Melick v. Stanley

• Decision Date: 24 April 1980
• Citation: 174 N.J.Super. 271,416 A.2d 415
• Parties: Frank H. MELICK, Plaintiff, v. James L. STANLEY, and James L. Stanley, Jr., Defendants.
• Court: New Jersey Superior Court

Page 271

174 N.J.Super. 271

416 A.2d 415

Frank H. MELICK, Plaintiff, v. James L. STANLEY, and James L. Stanley, Jr., Defendants.

Superior Court of New Jersey, Law Division,

Cumberland County.

April 24, 1980.

Robert P. Clark, Manasquan, for plaintiff (Clark, Gertler & Hanna, Manasquan, attorneys).

Anthony D. Buonadonna, Vineland, for defendants (Tuso, Gruccio, Pepper, Buonadonna, Giovinazzi & Butler, Vineland, attorneys).

MILLER, J. S. C.

This is a subrogation action filed in the name of Frank H. Melick by his insurance carrier Nationwide Mutual Insurance Company (Nationwide). At issue is whether Nationwide may recover PIP benefits from defendants in the amount of $10,739.75 representing medical expenses and related benefits paid to plaintiff under a policy of "no-fault" insurance issued in the State of Delaware. The pertinent facts are as follows:

On September 15, 1977 plaintiff sustained serious injuries as a result of a collision between the van he was driving and a septic tank truck owned by defendant James L. Stanley and operated by defendant James L. Stanley, Jr. The accident occurred in New Jersey. At the time plaintiff was a resident of Delaware and both defendants were residents of New Jersey.

Following the accident plaintiff instituted suit against defendants in the United States District Court for the District of New Jersey pursuant to 28 U.S.C.A. § 1332 seeking damages in the amount of $15,000 against each defendant for personal injuries, pain and suffering and medical expenses incurred as a result of the collision.

On or about November 14, 1978 the parties entered into a settlement agreement wherein plaintiff, in consideration of the sum of $18,500, executed a release of all claims against defendants. The federal action was dismissed several days later.

Plaintiff's insurer, Nationwide, was not a signatory to this release which provided in pertinent part that plaintiff released defendants:

. . . more particularly, but not in limitation, for personal injuries, permanent and/or temporary disability, medical and/or hospital expenses and any and all other incidental expenses and loss alleged (as a result of the aforesaid accident) . . . (Emphasis supplied) In September 1979 this subrogation action was filed against the same defendants in the Superior Court of New Jersey, Law Division, seeking unspecified damages as a result of the September 15, 1977 motor vehicle accident.

In the belief that the instant suit sought recovery of the same damages which were the subject of the prior federal suit, defendants moved for summary judgment dismissing the complaint on the ground that the prior settlement and release barred any further action by plaintiff.

In opposition plaintiff acknowledged the prior release but pointed out that the instant suit was actually a subrogation action by Nationwide to recover medical expenses and related PIP benefits paid to plaintiff before the release was executed. Unlike New Jersey, Delaware law mandates subrogation rights for insurers which have paid PIP benefits to persons covered by insurance policies issued in accordance with Delaware's no-fault statute. Compare N.J.S.A. 39:6A-9 with 21 Del.C. § 2118(f). Nationwide's position as the real party in interest is that the prior release was for pain and suffering in plaintiff's personal action against defendants and that it could not affect Nationwide's subrogation rights against defendants for the medical expense and related PIP benefits paid to its insured. Nationwide further contends that defendants, through their insurance carrier, State Farm Mutual Insurance Company (State Farm) and the carrier's attorney, were aware of its subrogated interest in these PIP benefits prior to August 21, 1978. In addition, Nationwide cites its insured's answers to interrogatories propounded by defendants in the federal suit which indicated that plaintiff's medical and hospital expenses were being paid by Nationwide.

In response, defendants submitted the affidavit of a State Farm field claim specialist who was instrumental in the settlement of the federal suit. In his affidavit the claim specialist states that neither plaintiff's personal attorney nor Nationwide ever notified him of the existence of Nationwide's subrogation interest in the PIP benefits sought here. According to the claim specialist, the only subrogated interests discussed concerned a claim for property damage to plaintiff's van in the amount of $1,679 which was paid by State Farm on February 5, 1979.

At the outset two issues are raised by the facts: (1) what are Nationwide's subrogation rights in New Jersey with respect to PIP benefits paid to its Delaware insured under a policy of no-fault insurance issued in Delaware, and (2) what effect does the release executed by plaintiff in the prior federal suit have on Nationwide's subrogation interests?

This is a suit filed in the name of a Delaware insured based upon subrogation rights arising from a policy of insurance issued in Delaware in accordance with that state's no-fault statute. In such a case our law provides that the rights and liabilities of the insurer under the policy and the statutory impact thereon must be determined by the law of the state where the contract of insurance was made, in this case Delaware. State Farm Mut. Auto. Ins. v. Simmons Estate, 169 N.J.Super. 133, 404 A.2d 340 (App.Div.1979). This is in accord with the settled principles of conflicts discussed in Buzzone v. Hartford Acc. and Indem. Co., 23 N.J. 447, 457, 129 A.2d 561 (1957). Delaware's no-fault statute mandates insurance coverage for lost earnings and all reasonable and necessary medical and hospital expenses incurred by a covered party who has been struck by a motor vehicle. 21 Del.C. § 2118(a)(2). This includes coverage for expenses incurred as a result of accidents involving non-Delaware insureds in any state of the United States. 21 Del.C. § 2118(a) (2)d. By statute, insurers providing these benefits are subrogated to the rights and claims of the person to whom benefits are provided to the extent of the benefits paid. 21 Del.C. § 2118(f). Such subrogated rights are limited to the maximum amounts of the tortfeasor's liability insurance coverage available for the injured party, after the injured party's claim has been settled or otherwise resolved. 21 Del.C. § 2118(f)(1).

In addition, the statute precludes any person eligible for no-fault benefits, other than an insurer in a subrogation action, from pleading or introducing into evidence in an action for damages against a tortfeasor, those damages for which compensation is available from the covered party's insurer. 21 Del.C. § 2118(g). Furthermore, effective June 2, 1977, the Delaware statute was amended to prohibit an insurer from joining in an action by an injured party against a tortfeasor for recovery of any benefits paid by the insurer. 21 Del.C. § 2118(f)(4); amended by 61 Del.Laws C. 66. The practical effect of these provisions is to prohibit injured plaintiffs from attempting to recover compensation for medical expenses from alleged tortfeasors in automobile negligence actions. Garr v. Clayville, 71 F.R.D. 553, 555 (D.Del.1976). Instead the statute mandates that the proper plaintiffs for such damages are insurers who are subrogated to the rights of the person for whom benefits are provided under 21 Del.C. § 2118(f). Id. at 555.

Accordingly, applying New Jersey conflicts of law principles, the Delaware subrogation statute must be given effect in the instant suit. It should be noted, however, that even if the conflict of law principles provided otherwise so that New Jersey law controlled the insurer's subrogation rights, the result would not be different.

As initially enacted, § 9 of the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 et seq., prohibited insurers from exercising their subrogation rights except by intercompany arbitration. At the request of the insurance industry this section was amended on May 4, 1972 to cut off the insurers' subrogation rights after January 1, 1975. See L.1972, c. 203, § 7. The apparent thinking of the Legislature and the insurance industry in imposing the cut-off date was that losses incurred due to PIP payments would eventually equal out among insurers. By extinguishing the subrogation remedy it was believed costs of litigation would decrease and that saving would be passed on to the consumer in the form of lower premiums. Prudential Property & Cas. Ins. Co. v. New Hampshire Ins. Co., 167 N.J.Super. 537, 401 A.2d 291 (Law Div.1979).

The statutory bar against subrogation actions, however, has not been held to be absolute. In Newson v. Hertz Corp., 164 N.J.Super. 141, 395 A.2d 902 (1978), the Appellate Division held that N.J.S.A 39:6A-9 would not bar an insurer from bringing a subrogation action against the self-insured owner of a truck since this was not a motor vehicle insured in accordance with the provisions of the New Jersey Automobile Reparation Reform Act. In an earlier decision our Supreme Court held that where the accident occurs outside New Jersey and a New Jersey vehicle and an out-of-state vehicle are involved, the predicate for preventing subrogation does not exist. Cirelli v. Ohio Cas. Ins. Co., 72 N.J. 380, 387, 371 A.2d 17 (1977). Although Cirelli involved a pre-1975 accident so that the insurer's right of subrogation by intercompany arbitration still existed, the Supreme Court noted that this type of arbitration would not be feasible when out-of-state insurance companies were involved. In dictum the court also noted that the statutory bar against subrogation would not apply to out-of-state accidents with foreign vehicles which occurred after January 1, 1975.

In the instant case defendants' vehicle was a septic tank truck, clearly not within the definition of an automobile required to be covered by a policy of no-fault insurance under New Jersey law. See N.J.S.A. 39:6A-2(a). In addition, it was not...