AAA MID-ATLANTIC INSURANCE COMPANY OF NEW JERSEY v. STATE FARM INDEMNITY COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3636-05T23636-05T2

AAA MID-ATLANTIC INSURANCE

COMPANY OF NEW JERSEY,

Plaintiff-Respondent,

v.

STATE FARM INDEMNITY

COMPANY,

Defendant-Appellant.

_______________________________________

 

Argued February 28, 2007 - Decided March 15, 2007

Before Judges Parker and Yannotti.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. MID-L-5431-05.

Michael F. O'Gara argued the cause for appellant (Martin & Simmonds, attorneys; Mr. O'Gara, on the brief).

Sanford D. Kaplan argued the cause for respondent (Muscio & Kaplan, attorneys; Mr. Kaplan, on the brief).

PER CURIAM

Defendant State Farm Indemnity Company (State Farm) appeals from orders entered on February 3, 2006, and March 17, 2006, granting summary judgment in favor of plaintiff AAA Mid-Atlantic Insurance Company of New Jersey (AAA Mid-Atlantic). We affirm.

The facts are undisputed. On or about November 3, 2005, Heinrich Koehler (Koehler) was crossing a street in New York City when he was struck by a vehicle driven by Hany Lansing (Lansing). At the time, both Koehler and Lansing were New Jersey residents. Lansing's vehicle was insured by AAA Mid-Atlantic, under a "standard" New Jersey auto insurance policy. Koehler sustained personal injuries in the accident, and he was paid personal injury protection (PIP) benefits pursuant to coverage provided to him under an auto insurance policy issued by State Farm.

State Farm thereafter filed a claim with Arbitration Forums, Inc. (AFI) against AAA Mid-Atlantic, seeking binding arbitration of its claim for contribution and reimbursement for the PIP benefits paid to Koehler. AAA Mid-Atlantic then filed a declaratory judgment action seeking a determination that AFI did not have jurisdiction in the matter because, under its policy, AAA Mid-Atlantic had no obligation to provide coverage to Koehler and was not required to reimburse State Farm for the PIP benefits it had paid to Koehler for injuries sustained in the November 3, 2005, accident. On December 2, 2005, AAA Mid-Atlantic moved for summary judgment. State Farm opposed the motion, arguing that its claim was arbitrable.

Judge Edward J. Ryan heard the motion on February 3, 2006, and placed his decision on the record that day. The judge found that, in asserting its claim for contribution and reimbursement for Koehler's PIP benefits, State Farm was seeking to impose liability when no coverage exists under AAA Mid-Atlantic's policy. The judge determined that AFI did not have jurisdiction over such a claim and entered the order granting AAA Mid-Atlantic's motion for summary judgment. The judge filed an amended order on March 17, 2006, which enjoined State Farm from proceeding with arbitration of its claim. This appeal followed.

State Farm argues that the judge erred because the dispute is "precisely" the kind of dispute that AFI should decide. According to State Farm, the arbitrator should determine whether AAA Mid-Atlantic is required to provide coverage in the circumstances of this case. We disagree and affirm substantially for the reasons stated by Judge Ryan in the decision that he placed on the record. We add the following comments.

State Farm and AAA Mid-Atlantic are signatories to an agreement under which AFI arbitrates certain insurance disputes. Under the AFI agreement, the signatory companies must submit to arbitration certain claims, including claims involving matters for which signatories have issued separate policies that provide "concurrent coverage" to the same party.

The AFI agreement provides, however, that unless a signatory otherwise consents, it is not required to arbitrate a claim for which it has asserted a "denial of coverage." The agreement defines the term "denial of coverage" as follows:

A company's assertion that the [entity and/or individual] involved in the accident, occurrence or event in dispute is not covered under the company's policy of insurance, or that there was no policy in effect at the time of the accident, occurrence or event. (It is not a denial of coverage as long as the company admits that the [party is] an insured under the policy in effect at the time of the accident, occurrence or event, i.e. primary-excess coverage, policy limits, or the claim is being handled under a reservation of rights.)

Here, Judge Ryan correctly found that State Farm's claim against AAA Mid-Atlantic for reimbursement was not subject to mandatory arbitration because AAA Mid-Atlantic had validly asserted a "denial of coverage." AAA Mid-Atlantic's "denial of coverage" was based on the fact that Koehler was not covered under the AAA Mid-Atlantic policy, which provides that coverage does not extend to a pedestrian who is injured by a covered auto, if that individual is entitled to PIP benefits as a "named insured" or "family member" under the terms of another policy. This so-called "follow the family" exclusion is permitted by N.J.S.A. 39:6A-7b(3). Because AAA Mid-Atlantic had validly denied coverage, State Farm was not entitled to arbitration of its claim under the ALI agreement.

 
We note that, while the accident occurred in New York, New Jersey had the predominant interest in the matter, and State Farm's claim for contribution from AAA Mid-Atlantic for Koehler's PIP benefits was correctly determined by application of New Jersey law. As stated previously, when the accident occurred, Koehler and Lansing were residents of New Jersey. Lansing's vehicle was insured by AAA Mid-Atlantic under a "standard" New Jersey policy. Furthermore, AAA Mid-Atlantic is not authorized to engage in the insurance business in New York, and AAA Mid-Atlantic's policy need not be read to conform to New York's PIP law. In addition, State Farm paid Koehler PIP benefits pursuant to New Jersey law and regulations and sought reimbursement for a portion of its PIP benefits from New Jersey's Unsatisfied Claim and Judgment Fund. In the circumstances, the judge correctly applied the terms of AAA Mid-Atlantic's policy in concluding that AAA Mid-Atlantic was not obligated to contribute or reimburse State Farm for any PIP benefits paid to Koehler.

Affirmed.

 

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A-3636-05T2

March 15, 2007