P.M. BRIEFING : Allstate Insurance Files Suit Against New Jersey Regulations

Allstate Insurance Co. filed its long-promised lawsuit against New Jersey’s new car insurance law in federal court today, claiming that the plan to lower rates is unconstitutional because it takes away insurance company profits without due process.

“This law is an unfair and unconstitutional effort to avoid facing up to the real problems of auto insurance in New Jersey by punishing Allstate and other insurers,” Allstate attorney Floyd Abrams said after the suit was filed.

“Filing this suit is in the best interests of Allstate’s customers, shareholders and New Jersey employees,” he said.

The suit, filed in U.S. District Court in Newark, attacks a portion of the law that requires insurance companies to pay off $1.4 billion of the $3-billion debt of the Joint Underwriting Assn., New Jersey’s financially troubled pool for high-risk drivers.

Insurance companies would not be allowed to pass the expense on to customers, and those who object would not be permitted to stop writing auto policies in New Jersey unless they also abandon their other insurance business in the state.

That amounts to a seizure of insurance company property--insurance profits--without due process, and is a violation of the Constitution, the company argued. The action also “deprives Allstate of its right to make a fair and reasonable return on its business,” the suit claimed.

The payoff of the JUA debt is the key to eliminating the $222 annual surcharge all insured motorists in New Jersey pay to subsidize the pool.