(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).
UNSATISFIED CLAIM & JUDGMENT FUND BOARD, ET AL. V. NEW JERSEY MANUFACTURERS
INSURANCE COMPANY (A-34-94)
Argued October 11, 1994 -- Decided November 23, 1994
CLIFFORD, J., writing for a unanimous Court.
On January 7, 1989, Jose Fernandez was operating an uninsured vehicle that collided with an
automobile owned and driven by John Zane and insured by New Jersey Manufacturers (NJM). Two
passengers in the Fernandez vehicle were injured. Those passengers sued Fernandez, Zane, the State of
N.J., Department of Insurance and the Unsatisfied Claim and Judgment Fund (Fund) for their bodily injuries
sustained in the collision.
Neither passenger had any insurance available from which to make a claim for personal injury
protection (PIP) benefits or any uninsured-motorist coverage. The Fund agreed to pay the passengers' PIP-benefit claims in exchange for the dismissal of the complaint against the Fund and its release from PIP-benefits liability. The passengers did retain the right to sue Fernandez and Zane. The Fund thereafter
asserted a subrogation or reimbursement claim against NJM to recover the amount of PIP benefits the Fund
had paid to the passengers. Both parties moved for summary judgment on the issue of liability for those
payments. The trial court denied the Fund's motion, granted NJM's cross-motion and dismissed the
complaint, concluding that the Fund had no right of subrogation or of reimbursement for PIP benefits
against a third-party tortfeasor. The trial court found that the Fund's only remedy was against Fernandez,
the uninsured owner of the host vehicle.
Before the Appellate Division, the Fund argued that the combined effect of N.J.S.A. 39:6-86.6
(section 86.6 of the Fund Law), N.J.S.A. 39:6A-9.1 (section 9.1 of the No-Fault Law), and discussion in
Wilson v. Unsatisfied Claim & Judgment Fund Board, support the conclusion that the Fund had a right of
subrogation or reimbursement. The Appellate Division disagreed, finding that neither the statutes nor
Wilson authorized any such remedy.
The Supreme Court granted certification.
HELD: The Unsatisfied Claim & Judgment Fund does not have the right of reimbursement or
subrogation from a third-party tortfeasor of personal-injury-protection benefits paid to passengers
in an uninsured automobile that collided with an insured vehicle.
1. Section 86.6 grants the Fund two sources for recovery of PIP benefits that it has paid. The Fund
may recover from an uninsured motorist and from the owner or operator of a hit-and-run vehicle whose
identity was learned only after the Fund had paid the PIP benefits. Because the third-party tortfeasor, Zane,
was neither uninsured nor unknown at the time of the accident, and because NJM was not an insurer of a
hit-and-run motorist, section 86.6 fails to provide the Fund with a source of recovery. (pp. 4-8)
2. The Fund also claims that section 9.1 of the No-Fault Law authorizes it to recover the paid PIP benefits from NJM. The party invoking section 9.1's reimbursement right must be an insurer, a health-maintenance organization or a governmental agency, and must have paid PIP benefits as a result of a New Jersey-based accident. Although the legislative history is unclear, statutory analysis demonstrates that the Fund cannot recover the PIP benefits from NJM because Zane does not come within either of the two classes specified in section 9.1 as liable for reimbursement -- insureds not required to carry PIP coverage and
uninsureds. Zane was neither an insured not required to carry PIP coverage nor an uninsured motorist.
Therefore, the Fund cannot seek reimbursement from NJM or Zane directly. (pp. 8-12)
3. The Fund's interpretation of section 9.1 that recovery may be had from any insured tortfeasor would
so expand the scope of the reimbursement right as to substantially alter the legislative intent of the statute.
The legislative history shows a conscious decision to eliminate any right of recovery between two PIP
carriers. The only methods for recouping paid PIP benefits from another insurer are through intercompany
agreement or arbitration. Moreover, permitting reimbursement rights to be pursued in the courtroom would
conflict with the long-standing goal of the No-Fault Law to decrease the need for litigation. (pp. 13-16)
4. Allowing the Fund to pursue a common-law subrogation claim against another PIP carrier would
contradict the legislative intent and conflict with the goals of the No-Fault law. Moreover, subrogation is
derivative; thus, the rights of the subrogee are no greater than those of the subrogor. Inasmuch as the
passengers had no statutory or common-law tort rights against NJM, the Fund, as the subrogee of the
passengers, has no rights against NJM either. The Fund, however, is not without a subrogation remedy. It
has a subrogation claim against Fernandez, the uninsured motorist. (pp. 16-25)
5. The cases cited by the Fund in support of the subrogation right are distinguishable because none of
the vehicles driven by the tortfeasors in those cases were required by law to carry PIP coverage; thus, each of
those cases falls within section 9.1's right of reimbursement from insured tortfeasor not required to maintain
PIP coverage. More importantly, public policy strongly militates against finding a subrogation right for the
Fund in light of the fact that the source of its funding lies with insurers. In addition, the exercise of any
reimbursement or subrogation right introduces fault into a no-fault system. Of course, the Legislature may
choose to create such a new right for the Fund; however, that decision rests with the Legislature. (pp. 25-29)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and
STEIN join in JUSTICE CLIFFORD's opinion.
SUPREME COURT OF NEW JERSEY
A-
34 September Term 1994
UNSATISFIED CLAIM & JUDGMENT
FUND BOARD and COMMISSIONER OF
INSURANCE ON BEHALF OF THE
UNSATISFIED CLAIM & JUDGMENT
FUND BOARD,
Plaintiffs-Appellants,
v.
NEW JERSEY MANUFACTURERS
INSURANCE COMPANY,
Defendant-Respondent.
Argued October 11, 1994 -- Decided November 23, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
270 N.J. Super. 311 (1994).
Ralph J. Padovano argued the cause for
appellants (Beattie Padovano, attorneys;
Antimo A. Del Vecchio, on the briefs).
Brian G. Steller argued the cause for
respondent (Connell, Foley & Geiser,
attorneys; Kathleen M. Cehelsky, on the
letter brief).
The opinion of the court was delivered by
CLIFFORD, J.
The Unsatisfied Claim and Judgment Fund (UCJF or Fund) paid
personal-injury-protection (PIP) benefits to passengers in an
uninsured automobile that collided with a vehicle insured by
defendant, New Jersey Manufacturers Insurance Company (NJM).
Thereafter the Fund asserted a subrogation or reimbursement claim
against NJM, seeking to recover its PIP payments. The Law
Division entered summary judgment for the defendant insurer, and
the Appellate Division affirmed,
270 N.J. Super. 311 (1994). We
granted the Fund's petition for certification,
136 N.J. 295
(1994), and now affirm.
On January 7, 1989, Maya Upia and Pura Ventura were
passengers in the uninsured vehicle owned and operated by Jose
Fernandez when it collided with the automobile of John Zane,
insured by defendant, NJM. The accident occurred when Zane,
travelling south on Paulison Avenue, Clifton, attempted to make a
left-hand turn onto Clifton Avenue and struck Fernandez's
northbound automobile.
Upia and Ventura instituted suit against Fernandez, Zane, and the State of New Jersey, Department of Insurance, UCJF, for bodily injuries that they had sustained in the collision. Neither passenger had any insurance available from which to make a claim for PIP benefits or any uninsured-motorist coverage. The Fund agreed to pay Upia's and Ventura's PIP-benefits claims of $1,424 and $3,487.60 respectively, in exchange for the dismissal of the complaint against the Fund and a release of the Fund from PIP-benefits liability, thus preserving any rights of the
passengers to proceed against the alleged tortfeasors, Fernandez
and Zane.
The Fund then filed this suit against Zane's insurer, NJM,
to recover the amount of PIP benefits the Fund had paid to the
passengers. On the parties' motions for summary judgment, the
Law Division denied the Fund's motion, granted NJM's cross-motion, and dismissed the complaint. The trial court concluded
that the Fund had no right either of subrogation or of
reimbursement for PIP payments against a third-party tortfeasor,
and that the Fund's remedy was against the uninsured owner of the
host vehicle, Fernandez.
In the Appellate Division the Fund argued, as it does here,
that the combined effect of N.J.S.A. 39:6-86.6 (section 86.6 of
the Fund Law), N.J.S.A. 39:6A-9.1 (section 9.1 of the No-Fault
Law), and dicta in Wilson v. Unsatisfied Claim & Judgment Fund
Board,
109 N.J. 271 (1988), support the conclusion that the Fund
has such a right of subrogation or reimbursement. Because the
Appellate Division found that neither the statutes nor Wilson
authorizes that remedy, it affirmed the trial court's order for
summary judgment in favor of defendant. 270 N.J. Super. at 314.
In view of Justice Garibaldi's comprehensive discussion of
the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1
to -35 (No-Fault Law), last term for a unanimous Court in Roig v.
Kelsey,
135 N.J. 500, 502-11 (1994), we do not rework that well-ploughed ground. We focus instead on the 1988 version of the
statutory provisions, effective January 1, 1989, six days before
the accident giving rise to this case. Under the 1988 amendments
the "verbal threshold" applied to all insureds unless they
elected otherwise, thereby foreclosing those insureds from
recovery in tort for noneconomic damages except in nine specified
circumstances. N.J.S.A. 39:6A-8. See generally Cynthia M. Craig
& Daniel J. Pomeroy, New Jersey Auto Insurance Law § 4:3-5
(discussing 1988 amendments), § 15:3-2 (reviewing rules applying
threshold to plaintiffs). Significantly, the "verbal threshold"
bound even PIP claimants who had no insurance, such as
pedestrians or passengers. Id. at § 4:3-5. Therefore, the PIP
claimants in this case, the passengers in Fernandez's car who
were not required to maintain PIP coverage, were bound by the
"verbal threshold" and thus could not sue in tort for their
injuries. See id. at § 15:3-2a(7).
The UCJF Law, on the other hand, is quite different from the No-Fault Law, both in purpose and effect. Originally enacted in 1952, that Law established the Fund "to provide a measure of
relief to persons who sustain losses or injury inflicted by
financially-irresponsible or unidentified operators of motor
vehicles, where such persons would otherwise be remediless."
Douglas v. Harris,
35 N.J. 270, 279 (1961). "The legislature
created the Fund 'to provide the kind of protection a liability
insurance policy would provide.'" Esdaile v. Hartsfield,
245 N.J. Super. 591, 595 (App. Div. 1991) (quoting 25 New Jersey
Practice, Motor Vehicle Law and Practice § 1151, at 3 (2d ed.
1987)), rev'd on other grounds,
126 N.J. 426 (1992). However,
the statute does not reflect a goal of making every claimant
completely whole or compensating all accident victims; rather, it
seeks to offer some measure of relief to those who come within
the class intended to be protected, to prevent a claimant from
being forced to absorb the entire economic loss caused by the
accident. Ibid.
With the arrival of the No-Fault Law the Legislature built
into the Fund Law provisions covering PIP benefits. The sections
of the Fund Law concerning the eligibility requirements and
procedures for collecting PIP benefits from the Fund are N.J.S.A.
39:6-86.1 to -86.6. In virtually all respects, the PIP
provisions in the Fund Law track those in the No-Fault Law. See
Craig & Pomeroy, supra, at § 31:3-5; compare N.J.S.A. 39:6-86.1
(listing available PIP benefits) with N.J.S.A. 39:6A-4 (listing
available PIP benefits).
The Fund relies on section 86.6, "Recovery of benefits paid
by Fund," to argue that it may recoup the paid PIP benefits from
NJM, "the insurer." That section provides:
The commissioner shall be entitled to
recover on behalf of the [UCJF] for all
payments made by it pursuant to sections 7
and 10 of this act, regardless of fault, from
any person who owned or operated the
automobile involved in the accident and whose
failure to have the required insurance
coverage in effect at the time of the
accident resulted in the payment of [PIP]
benefits. If the identity of the owner and
operator is not ascertained until after [PIP]
benefits have been paid[,] then the
commissioner shall be entitled to recover for
such payments, regardless of fault, from the
operator if he was driving without the
owner's permission or from the operator and
the owner if he was driving with the owner's
permission or, in either case, from the
insurer if there is an insurance policy
providing [PIP] benefits that was in effect
at the time of the accident with respect to
such automobile.
The commissioner is authorized to bring
an action, which shall be a summary
proceeding, in the Superior Court to reduce
the right provided by this section to
judgment.
The statute is clear. Section 86.6 grants the Fund two
sources for recovery of PIP benefits that it has paid. The first
is from an uninsured motorist -- the owner or operator who should
have had insurance with PIP coverage and did not, thus resulting
in the Fund's paying out PIP benefits. The second is from hit-and-run accidents -- the owner or operator whose identity was
learned only after the Fund had paid the PIP benefits. See
Sanders v. Hunter,
253 N.J. Super. 666, 671-72 (Law Div. 1991);
Craig & Pomeroy, supra, at § 30:3-4c; Mario A. Iavicoli, No Fault
and Comparative Negligence In New Jersey § 76 (1973); see also
Wilson v. Unsatisfied Claim & Judgment Fund Bd.,
213 N.J. Super. 594, 602 (Law Div. 1985) (noting that under section 86.6 Fund may
recover PIP payments it has advanced), aff'd,
213 N.J. Super. 520
(App. Div. 1986), aff'd,
109 N.J. 271 (1988). Section 86.6's
reference to "the insurer" at the end of the first paragraph
refers to the insurer covering either the owner or operator of
the automobile in the hit-and-run accident that the Fund had
presumed to be uninsured. That provision ensures that if an
insurance policy for the hit-and-run vehicle's owner or operator
was in effect at the time of the accident, the Fund may recover
the paid PIP benefits from the tortfeasor's insurer under that
policy.
In this case, the third-party tortfeasor, Zane, was neither
uninsured nor unknown at the time of the accident, and the
insurer, NJM, was not an insurer of a hit-and-run motorist.
Therefore, contrary to the Fund's arguments, section 86.6 fails
to provide the Fund with a source of recovery.
The Fund also relies on section 9.1 of the No-Fault Law,
claiming that it authorizes the Fund to recover the paid PIP
benefits from NJM. Section 9.1 begins:
An insurer, health maintenance
organization or governmental agency paying
* * * [PIP] benefits * * * , as a result of
an accident occurring within this State,
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] * * * coverage, other than for
pedestrians, under the laws of this State,
* * * or although required did not maintain
[PIP] * * * coverage at the time of the
accident.
It continues:
In the case of an accident occurring in this
State involving an insured tortfeasor, the
determination as to whether an insurer,
health maintenance organization or
governmental agency is legally entitled to
recover the amount of payments and the amount
of recovery, including costs of processing
benefit claims and enforcing rights granted
under this section, 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.
Notably, section 9.1 creates a direct right of reimbursement, not a subrogation right. The right is primary for the injured party's insurer, and the insurer's recovery does not depend on a claim that it acquires from the rights of its insured. Wilson, supra, 109 N.J. at 280; Liberty Mut. Ins. Co. v. Selective Ins. Co., 271 N.J. Super. 454, 458 (App. Div. 1994); IFA Ins. Co. v. Waitt, 270 N.J. Super. 621, 625 (App. Div.), certif. denied, __
N.J. __ (1994); Allstate Ins. Co. v. Coven,
264 N.J. Super. 240,
245-46 (App. Div. 1993); Range v. McLarty,
246 N.J. Super. 196,
199 (Law Div. 1990); Buoni v. Browning Ferres Indus.,
219 N.J.
Super. 96, 99-100 (Law Div. 1987). In addition, the statute
allows PIP carriers to recover not from other PIP carriers but
from non-PIP carriers and uninsureds.
The requirements for the party invoking section 9.1's
reimbursement right are that it be an insurer, health-maintenance
organization, or a governmental agency, and that it have paid PIP
benefits as a result of an accident occurring in New Jersey. The
Fund clearly satisfies the second criterion; the question is
whether the Fund comes within the term "governmental agency."
Although the Fund is linked to the government, it remains independent of it. For example, the Fund Law provides that the UCJF board is "in, but not as a part of, the Department of Insurance." N.J.S.A. 39:6-64. The board consists of the Commissioner of Insurance and representatives from four insurance groups. The designated members of the board must be employed by insurers and may not receive any compensation from the Fund. The board must reimburse the Department of Insurance or any other agency that has incurred expenses in performing services for the board. Ibid. Moreover, the UCJF receives all its funding from annual assessments on the insurance industry; no public funds are used and the State does not appropriate money to the Fund.
N.J.S.A. 39:6-63. Yet, the Fund is a creature of the Legislature
and its administration and application are dictated by the Fund
and No-Fault Laws. In addition, the Fund is "public" in that it
is administered and maintained in the public interest.
The legislative history of section 9.1 does not give a clear picture of whether the Legislature meant for the Fund to be eligible for reimbursement for PIP payments. In 1990, the Legislature amended section 9.1 to include health-maintenance organizations and governmental agencies; prior to that time, the statute referred only to insurers. However, in Wilson, supra, 109 N.J. at 279, and Sotomayor v. Vasquez, 109 N.J. 258, 269, both decided in 1988, we found that the availability of a third-party liability action would not in and of itself defeat a claim for PIP benefits from the Fund. Although we recognized that our interpretation might increase the financial burdens of the Fund, we concluded that our decision comported with the policies underlying the No-Fault Law. We also observed that unlike its treatment of insurers, the Legislature had not provided the Fund with a statutory grant or restraint of reimbursement or subrogation from third-party tortfeasors. Wilson, supra, 109 N.J. at 280. Thus, the 1990 amendment adding "governmental agency" to section 9.1 could be interpreted as a response to Wilson and Sotomayor, designed to provide the Fund with the reimbursement right. See Range, supra, 246 N.J. Super. at 199. We know of no other "governmental agency" that would be making
PIP payments and then looking for reimbursement. On the other
hand, if the Legislature had wanted to grant to the Fund the
reimbursement right set forth in section 9.1, it could easily
have said "UCJF" instead of "governmental agency."
However, to resolve this case we need not determine whether
the Fund is a governmental agency within section 9.1, because
even if we conclude that the Fund is a governmental agency,
section 9.1 does not provide a reimbursement right against PIP
carriers situated as is NJM.
The statute provides that an insurer, health-maintenance organization, or governmental agency may recover from any tortfeasor who 1) was not required by law to maintain PIP coverage or 2) although required, failed to carry PIP coverage. N.J.S.A. 39:6A-9.1. The first class refers to insured commercial or public vehicles without PIP coverage. (A key limitation of the No-Fault Law is its applicability only to private-passenger automobiles. Craig & Pomeroy, supra, at § 1.2-4b(1); George J. Kenny & Frank A. Lattal, New Jersey Insurance Law, § 11.4 (1993).) The second class refers to uninsured tortfeasors. The statute further provides that if the tortfeasor is insured, his or her insurer is liable for the PIP-reimbursement payment. Therefore, recovery from an uninsured tortfeasor may be direct, but recovery from an insured tortfeasor must be through his or her insurer. The legislative policy behind shielding commercial
tortfeasors from personal liability was "'to protect small
commercial operators from the danger of being rendered insolvent
by being held liable for large PIP reimbursement claims that
sometimes arise from catastrophic injuries.'" Liberty Mut. Ins.
Co. v. Selective Ins. Co.,
271 N.J. Super. 569, 574 (Law Div.
1993) (quoting Sherman v. Garcia Constr. Co.,
251 N.J. Super. 352, 354 (App. Div. 1991)), aff'd,
271 N.J. Super. 454 (App. Div.
1994).
That statutory analysis demonstrates that the Fund cannot
recover the PIP payments from NJM because Zane does not come
within either of the two classes specified by the statute.
First, Zane was not one who was "not required to maintain PIP
coverage": he operated a private-passenger automobile for which
he was required to and did carry PIP coverage. Thus, he does not
fall within the first class of tortfeasors liable for
reimbursement payments under section 9.1; and because Zane is not
a tortfeasor from whom the Fund can recover, NJM, as Zane's
insurer, is not "the insurer" from whom the Fund can recover.
Second, Zane was not uninsured; hence, he does not fall within
the second class of tortfeasors, so the Fund cannot seek
reimbursement from him directly. Consequently, the Fund has no
reimbursement right against NJM under the circumstances of this
case.
The Fund isolates part of section 9.1 to argue that recovery
may be had from any insured tortfeasor, not just those insured
tortfeasors not required to carry PIP coverage. That part of the
statute provides: "In the case of an accident * * * involving an
insured tortfeasor, * * * [recovery] shall be made against the
insurer of the tortfeasor * * * ." (Emphasis added.) By itself,
that truncated portion of the statute suggests that recovery is
available from any insured tortfeasor. However, as the rest of
section 9.1 makes clear, the quoted portion relates back to the
earlier reference in that section to "any tortfeasor who was not
* * * required to maintain [PIP] * * * coverage": those
tortfeasors operating commercial or public vehicles that are
insured but do not have PIP coverage. The statute established a
special method of recovery in the case of "an insured tortfeasor"
as opposed to those tortfeasors who are completely uninsured. As
discussed above, the sentence ensures that the insurers of those
insured tortfeasors, and not the tortfeasors themselves, are
liable for the payment. Therefore, when read as a whole, the
statute provides only two classes from which recovery may be
realized: uninsureds, and insureds not required to carry PIP
coverage.
Moreover, the Fund's interpretation of section 9.1 so expands the scope of the reimbursement right that were we to adopt that interpretation, we would substantially alter the legislative intent. The Fund's reading of the statute creates
another class from which one can recoup PIP payments -- a class
of all "insured tortfeasors." Adding that class to section 9.1
would allow reimbursement for PIP benefits paid in almost all
accidents because the statute would cover uninsureds, insureds
without PIP coverage, and the new class of insureds with PIP
coverage. Thus the Fund's interpretation would permit one PIP
carrier to recoup PIP payments it had made to its own insured
from another PIP carrier for damages that the first carrier's
insured had incurred where the second carrier's insured was at
fault.
That the Legislature intended that result is implausible for several reasons. First, had the Legislature intended to provide a right of reimbursement against all insured tortfeasors, it would not have inserted the qualifying language in the first sentence following "any tortfeasor," beginning with "who." What follows "who" modifies and narrows the term "any tortfeasor" to two types of tortfeasors without PIP coverage. Moreover, the legislative history shows a conscious decision to eliminate any right of recovery between two PIP carriers. A provision permitting insurers paying PIP benefits to pursue claims against tortfeasors' insurers, originally created in N.J.S.A. 39:6A-9, was deemed inefficient, and it expired two years after it had been enacted. Iavicoli, supra, at § 50. Lastly, section 9.1 is a fault-based provision in that it allows one carrier to collect from the insurer of the person who was at fault in the accident.
The history of the No-Fault Law shows a trend toward eliminating
fault-based provisions, see Roig, supra, 135 N.J. at 502-11;
therefore, any provision that contains fault-based concepts was
likely intended to extend to only those instances specified in
the statute. See New Jersey Auto. Full Ins. Underwriting Ass'n
v. Liberty Mut. Ins. Co.,
270 N.J. Super. 49, 53 (App. Div. 1994)
("Since [the section 9.1] right is wholly statutory, it is
strictly limited by the terms of the enactment which created
it."); Sherman, supra, 251 N.J. Super. at 356 ("[A]ny right
established by section 9.1 must be limited to the plain language
of the legislative provision."); Longworth v. Ohio Casualty
Group,
213 N.J. Super. 70, 85 (Law Div. 1986) ("A reasonable
interpretation of the present § 9.1 is that where the Legislature
has deemed to extend such right of subrogation[,] it has done so
expressly."), aff'd,
223 N.J. Super. 174 (App. Div. 1988).
Moreover, the cases employing section 9.1 fail to support the Fund's position that it may recover from another PIP carrier. All the cases applying section 9.1 do so in situations in which a commercial vehicle was at fault, and they involve recoupment from a commercial vehicle's insurer. See, e.g., IFA Ins., supra, 270 N.J. Super. at 625; Allstate, supra, 264 N.J. Super. at 247; Sherman, supra, 251 N.J. Super. at 354; Liberty Mutual, supra, 271 N.J. Super. at 572; Hanover Ins. Co. v. Lewis, 260 N.J. Super. 380, 389 (Law Div. 1992); Range, supra, 246 N.J. Super. at 198; Buoni, supra, 219 N.J. Super. at 98. The Fund cites no case
allowing an insurer, a health-maintenance organization, or the
UCJF to exercise the reimbursement right against the insurer of
an operator or owner of a private-passenger automobile.
The only methods for recouping paid PIP benefits from
another insurer are through intercompany agreement or
arbitration. New Jersey Auto. Full Ins. Underwriting Ass'n,
supra, 270 N.J. Super. at 53. The Fund suggests that it should
not be constrained by the requirement of an agreement or
arbitration. However, permitting reimbursement rights to be
pursued in the courtroom would conflict with the long-standing
goal of the No-Fault Law to eliminate litigation wherever
possible. The Legislature could not have intended to open up a
new avenue of recovery without also providing that the recovery
had to be sought outside the court system. In addition, no
reason exists for allowing the Fund to proceed in seeking
recovery under section 9.1 in a way that differs from the way
those insurers who invoke the same statutorily-derived
reimbursement right recover.
We also reject the Fund's argument that it has a common-law right of subrogation. Allowing the Fund to pursue a common-law subrogation claim against another PIP carrier would contravene the legislative history and disrupt the balance established by
the No-Fault Law. With the enactment of that Law, the
Legislature provided for a subrogation right for insurers to
exercise against other PIP carriers whose insureds were at fault
in the accident. N.J.S.A. 39:6A-9 (section 9) (expired Dec. 31,
1974); Iavicoli, supra, at § 50. Significantly, at the behest of
the insurance industry, the Legislature provided for section 9, a
fault-based provision, to self-expire two years from the
effective date of the enactment of the No-Fault Law. Iavicoli,
supra, at § 50. Despite the attractiveness of recouping PIP
payments from a tortfeasor's carrier, the insurance industry
doubted the economic benefit of subrogation because it resulted
in the increased cost of shifting dollars and papers among the
PIP carriers. Ibid. The true purpose of the subrogation
provision was to ease the transition into a no-fault system and
to allow for the compilation of statistics for the rate-making
process. Ibid. Importantly, the termination of section 9 was
not intended to confer on injured persons the right to sue for
losses satisfied by PIP payments. Ibid.; see N.J.S.A. 39:6A-12.
A subrogation right allows the insurer or PIP carrier to step into the shoes of its insured to acquire thereby any cause of action of the insured. Therefore, for an insurer to recover in subrogation under section 9, the tortfeasor's insurer had to be liable to the injured party for PIP benefits. Hence, the injured person had to qualify for PIP benefits under the owner's or operator's policy as either a family member, a passenger in
the insured vehicle, an operator of the insured automobile
driving with permission, or a pedestrian. Thus in Pennsylvania
Manufacturers' Ass'n Insurance Co. v. GEICO,
136 N.J. Super. 491
(App. Div. 1975), a declaratory-judgment action, the court denied
a subrogation claim asserted by the PIP carrier for a passenger
in its insured's vehicle. According to the Appellate Division,
the subrogation rights found in section 9 were no greater than
the rights of the injured party to whom PIP payments had been
made. Because the injured party was not entitled to the PIP
benefits provided in the tortfeasor's policy -- she was not a
named insured, a resident family member, a passenger in the
insured tortfeasor's vehicle, or a pedestrian -- the host
vehicle's PIP carrier was not entitled to subrogation in respect
of the tortfeasor's PIP coverage. Id. at 497-98
After the fault-based subrogation provision of section 9 expired, an insurer had no statutory basis for recouping from the tortfeasor's carrier or the uninsured tortfeasor the PIP payments it had made to its insured. Craig & Pomeroy, supra, at § 14:1. Thus the termination of section 9 effected a bar against subrogation actions between two PIP carriers. See Cirelli v. Ohio Casualty Ins. Co., 72 N.J. 380, 385 (1977); Prudential Property & Casualty Ins. Co. v New Hampshire Ins. Co., 167 N.J. Super. 537, 542 (Law Div. 1979); Marriner v. Koenig, 148 N.J. Super. 363, 365 (Law Div. 1977). Accordingly, PIP carriers could adjust their rates to reflect the implementation of the no-fault
system. Yet, the insurance industry and the Legislature believed
that the elimination of the subrogation right as it related to
other PIP carriers would have little effect on the insurers'
expenses because the cost of paying PIP benefits would likely
balance out among them and therefore would keep rates stable.
Prudential, supra, 167 N.J. Super. at 540.
Initially, a line of cases developed permitting PIP carriers
to seek subrogation from the insurer of a vehicle not required to
maintain PIP coverage in New Jersey. For example, in Cirelli,
supra,
72 N.J. 380, this Court concluded that for out-of-state
accidents with foreign vehicles, no statutory policy precluded
enforcement of a subrogation provision in an insurance policy.
We found that although eliminating subrogation among New Jersey
carriers might reduce premiums through reduced administrative
costs, that result did not occur when an out-of-state insurer was
involved because the out-of-state insurer, having no such similar
restriction on subrogation, might exercise its rights against New
Jersey carriers. Id. at 387. Thus, New Jersey residents could
end up subsidizing insurance operations and policyholders of
other jurisdictions. Id. at 388. Moreover, the Court observed
that a foreign jurisdiction might permit an injured party to sue
in tort for expenses already received through PIP benefits,
thereby allowing a double recovery. Ibid. To avoid that result,
we concluded that the insurer could seek reimbursement from its
insured if the insured sued in tort in New York. Ibid.
Other courts also concluded that the bar on subrogation did
not apply to cases in which the vehicle at fault was not an
automobile required to carry PIP coverage. See, e.g., Newson v.
Hertz Corp.,
164 N.J. Super. 141, 145 (App. Div. 1978) (allowing
subrogation action against self-insured truck, noting that
nothing in No-Fault Law "remotely suggests that an insurer is
barred from bringing a subrogation action against the owner or
operator of a motor vehicle [that] is not insured in accordance
with the provisions of the act"); Melick v. Stanley,
174 N.J.
Super. 271, 277-78 (Law Div. 1980) (allowing subrogation against
commercial truck without PIP coverage because expiration of
section 9 had not effected absolute ban on subrogation in New
Jersey; rather, subrogation rights were still in force where
accident involved at least one other vehicle other than
automobile insured in New Jersey), aff'd o.b.,
181 N.J. Super. 128 (App. Div. 1981); Marriner, supra, 148 N.J. Super. at 365-66
(permitting subrogation where automobile hit self-insured truck
because no-fault goal of parity of losses between insurers
otherwise would not be served).
In 1981, however, this Court revisited the subrogation issue in Aetna Insurance Co. v. Gilchrist Brothers, Inc., 85 N.J. 550. Aetna's insured was injured when his car was struck from behind by a commercial truck. After paying PIP benefits to its insured, Aetna asserted a subrogation claim against the truck's insurer. Id. at 554-55. At the time of the accident, section 9 was no
longer in effect. Id. at 555. This Court began its analysis by
noting that the "underpinning of subrogation is its derivative
nature." Id. at 560. Thus, the insurer acquires whatever rights
its insured had against a tortfeasor, but no more, and is subject
to the defenses the tortfeasor may have against the insured. Id.
at 560-61. Concluding that Aetna's insured had no rights against
the truck driver to recover expenses for his injuries that had
been paid as PIP benefits, we refused to allow subrogation. Id.
at 562. The insured had no rights because the evidentiary-exclusion rule of N.J.S.A. 39:6A-12 (section 12) bars injured
parties from recovering tort damages for amounts collectible or
paid under PIP. Ibid. In acknowledging the seeming incongruence
with section 9, we explained that section 9 had to be considered
with section 12.
When so viewed, it can be seen that the
purpose of N.J.S.A. 39:6A-9 was to create a
limited right of recovery by the insurer
paying PIP benefits until December 31, 1974,
despite the fact its insured could not
otherwise recover the amount of PIP benefits
from the tortfeasor. Though section 9 uses
the word "subrogation," in fact the right
created therein was not one of "subrogation"
because the insurer's right did not arise by
operation of a provision in the contract of
insurance. The insurer did not stand in the
shoes of the insured, but was able to obtain
recovery of PIP payments only because of
section 9.
Therefore, the expired section 9 had not created a true subrogation right; rather, it had created a temporary exception
to section 12's bar against suits for damages collectible or paid
as PIP benefits.
Justice Sullivan dissented. He argued that the majority
decision would result in "private automobile owners 'subsidizing'
the cost of insurance on non-PIP-covered commercial vehicles in
this State" because "the PIP insurer's own customers will
ultimately pay, through higher premiums, for tortious conduct by
operators of commercial vehicles." Id. at 567, 568. Justice
Sullivan pointed out that commercial insurers enjoy subrogation
and reimbursement rights under workers' compensation laws, and
the workers' compensation carriers are free to seek subrogation
or reimbursement from a negligent motorist's automobile insurer,
with the result that commercial insurers avoid having to increase
the liability rates for their insureds. Id. at 568. Because the
majority decision denied automobile-insurance carriers a similar
subrogation right against commercial insurers, the imbalance
resulted "in higher liability insurance premiums for private
automobile owners in the State with a corresponding windfall for
commercial vehicle owners." Id. at 568-69. Justice Sullivan
would have found that section 9 eliminated all subrogation rights
of PIP insurers, "but only where all the insurance carriers
involved * * * are subject to the requirements of the No Fault
Act." Id. at 570.
As a direct response to Aetna, the Legislature enacted
N.J.S.A. 39:6-9.1. IFA Ins., supra, 270 N.J. Super. at 625;
Buoni, supra, 219 N.J. Super. at 99; Craig & Pomeroy, supra, at §
14:2. With section 9.1, then, the Legislature adopted the Aetna
majority's position that creation of any subrogation right would
be inconsistent with section 12, and thus enacted a reimbursement
right. The Legislature also incorporated Justice Sullivan's
concerns regarding the imbalance between private-passenger
automobile insurance and commercial-vehicle insurance by allowing
PIP carriers to recoup PIP payments from commercial vehicles.
However, because of past inefficiencies in the reimbursement
process, the Legislature found unnecessary any provision for
reimbursement rights as between PIP carriers. See Liberty Mut.,
supra, 271 N.J. Super. at 458 (noting that section 9.1 was
designed to reduce cost of private-passenger automobile-insurance
premiums by "allowing the PIP carrier to recoup its payments from
a commercial liability carrier"); Allstate, supra, 264 N.J.
Super. at 246 (finding that section 9.1 did not disturb "blanket
prohibition on subrogation announced in Aetna"); Longworth,
supra, 213 N.J. Super. at 86 (reasoning that section 9.1 did not
"overrule Aetna" and that it covered commercial insureds).
The foregoing discussion indicates that the Fund clearly does not have a "subrogation" right against NJM. First, as Pennsylvania Manufacturers' and Aetna explain, subrogation is derivative and the rights of the subrogee are no greater than
those of the subrogor. Here, the injured parties were passengers
in the vehicle that the Fund covered, and the Fund asserted a
subrogation claim against NJM, the insurer of the motorist
driving the other vehicle, Zane, who it alleges was at fault in
the accident. However, the passengers had no right to collect
PIP benefits from Zane or NJM because in respect of the Zane
vehicle they did not qualify as family members, passengers,
operators, or pedestrians. See Sotomayor, supra, 109 N.J. at
268-69 & n.4 (relying on Pennsylvania Manufacturers' to conclude
that although some plaintiffs may be viewed as "'slipping between
the cracks' of the system, * * * the Legislature had to balance
varied interests in developing a system that would provide a high
measure of protection in most eventualities"). Likewise, because
they were bound by the verbal threshold, the passengers had no
common-law tort claim against Zane. Inasmuch as the Fernandez
passengers had no statutory or common-law tort rights against
NJM, the Fund, as the "subrogee" of the passengers, has no rights
against NJM either.
Moreover, the history of the subrogation right indicates that its exercise was deemed inefficient. Elimination of that right was designed to cut costs and keep rates low, a rationale still applicable to the no-fault scheme today. Therefore, revival of a subrogation right in favor of the Fund by this Court would conflict with the goals of the No-Fault Law and would directly contradict the legislative intent. Even when
subrogation claims were authorized by statute, they had to
proceed through arbitration. One of the unmistakable purposes of
the enactment of the No-Fault Law was to provide some relief to
courts overburdened with insurance-related litigation, a goal
that remains prominent today. We are fully persuaded that the
Fund has no "subrogation" claim against NJM.
The Fund, however, is not without a subrogation remedy: it
has a subrogation claim against Fernandez, the uninsured
motorist. The passengers in his vehicle would have been entitled
to collect PIP benefits under Fernandez's policy had he been
insured. Because he was uninsured and the Fund had to pay PIP
benefits to the passengers, the Fund may recoup from Fernandez
the PIP payments under N.J.S.A. 39:6-86.6.
Finally, we address so much of the Fund's argument as relies on our decision in Wilson, supra, 109 N.J. 271. In Wilson, we held that a qualified injured party could recover PIP benefits from the UCJF without first exhausting efforts to collect the expenses in an action directly against the tortfeasor. Id. at 279. In recognizing that the Fund's assets would now be consumed at a faster rate, we added, "we do not foreclose by our disposition the possibility that the Fund should appropriately be subrogated to or reimbursed for the injured party's right to recover 'PIP-type' damages from an insured third party." Ibid.
We noted Aetna's restriction on subrogation and the section 9.1
response providing a direct right of reimbursement "against a
tortfeasor * * * who was not required to maintain PIP coverage or
against a tortfeasor who failed to carry PIP protection." Id. at
280. We concluded that "[t]he Fund has no comparable statutory
grant or restraint of reimbursement or subrogation against third-party tortfeasors although it has a powerful summary no-fault
remedy against the uninsured owner * * * ." Ibid. Nonetheless,
we explicitly stated that we would not resolve the issue in that
case. Ibid.
The Fund also relies on Sotomayor, the companion case to
Wilson, in which we specifically left it to the Fund to seek
subrogation if the claimant was found to be eligible for
benefits. 109 N.J. at 270. The Fund also cites Range, supra,
246 N.J. Super. at 199, which permitted the Fund to seek
reimbursement under section 9.1.
From those cases, the Fund argues that the courts have recognized the UCJF's rights of subrogation or reimbursement. The Fund observes that because the Fund's assets are held in trust for the benefit of the general public, public policy demands that the Court carefully guard those assets and strive to preserve them through expanding the subrogation and reimbursement rights of the Fund. It argues that it has carried out Wilson's dictates and has properly paid the injured parties in this case
and invites the Court to take the next step, which it claims
would be to allow the UCJF to recoup those funds from the
responsible tortfeasor, Zane, or his insurer, NJM. For several
reasons we decline the invitation to create a right of
subrogation.
First, the cases on which the Fund relies are
distinguishable from this case because none of the vehicles
driven by the tortfeasors in Wilson, Sotomayor, and Range -- a
public school bus, an out-of-state automobile, and a taxi -- was
required by law to carry PIP coverage. Therefore, each of those
cases falls squarely within section 9.1's right of reimbursement
from "any tortfeasor who was not, at the time of the accident,
required to maintain [PIP] * * * coverage * * * under the laws of
this State * * * ." N.J.S.A. 39:6A-9.1. Here, the alleged
tortfeasor, Zane, drove a private-passenger automobile and was
required to and did carry PIP coverage; therefore, he does not
fall within that class of tortfeasors.
More importantly, public policy strongly militates against finding a subrogation right for the Fund. The source of the UCJF funding is insurers. Because no taxpayer money goes toward the Fund, the incentive for allowing recoupment dwindles. In addition, the funding structure is organized so that each year insurers "ante up" to the Fund a lump sum according to their market share. To allow the Fund to pursue reimbursement from
those very insurers that already serve as the only source of the
UCJF funding seems repetitive and burdensome. The result would
be an exchange of a tremendous amount of money and paperwork,
only to have the insurers provide the Fund with whatever
resources it needs anyway. See also Wilson v. Unsatisfied Claim
& Judgment Fund Board,
213 N.J. Super. 520, 524 (App. Div. 1986)
("[T]he single insurance carrier for a third party is not
compelled to carry the burden imposed by the uninsured, but
rather the insurance carriers doing business within the State
spread that cost through Fund assessment against each carrier
* * * ."); Wilson, supra, 213 N.J. Super. at 602 (noting that
omission of Fund from section 9.1 rights may have been because
Fund's budget requirements are met by contributions from
insurers, and if it could recover, "the Fund would be entitled to
make recoveries from those insurers who had already contributed
monies to the Fund to cover such losses").
In addition, the exercise of any reimbursement or subrogation right introduces fault into a system designed to limit its role. The Legislature has crafted statutes to balance the competing interests and to move toward the goals it seeks to achieve. In so doing, it has strategically built some fault concepts into the system. One such provision is section 9.1. Uninsured and commercial-vehicle tortfeasors do not share in the costs of maintaining the no-fault system; however, without section 9.1, they would otherwise reap its benefits. That is so
because the No-Fault Law forces insurers to pay for their own
insureds' expenses and also prohibits injured parties from suing
tortfeasors for the same costs, resulting in those tortfeasors
avoiding any responsibility for their roles in the accidents.
Allowing recoupment simply ensures that the private-passenger
automobile insurers do not subsidize other insurers and that
those savings are passed on to consumers -- the same consumers
the No-Fault Law was designed to protect.
As we have observed, one goal of the No-Fault Law is to
avoid excessive litigation related to accidents and insurance;
the section 9.1 reimbursement right and the section 86.6
subrogation right requires resolution by intercompany agreement
or arbitration. Creation of a common-law subrogation right
without a corresponding restriction directing that disputes be
settled by arbitration would result in an increase in litigation
contrary to the legislative goal.
The no-fault scheme is of legislative design. If the
Legislature chooses to create a new right for the Fund, it can do
so. Revival of a subrogation right by this Court would most
certainly affect that scheme. Any decision to alter the system
more appropriately rests with the Legislature.
Judgment affirmed.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi, and Stein join in this opinion.
NO. A-34 SEPTEMBER TERM 1994
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
UNSATISFIED CLAIM & JUDGMENT
FUND BOARD and COMMISSIONER OF
INSURANCE ON BEHALF OF THE
UNSATISFIED CLAIM & JUDGMENT
FUND BOARD,
Plaintiffs-Appellants,
v.
NEW JERSEY MANUFACTURERS
INSURANCE COMPANY,
Defendant-Respondent.
DECIDED November 23, 1994
Chief Justice Wilentz PRESIDING
OPINION BY Justice Clifford
CONCURRING OPINION BY
DISSENTING OPINION BY