Fernandez v. Nationwide Mut. Fire Ins. Co.
| Decision Date | 16 July 2009 |
| Docket Number | A-54 September Term 2008. |
| Citation | 974 A.2d 1031,199 N.J. 591 |
| Parties | Sebastian FERNANDEZ, Plaintiff-Appellant, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant-Respondent, and Proformance Insurance Company, Defendant. |
| Court | New Jersey Supreme Court |
Dennis J. Drasco, Roseland, argued the cause for appellant (Lum, Drasco & Positan, attorneys; Mr. Drasco and Kevin J. O'Connor, on the briefs).
Christine M. Mercado, argued the cause for respondent (Richard D. Millet & Associates, attorneys, Somerville).
Peggy Sheahan Knee, submitted a brief on behalf of amicus curiae New Jersey State Bar Association (Ms. Knee, President, and Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, attorneys; Ms. Knee, Eric G. Kahn, Springfield, Annabelle M. Steinhacker, and Amirali Y. Haidri, Union, on the brief).
The judgment of the Appellate Division is affirmed substantially for the reasons expressed in the thorough and thoughtful opinion by Judge Gilroy. Fernandez v. Nationwide Mut. Fire Ins. Co., 402 N.J.Super. 166, 952 A.2d 1156 (App. Div.2008). As the panel aptly concluded, this matter is governed by the principles previously set forth in Knox v. Lincoln General Insurance Co., 304 N.J.Super. 431, 701 A.2d 445 (App.Div.1997), and reaffirmed in David v. Government Employees Insurance Co., 360 N.J.Super. 127, 821 A.2d 564 (App.Div.), certif. denied, 178 N.J. 251, 837 A.2d 1094 (2003). Applying that precedent to the instant matter required that the cost of providing PIP benefits to the victim be borne by the insurer of the responsible party, here the tortfeasor. We add only the following.
Unlike our colleagues in the dissent, we are not persuaded that there is a compelling policy need or statutory basis to justify reinterpretation of the No-Fault Law,1 specifically N.J.S.A. 39:6A-9.1, to achieve a result different from that reached by the appellate panel. The Appellate Division's decision correctly held that the insurer of the responsible party, and not the injured victim's insurer, was liable for the expense of PIP benefits for the victim. Simply because that conclusion diminishes the total amount available to the victim from the tortfeasor's policy of insurance does not produce an unjust result. Rather, that conclusion advances stability in the insurance marketplace by requiring that the ultimate cost of PIP benefits be borne by the insurer of the responsible party, not by the insurer of the victim. That result has been the controlling application of the No-Fault Law in this state for more than a decade, undisturbed by any legislative disapproval. It is sophistic to declare that interpretation to be suddenly unreasonable or contradictory to the No-Fault Law as presently written.
We recognize that the Legislature may decide that a different policy is preferable and may alter the law; that is its province. Until that occurs, we affirm the Appellate Division's application of settled law in this matter.
Broadly described, N.J.S.A. 39:6A-9.1 provides that an insurer may recover, from a tortfeasor, personal injury protection (PIP) benefits paid to its insured as a result of an automobile accident. The issue presented in this case is straightforward: whether the statute authorizes reimbursement to the PIP carrier when the tortfeasor's policy is insufficient to cover the insured's total damages. In other words, who bears the loss when either the insured or the insurer will come up short? In my opinion, the Legislature intended the carrier to be reimbursed for its PIP payments only to the extent that the proceeds of the tortfeasor's policy exceed the full amount of the insured's damages for all claims.
The Court today approves a contrary paradigm that gives the carrier a priority over its insured where the tortfeasor's policy is inadequate to make the insured whole, effectively paying the carrier out of the insured's funds. The effect of the Court's opinion in practical terms is that an innocent victim of a car accident who incurs $500,000 in medical expenses and receives $250,000 in PIP payments will have no recourse against a tortfeasor's $250,000 liability policy because that policy will be used to satisfy the victim's PIP carrier. Accordingly, the victim will sustain a medical expense loss of $250,000 while his carrier will be made whole.
Because that conclusion cannot be squared with the legislatively declared reparation goals of our no-fault statutes, alters the fundamental nature of the insurance contract, and will have the cruel effect of impoverishing innocent accident victims, I respectfully dissent.
On February 4, 2004, plaintiff, Sebastian Fernandez, was critically and permanently injured in an accident when the automobile he was driving was struck by a commercial vehicle operated by Peter Garafalo and owned by Go Pro Waste Services, Inc. ("Go Pro"). Fernandez was insured under a policy issued by defendant Nationwide Mutual Fire Insurance Company ("Nationwide"), and Garafalo and Go Pro, under a $1,000,000 liability policy issued by defendant Proformance Insurance Company ("Proformance"). There are no liability issues in the case and thus no need recount the details of the accident.
Fernandez's total medical expenses were $591,269.62, of which Nationwide paid approximately $250,000. Both Fernandez and Nationwide sought to recover their losses through concurrent proceedings. On April 20, 2004, Fernandez filed suit against Garafalo and Go Pro. That case was submitted to non-binding arbitration pursuant to N.J.S.A. 39:6A-25(b).
In the meantime, Nationwide filed an inter-company arbitration action against Proformance for reimbursement of the PIP payments it had paid Fernandez, pursuant to N.J.S.A. 39:6A-9.1. In September 2005, Nationwide obtained an award against Proformance for its PIP outlay, but the money was not transferred due to Fernandez's pending arbitration proceeding. In that proceeding, the arbitrator awarded Fernandez $1,841,269.62, made up of $1,500,000 in noneconomic damages and $341,269.62 in medical expenses. The medical expense figure reflected the cost of all of Fernandez's medical bills minus Nationwide's PIP payments, thus obviating any issue of double recovery. Fernandez settled with Garafalo and Go Pro for the full amount of the Proformance policy, which was $800,000 less than his adjudicated damages. Because of the award in favor of Nationwide, Proformance, with the consent of Fernandez, deposited the amount that Nationwide had been awarded into court.
Fernandez thereafter instituted an action for a declaratory judgment regarding his entitlement to the deposited funds. Both he and Nationwide filed motions for summary judgment. The trial judge denied Nationwide's motion, granted Fernandez's cross-motion, and directed that the deposited funds be paid to Fernandez. Nationwide appealed and the Appellate Division reversed, relying on the decisions in Knox v. Lincoln General Insurance Co., 304 N.J.Super. 431, 701 A.2d 445 (App.Div. 1997), and David v. Government Employees Insurance Co., 360 N.J.Super. 127, 821 A.2d 564 (App.Div.), certif. denied, 178 N.J. 251, 837 A.2d 1094 (2003). The panel declared "that where a PIP carrier has paid benefits to its insured, it is entitled to reimbursement of those benefits from the insurance proceeds of a third-party tortfeasor, pursuant to N.J.S.A. 39:6A-9.1, even if the limits of the tortfeasor's insurance policy are insufficient to make the insured whole." Fernandez v. Nationwide Mut. Fire Ins. Co., 402 N.J.Super. 166, 168-69, 952 A.2d 1156 (App.Div.2008). We granted certification. 197 N.J. 15, 960 A.2d 745 (2008).
N.J.S.A. 39:6A-9.1 provides that:
An insurer, health maintenance organization or governmental agency paying ... personal injury protection benefits in accordance with [N.J.S.A.] 39:6A-4 or 39:6A-10 ... as a result of an accident occurring within this State, shall, within two years of the filing of the claim, have the right to recover the amount of payments from any tortfeasor who was not, at the time of the accident, required to maintain personal injury protection or medical expense benefits coverage, other than for pedestrians, under the laws of this State, including personal injury protection coverage required to be provided in accordance with section 18 of P.L. 1985, c. 520 (C. 17:28-1.4), or although required did not maintain personal injury protection or medical expense benefits coverage at the time of the accident.
The statute continues:
In the case of an accident occurring in this State involving an insured tortfeasor, the determination as to whether an insurer, health maintenance organization or governmental agency is legally entitled to recover the amount of payments and the amount of recovery, including the costs of processing benefit claims and enforcing rights granted under this section, shall be made against the insurer of the tortfeasor, and shall be by agreement of the involved parties or, upon failing to agree, by arbitration.
[N.J.S.A. 39:6A-9.1.]
We have previously considered that statute and described it as permitting an insurer to recover PIP benefits
from any tortfeasor who 1) was not required by law to maintain PIP coverage or 2) although required, failed to carry PIP coverage. N.J.S.A. 39:6A-9.1. The first class refers to insured commercial or public vehicles without PIP coverage. (A key limitation of the No-Fault Law is its applicability only to private-passenger automobiles.) The second class refers to uninsured tortfeasors. The statute further provides that if the tortfeasor is insured, his or her insurer is liable for the PIP-reimbursement payment. Therefore, recovery from an uninsured tortfeasor may be direct, but recovery from an insured tortfeasor must be through his or her insurer.
[Unsatisfied Claim & Judgment Fund Bd. v. N.J. Mfrs. Ins. Co., 138 N.J. 185 193, 649 A.2d 1243 (1994) (citations omitted).]
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