State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exchange

• Decision Date: 31 July 1996
• Citation: 679 A.2d 620,146 N.J. 1
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Respondent, v. LICENSED BEVERAGE INSURANCE EXCHANGE, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 1

146 N.J. 1

679 A.2d 620

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Respondent, v. LICENSED BEVERAGE INSURANCE EXCHANGE, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Feb. 14, 1996.

Decided July 31, 1996.

Daniel S. Jahnsen, Brick, for appellant (Grossman & Kruttschnitt, attorneys; Anthony M. Tracy, on the brief).

Brian P. Fleming, Chatham, for respondent (Maloof, Lebowitz, Connahan & Oleske, attorneys).

The opinion of the Court was delivered by

COLEMAN, J.

The issue raised in this appeal is whether a tavern is a "tortfeasor" under the New Jersey Automobile Reparation Reform Act's reimbursement provision, N.J.S.A. 39:6A-9.1, who is potentially responsible for reimbursing personal injury protection (PIP) benefits paid by a private passenger automobile carrier to one of its insureds because of the tavern's negligence.

The trial court, relying on Allstate Ins. Co. v. Coven, 264 N.J.Super. 240, 624 A.2d 594 (App.Div.1993), submitted the issue of reimbursement, pursuant to N.J.S.A. 39:6A-9.1, to arbitration. The order requiring arbitration was appealed, and in an unpublished opinion, the Appellate Division affirmed. We granted certification, 142 N.J. 516, 665 A.2d 1109 (1995), and now affirm.

I

On March 1, 1992, George Schrope and Peter Zoon were patrons of the Boulevard Pub in Hackensack, New Jersey. Both men were served alcoholic beverages while they were visibly intoxicated. Later that evening, Zoon drove himself and Schrope to their mutual residence in Hopatcong. Upon arriving home, Zoon was unable to maneuver his automobile into the garage. In an attempt to be of assistance, Schrope exited the vehicle, and stood in front of it in an effort to direct Zoon into the garage. In the process, Zoon drove the vehicle directly into Schrope, pinning him between the car bumper and the garage entrance, causing severe leg injuries.

As a result of that accident, State Farm Mutual Automobile Insurance Company (State Farm) paid $35,330.72 in PIP benefits on behalf of its insured, Schrope. State Farm instituted the present litigation against Licensed Beverage Insurance Exchange (LBIE), the reinsurer of the Boulevard Pub, to recover those payments pursuant to the PIP reimbursement statute, N.J.S.A. 39:6A-9.1.

On March 18, 1994, the trial court heard arguments on an order to show cause why the LBIE should not be required to submit the reimbursement claim to arbitration as required by the reimbursement statute. Summary judgment was granted in favor of State Farm, requiring the LBIE to submit to arbitration. The trial court reasoned, relying on Coven, that the statute applies to "any tortfeasor" who may be liable, without limitation.

On appeal, State Farm argued that the language of N.J.S.A. 39:6A-9.1 was broad enough to encompass "any and all tortfeasors." The LBIE argued that the phrase was limited to apply only to those tortfeasors who owned commercial vehicles. The Appellate Division agreed with State Farm. It reasoned that "an alternative and more expansive reading of the statute appears to us better to satisfy the legislative concern that the risk be spread to the insurers of all responsible tortfeasors."

II

This appeal focuses on the scope of the phrase "any tortfeasor ..." set forth in the reimbursement statute. That statute provides:

Any insurer, health maintenance organization or governmental agency paying ... [PIP] benefits ... 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 [PIP] or medical expense benefits coverage other than for pedestrians, under the laws of this State ... or although required did not maintain [PIP] or medical expense benefits coverage at the time of the accident. In the case of an accident occurring in this State involving an insured tortfeasor, the determination as to whether an insurer ... is legally entitled to recover the amount of payments and the amount of recovery ... 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

(emphasis added).]

The LBIE argues that its insured, the Boulevard Pub, is not subject to the requirements of the reimbursement statute because the Legislature intended the "any tortfeasor ..." phrase to encompass only those tortfeasors who own commercial vehicles, as set forth in N.J.S.A. 17:28-1.3. That interpretation, the LBIE maintains, becomes manifest when N.J.S.A. 17:28-1.3 and N.J.S.A. 39:6A-9.1 are read together. State Farm, on the contrary, contends that the "any tortfeasor ..." phrase is not limited to those tortfeasors who own commercial vehicles, but rather applies to any and all tortfeasors.

-A-

When a court is called upon to interpret a statute, certain rules of statutory interpretation may be of assistance. State Farm contends that the "any tortfeasor ..." phrase is unambiguous and should be accorded its plain meaning. Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 128, 527 A.2d 1368 (1987); Renz v. Penn Cent. Corp., 87 N.J. 437, 440, 435 A.2d 540 (1981). Because we are satisfied that the "any tortfeasor ..." phrase is not unambiguous, we must consider other rules of statutory interpretation. Young v. Schering Corp., 141 N.J. 16, 25, 660 A.2d 1153 (1995). "In the interpretation of a statute our overriding goal has consistently been to determine the Legislature's intent." Roig v. Kelsey, 135 N.J. 500, 515, 641 A.2d 248 (1994) (citing Lesniak v. Budzash, 133 N.J. 1, 8, 626 A.2d 1073 (1993)). To make that decision, a court should consider the "legislative policy underlying the statute and any history which may be of aid." Lesniak, supra, 133 N.J. at 8, 626 A.2d 1073.

"[A] court should avoid a literal interpretation of individual statutory terms or provisions that would be inconsistent with the overall purpose of the statute." Young, supra, 141 N.J. at 25, 660 A.2d 1153; Suter v. San Angelo Foundry & Mach. Co., 81 N.J. 150, 160, 406 A.2d 140 (1979). A single statutory term or phrase should be considered as part of the entire statutory scheme rather than in a vacuum. Maritime Petroleum Corp. v. City of Jersey City, 1 N.J. 287, 298, 63 A.2d 262 (1949).

-B-

An understanding of the history of the reimbursement statute is important in defining its scope. In 1972, the State Legislature enacted the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35, commonly known as the "No-Fault" law. The Act "encompasse[d] the recommendations of the Automobile Insurance Study Commission created under Joint Resolution 4 of 1970." Gambino v. Royal Globe Ins. Cos., 86 N.J. 100, 105, 429 A.2d 1039 (1981) (quoting Sponsor's Statement to L. 1972, c. 70).

An interpretation of the purpose of the No-Fault law in a later case is informative:

The Legislature's intent in adopting the act was to provide a means of quickly compensating injured motorists. The tort system was considered to be an inefficient means of compensation since it required expensive and time-consuming litigation, and since it would not compensate drivers whose own fault caused their injuries. The act contemplated the elimination of burdensome administrative and investigative expenses and a consequent lowering of insurance premiums.

* * * * * *

The intent of the No Fault law is that each automobile insurer should pay the medical expenses of its insured. It is the primary coverage. Substantial savings to insurers and the public were expected to result from the elimination of intercompany litigation.

[Garden State Fire & Casualty Co. v. Commercial Union Ins. Co., 176 N.J.Super. 301, 305, 422 A.2d 1327 (App.Div.1980).]

Prior to the enactment of the No-Fault law, insurers were free to file suit against other insurers to recover payments for medical expenses based on the common-law right of subrogation. The No-Fault Act was intended to eliminate this type of litigation; however, it did allow for a two-year transition period between 1973 and December 31, 1974, during which time insurers paying PIP benefits were able to recover the PIP costs from the tortfeasor's insured. Unsatisfied Claim & Judgment Fund Bd. v. New Jersey Mfrs. Ins. Co., 138 N.J. 185, 197, 649 A.2d 1243 (1994).

The reimbursement option was embodied in a temporary provision, N.J.S.A. 39:6A-9, now repealed, which provided a limited right to "subrogation" that could be pursued only through arbitration. ¹ It was suggested that this two-year period allowing intercompany arbitration was necessary to compile information for the rate-setting process. Pennsylvania Mfrs. Ass'n Ins. Co. v. Government Employees Ins. Co., 136 N.J.Super. 491, 499, 347 A.2d 5 (App.Div.1975) (citing Mario A. Iavicoli, No Fault & Comparative Negligence in New Jersey § 50, at 117 (1973)), aff'd, 72 N.J. 348, 370 A.2d 855 (1977). Subrogation was disfavored eventually because "it merely shifted money and paper among insurance companies at additional administrative expense." James W. Kerwin, Survey of Insurance Law, 31 Rutgers L.Rev. 519, 542 (1978).

Cirelli v. Ohio Casualty Ins. Co., 72 N.J. 380, 371 A.2d 17 (1977), involved an accident between a New York resident and a New Jersey resident insured under a policy allowing PIP reimbursement. Id. at 383-87, 371 A.2d 17. Cirelli, the New Jersey resident, was paid PIP benefits by his carrier and then instituted suit in New York, seeking to recover as part of his damages the PIP payments. His insurance policy, however, contained a right of subrogation for PIP payments. The accident occurred on March 1, 1974, and the two-year statutory right of subrogation did not expire until December 31, 1974. Id. at 383, 385, 371 A.2d 17. Cirelli sought a judgment declaring that the right of subrogation in the policy was invalid. Id. at 384, 371 A.2d 17. Although the statutory procedure for resolving the issue was intercompany arbitration, the...