Government Employees Ins. Co. v. Halfpenny

Decision Date31 January 1980
Citation103 Misc.2d 128,425 N.Y.S.2d 212
CourtNew York Supreme Court
PartiesGOVERNMENT EMPLOYEES INSURANCE COMPANY, as Subrogee of Margaret Halfpenny, Plaintiff, v. Margaret HALFPENNY, General Accident Insurance Group, Robert A. Johnson, Sr., and Hartford Accident & Indemnity Company, Defendants.
Morris, Duffy, Ivone & Jensen, New York City, for plaintiff

Trubin, Sillcocks, Edelman & Knapp, New York City, for defendant Halfpenny.

George S. Evans, New York City, for defendant General Acc. Ins. Group.

Langan & Levy, New York City, for defendant Robert A. Johnson.


The separate summary judgment motions and cross motion relating to this interstate no-fault puzzle are hereby consolidated for a single joint disposition. After two conferences and oral argument, submission of multiple briefs, and considerable independent research, the legal relationships of the parties have been sufficiently clarified to provide answers to the threshold questions which are determinative of the motions.


The accident parties

On December 13, 1975, the defendant Margaret Halfpenny (Halfpenny), a resident of New York, was seriously injured in an auto accident while operating her New York registered vehicle in Secaucus, New Jersey. She claims that the accident was due to the negligence of Dr. Robert A. Johnson, a New Jersey resident, who was operating his New Jersey registered and garaged motor vehicle at the time.

Parties insurance coverages

Halfpenny was insured by Government Employees Insurance Company (GEICO) under the terms of its standard no-fault insurance policy issued in New York pursuant to the then applicable laws of New York. It contained standard no-fault coverage, plus an "Additional Personal Injury Protection Amendment" to provide first party benefits for an out-of-state accident. Dr. Johnson was issued the standard New Jersey no-fault statutory policy providing $100,000 liability coverage by General Accident Insurance Group (General). In addition, he procured an excess umbrella liability policy with substantially greater coverage from Hartford Accident & Indemnity Co. (Hartford).

Halfpenny's actions

Halfpenny received payments for basic economic loss (PIP-1st party benefits) from GEICO, her New York no-fault carrier in the total sum of $49,079.40.

Halfpenny also commenced an action in the United States District Court, Eastern District of New York, based upon diversity of citizenship, to recover the sum of $1,000,000 in damages from Dr. Johnson for the injuries sustained in the accident. The complaint by its terms explicitly sought only those damages recoverable by a plaintiff subject to the provisions of the New York no-fault statute. Paragraph 10 of the complaint reads as follows:

"That by reason of the said occurrence the plaintiff has sustained serious injury as defined in Subdivision 4 of Section 671 of the Insurance Law of the State of New York or economic loss greater than basic economic loss as defined in subdivision 1 of Section 671 of the Insurance Law".

During the pendency of this action GEICO wrote to its assured Halfpenny and to the other liability carriers claiming a lien for the return of its $49,079.40 in PIP payments from any recovery in the action. Although it presently concedes that it had no right to lien status, GEICO asserts that it placed everyone on notice of its claim for reimbursement of its policy payments.

Settlement in Federal Court

The Halfpenny action was settled before trial in Federal Court for $375,000. General agreed to pay $100,000, its full coverage, and Hartford, $275,000. The scope of the settlement was made a matter of record in open court before Judge Brieant. The following abstracts are considered relevant to these motions:

"The settlement offer then includes the full amount of policy coverage as far as the liability aspect of the policy is concerned, concerning personal injury."

"Ms. Halfpenny, do you understand that your lawsuit for personal injuries, pain, suffering and damages incurred as a result of your accident of December 13, 1975 is being settled for the total sum of $375,000."

"The Court understands that no lien has been asserted against Miss Halfpenny by the company which paid the so-called no-fault benefits. And I understand that none could be so asserted. So the liens we're talking about are for medical expenses and for excess for the money she has already collected, and I presume already paid to the doctors from her no-fault benefits."

"It is further understood Your Honor that the amount offered in settlement is for the personal injury claims asserted in the complaint before this Court, and the associated damages that arose out of the claim asserted before this Court."

"Certainly and we are also settling, if it please the Court, since the complaint makes reference to prospective damages and treatment anything that comes up in the future will be borne by Ms. Halfpenny."

After settlement of the Federal Court action Halfpenny placed $49,079.40 of the settlement proceeds in escrow pending a determination of the claims asserted in this action.


Plaintiff GEICO has commenced this action against the defendants Halfpenny, General and Hartford, to recover the $49,079.40 paid by it under its policy. It claims subrogation status arising out of the PIP payments by virtue of the following language contained in its policy issued to Halfpenny:

"SUBROGATION In the event of any payment for extended economic loss, the Company is subrogated to the extent of such payments to the rights of the person to whom, or for whose benefit, such payments were made. Such person must execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Such person shall do nothing to prejudice such rights".

The complaint alleges, inter alia: that plaintiff GEICO put all parties on notice of its claim for reimbursement; that by settling the liability case and disbursing the proceeds without making provision for plaintiff's reimbursement rights, the defendant Halfpenny interfered with, failed to secure and prejudiced plaintiff's contract subrogation rights, and thereby breached the provisions of her insurance policy; and that the other carriers incurred liability by acting in derogation of plaintiff's subrogation rights, in agreeing to a settlement and disbursing funds without provision for reimbursement to plaintiff.

Separate motions for summary judgment have been made on behalf of the defendants Halfpenny, Hartford, General and Johnson. Plaintiff opposes the motions and has cross-moved for judgment against all defendants.


Determination of the following related basic preliminary questions is crucial to a proper resolution of the rights of the parties on this motion.

A. The nature and extent of the cause of action available to, and commenced by Halfpenny as a result of the accident; and

B. The scope, intent, and effect of the release and settlement agreement of the parties in the United States District Court.


No-Fault Laws

New Jersey and New York are now, and at the time of the accident they both were, states which enacted no-fault laws in abridgment of the prior common-law tort remedy. At present the statutes in both states reflect a public policy which requires a carrier paying first party statutory benefits (PIP) to absorb the economic impact of its policy obligation, and bars any reimbursement from the assured or the tortfeasor's carrier via subrogation or intercarrier company arbitration. At the time of this accident the present New Jersey statute It should also be noted that a person injured in an out-of-state accident is not covered under the New York statute, but PIP payments are procurable thereunder by contracting therefor at an additional premium, as was done in the instant case.

was effective, but New York authorized intercarrier arbitration as an exclusive carrier recoupment remedy until 1977. (N.J.Stat.Anno. 39:6A-9; N.Y.Ins.Law, §§ 671, 672, 674.) Both of these statutes, however, are only applicable when the parties involved are covered in accordance with its mandate. If the parties do not fall within the ambit of the statute, they receive no no-fault benefits and they retain the tort remedy which existed prior to no-fault enactment. The New Jersey statute is applicable to "Every owner or registered owner of an automobile registered or principally garaged" in New Jersey (N.J.Stat.Ann. 39:6A-3) and provides statutory no-fault protection to an insured, member of the family residing in the household, other persons injured while occupying or using the insured vehicle, using the vehicle with the insured's consent or to pedestrians injured by such use. (N.J.Stat.Ann. 39:6A-4.) Under the statute a nonresident in a non-New Jersey registered or insured vehicle, injured in an accident in New Jersey with a covered vehicle, is not covered by or subject to the New Jersey no-fault law (see American Hardware Mutual Ins. Co. v. Bradley, 153 N.J.Super. 72, 379 A.2d 53 (1977)). Such person would still possess the common-law tort cause of action which includes a right of recovery of medical expenses (see Cirelli v. Ohio Casualty Insurance Co., 72 N.J. 380, 371 A.2d 17; Theobold v. Angelos, 40 N.J. 295, 191 A.2d 465; Coll v. Sherry, 29 N.J. 166, 148 A.2d 481).

Choice of Law

Under all of the facts herein it is beyond question that a cause of action by Halfpenny against Johnson for damages arising out of this accident is determinable under the law of the State of New Jersey. No considerations of equity, points of contact, public policy or harsh quest statute here exist to alter the long accepted conflict-of-law rule of lex loci delicti. (See Neumeier v. Kuehner, 31 N.Y.2d 121, 335 N.Y.S.2d 64, 286 N.E.2d 454; Tooker v. Lopez, 24 N.Y.2d 569, 301 N.Y.S.2d 519, 249 N.E.2d 394; ...

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