SYLLABUS
(This syllabus is not part of the opinion of the Court. It has
been prepared by the Office of the Clerk for the convenience of the
reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not
have been summarized).
Argued January 3, 2006 -- Decided February 1, 2006
PER CURIAM
In 1999, Willie Braddy drove his truck into a parked vehicle in which Frederick Johnson was seated, severely injuring Johnson. At the time of the accident, Braddy’s employer was insured under a $1 million liability policy issued by Reliance Insurance Company (Reliance) and an umbrella policy issued by National Union Insurance Company that provided coverage for any judgment in excess of the Reliance coverage up to $25 million. After Johnson filed suit against Braddy and his employers (defendants), Reliance became insolvent and was liquidated, triggering the New Jersey Property-Liability Insurance Guaranty Association Act, N.J.S.A. 17:30A-1 to -20 (Act). The Act established the New Jersey Property-Liability Insurance Guaranty Association (PLIGA) which covers claims up to $300,000 against an insolvent insurer.
The issue is whether the holder of an insurance policy is personally liable
for judgments in excess of the $300,000 maximum liability under the Act. The
trial court held in the affirmative. The Appellate Division granted defendants’ motion for
leave to appeal because of the conflict between the trial court’s decision and
the published opinion in Flaherty v. Safran,
367 N.J. Super 565 (Law Div.
2003). In a published opinion, the Appellate Division affirmed, concluding that, in the
absence of a statutory directive to the contrary, PLIGA should be construed to
give the injured party the right to recover damages from the policyholder above
the PLIGA maximum. The Appellate panel overruled Flaherty.
The Supreme Court granted defendants’ petition for certification.
HELD: An insurance policy holder is personally liable for judgments in excess of
the $300,000 maximum liability under the New Jersey Property-Liability Insurance Guaranty Association Act,
N.J.S.A. 17:30A-1 to -20.
1. We recognize the potentially catastrophic effect that this ruling may have on
responsible citizens who have purchased insurance to protect themselves and the victims of
accidents in which they are involved. We therefore commend this issue to the
Legislature for such remedial action as it deems appropriate. (Pp. 4-5)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, WALLACE and RIVERA-SOTO join
in this opinion.
SUPREME COURT OF NEW JERSEY
A-
5 September Term 2005
FREDERICK JOHNSON and MARGARET ANN JOHNSON, his wife,
Plaintiffs,
v.
WILLIE R. BRADDY, BRADDY TRUCKING and WALSH TRUCKING,
Defendants-Appellants,
and
JOHN and JANE DOES 1-10 and ABC CORPORATION (FICTITIOUS INDIVIDUALS, CORPORATIONS OR OTHER
BUSINESS ENTITIES PRESENTLY UNIDENTIFIABLE,
Defendants.
Argued January 3, 2006 – Decided February 1, 2006
On appeal from the Superior Court, Appellate Division, whose opinion is reported at
376 N.J. Super. 215 (2005).
Leonard C. Leicht argued the cause for appellants (Morgan, Melhuish, Monaghan, Arvidson, Abrutyn
& Lisowski, attorneys).
John Zen Jackson argued the cause for amicus curiae New Jersey Hospital Association
(Kalison, McBride, Jackson & Murphy, attorneys).
Robert J. Conroy argued the cause for amicus curiae Medical Society of New
Jersey (Kern Augustine Conroy & Schoppmann, attorneys).
PER CURIAM
In 1999, defendant Willie Braddy drove his truck into a parked vehicle in
which plaintiff Frederick Johnson was seated, severely injuring Johnson. At the time of
the accident, Braddy’s employer was insured under a $1 million liability policy issued
by Reliance Insurance Company (Reliance) and an umbrella policy issued by National Union
Insurance Company that provided coverage for any judgment in excess of the Reliance
coverage up to $25 million.
After Johnson
See footnote 1
filed suit against Braddy and his employers, Reliance became insolvent and
was liquidated by the Pennsylvania Insurance Commissioner. The liquidation, in turn, triggered the
New Jersey Property-Liability Insurance Guaranty Act (Act), N.J.S.A. 17:30A-1 to -20, which was
established “to minimize financial loss to claimants or policyholders because of the insolvency
of an insurer . . . .” N.J.S.A. 17:30A-2(a). The Act established the
New Jersey Property-Liability Insurance Guaranty Association (PLIGA), made up of all insurers “admitted
or authorized” to conduct insurance business in the state, N.J.S.A. 17:30A-5(f), and covers
claims up to $300,000 against an insolvent insurer. N.J.S.A. 17:30A-8(a)(1). However, the Act
is silent as to whether policyholders are personally liable for judgments in excess
of that figure.
After some procedural maneuvering that need not be recounted here, defendants moved for
summary judgment, arguing that a responsibly insured citizen whose insurer becomes insolvent should
not be exposed to personal liability for amounts that would have been covered
by the policy had its insurer not failed. Defendants claimed that the text
of the Act itself supports that position.
Plaintiffs countered that under PLIGA, an insured is personally liable for any amount
above $300,000. According to plaintiffs, the statutory figure is a cap to insurance
coverage that the State provides when an insurer becomes insolvent and the tortfeasor
is essentially a self-insurer beyond that figure. Plaintiffs also argued that the text
of the statute does not explicitly release the tortfeasor from claims in excess
of $300,000. Ibid. The trial judge agreed with plaintiffs and defendants moved for
leave to appeal, which was granted.
In a published opinion, an Appellate Division panel affirmed the trial judge’s denial
of summary judgment. Johnson v. Braddy,
376 N.J. Super. 215 (App. Div. 2005).
In so doing, the panel concluded that, in the absence of a statutory
directive to the contrary, PLIGA should be construed to give the injured party
the right to recover damages from the policyholder above the PLIGA maximum. Id.
at 217.
Defendants moved for leave to appeal, which we granted.
184 N.J. 159 (2005).
Here, they reiterate the arguments advanced before the Appellate Division and underscore the
devastating impact of the Appellate Division’s decision on financially responsible individuals who procure
insurance from carriers that later become insolvent.
We have carefully reviewed the decision of the Appellate Division in light of
those arguments and have concluded that it is legally unassailable. We therefore affirm
substantially for the reasons expressed in Judge Skillman’s thorough and thoughtful opinion.
We add only this. We recognize the potentially catastrophic effect that this ruling
may have on responsible citizens who have purchased insurance to protect themselves and
the victims of accidents in which they are involved. In this matter, for
example, the insured may be exposed to up to a $700,000 payment representing
the difference between the $300,000 PLIGA cap and the $1 million excess insurance
threshold purchased by defendants. Such payments could wipe out a party that acted
in good faith to procure insurance. The situation is exacerbated, according to the
parties, because insurance to cover the insolvency of a primary carrier is simply
not available.
We therefore commend this issue to the Legislature for such remedial action as
it deems appropriate. Here, the interests of innocent victims are pitted against those
of our citizens who have done everything within their power to protect themselves
from exposure to tort claims but whose efforts have been thwarted by the
insolvency of an insurer. Reconciling those competing interests, while difficult, is not an
insurmountable task. One obvious approach would be to alter the PLIGA cap so
that it is co-extensive with the insurance coverage purchased from the insolvent insurer;
another approach would be to immunize the insured of an insolvent insurer to
the extent of the coverage purchased from that insurer. Both answers have positive
and negative implications that the Legislature can assess and act accordingly.
The judgment of the Appellate Division is affirmed.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, WALLACE, and RIVERA-SOTO join
in the Court’s opinion.
SUPREME COURT OF NEW JERSEY
NO. A-5 SEPTEMBER TERM 2005
ON REMAND FROM Appellate Division, Superior Court
FREDERICK JOHNSON and
MARGARET ANN JOHNSON, his
Wife,
Plaintiffs,
v.
WILLIE R. BRADDY, BRADDY
TRUCKING and WALSH TRUCKING,
Defendants-Appellants,
and
JOHN and JANE DOES 1-10 and
ABC CORPORATION (FICTITIOUS
INDIVIDUALS, CORPORATIONS OR
OTHER BUSINESS ENTITIES
PRESENTLY UNIDENTIFIABLE,
Defendants.
DECIDED February 1, 2006
Chief Justice Poritz PRESIDING
OPINION BY Per Curiam
CONCURRING OPINION BY
DISSENTING OPINION BY
CHECKLIST
AFFIRM
Footnote: 1
Johnson’s wife also sued per quod.