(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 February 28, 1995 -- Decided May 25, 1995
STEIN, J., writing for a unanimous Court.
The issue on appeal is whether a municipality's insurance carrier (or self-insurance fund) is liable for
uninsured-motorist (UM) benefits to a covered employee who also has UM benefits available under his
personal automobile-insurance policy.
In April 1990, Timothy Holman, a Neptune Township (Neptune) police officer, was on duty driving a
police vehicle when he was involved in an accident with a hit-and-run driver. At that time, Holman was
insured under a personal automobile-insurance policy with Prudential Property & Casualty Insurance
Company (Prudential), which provided UM coverage in the amount of $100,000 per person and $300,000 per
accident. Neptune was insured by Monmouth County Municipal Joint Insurance Fund (JIF), a municipal
self-insurance fund, which provided UM coverage for Neptune and its employees in the amount of $200,000
per person and accident.
In May 1992, Holman filed for UM arbitration under the Prudential and JIF policies, seeking UM
benefits for his injuries caused by the hit-and-run driver. In September 1992, Prudential filed with the Law
Division a complaint for declaratory judgment, claiming that any arbitration award for UM benefits should
be prorated between it and JIF, pursuant to the UM statute, N.J.S.A. 17:28-1.1c. JIF contended that the
Tort Claims Act, specifically N.J.S.A. 59:9-2e, required that Holman exhaust his coverage with Prudential
before seeking payment for any arbitration award from JIF.
On cross-motions for summary judgment, the trial court held that because UM claims are
contractual obligations on the part of the insurer, the Tort Claims Act was not applicable and that the UM
statute required proration between Prudential and JIF of any arbitration award to which Holman might be
entitled.
On appeal, the Appellate Division affirmed the decision of the trial court, relying on case law that
held that N.J.S.A. 59:9-2e did not provide authority for the conclusion that a municipality's underinsured
motorist (UIM) coverage was excess over the injured employee's personal insurance coverage and that there
is no distinction between UIM and UM coverage.
The Supreme Court granted certification.
HELD: Where a public-entity employee is injured while working by an uninsured motorist, and seeks UM
benefits from both the public entity's insurer and his or her personal-insurance carrier, any
arbitration award of UM benefits must be prorated pursuant to the UM statute, N.J.S.A. 17:28-1.1c.
1. The Court affirms the decision of the Appellate Division substantially for the reasons expressed in that
court's opinion, but adds several additional observations. (p. 3)
2. Because the proration of UM benefits is not an effort to seek tort damages against a public entity or one of its employees either directly or derivatively, the Tort Claims Act, specifically N.J.S.A. 59:9-2e, is not
applicable. Furthermore, entirely different legislative objectives, unrelated to the purposes underlying the
Tort Claims Act, compel JIF's pro rata contribution. Those objectives include the legislative determination
that the requirement of compulsory insurance includes the obligation to carry UM coverage, an obligation
that also applies to public entities. In addition, the Legislature has determined that when more than one
policy providing UM coverage is available to compensate a claimant for injuries, those policy benefits should
be allocated on a pro rata basis without regard to whether any of the insureds are public entities. (pp. 6-9)
3. A UM claim is a statutory cause of action that has many tort-like characteristics and has been viewed as a
tort substitute for the injured party's claim against the uninsured driver, not the public entity. A UM claim is
a contractual right asserted against an insurance company for its contractual liability derived from a driver's
negligence and his or her failure to carry insurance. Because the claim arises out of contract, it does not
implicate the Tort Claims Act. (pp. 9-13)
Judgment of the Appellate Division is AFFIRMED.
JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and COLEMAN join in JUSTICE
STEIN'S opinion. CHIEF JUSTICE WILENTZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
98 September Term 1994
PRUDENTIAL PROPERTY & CASUALTY
INSURANCE COMPANY,
Plaintiff-Respondent,
v.
MONMOUTH COUNTY MUNICIPAL
JOINT INSURANCE FUND,
Defendant-Appellant,
and
SCIBAL INSURANCE GROUP and
TIMOTHY HOLMAN,
Defendants.
Argued February 28, 1995 -- Decided May 25, 1995
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
274 N.J. Super. 345 (1994).
Linda Hayes Grasso argued the cause for
appellant (Cleary & Alfieri, attorneys; James
J. Cleary, of counsel).
Randi S. Greenberg argued the cause for
respondent (Robert A. Auerbach, attorney).
The opinion of the Court was delivered by
STEIN, J.
This appeal concerns the liability of a municipality's
insurance carrier (or self-insurance fund) for uninsured-motorist
(UM) benefits to a covered employee who also has UM benefits
available under his automobile-insurance policy. The
municipality asserts that the overriding philosophy of public-entity immunity from tort liability under the New Jersey Tort
Claims Act (Tort Claims Act), N.J.S.A. 59:1-1 to 12-3, would be
circumvented if municipal-insurance coverage were to be liable on
a pro rata basis for UM benefits payable because a public
employee was injured by an uninsured motorist. The employee's
carrier contends that the Tort Claims Act is irrelevant, that the
employee carrier's policy and the municipality's coverage are
contractual obligations only, and that pro rata contribution to
pay the employee's claim is mandated by statute, see N.J.S.A.
17:28-1.1c (requiring proration of UM coverages).
In April 1990, defendant Timothy Holman, a Neptune Township
(Neptune) police officer, was on duty driving a police vehicle
when he was involved in an accident with a hit-and-run driver.
At that time, Holman was insured under an automobile-insurance
policy with plaintiff, Prudential Property and Casualty Insurance
Company (Prudential), which provided UM coverage in the amount of
$100,000 per person and $300,000 per accident. Neptune was
insured by defendant Monmouth County Municipal Joint Insurance
Fund (JIF), a municipal self-insurance fund, which provided UM
coverage for Neptune and its employees in the amount of $200,000
per person and accident.
In May 1992, Holman filed for UM arbitration under the
Prudential and JIF policies, seeking UM benefits for his injuries
caused by the hit-and-run driver. In September 1992, Prudential
filed a complaint for declaratory judgment in the Law Division,
contending that any arbitration award for UM benefits should be
prorated between it and JIF pursuant to N.J.S.A. 17:28-1.1c. JIF
argued that the letter and spirit of the Tort Claims Act required
that Holman exhaust his coverage with Prudential before seeking
payment for any arbitration award from JIF.
On cross-motions for summary judgment, the Law Division,
relying on Christy v. City of Newark,
102 N.J. 598 (1986), held
that because UM claims are contractual obligations on the part of
the insurer, the Tort Claims Act was not applicable.
Accordingly, it found that N.J.S.A. 17:28-1.1c required proration
between Prudential and JIF of any arbitration award to which
Holman might be entitled. The Appellate Division affirmed,
274 N.J. Super. 345 (1994), observing that it based its holding on
the analysis set forth in Prudential Property & Casualty
Insurance Co. v. Travelers Insurance Co.,
264 N.J. Super. 251
(App. Div. 1993) (Prudential v. Travelers), which
held that N.J.S.A. 59:9-2e [(prohibiting
receipt of duplicate benefits by claimant and
subrogation claims by insurance carriers
against public entities)] did not provide
authority for the conclusion that a
municipality's underinsured motorist (UIM)
coverage was excess over the UIM coverage
provided by the injured police officer's
personal UIM coverage. In a footnote, we
observed that there were conflicting
decisions on that point in the Law Division
with respect to UM claims. However, we noted
that `[i]n terms of the nonapplicability of
N.J.S.A. 59:9-2e, we see no distinction
between a UM and a UIM claim[,]' and agreed
with [the Law Division's] analysis of the
question in Rox v. Allstate Ins. Co. * * * .
We granted certification, 138 N.J. 268 (1994), and now affirm substantially for the reasons stated in the Appellate Division opinion. We add these observations to supplement the Appellate Division's analysis.
The Compulsory Motor Vehicle Insurance law, N.J.S.A. 39:6B-1 to -3, requires every owner of a motor vehicle registered or principally garaged in New Jersey to "maintain motor vehicle liability insurance coverage" insuring against liability for bodily injury, death, and property damage. N.J.S.A. 39:6B-1. See also N.J.S.A. 39:6A-3 (requiring automobile owners to maintain automobile-liability coverage). The UM statute, N.J.S.A. 17:28-1.1, requires all motor-vehicle liability policies to include UM coverage. See also N.J.S.A. 39:6A-14 (requiring automobile owners to carry UM coverage). The UM statute provides in pertinent part:
Uninsured and underinsured motorist coverage provided for in this section shall not be increased by stacking the limits of coverage of multiple motor vehicles covered under the same policy of insurance nor shall these coverages be increased by stacking the limits of coverage of multiple policies available to the insured. If the insured had uninsured motorist coverage available under more than one policy, any recovery shall not exceed the higher of the applicable limits of the respective coverages and the recovery shall be prorated between the applicable
coverages as the limits of each coverage bear
to the total of the limits.
JIF acknowledges that as a self-insurance fund for municipalities it is obligated to provide UM coverage for Neptune. 274 N.J. Super. at 347. See Ross v. Transport of New Jersey, 114 N.J. 132, 139 (1989); Christy, supra, 102 N.J. at 607-08; Mortimer v. Peterkin, 170 N.J. Super. 598, 599-600 (App. Div. 1979); Transport of New Jersey v. Watler, 161 N.J. Super. 453, 462-63 (App. Div. 1978), aff'd as modified, 79 N.J. 400 (1979); Rox v. Allstate Ins. Co., 250 N.J. Super. 536, 541 (Law Div. 1991).
Conceding that it must provide UM coverage, JIF nonetheless argues that construing N.J.S.A. 17:28-1.1c to require prorated UM coverage between a private insurer and a self-insured municipality is inconsistent with the Tort Claims Act, specifically N.J.S.A. 59:9-2e. JIF contends that such an interpretation frustrates the Tort Claims Act's objectives and imposes greater financial liability on a municipality for a third party's negligence than it does for the municipality's negligence. Specifically, JIF stresses that under N.J.S.A. 59:9-2e, benefits available to a claimant from collateral sources that "duplicate[] any benefit contained in the award" against a public entity are deducted from the amount of the public entity's liability, even though that liability is based on the fault of the public entity or its employees. JIF asserts that in this case the public entity was not at fault, but nevertheless has
been required by the lower courts to contribute pro rata with
Prudential to compensate Holman for his injuries.
The Legislature enacted the Tort Claims Act to establish
qualified governmental immunity for the negligent acts of
governmental entities and their employees. See N.J.S.A. 59:1-2.
In adopting the Tort Claims Act, the Legislature "declared [it]
to be the public policy of this State that public entities shall
only be liable for their negligence within the limitations of
[the Tort Claims Act] and in accordance with the fair and uniform
principles established [t]herein." Ibid. Although this Court
has emphasized that immunity is the dominant consideration of the
Tort Claims Act, see, e.g., Weiss v. New Jersey Transit,
128 N.J. 376, 383 (1992); Rochinsky v. State, Dep't of Transp.,
110 N.J. 399, 408 (1988), "[n]othing in [the Tort Claims Act] shall affect
liability based on contract or the right to obtain relief other
than damages against the public entity or one of its employees."
N.J.S.A. 59:1-4.
The specific provision of the Tort Claims Act that JIF
relies on is N.J.S.A. 59:9-2e, which states in pertinent part:
If a claimant receives or is entitled to
receive benefits for the injuries allegedly
incurred from a policy or policies of
insurance or any other source other than a
joint tortfeasor, such benefits shall be
disclosed to the court and the amount thereof
[that] duplicates any benefit contained in
the award shall be deducted from any award
against a public entity or public employee
recovered by such claimant * * * .
The "intent of subparagraph (e) is to prohibit the receipt of
duplicate benefits by a claimant filing suit under the [Tort
Claims Act]." N.J.S.A. 59:9-2 cmt. See also Prudential v.
Travelers, supra, 264 N.J. Super. at 257 (stating that N.J.S.A.
59:9-2e abrogates the collateral-source rule in respect of tort-based claims against public entities); Murray v. Nicol,
224 N.J.
Super. 303, 312 (App. Div. 1988) (same). JIF contends that an
additional purpose of N.J.S.A. 59:9-2e is to hold public entities
secondarily liable in respect of tort liability. That is, in
cases in which the public entity is a tortfeasor, benefits
obtainable from outside sources must be resorted to first before
the public entity is required to pay damages. JIF asserts that
the same policy should apply to a public entity's obligation to
provide UM coverage, reasoning that because UM benefits
constitute a contractual substitute for tort liability, the Tort
Claims Act's philosophy should control the allocation of UM
benefits available under multiple policies.
JIF's argument based on N.J.S.A. 59:9-2e is unsupported
either by that provision's wording or by the purpose underlying
the Tort Claims Act. The primary objective of N.J.S.A. 59:9-2e,
avoidance of duplicate benefits to those who seek tort damages
from a public entity, will not be thwarted by prorating the UM
benefits. Holman's damages will be fixed by the arbitrator, and
the proration of those damages between Prudential and JIF will
cause Holman to be compensated only once. Additionally, neither
Holman nor Prudential is asserting a claim against Neptune or its
employees for damages sounding in tort. See Prudential v.
Travelers, supra, 264 N.J. Super. at 255-57. Nor is Holman a
claimant in the context of the provisions of the Tort Claims Act.
See N.J.S.A. 59:8-1 to -11; see also Prudential v. Travelers,
supra, 264 N.J. Super. at 256 (stating that "award" against
"public entity" referenced in N.J.S.A. 59:9-2e "refers to one
that is given in accord with a trial conducted pursuant to
N.J.S.A. 59:9-1 and the limiting provisions of N.J.S.A. 59:9-2a
to d").
Because the proration of UM benefits under N.J.S.A. 17:28-1.1c is not an effort to seek tort "damages against [a] public
entity or one of its employees" either directly or derivatively,
see N.J.S.A. 59:1-4, we hold that the Tort Claims Act,
specifically N.J.S.A. 59:9-2e, is inapplicable. Moreover, we
conclude that entirely different legislative objectives,
unrelated to the purposes underlying the Tort Claims Act, compel
JIF's pro rata contribution. Those objectives include the
legislative determination that the requirement of compulsory
insurance includes the obligation to carry UM coverage, see
N.J.S.A. 17:28-1.1, an obligation that has been held to apply to
public entities. See, e.g., Ross, supra, 114 N.J. at 139;
Christy, supra, 102 N.J. at 607-08. Furthermore, the Legislature
has determined that when more than one policy providing UM
coverage is available to compensate a claimant for injuries,
those policy benefits should be allocated on a pro rata basis
without regard to whether any of the insureds are public
entities. See N.J.S.A. 17:28-1.1c. Thus, the advantage of
requiring claimants to exhaust other sources of benefits as a
condition of public-entity liability afforded by the Tort Claims
Act is unavailable to JIF because the Legislature has determined
that a different policy requiring the proration of benefits is
controlling in the context of UM coverage.
In addition, JIF argues that the principle of sovereign
immunity should not be swept aside because of the "putative
contractual basis" of a UM claim, see Ross, supra, 114 N.J. at
144, and maintains that we should reject the distinction between
tort and contract for determining whether N.J.S.A. 59:9-2e
applies in the context of recovery under a UM policy. JIF points
out that this Court has noted in Ross, supra, 114 N.J. at 144-45,
and Midland Insurance Co. v. Colatrella,
102 N.J. 612, 617
(1986), that a UM provision effectively functions as a
contractual substitute for a tort action against an uninsured
motorist, and recovery under a UM policy is regarded "as damages"
by statute, N.J.S.A. 17:28-1.1a. Thus, JIF contends that because
UM coverage is a tort substitute, N.J.S.A. 59:9-2e should apply
to those cases in which the injured party is attempting to
recover UM benefits from both his or her personal-insurance
carrier and the public entity's carrier. We also find that
contention to be without merit. See Christy, supra, 102 N.J. at
610.
In Christy, supra, this Court was presented with an almost
identical argument--that is, that the Tort Claims Act,
specifically N.J.S.A. 59:2-1a, "immunizes the [municipality]
against claims for UM benefits allegedly due because of the
negligence of a third-party uninsured motorist." 102 N.J. at
610. There, a police officer who had been injured by a hit-and-run motorist sought UM benefits under both his automobile-insurance policy and the municipality's self-insurance scheme.
The Court found that that statute was "couched in terms of tort
liability," and because that officer's "claim [was] one arising
out of contract," the municipality was obliged "to furnish UM
benefits." Ibid. This Court then remanded the case to the Law
Division to determine which carrier would provide primary
insurance coverage because that "case arose before January 1,
1984, the effective date of the so-called `anti-stacking'
legislation, L. 1983, c. 362, § 2(c), codified in N.J.S.A. 17:28-1.1(c)." 102 N.J. at 610. However, because N.J.S.A. 17:28-1.1c
now provides for proration between insurance carriers, the
question of primary coverage has been superseded by statute.
See, e.g., Rox, supra, 250 N.J. Super. at 543.
Contrary to JIF's argument, Ross, supra, and Colatrella,
supra, are inapposite to these facts and do not diminish the
continued force of Christy. See Downey v. City of Elizabeth,
273 N.J. Super. 335, 338 n.1 (App. Div. 1994); see also Prudential v.
Travelers, supra, 264 N.J. Super. at 256 (stating that Ross,
supra, "did not diminish the impact of the Christy analysis in
cases where the public entity has voluntarily provided UM/UIM
coverage").
In Ross, supra, the issue was whether New Jersey Transit Bus
Operations, Inc. (Transit), which as a public entity had no
obligation to carry insurance or to self-insure, see N.J.S.A.
39:6-54 (exempting government-owned vehicles from insurance
obligations), nevertheless had to provide UM coverage for the
benefit of a bus passenger who had been injured in a motor-vehicle accident involving the bus and an uninsured vehicle. In
holding that "Transit [was] exempt from providing UM coverage,"
the Court observed that its conclusion was "consistent with
Transit's tort protection under the Tort Claims Act." 114 N.J.
at 145. The Court noted that the "public policy behind the Tort
Claims Act and the N.J.S.A. 39:6-54 exemption [was] not
inconsistent with the public polic[y] favoring UM coverage * * *
given the statutory scheme involved in [that] case. * * *
Therefore, [that was] a limited situation where the public policy
for UM coverage [was] overridden by a statutory exception * * *
." Id. at 146. Significantly, we further noted that if Transit
were either to insure or to self-insure, it would have been
forced to comply with N.J.S.A. 17:28-1.1 and provide UM coverage.
Id. at 142.
In Colatrella, supra, the issue was whether a workers'-compensation carrier could seek reimbursement from an employee
who had been injured by a hit-and-run motorist and had received
both workers'-compensation and UM benefits. N.J.S.A. 34:15-40(b)
provides that an injured employee who receives compensation
benefits and later recovers a greater sum from a third person
liable for those injuries must reimburse the employer or its
compensation carrier to the extent of benefits paid. We observed
that that statute makes no mention of how the recovery of UM
benefits should be treated. However, because recovery under UM
insurance is premised on the tortious conduct of another, the
Court imposed a workers'-compensation lien as a judicial remedy
to assure that the Workmen's Compensation statute and the UM
statute functioned as the Legislature had intended. 102 N.J. at
618. We "base[d] our decision on the belief that the primary
concern of the Legislature [in that case], as in other work-related injuries caused by third-party tortfeasors, [was] to
integrate the sources of recovery." Ibid. Critical to our
decision was the fact that the workers'-compensation and UM
benefits exceeded the value of the employee's injuries. As we
subsequently determined, our holding in Colatrella would not
apply to cases "[w]here an injured party's combined compensation
and UM recoveries do not indemnify him in full for his loss."
Charnecky v. American Reliance Ins. Co.,
249 N.J. Super. 91, 94
(App. Div. 1991), aff'd o.b.,
127 N.J. 188 (1992).
We acknowledge our observations in Ross and Colatrella that
a UM claim is a statutory cause of action that has many tort-like
characteristics, but we nevertheless view a UM claim as a tort
substitute for the injured party's claim against the uninsured
driver and not against the public entity. See Christy, supra,
102 N.J. at 610 (stating that claim for UM benefits is not "`one
in which a claim for tort has been asserted against'" a
municipality). A UM claim is simply a contractual right asserted
against an insurance company for its contractual liability
derived from the negligence of the errant driver and his or her
failure to carry insurance. As this Court noted in Christy,
supra, a claim for UM benefits should be regarded as one arising
out of contract, 102 N.J. at 610, and hence, the Tort Claims Act
is not implicated.
In sum, we hold that where a public-entity employee is
injured while working by an uninsured motorist, and seeks UM
benefits from both the public entity's insurer and his or her
personal-insurance carrier, any arbitration award of UM benefits
must be prorated pursuant to N.J.S.A. 17:28-1.1c.
Judgment affirmed.
Justices Handler, Pollock, O'Hern, Garibaldi, and Coleman
join in this opinion. Chief Justice Wilentz did not participate.
NO. A-98 SEPTEMBER TERM 1994
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
PRUDENTIAL PROPERTY & CASUALTY
INSURANCE COMPANY,
Plaintiff-Respondent,
v.
MONMOUTH COUNTY MUNICIPAL
JOINT INSURANCE FUND,
Defendant-Appellant,
and
SCIBAL INSURANCE GROUP and
TIMOTHY HOLMAN,
Defendants.
DECIDED May 25, 1995
Justice Handler PRESIDING
OPINION BY Justice Stein
CONCURRING OPINION BY
DISSENTING OPINION BY