Liberty Mut. Ins. Co. v. Penske Truck Leasing, Co.

• Decision Date: 23 May 2019
• Docket Number: DOCKET NO. A-5624-17T3
• Parties: LIBERTY MUTUAL INSURANCE COMPANY, a corporation, and Eugene Jerinsky, Plaintiffs-Appellants, v. PENSKE TRUCK LEASING, CO., a company, corporation and/or other business entity, Defendant, and CEVA Freight, LLC, a company, corporation and/or other business entity, and Albert Kika, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

459 N.J.Super. 223

208 A.3d 888

LIBERTY MUTUAL INSURANCE COMPANY, a corporation, and Eugene Jerinsky, Plaintiffs-Appellants,

v.PENSKE TRUCK LEASING, CO., a company, corporation and/or other business entity, Defendant,andCEVA Freight, LLC, a company, corporation and/or other business entity, and Albert Kika, Defendants-Respondents.

DOCKET NO. A-5624-17T3

Superior Court of New Jersey, Appellate Division.

Submitted March 12, 2019

Decided May 23, 2019

Clark & Di Stefano, PC, Sea Girt, attorneys for appellants (Robert P. Clark, on the briefs).

Marks O'Neill O'Brien Doherty & Kelly PC, Cherry Hill, attorneys for respondents (Michael J. Notartomas, on the brief).

Before Judges Yannotti, Rothstadt and Gilson.

The opinion of the court was delivered by

GILSON, J.A.D.

Section 9.1 of the New Jersey Automobile Reparation Reform Act (the No-Fault Act), N.J.S.A. 39:6A-1 to -35, provides insurers, which have paid personal injury protection (PIP) benefits to their insured, with the statutory right to seek reimbursement against certain tortfeasors. N.J.S.A. 39:6A-9.1. If the tortfeasor is insured, the determination whether the insurer that paid the PIP benefits is entitled to recover those payments and the amount of the recovery is by agreement of the parties, and, if they are unable to agree, by arbitration. Ibid.

In this appeal, the non-PIP insurer disputes whether its insured was a tortfeasor. Thus, the question presented is whether that dispute must be arbitrated under Section 9.1 of the No-Fault Act or resolved in a court proceeding. We hold that the issue of whether a party is a tortfeasor is to be resolved at arbitration when that issue involves factual questions as to the fault or negligence of the insured.

Accordingly, on this appeal we reverse the Law Division order dated June 4, 2018, which denied the motion of plaintiff Liberty Mutual Insurance Company (Liberty or plaintiff) to compel defendant CEVA Freight, LLC (CEVA), a self-insured company, to arbitrate Liberty's demand for reimbursement of PIP benefits. We also reverse a July 20, 2018 order denying Liberty's motion for reconsideration. We remand with the direction that the Law Division enter an order compelling CEVA and Liberty to arbitrate both whether Liberty is entitled to the reimbursement and the amount of the reimbursement. Thus, the arbitrator will determine whether the driver of the truck, which was owned and self-insured by CEVA, was a tortfeasor.

I.

The basic facts concerning the underlying automobile accident are not in dispute. At approximately 4:45 a.m. on October 7, 2016, a tractor-trailer truck driven by Albert Kika and a pickup truck driven by Eugene Jerinsky were involved in a collision. Kika was attempting to back the truck he was driving into a car dealership located off the southbound lanes of Route 9 in Freehold. While backing into the entrance to the dealership, Kika's truck blocked the southbound lanes of Route 9. As Kika was maneuvering his truck into the driveway, Jerinsky was driving his pickup truck in the right southbound lane of Route 9 and his pickup truck struck the trailer of Kika's truck.

A police accident report stated that Kika "failed to yield [the] right-of-way [to] traffic" while attempting to back his tractor-trailer into the dealership driveway. A witness gave a statement and reported that he was driving his vehicle in the left southbound lane, saw the tractor-trailer blocking the roadway, and was able to stop. The witness then saw the pickup truck hit the trailer. The police report also stated that there was visible damage to the side of the trailer and the front end of the pickup truck.

Jerinsky had automobile liability insurance provided by Liberty. Kika was employed by CEVA, and CEVA owned and self-insured the truck driven by Kika. CEVA does not maintain and is not required to maintain PIP coverage because the truck was a commercial vehicle. See Empire Fire & Marine Ins. Co. v. GSA Ins. Co., 354 N.J. Super. 415, 417, 808 A.2d 98 (App. Div. 2002)("Commercial vehicles are not within the definition of ‘automobile’ as used in N.J.S.A. 39:6A-4 and, therefore, are not statutorily required to maintain PIP coverage."). Following the accident, Jerinsky received medical treatment and applied to Liberty for PIP benefits. Liberty opened a PIP claims file and began paying Jerinsky's medical providers. Jerinsky also applied for automobile property damage benefits. Liberty paid both types of benefits on behalf of Jerinsky.

In August 2017, Liberty requested reimbursement from CEVA for the PIP benefits it had paid on behalf of Jerinsky. Liberty also informed CEVA that if it would not agree to provide reimbursement, Liberty demanded arbitration of its right to reimbursement of the PIP benefits. CEVA, through its third-party administrator, denied Liberty's request and refused to arbitrate the issue, contending that Kika was not at fault for the accident.

In September 2017, Liberty and Jerinsky filed a complaint against CEVA and Kika. Liberty demanded reimbursement of the PIP benefits it had paid on behalf of Jerinsky. Liberty also demanded arbitration of its claim for reimbursement of the PIP benefits. In addition, Liberty and Jerinsky sought automobile property damages directly from defendants for the alleged total loss of Jerinsky's vehicle.

CEVA and Kika filed an answer and CEVA admitted that it was self-insured. Liberty again requested CEVA to consent to arbitration, but CEVA continued to refuse to arbitrate Liberty's PIP benefits claim. Liberty, therefore, filed a motion to compel CEVA to arbitrate the PIP benefit reimbursement claim citing N.J.S.A. 39:6A-9.1. CEVA opposed that motion, contending that its driver, Kika, was not a tortfeasor and the question of Kika's fault for the accident should be decided in a court proceeding and not at arbitration.

After hearing oral arguments, the trial court denied Liberty's motion. The court read its decision into the record on June 1, 2018, and supplemented those reasons in a written rider to its order. The court reasoned that Section 9.1 of the No-Fault Act used the term "tortfeasor," but the statute did not define that term. The trial court went on to reason that before Liberty could compel arbitration of the amount of its reimbursement, there had to be a determination that CEVA's insured was a tortfeasor. Consequently, the court held that the issue of Kika's fault for the accident would be determined in a court proceeding, either by a judge or jury. Thereafter, if Kika was found to be a tortfeasor, the amount of reimbursement Liberty was entitled to receive would be determined at arbitration in accordance with N.J.S.A. 39:6A-9.1. Thus, in an order dated June 4, 2018, the trial court denied Liberty's motion to compel CEVA to arbitration.

Liberty moved for reconsideration. The trial court again heard oral argument, but on July 20, 2018, denied reconsideration. The trial court again explained the reasons for its decision on the record.

II.

Liberty now appeals from the orders entered on June 4, 2018 and July 20, 2018, denying its motion to compel CEVA to arbitration. Liberty has a right to appeal those orders because Rule 2:2-3 allows appeals from orders granting or denying arbitration.

The central issue on this appeal is whether Section 9.1 of the No-Fault Act, N.J.S.A. 39:6A-9.1, compels arbitration of the question whether a party is a tortfeasor when that issue is disputed. That issue requires us to construe the statute and, therefore, is a question of law that we determine de novo. Kocanowski v. Twp. of Bridgewater, 237 N.J. 3, 9, 203 A.3d 95 (2019) (citing State v. Fuqua, 234 N.J. 583, 591, 192 A.3d 961 (2018) ).

A.

To put this issue in context, we will briefly review the No-Fault Act and some of its relevant amendments. In 1972, the Legislature enacted the No-Fault Act to eliminate inefficient common-law subrogation litigation among insurers by "requiring automobile insurers to provide ‘primary coverage’ and ‘pay the medical expenses of [their] insured.’ " Johnson v. Roselle EZ Quick LLC, 226 N.J. 370, 382-83, 143 A.3d 254 (2016) (alteration in original) (quoting State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exch., 146 N.J. 1, 6, 679 A.2d 620 (1996) ).

As originally enacted, the No-Fault Act provided that PIP insurers would be "subrogated to the rights of any party to whom [they] make[ ] [PIP] payments," through " ‘inter-company arbitration or by inter-company agreement’ with the tortfeasor's insurer." Id. at 383, 143 A.3d 254 (alterations in original) (quoting L. 1972, c. 70, § 9). That subrogation provision, however, became "inoperative" two years after the effective date of the No-Fault Act. Ibid. (citing L. 1972, c. 70, § 9).

In 1981, our Supreme Court addressed the question whether, following the expiration of the No-Fault Act subrogation provision, an insurer had a common-law right to subrogation.

Aetna Ins. Co. v. Gilchrist Bros., Inc., 85 N.J. 550, 561-62, 566-67, 428 A.2d 1254 (1981). The Court held that insurers had such a subrogation right, but also held that the insurers could not seek reimbursement because of other provisions of the No-Fault Act. Id. at 566-67, 428 A.2d 1254. In that regard, the Court pointed out that another section of the No-Fault Act stated that "[e]vidence of the amounts collectible or paid pursuant to [PIP coverage] is inadmissible in a civil action for recovery of damages for bodily injury by such injured person." Id. at 562, 428 A.2d 1254 (quoting N.J.S.A. 39:6A-12). Thus, the Court reasoned that the No-Fault Act had extinguished an insured person's right to maintain an action for PIP payment and, as a result, the insurer had no right to reimbursement through subrogation. Ibid.

The Legislature responded in 1983 by enacting Section 9.1. N.J.S.A. 39:6A-9.1 ; L. 1983, c. 362, § 20. That provision allows automobile insurers to recover PIP benefits through reimbursement against certain tortfeasors. Thus, Section 9.1 created a right of reimbursement belonging to...