Onyx Insurance Co. v. New Jersey Department of Banking & Insurance Division

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________

No. 16-2153
___________

ONYX INSURANCE COMPANY, INC., A Risk Retention Group,
Appellant

v.

NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE DIVISION
(DOBI); KENNETH E. KOBYLOWSKI, COMMISSIONER OF DOBI;
NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION
(NJPLIGA) (joined for discovery purposes only)
___________________________________________

On Appeal from the United States District Court
for the District of New Jersey
(D.N.J. No. 3:15-cv-03469)
District Judge: Honorable Michael A. Shipp
___________________________________________

Submitted under Third Circuit L.A.R. 34.1(a)
on June 13, 2017

Before: JORDAN and KRAUSE, Circuit Judges, and STEARNS, District Judge.*

(Opinion filed: August 8, 2017)
____________

OPINION**
____________

*
The Honorable Richard G. Stearns, United States District Judge for the District
of Massachusetts, sitting by designation.
**
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
KRAUSE, Circuit Judge.

Onyx Insurance Company, Inc. appeals from the District Court’s dismissal of

Onyx’s complaint alleging that it was wrongfully denied participation in a New Jersey

fund responsible for making personal injury payments to uninsured pedestrians involved

in motor vehicle accidents. For the reasons that follow, we will affirm.

I. Background

Under New Jersey law, pedestrians involved in motor vehicle accidents may seek

personal injury benefits from their own motor vehicle insurance carriers, or, if they are

uninsured, from New Jersey’s Unsatisfied Claim and Judgment Fund. See N.J. Stat. Ann.

§§ 39:6-86.7, 39:6A-4. The Fund is administered by the New Jersey Property-Liability

Insurance Guaranty Association, a nonprofit organization created by the New Jersey

Legislature and regulated by New Jersey’s Commissioner of Banking and Insurance. See

id. §§ 17:30A-5, 17:30A-6, 17:30A-6.1, 17:30A-9. By statute, the Association is

comprised of “member insurers” against whom the Association assesses payments to

cover its obligations, such as its duty to make personal injury payments from the Fund to

uninsured pedestrians. See id. §§ 17:30A-5, 17:30A-8; see also id. § 17:30A-2.

Onyx, however, is a “risk retention group” governed by the federal Liability Risk

Retention Act of 1986 (“LRRA”), 15 U.S.C. §§ 3901-3906. Onyx provides liability

insurance and reinsurance and is organized to “assum[e] and spread[] . . . the liability

exposure of its group members,” which include taxis registered in New Jersey. Id.

§ 3901(a)(4)(A). Contending that the New Jersey statutory scheme wrongly excluded

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Onyx from participating in the Fund and did so in a manner that discriminated against

risk retention groups in violation of the LRRA, Onyx brought suit against the

Association, New Jersey’s Department of Banking and Insurance, and the Department’s

commissioner. Onyx sought a declaratory judgment directing the defendants to permit

Onyx to take part in the Fund, and it also sought reimbursement for “all paid claims”

Onyx had incurred for pedestrian personal injury coverage. App. 40. The District Court

dismissed the complaint for failure to state a claim under Federal Rule of Civil Procedure

12(b)(6), and this timely appeal followed.

II. Jurisdiction

The District Court had jurisdiction pursuant to 28 U.S.C. § 1331, and we have

jurisdiction pursuant to 28 U.S.C. § 1291.1

III. Standard of Review

In reviewing the District Court’s dismissal of Onyx’s complaint pursuant to

Rule 12(b)(6), our review is plenary. McMullen v. Maple Shade Twp., 643 F.3d 96, 98

(3d Cir. 2011). We accept as true all well-pled factual allegations in the complaint,

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The Department of Banking and Insurance has urged that this case is moot
because the Department issued a June 30, 2015 order that denied Fund payments for all
commercial pedestrian personal injury claims (not just those involving risk retention
groups), required all commercial motor vehicle insurers to include coverage for
pedestrian claims, and thereby diminished the merit of Onyx’s assertion of discriminatory
treatment toward risk retention groups. We conclude, however, that Onyx retains “a
personal stake in the outcome of the lawsuit” based, at the very least, on its claim for
reimbursement of pedestrian claims it has previously paid. Campbell-Ewald Co. v.
Gomez, 136 S. Ct. 663, 669 (2016) (quoting Genesis Healthcare Corp. v. Symczyk, 133
S. Ct. 1523, 1528 (2013)). Accordingly, the Department’s June 30, 2015 order does not
deprive this Court of jurisdiction.

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viewing them in the light most favorable to the plaintiff, Santomenno ex rel. John

Hancock Tr. v. John Hancock Life Ins. Co. (U.S.A.), 677 F.3d 178, 182 (3d Cir. 2012),

and we will affirm if the plaintiff failed to plead “enough facts to state a claim to relief

that is plausible on its face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

IV. Discussion

Onyx advances three arguments on appeal, which we address seriatim. First,

Onyx asserts that the LRRA preempts New Jersey state law and that the defendants must

therefore allow Onyx to pay into and receive benefits from the Fund. But although Onyx

argues that the LRRA mandates that New Jersey allow risk retention groups to participate

in state-established mechanisms “for the equitable apportionment among insurers of

liability insurance losses and expenses,” the LRRA in fact states that “any state may

require . . . a [risk retention] group to . . . participate” in such a mechanism. 15 U.S.C.

§ 3902(a)(1)(C) (emphasis added). Far from mandating that states allow risk retention

groups to participate in equitable apportionment mechanisms, the LRRA merely gives

states the option to do so—an option that New Jersey has declined to exercise.2

Second, Onyx contends that its exclusion from the Fund was discriminatory and

therefore in violation of the LRRA provision providing that, if a state exercises its option

2
To the extent Onyx asserts that, even if federal and state statutes prevent it from
participating in the Association, see 15 U.S.C. § 3902(a)(2); N.J. Stat. Ann. § 17:47A-9,
Onyx should nonetheless be allowed to participate only in the Fund and not in the
Association, such a Fund-only participation status simply does not exist under New
Jersey law, see N.J. Stat. Ann. § 17:30A-5, and, particularly given our analysis of Onyx’s
discrimination allegation below, the LRRA does not require New Jersey to create such a
status, see generally 15 U.S.C. § 3902.

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to require risk retention groups to participate in a mechanism for equitable apportionment

of insurance losses and expenses, then the state must do so “on a nondiscriminatory

basis.” 15 U.S.C. § 3902(a)(1)(C). But Onyx’s contention is premised on the mistaken

notion that the LRRA mandates that New Jersey allow risk retention groups to participate

in the Fund. And even assuming the LRRA embodies a congressional intent to prohibit

discriminatory treatment of risk retention groups as compared to other kinds of insurers,

the statute clearly limits that intent to specific kinds of state regulation. See id.

§ 3902(a)(1)(B), (a)(1)(C), (a)(4), (c). Thus, we agree with the District Court and with

the New Jersey Superior Court Appellate Division, both of which rejected the contention

that New Jersey’s insurance scheme impermissibly discriminates against risk retention

groups, see Am. Int’l Ins. Co. of Del. v. 4M Interprise, Inc., 70 A.3d 757, 762-64 (N.J.

Super. Ct. App. Div. 2013).

As the Appellate Division explained, New Jersey’s dissimilar treatment of risk

retention groups and other insurers represents the “trade-off” for risk retention groups:

“[I]n exchange for limited State regulation,” risk retention groups are not permitted

membership in insolvency guaranty associations, such as the Association here. Id. at

763-64 (internal quotation marks omitted). Congress expressly intended risk retention

groups to be treated differently from other insurers in manifold situations, as exemplified

in the LRRA’s statutory exemptions for risk retention groups from “State law[s], rule[s],

regulation[s], or order[s].” 15 U.S.C. § 3902(a).3 Because disparate treatment of risk

3
Indeed, federal law prohibits states from allowing risk retention groups such as
Onyx “to participate in any insurance insolvency guaranty association to which an insurer

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retention groups is permissible absent an express LRRA prohibition—and because in

many instances disparate treatment is required under the LRRA, see id.—the District

Court properly rejected Onyx’s claim of discrimination based on Onyx’s exclusion from

the Association and from the Fund.

Finally, pointing to the complaint’s mention of the Department of Banking and

Insurance’s shifting positions regarding risk retention groups’ obligations to uninsured

pedestrians, Onyx argues that, because the Department’s various positions amount to an

admission of discriminatory practices and because the complaint therefore satisfies the

Rule 12(b)(6) pleading standard, the District Court should have permitted discovery to

proceed. However, as discussed above, the District Court correctly dismissed the

complaint as a matter of law, so discovery here would merely be “a fishing expedition”

for facts to support a “speculative pleading of a case.” Zuk v. E. Pa. Psychiatric Inst. of

the Med. Coll., 103 F.3d 294, 299 (3d Cir. 1996). We therefore agree with the District

Court’s decision not to allow this case to proceed to discovery.

V. Conclusion

For the foregoing reasons, we will affirm the Order of the District Court

dismissing Onyx’s complaint.

licensed in the State is required to belong” (such as the Association here), 15 U.S.C.
§ 3902(a)(2), and thus Onyx is not one of the Association’s member insurers, see
N.J. Stat. Ann. § 17:47A-9. This provides an independent reason Onyx’s arguments fail,
because instead of making payments into the Fund, which would then disburse any
necessary personal injury payments to uninsured pedestrians, Onyx is required by statute
to cover personal injury payments to uninsured pedestrians in its liability insurance
policies. See id. §§ 17:28-1.3, 39:6A-4.

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