Plaintiff sells workers’ compensation insurance through its “EquityComp” program approved by New Jersey law. Defendant purchased an EquityComp policy. Unable to pay its insurance premiums, defendant executed a promissory note acknowledging its indebtedness and promising to pay plaintiff a stated amount in full settlement. Defendant made no payments toward the note, however, leading plaintiff to commence a lawsuit.

Defendant argued that the note was void as against public policy because it derived from a Reinsurance Participation Agreement (RPA) that was executed as part of the EquityComp program, but which was not itself approved by New Jersey regulators. According to defendant, plaintiff used the RPA to unlawfully circumvent state regulations governing policies issued with guaranteed versus loss-sensitive premiums. According to the court, however, the EquityComp was valid and enforceable regardless of whether it violated New Jersey insurance regulations. Citing Nebraska law, the court determined that the note was a distinct, unconditional agreement to “settle” a delinquent account. The court refused to “look behind” and nullify that agreement based on defendant’s allegations, particularly where there were no allegations of fraud or mistake in the issuance of the note.

Applied Underwriters, Inc. v. Top’s Personnel, Inc., No. 8:15-cv-00090-JMG-CRZ (USDC D. Neb. Aug. 2, 2018)