Cirelli v. Ohio Cas. Ins. Co.

• Decision Date: 28 February 1977
• Citation: 371 A.2d 17,72 N.J. 380
• Parties: Alberto CIRELLI, Plaintiff-Respondent-Cross-Appellant, v. The OHIO CASUALTY INSURANCE CO., Defendant-Appellant-Cross-Respondent, and Richard C. McDONOUGH, New Jersey Commissioner of Insurance, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 380

72 N.J. 380

371 A.2d 17

Alberto CIRELLI, Plaintiff-Respondent-Cross-Appellant, v. The OHIO CASUALTY INSURANCE CO., Defendant-Appellant-Cross-Respondent, and Richard C. McDONOUGH, New Jersey Commissioner of Insurance,

Defendant-Respondent.

Supreme Court of New Jersey.

Argued Nov. 8, 1976.

Decided Feb. 28, 1977.

Elliott Abrutyn, Pine Brook, for appellant-cross-respondent (Morgan, Melhuish, Monaghan, McCoid & Spielvogel, Livingston, attorneys).

Charles F. Krause, III, Union City, for respondent-cross-appellant (Riemenschneider, Krause & Vion, Union City, attorneys).

Maureen McGrath, Deputy Atty. Gen., filed a statement in lieu of brief on behalf of respondent Richard C. McDonough (William F. Hyland, Atty. Gen., attorney; Stephen Skillman, Asst. Atty. Gen., of counsel).

The opinion of the court was delivered by

SCHREIBER, J.

The primary issue in this case concerns the validity of reimbursement and subrogation provisions in an automobile liability insurance policy with respect to personal injury benefits paid to the assured as required by the New Jersey Automobile Reparation Reform Act (No Fault Law), N.J.S.A. 39:6A--1 Et seq.

The facts are undisputed. The plaintiff Alberto Cirelli, while a passenger in an automobile owned by him and driven by his son, Emilio Cirelli, was injured when his car collided with a vehicle owned by Mary Natelli and operated by her husband Thomas. The accident occurred in Clarkestown, New York on March 1, 1974. Cirelli was a New Jersey resident and his liability insurance carrier was the defendant, The Ohio Casualty Insurance Co. (Ohio). The Natellis, New York residents, were insured by Boston Old Colony Insurance Co. (Boston).

Ohio's policy included an endorsement which provided for personal injury protection (PIP), a requirement of the New Jersey No Fault Law. Accordingly, Ohio was bound, Inter alia, to pay its insured Cirelli for All reasonable medical expenses (his hospital and medical expenses exceeded $120,000) and wage losses (subject to a weekly maximum payment of $100 and gross limit of $5200). N.J.S.A. 39:6A--4. Ohio Claimed that, since the accident had occurred in New York and the New York No Fault Law¹ limited the insurance company's liability for personal injury protection to $50,000, its exposure did not exceed that amount. N.Y. Ins. Laws §§ 671, 672 (McKinney). Therefore, Ohio refused to pay more than $50,000 toward the hospital and medical expenses.

The Ohio PIP endorsement also provided that the company would be subrogated, to the extent of PIP payments made, to Cirelli's rights against a third person. The endorsement also required Cirelli to reimburse Ohio from the proceeds of 'any settlement or judgment' that Cirelli recovered from the tort-feasor who was responsible for the accident.

Cirelli² instituted a declaratory judgment proceeding against Ohio in which he sought an adjudication that Ohio was responsible for PIP expenses in excess of $50,000 and that the reimbursement provisions were invalid.³

The trial court, in a written opinion, 133 N.J.Super. 492, 337 A.2d 405 (Law Div.1975), found that Ohio was not entitled to the benefit of the $50,000 New York statutory limitation. The defendant is not pressing this issue on this appeal and we shall not discuss it beyond stating our conclusion that we fully concur with the trial court's determination. The court also concluded that the reimbursement provisions were unenforceable because they were repugnant to the provisions and intent of the New Jersey PIP benefits, but that Cirelli was obligated to reimburse Ohio for any medical expenses which he might recover from Natelli. The trial court also ordered Ohio to pay plaintiff's counsel a legal fee of $5,000 for services rendered in connection with the issue concerning the New York monetary ceiling, but not with respect to fees involved in the reimbursement aspect of the case.

Ohio filed an appeal in which it challenged the finding of invalidity of the reimbursement agreement and the awarding of the counsel fee. Upon motion, the matter not having been heard by the Appellate Division, we granted certification, R. 2:12--2. 69 N.J. 448, 354 A.2d 645.

I

The counsel fee was awarded pursuant to R. 4:42--9(a)(6), which sanctions allowance of counsel fees in an action upon a liability or indemnity insurance policy in favor of a successful claimant. However, since the No Fault Law does not provide for counsel fees, Ohio asserts that the court may not by rule provide for such fees, that the particularization of suits predicated upon liability and indemnity insurance policy cases is an arbitrary and unreasonable classification and therefore is unconstitutional, and that in any event the fee was excessive. We find no merit in any of these contentions. It is well-settled that courts may fix counsel fees and appropriate criteria to that end may be established by the Supreme Court pursuant to its rule making power, Liberty Title & Trust Co. v. Plews, 6 N.J. 28, 43, 77 A.2d 219 (1950); that selection of actions on liability or indemnity insurance policies in which counsel fees may be awarded is a reasonable classification, N.J. Manufacturers Ins. Co. v. Consolidated, 124 N.J.Super. 598, 600--601, 308 A.2d 76 (Law Div.1973), and Felicetta v. Commercial Union Ins. Co., 117 N.J.Super. 524, 528, 285 A.2d 242 (App.Div.1971), certif. den. 60 N.J. 141, 286 A.2d 514 (1972); and that examination of the affidavit of services confirms the reasonableness of the trial court's judgment in fixing the amount of the fee.

II

The No Fault Law grants an insurer paying PIP benefits subrogation rights, exercisable by intercompany arbitration against only the insurer of the tortfeasor. N.J.S.A. 39:6A--9. However, the same section provides that it shall be inoperative after December 31, 1974. This has been held to mean that subrogation rights have been extinguished with respect to accidents occurring after that date. Pa. Mfrs. Assn. Ins. Co. v. Gov't Emp. Ins. Co., 136 N.J.Super. 491, 498, 347 A.2d 5 (App.Div.1975), aff'd o.b. this day 72 N.J. 348, 370 A.2d 855.

Since the accident in the present case occurred prior to January 1, 1975, the defendant's subrogation rights are required to be evaluated in accordance with N.J.S.A. 39:6A--9, providing for intercompany arbitration. Plaintiff contends that the defendant is restricted to that subrogation remedy. Defendant's position is that the intercompany arbitration provision of the statutory section could have been intended to be applicable only where both vehicles involved in the accident are New Jersey vehicles insured under the requirements of New Jersey law, including the No Fault Law. It is doubtful, as contended by defendant, that our Legislature has power to compel an out of state insurer covering an out of state motor vehicle for tort liability to arbitrate with the New Jersey resident's no fault carrier the issue of the incidence and amount of such liability, particularly where the accident occurs outside this State. Therefore, mandatory intercompany arbitration cannot reasonably have been in contemplation in such case.

The question then arises whether, as to pre-January 1975 accidents involving out of state accidents with foreign vehicles, there is a statutory or other policy precluding the enforcement of such a subrogation agreement as contained in the instant policy--if consistent with full recourse by plaintiff to the liability to him for all his damages of any third person or insurer thereof. For reasons to be stated, we would answer that question in the negative and we would regard the pertinent considerations as similar to those applicable as to accidents occurring after December 31, 1974, when N.J.S.A. 39:6A--9 became inoperative.

Preliminarily, we agree with the trial court that in general the 'rationale of the act involves a plan by which each insurance carrier undertakes the payment of P.I.P. benefits to its assured regardless of fault and, as of January 1, 1975, without the cumbersome...