Hanover Ins. Co. v. Lewis

• Decision Date: 31 August 1992
• Citation: 616 A.2d 963,260 N.J.Super. 380
• Parties: The HANOVER INSURANCE COMPANY, as servicing carrier for New Jersey Full Automobile Underwriting Association, and Krishnadas Mehta, Plaintiffs, v. Lester LEWIS and the Hartford Insurance Company, Defendants.
• Court: New Jersey Superior Court

Page 380

260 N.J.Super. 380

616 A.2d 963

The HANOVER INSURANCE COMPANY, as servicing carrier for New Jersey Full Automobile Underwriting Association and Krishnadas Mehta, Plaintiffs, v. Lester LEWIS and the Hartford Insurance Company, Defendants.

Superior Court of New Jersey, Law Division Union County.

Decided Aug. 31, 1992.

Harold Seide, Jersey City, for plaintiffs (Keane, Brady, & Burns, attorneys).

Mary Breslin, Oradell, for defendants (Purcell, Ries, Shannon, Mulcahy & O'Neill, Bedminster, attorneys).

MENZA, J.S.C.

Plaintiffs move for summary judgment.

The question presented in this case is whether personal injury protection (PIP) reimbursement recovery is limited to the amount of the tortfeasor's liability policy.

The plaintiff Krishnadas Mehta (Mehta) was injured as a result of an automobile accident involving the defendant Lester Lewis (Lewis), who was operating a commercial vehicle at the time.

The plaintiff, Hanover Insurance Company (Hanover), insured the Mehta vehicle.

The defendant, Hartford Insurance Company (Hartford), insured the Lewis vehicle and has paid to the plaintiff the sum of $35,000.00--the full amount of Lewis liability policy. Since the Lewis vehicle was a commercial vehicle, it did not have PIP coverage.

Hanover now seeks reimbursement from Hartford, Lewis' insurance company ¹, for the PIP benefits that it paid to Mehta ($13,702.87), pursuant to N.J.S.A. 39:6A-9.1, Recovery of Personal Injury Protection Benefits from Tortfeasors.

Hartford objects, contending that it has paid to Mehta the limits of its liability policy and it is therefore not liable for any further payments. Hartford's policy provides:

Coverage

We will pay all sums an "insured" legally must pay as damage because of "bodily injury" or "property damage" to which this insurance applied, caused by an "accident" and resulting from the ownership, maintenance or use of a covered "auto."

Limit of Insurance

Regardless of the number of covered "autos," "insureds," premiums paid, claims made or vehicles involved in the "accident," the most we will pay for all coverage resulting from any one "accident" is the unit of insurance for liability coverage shown in the declarations.

The original reimbursement statute, N.J.S.A. 39:6A-9, was stated in terms of subrogation and provided:

Any insurer paying benefits in accordance with the provisions of section 4 and section 10, personal injury protection coverage, regardless of fault, shall be subrogated to the rights of any party to whom it makes such payments, to the extent of such payments. Such subrogated insurer may only by intercompany arbitration or by intercompany agreement exercise its subrogation rights against only the insurer of any person liable for such damages in tort provided, however, that such insurer may exercise its subrogation rights directly against any person required to have in effect the coverage required by this act and who failed to have such coverage in effect at the time of the accident. The exemption from tort liability provided in section 8 does not apply to the insurers' subrogation rights. On and after 2 years from the effective date of this act the provisions of this section shall be inoperative. (emphasis added).

In the case of Pa. Mfgrs. Assn. Ins. Co. v. Govt. Emp. Ins. Co., 136 N.J.Super. 491, 347 A.2d 5 (App.Div.1975), the court concluded that the statute, in providing for subrogation, granted to the insurer only those rights which the PIP recipient would have had against the tortfeasor's insurer. The court said:

We find no indication in the No Fault Law evidencing a legislative intent to tamper with the existing law of normal subrogation. ... The rights of ... [the plaintiff] ... are therefore controlled by existing subrogation principles, with the right and quantum of recovery equated with that of the injured person to whom the PIP payments were made.

. . . . .

Since under the PIP provision of the No Fault Law she is reimbursed on a first-party basis by her host's insurance carrier, she is required to forego her right to recover for these reimbursed expenses and Pennsylvania is subrogated to recover from GEICO in an amount limited by the coverage of the liability feature of its policy. (Id. at 498, 347 A.2d 5).

The statute expired on January 1, 1975, two years after it was enacted.

In 1981, after the expiration of the first statute and prior to the enactment of the current statute, the Supreme Court, in the case of Aetna Ins. Co. v. Gilchrist Bros. Inc., 85 N.J. 550, 428 A.2d 1254 (1981), held that an insurer seeking subrogation had only those rights which its insured had. It stated:

The underpinning of subrogation is its derivative nature. The insurer obtains only the right of the insured against the tortfeasor subject to defenses of the wrongdoer against the insured ...

. . . . .

Therefore, the rights of the insured beneficiary, the subrogor, become the rights of the subrogated insurer. No additional rights are created. No new cause of action comes into existence ...

. . . . .

The issue then is what rights ... [the decedent] ... had which would have entitled him to recover from ... [defendants] ... those expenses incurred as a result of the automobile accident and paid as part of the PIP coverage under the Aetna policy. The answer is none. It is none because the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 et seq., which mandates that every automobile liability insurance policy must provide PIP coverage, has eliminated the ability of the insured in an action in this State to recover damages from the tortfeasor for the amounts collectible or paid under PIP ... (Id. at 560-562 ).

. . . . .

In the absence of a clearly expressed legislative intent to the contrary, we regard the language in ... [ N.J.S.A. 39:6A-12] ... as conclusive, irrespective of the nature of the tortfeasor's insurance coverage. The rights of plaintiff's insurance carrier as subrogee cannot exceed those of its insured. Since the injured plaintiff could not recover PIP damages from the tortfeasor, neither could plaintiff's insurance carrier.

. . . . .

The arguments marshalled by the dissent should more properly be directed to the Legislature. The Legislature decided injured plaintiffs may not recover PIP payments from the tortfeasor who thereby benefits from a collateral source. It is not for us to rewrite the statute to comport with our judgment of what we may consider to be a wiser course. (Id. at 566, 428 A.2d 1254).

The Legislature responded in 1983 by enacting the current statute N.J.S.A. 39:6A-9.1. This statute makes no mention of a subrogation right as did the prior statute. Instead, it explicitly states that an insurer who makes PIP payments shall have the right to recover the amount of payments from the tortfeasor. The statute provides:

Any insurer ... paying personal injury protection benefits ... as a result of an accident occurring within this State, shall, within two years of 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 benefit coverage, other than for pedestrians ... or although required did not maintain personal injury protection ... at the time of the accident.

In the case of an accident occurring in this State, involving an insured tortfeasor, the determination 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 cost of processing benefits 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 against the insurer of the tortfeasor and shall be by agreement of the involved parties or, upon failing to agree, by arbitration. (emphasis added).

Although there are no New Jersey cases which have interpreted the statute, decisions in other jurisdictions have concluded that an amount an insurer seeks in reimbursement is not limited to the other insurer's limits of liability.

In the case of Ohio Sec. Ins. Co. v. Drury, 582 S.W.2d 64 (Ky.1979), the court concluded that the Kentucky statute creating a separate right of recovery had no relationship to the tortfeasor's insurance contract. The court said:

Motorist Mutual urges that since it has paid $23,000.00 out of its $25,000.00 limits on bodily injury liability coverage, Equity is entitled to the remaining $2,000.00 and no more, for there is no policy provision from which to pay the additional $8,000.00 Equity is demanding. The answer to that is that, Motorist Mutual, by writing insurance in Kentucky, makes itself amenable to the provisions of the Kentucky Law and necessarily assumes the obligations of ... [the statute] ... notwithstanding the provisions of its contract with Farris. Equity's claim against Motorist Mutual is not entirely one of subrogation, but rather is reimbursement by virtue of the provision of the statute, or by operation of law. (Emphasis added). (Id. at 67-68).

A New York case, Criterion Ins. Co. v. Com. Union Assur. Co., 89 Misc.2d 36, 390 N.Y.S.2d 953 (Sup.Ct.1976), reached a similar holding. In that case the defendant contended that any interpretation of the New York statute which required it to pay to the plaintiff any sums in excess of its limits of its liability policy impairs the obligations of its contract with its insurer.

The New York No Fault Law provides:

Any insurer liable for the payment of first party benefits to or on behalf of a covered person shall have the right to recover the amount of such benefits so paid from the insurer of any other covered person if and to the extent that such other covered person would have been liable, but for the provisions of this article, to pay damages in an action of law. (Comprehensive...