioner.
##### **§ 17:51A-2** Application of act {#sec-17-51a-2 omnilex-key=us-nj-statutes--title-17--17:51A-2}
2. The provisions of this act shall apply to: all domestic insurers; any other insurer doing business in this State whose state of domicile has asked the commissioner to apply the provisions of this act in regard to such insurer; and any other entity subject to rehabilitation, liquidation, reorganization or conservation by the commissioner under the laws of this State.
##### **§ 17:51A-3** Administrative supervision of insurer {#sec-17-51a-3 omnilex-key=us-nj-statutes--title-17--17:51A-3}
3. a. An insurer may be subject to administrative supervision by the commissioner if upon examination or at any other time it appears in the commissioner's discretion that:
(1) The insurer's condition renders the continuance of its business hazardous to the public or to its insureds;
(2) The insurer has or appears to have exceeded its powers;
(3) The insurer has failed to comply with the applicable provisions of the insurance statutes of this State, any administrative rules promulgated thereunder or any order of the commissioner;
(4) The business of the insurer is being conducted fraudulently; or
(5) The insurer has consented to administrative supervision.
b. If the commissioner determines that any of the conditions set forth in subsection a. of this section exist, the commissioner shall:
(1) Notify the insurer of his determination;
(2) Furnish to the insurer a written list of actions to be taken by the insurer to abate the conditions giving rise to the determination; and
(3) Notify the insurer that it is under the supervision of the commissioner and that the commissioner is applying and effectuating the provisions of this act.
c. If placed under administrative supervision, the insurer shall have 60 days, or another period of time as designated by the commissioner, to comply with the requirements imposed by the commissioner.
d. If the conditions giving rise to the supervision still exist at the end of the supervision period specified in subsection c. of this section, the commissioner may, after notice and opportunity to be heard, extend such period.
e. If the commissioner determines that the conditions giving rise to the supervision have been sufficiently remedied, the commissioner shall release the insurer from supervision.
##### **§ 17:51A-4** Confidentiality of information; exceptions {#sec-17-51a-4 omnilex-key=us-nj-statutes--title-17--17:51A-4}
4. a. Proceedings, hearings, notices, correspondence, reports, records and other information in the possession of the commissioner or the department relating to the supervision of any insurer are confidential except as provided by this section.
b. The personnel of the department shall have access to these proceedings, hearings, notices, correspondence, reports, records or information as permitted by the commissioner.
c. The commissioner may open the proceedings or hearings or disclose the notices, correspondence, reports, records or information to a department, agency or instrumentality of this or another state of the United States if the commissioner determines that the disclosure is necessary or proper for the enforcement of the laws of this or another state of the United States.
d. The commissioner may open the proceedings or hearings or make public the notices, correspondence, reports, records or other information to the public if the commissioner deems that it is in the best interest of the public or in the best interest of the insurer, its insureds or creditors.
e. This section does not apply to hearings, notices, correspondence, reports, records or other information obtained upon the appointment of a receiver for the insurer by a court of competent jurisdiction.
##### **§ 17:51A-5** Powers of supervision {#sec-17-51a-5 omnilex-key=us-nj-statutes--title-17--17:51A-5}
5. During the period of supervision, the commissioner or his designated appointee shall serve as the administrative supervisor. The commissioner may prohibit the insurer from doing any of the following during the period of supervision, without the prior approval of the administrative supervisor:
a. Dispose of, convey or encumber any of its assets or its business in force;
b. Withdraw any of its bank accounts;
c. Lend any of its funds;
d. Invest any of its funds;
e. Transfer any of its property;
f. Incur any debt, obligation or liability;
g. Merge or consolidate with another company;
h. Approve new premiums or renew any policies;
i. Enter into any reinsurance contract or treaty;
j. Terminate, surrender, forfeit, convert or lapse any insurance policy, certificate or contract, except for nonpayment of premiums;
k. Release, pay or refund premium deposits, accrued cash or loan values, unearned premiums, or other reserves on any insurance policy, certificate or contract;
l. Make any material change in management;
m. Increase salaries and benefits of officers, directors, or employees, or the payment of bonuses, dividends or other payments; or
n. Such other acts as the commissioner deems necessary to protect the interests of the insurer's policyholders and the public.
##### **§ 17:51A-6** Contesting of action {#sec-17-51a-6 omnilex-key=us-nj-statutes--title-17--17:51A-6}
6. During the period of supervision the insurer may contest an action taken or proposed to be taken by the administrative supervisor specifying the manner wherein the action being complained of would not result in improving the condition of the insurer.
##### **§ 17:51A-7** Initiation of judicial proceedings {#sec-17-51a-7 omnilex-key=us-nj-statutes--title-17--17:51A-7}
7. Nothing contained in this act shall preclude the commissioner from initiating judicial proceedings to place an insurer in conservation, rehabilitation or liquidation, or other delinquency proceedings, however designated under the laws of this State, regardless of whether the commissioner has previously initiated administrative supervision proceedings under this act against the insurer.
##### **§ 17:51A-8** Rules, regulations {#sec-17-51a-8 omnilex-key=us-nj-statutes--title-17--17:51A-8}
8. The commissioner may, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate rules and regulations as are necessary to effectuate the purposes of this act.
##### **§ 17:51A-9** Commissioner may meet with supervisor, attorney, representative {#sec-17-51a-9 omnilex-key=us-nj-statutes--title-17--17:51A-9}
9. Notwithstanding any other provision of law to the contrary, the commissioner may meet with a supervisor appointed under this act and with the attorney or other representative of the supervisor, without the presence of any other person, at the time of any proceeding or during the pendency of any proceeding held under authority of this act to carry out the commissioner's duties under this act or for the supervisor to carry out his duties under this act.
##### **§ 17:51A-10** Governmental immunity {#sec-17-51a-10 omnilex-key=us-nj-statutes--title-17--17:51A-10}
10. There shall be no liability on the part of, and no cause of action of any nature shall arise against, the commissioner, the department or its employees or agents for any action taken by them in the performance of their powers and duties under this act.
## **Chapter 52** {#struct-chapter-52}
##### **§ 17:52-1** Business development corporations; purposes {#sec-17-52-1 omnilex-key=us-nj-statutes--title-17--17:52-1}
Five or more persons, all of whom shall be residents of this State, may form a corporation, which shall be designated as a business development corporation, which shall have power to make loans and investments for the purposes of bringing new industrial, mercantile, recreational, agricultural, mining and business establishments into this State; assisting existing industrial, mercantile, recreational, agricultural, mining and business establishments to remain in this State; expanding, rehabilitating, and developing industry, commerce, agriculture, mining, recreational facilities and business generally in this State to the end that the economic stability of the State may be maintained, and that the opportunities for employment and the enjoyment of a high standard of living be uniform throughout the State.
##### **§ 17:52-2** Certificate of incorporation; contents {#sec-17-52-2 omnilex-key=us-nj-statutes--title-17--17:52-2}
A. The persons desirous of creating a business development corporation shall execute and acknowledge a certificate of incorporation stating
(a) the name by which the corporation shall be known, which shall include the words "Business Development Corporation;"
(b) the location, described by street, number, municipality and county, of the principal office of the corporation;
(c) the name of the agent in charge of the principal office of the corporation, upon whom service of process against the corporation may be served;
(d) the amount of the authorized capital stock of the corporation;
(e) the par value of each share of stock of the corporation, which shall be not less than $10.00;
(f) the amount of the capital stock with which the corporation will commence business, which shall be not less than $100,000.00;
(g) the names and addresses of the incorporators, and the number of shares subscribed for by each;
(h) the names and addresses of the corporations, as limited by section 14 of this act, which have undertaken in writing to become members of the business development corporation, and the aggregate amount which such members are required to lend to the corporation, which shall be not less than $100,000.00;
(i) such other provisions, not inconsistent with this act, or with the provisions of Title 14, Corporations, General, of the Revised Statutes as the incorporators may choose to insert for the management of the business and the conduct of the affairs of the corporation.
B. Each certificate of incorporation of a business development corporation shall contain a statement that it is incorporated under the provisions of the Business Development Corporation Act of 1957. No certificate of incorporation of a business development corporation shall be required to contain a statement of its powers or purposes.
##### **§ 17:52-3** Submission of certificate of incorporation to Commissioner of Banking and Insurance; statement {#sec-17-52-3 omnilex-key=us-nj-statutes--title-17--17:52-3}
The certificate of incorporation shall be submitted to the Commissioner of Banking and Insurance within 60 days after its execution, together with a statement, certified as hereinafter provided, setting forth
(a) the names and addresses of the subscribers to the capital stock with which the corporation will commence business, and the number of shares subscribed for by each;
(b) the names and addresses of those corporations which have agreed in writing to become members of the corporation, and the amount, as hereinafter limited, which each such member is committed to lend to the business development corporation;
(c) in any case where an incorporator or a subscriber is acting as the agent for or nominee of another, the name and address of the principal for whom he is acting, and the number of shares which will be held for such principal;
(d) whether it is intended that the scope of the corporation's business is to be State-wide, or restricted to one or more counties; and, if the latter, the name or names of the county or counties in which it is contemplated the corporation will transact business.
##### **§ 17:52-4** Certification of statement {#sec-17-52-4 omnilex-key=us-nj-statutes--title-17--17:52-4}
The statement submitted pursuant to section 3 of this act shall be signed and certified by any 2 of the incorporators, and shall state that the contents thereof, insofar as they relate to matters within the knowledge of the signers, are true; and that, insofar as they relate to matters not within their knowledge, the signers believe them to be true.
##### **§ 17:52-5** Application for charter {#sec-17-52-5 omnilex-key=us-nj-statutes--title-17--17:52-5}
The submission of the certificate of incorporation and the certified statement pursuant to sections 3 and 4 of this act shall constitute the application for a charter under this act.
##### **§ 17:52-6** Designation of time and place of hearing; notice {#sec-17-52-6 omnilex-key=us-nj-statutes--title-17--17:52-6}
If the Commissioner of Banking and Insurance shall find that the certificate of incorporation and the certified statement comply with the requirements of sections 3 and 4 of this act, he shall designate a time and place for a hearing upon the application for charter, which shall be not less than 6 weeks and not more than 8 weeks after the date of the submission of the application for charter. The commissioner may require that the incorporators give such public notice of the application for charter and of the time and place of the hearing thereon, as the commissioner may deem advisable, but the commissioner may, if he considers that such notice will serve no useful purpose, hold such hearing without such notice.
##### **§ 17:52-7** Hearing on application for commissioner {#sec-17-52-7 omnilex-key=us-nj-statutes--title-17--17:52-7}
At the time and place designated for the hearing, the incorporators shall file proof with the Commissioner of Banking and Insurance that the requirements, if any, for public notice of the hearing have been complied with, and the commissioner shall afford all those desirous thereof, an opportunity to be heard. In addition to the matters presented at the hearing, the commissioner shall consider such facts and circumstances as he may determine to be relevant as a result of an independent investigation made or caused to be made by him. The commissioner shall cause a stenographic record of the hearing to be made, the cost whereof shall be paid by the incorporators.
##### **§ 17:52-8** Determination by commissioner {#sec-17-52-8 omnilex-key=us-nj-statutes--title-17--17:52-8}
The commissioner shall, within 90 days after the hearing, approve or disapprove the application and shall file a written memorandum of his decision in the Department of Banking and Insurance in which he shall state the reasons for his decision.
##### **§ 17:52-9** Approval of application by charter; record {#sec-17-52-9 omnilex-key=us-nj-statutes--title-17--17:52-9}
If the commissioner shall determine, as a result of the hearing and of the independent investigation made by him
(a) that the capital stock with which the corporation will commence business has been subscribed for, and that each subscriber has undertaken in writing to pay the amount of his subscription in cash upon approval according to law of the certificate of incorporation;
(b) that the amounts which those who have agreed in writing to become members of the corporation are bound, as hereinafter provided, to lend to the corporation, at least equal in the aggregate the amount of the capital stock with which the corporation will commence business;
(c) that the incorporators are qualified by character and experience to conduct a business development corporation;
(d) that the establishment of the business development corporation will not interfere with or adversely affect existing facilities for credit
he shall approve the application. The commissioner shall have power, in approving an application for charter, to limit the transaction of the corporation's business to a single county, or to 2 or more contiguous counties.
##### **§ 17:52-10** Concurrence by banking advisory board {#sec-17-52-10 omnilex-key=us-nj-statutes--title-17--17:52-10}
If the Commissioner of Banking and Insurance approves the application for charter, he shall present the record of the hearing and a memorandum of his conclusions to the banking advisory board at a meeting of that board called for the purpose of considering the application for charter. If the banking advisory board concurs in the approval by the commissioner, the commissioner shall endorse upon or annex to the certificate of incorporation a certificate that it has been approved by him and by the banking advisory board, and the certificate shall be filed in the Department of Banking and Insurance.
##### **§ 17:52-11** Beginning of corporate existence {#sec-17-52-11 omnilex-key=us-nj-statutes--title-17--17:52-11}
A. Upon the filing of the certificate of incorporation pursuant to section 10 of this act, the subscribers to the certificate, their successors and assigns, shall be a corporation by the name stated in the certificate, subject to the provisions of this act, and subject to the provisions of Title 14, Corporations, General, of the Revised Statutes, to the extent that the provisions of Title 14 are not inconsistent with the provisions of this act. Every corporation created pursuant to this act shall be subject to dissolution as otherwise by law provided, and shall be empowered to exercise all the powers authorized by this act, whether or not such powers are specifically set forth in its certificate of incorporation.
B. If, in approving the application for charter, the Commissioner of Banking and Insurance has limited the transaction of the corporation's business to a single county, or to 2 or more contiguous counties, the corporation shall have power to transact business only in the county or counties designated by the commissioner in his approval of the application. For the purposes of this act, a corporation is deemed to transact business in a county, if it makes a loan to a borrower whose sole or principal place of business is within the county, or if it directly or indirectly invests in lands or tangible personal property located within the county, or if it purchases or otherwise invests in securities or obligations of an issuer whose sole or principal place of business is located within the county.
##### **§ 17:52-12** Powers {#sec-17-52-12 omnilex-key=us-nj-statutes--title-17--17:52-12}
Every corporation organized pursuant to this act shall have power to
(a) lend money and make investments for the purposes expressed in section 1 of this act, but no such corporation shall lend any money or advance any credit to any borrower except upon proof that the borrower has applied for a loan to at least 2 banking institutions transacting business in this State, and has been refused such loan, and unless the board of directors of the corporation is satisfied that the loan applied for is not one that is obtainable from a financial institution transacting business in this State;
(b) borrow money, and otherwise incur indebtedness for any of its purposes; evidence its indebtedness by any form of obligation it sees fit; and secure any indebtedness incurred by it;
(c) buy, sell, encumber and otherwise dispose of such personal property as shall be necessary or convenient for the transaction of its business;
(d) buy, sell, mortgage, rent, lease, and otherwise deal in improved and unimproved real property for the purpose of industrial, mercantile, agricultural, recreational, mining or commercial development, and to erect, maintain, alter, hold, sell or lease industrial, commercial or other plants, buildings or establishments;
(e) co-operate with and assist local organizations and governmental units of this State in the promotion of the economic welfare of the State and its governmental subdivisions;
(f) exercise all other powers which a corporation organized pursuant to Title 14, Corporations, General, may exercise, to the extent that such powers are not inconsistent with the provisions of this act.
##### **§ 17:52-13** Directors {#sec-17-52-13 omnilex-key=us-nj-statutes--title-17--17:52-13}
The business and affairs of every business development corporation shall be managed by a board of directors consisting of not less than 9 and not more than 18, as the by-laws may prescribe. Not less than 2/3 of the directors shall be elected by the members of the corporation, and the remainder shall be elected by the stockholders.
##### **§ 17:52-14** Members; qualifications {#sec-17-52-14 omnilex-key=us-nj-statutes--title-17--17:52-14}
Any bank, trust company, national bank, insurance company, surety company or public utility company which is authorized to transact business in this State shall be eligible to become a member of a business development corporation. Membership shall become effective upon the acceptance by the board of directors of an application therefor. No corporation, other than 1 of the nature in this section designated, and no individual or individuals shall be eligible to become a member of a business development corporation.
##### **§ 17:52-15** Members; obligations {#sec-17-52-15 omnilex-key=us-nj-statutes--title-17--17:52-15}
Each member shall, when called upon to do so by the board of directors, lend money to the corporation, but no member shall make any loan to the corporation in any sum which would cause the amount owing to the member by the corporation to exceed 2% of the member's capital and surplus, or $100,000.00, whichever is the lesser. Calls for loans shall be prorated among the members who are subject to such call, according to the ratio which each member's maximum lending capacity, as in this section limited, bears to the aggregate lending capacities of all members.
##### **§ 17:52-16** Members; termination of membership {#sec-17-52-16 omnilex-key=us-nj-statutes--title-17--17:52-16}
Any member may withdraw from membership at the expiration of 3 months from the date when written notice of intention to withdraw is given to the board of directors. At the expiration of the period of the notice, the member shall be relieved of any further obligation to lend funds to the corporation, except to the extent necessary to fulfill commitments made by the corporation prior to the date when withdrawal is effective.
##### **§ 17:52-17** Members; stockholders; voting rights; preemptive rights {#sec-17-52-17 omnilex-key=us-nj-statutes--title-17--17:52-17}
At all meetings of the corporation, members and stockholders shall vote by classes. Each stockholder shall have 1 vote, in person or by proxy, for each share of stock held by him, and each member shall have 1 vote, in person or by proxy; except that, when the maximum liability of a member to make loans to the corporation pursuant to section 15 of this act exceeds $1,000.00, such member shall have 1 vote for each full $1,000.00 of the amount which represents the maximum liability of such member to make loans to the corporations. The members and stockholders shall have the power to elect directors, to make, amend and repeal by-laws, and to exercise such other powers, voting by classes, as are generally exercised by stockholders pursuant to the provisions of Title 14, Corporations, General, of the Revised Statutes. Stockholders shall have no pre-emptive or other preferential right to subscribe to stock of the corporation, whether on the issue of stock pursuant to an increase in the authorized capital stock, or on the issue of authorized but previously unissued stock, nor shall stockholders have any pre-emptive or other preferential right to purchase or subscribe for bonds or other evidences of debt of the corporation, notwithstanding that they are convertible into stock.
##### **§ 17:52-18** Banks and trust companies; powers {#sec-17-52-18 omnilex-key=us-nj-statutes--title-17--17:52-18}
Every bank and trust company organized under the laws of this State shall have power to become a member and a stockholder of a business development corporation, but a bank or trust company which is not a member of such a corporation shall not hold any stock of the corporation. No such bank or trust company shall become a member of more than 1 business development corporation, or hold stock in more than 1 such corporation, and no such bank or trust company shall invest more than 10% of its capital stock and surplus in the stock of any such corporation. Banks and trust companies which are not members of a business development corporation may invest in the obligations of any such corporation or corporations, but the aggregate amount so invested shall not exceed 10% of the capital and surplus of any such bank or trust company.
##### **§ 17:52-19** Other corporations; powers {#sec-17-52-19 omnilex-key=us-nj-statutes--title-17--17:52-19}
Corporations of this State other than banks and trust companies may also become stockholders of a business development corporation, except in any case where the certificate of incorporation or the by-laws of such corporation forbid the ownership of stock by any such corporation.
##### **§ 17:52-20** Limitations on indebtedness {#sec-17-52-20 omnilex-key=us-nj-statutes--title-17--17:52-20}
No business development corporation shall voluntarily incur any liability or indebtedness at any time when the incurring of any such liability or indebtedness will exceed 10 times its paid-in capital stock, or $10,000,000.00, whichever is the greater.
##### **§ 17:52-21** Loans prohibited {#sec-17-52-21 omnilex-key=us-nj-statutes--title-17--17:52-21}
No business development corporation shall make a loan to any of its officers or directors, or to any partnership of which such an officer or director is a member, or to any corporation in which any such officer or director has a controlling interest.
##### **§ 17:52-22** Reports {#sec-17-52-22 omnilex-key=us-nj-statutes--title-17--17:52-22}
A. Every business development corporation shall, not later than February 15 of each year, or within such extended period, not to exceed 45 days, as the commissioner may permit, make and file in the Department of Banking and Insurance, a report of its condition in a form prescribed by the Commissioner of Banking and Insurance. The commissioner shall have power to call for special reports when, in his judgment, such reports are necessary in order to obtain a full knowledge of the condition of the business development corporation.
B. A business development corporation which fails to make and transmit a report required by this section shall be subject to a penalty of $100.00 for each day during which such failure continues, to be recovered with costs by the State in a civil action prosecuted by the Attorney-General.
##### **§ 17:52-23** Supervision by Commissioner of Banking and Insurance {#sec-17-52-23 omnilex-key=us-nj-statutes--title-17--17:52-23}
A. The Commissioner of Banking and Insurance shall, whenever and as often as he deems it necessary, cause the affairs of every business development corporation to be examined to determine whether it is conducting its business in conformity with the laws of this State and its certificate of incorporation. In carrying out the provisions of this subsection, the commissioner shall have the same powers conferred upon him in the examination of the affairs of a banking institution organized under the laws of this State.
B. If the Commissioner of Banking and Insurance finds that a business development corporation is violating the provisions of its certificate of incorporation, or is conducting its business in violation of any law of this State, or in an unsafe manner, he shall order the business development corporation to cease its ultra vires, unlawful or unsafe practices, as the case may be. For a violation of any order of the commissioner, the business development corporation shall be subject to a penalty of $500.00, to be recovered with costs by the State in a civil action prosecuted by the Attorney-General.
C. The Commissioner shall have power to revoke the authority to transact business of a business development corporation which has willfully violated any lawful order made by him, upon not less than 20 days' notice to the corporation, and after formal hearing upon the causes assigned for such revocation, which shall be stated in the notice of hearing.
D. Any order or determination made by the commissioner pursuant to this section shall be subject to review, hearing and relief in the Superior Court in a proceeding in lieu of prerogative writ.
##### **§ 17:52-24** Filing fees and costs of examination {#sec-17-52-24 omnilex-key=us-nj-statutes--title-17--17:52-24}
In administering the provisions of this act, the Commissioner of Banking and Insurance shall receive, for the use of the State, the same filing fees and costs of examination as are charged or collected from banking institutions in like cases.
##### **§ 17:52-25** Business development corporation not deemed banking institution {#sec-17-52-25 omnilex-key=us-nj-statutes--title-17--17:52-25}
No business development corporation shall be deemed to be a banking institution for any purpose whatsoever, nor shall any such corporation accept deposits or act in a fiduciary capacity.
##### **§ 17:52-26** Applicability of act {#sec-17-52-26 omnilex-key=us-nj-statutes--title-17--17:52-26}
Nothing in this act shall affect or apply to any person, corporation, partnership or association which is otherwise by law authorized to exercise, or is not prohibited by law from exercising, any power or powers herein conferred upon business development corporations.
##### **§ 17:52-27** Short title {#sec-17-52-27 omnilex-key=us-nj-statutes--title-17--17:52-27}
This act shall be known as the Business Development Corporation Act of 1957.Poursuivez vos recherches dans ChatGPT ou Claude
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