ENCOMPASS INSURANCE COMPANY OF NEW JERSEY v. TRANS WARE, INC.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4853-09T3

ENCOMPASS INSURANCE COMPANY

OF NEW JERSEY AS SUBROGEE

OF NATASHA M. BAXTER,

Plaintiff-Respondent,

v.

TRANS WARE, INC., DANNY

SINGLETARY, AND RLI INSURANCE

COMPANY,

Defendants-Appellants,

and

STEVEN PINCKNEY,

Defendant.

_______________________________________

March 30, 2011

Argued March 1, 2011 Decided

Before Judges Yannotti and Espinosa.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. DC-4008-10.

Joseph A. Ricchezza argued the cause for appellants (Salmon, Ricchezza, Singer & Turchi, L.L.P., attorneys; Mr. Ricchezza and Timothy J. Schipske, on the brief).

Sandra S. Grossman argued the cause for respondent (Law Offices of Steven G. Kraus, attorneys; Ms. Grossman, on the brief).

PER CURIAM

Defendants Trans Ware, Inc. (TWI), Danny Singletary (Singletary) and RLI Insurance Company (RLI) appeal from an order entered by the Law Division on April 22, 2010, granting summary judgment in favor of plaintiff Encompass Insurance Company of New Jersey (Encompass). For the reasons that follow, we reverse.

This dispute arises from the following facts. On February 7, 2008, Pinckney was operating a motor vehicle near a controlled intersection at Bergen Street and Hawthorn Avenue in Newark, New Jersey. At the time, Singletary was operating a motor bus owned by TWI. Pinckney allegedly failed to stop at a red light at the intersection and collided with the motor bus.

Natasha Baxter (Baxter) was a passenger on the bus and was injured in the accident. TWI's vehicle was insured under a commercial bus policy issued by RLI, which provided Medical Expense Benefits coverage in the amount of $250,000 for motor bus passengers.

Baxter submitted a claim to Encompass, her auto insurer, for payment of her medical expenses. Encompass paid Baxter $10,000 for medical expenses and $752 in claims expenses related to the accident pursuant to the Extended Medical Benefits Coverage or so-called "Med-Pay" coverage under the policy. On August 17, 2009, Encompass demanded that RLI reimburse it for the $10,752 it paid to Baxter or submit the claim to arbitration. RLI refused Encompass's demand.

On February 3, 2010, Encompass filed a two-count complaint in the Law Division, as Baxter's subrogee, against TWI, Singletary, Pinckney and RLI. In count one of its complaint, Encompass alleged that Baxter was riding as a passenger in the TWI motor bus, and was injured when the bus collided with Pinckney's car. Encompass claimed that Singletary and Pinckney had operated their respective vehicles negligently. It sought, as Baxter's subrogee, recovery from TWI, Singletary and Pinckney of the $10,752 in "Med-Pay" benefits that it paid to Baxter pursuant to its policy, along with interest, attorney's fees and costs of suit.

In count two of its complaint, Encompass alleged that, because Baxter was riding as a passenger in TWI's motor bus when she was injured, TWI was required to maintain insurance that provided the passengers with Medical Expense Benefits. Encompass claimed that RLI had provided TWI with the coverage for its motor bus, and that the "Med-Pay" coverage provided under plaintiff's insurance policy is "excess" to the Medical Expense Benefits to which Baxter was entitled under the RLI policy. On this claim, Encompass demanded $10,752, plus interest, attorney's fees and costs of cost.

TWI, Singletary and RLI filed a motion for summary judgment. They argued that Encompass did not have a statutory right to reimbursement of the "Med-Pay" benefits it had paid to Baxter. TWI, Singletary and RLI also argued that Encompass was precluded by N.J.S.A. 39:6A-9.1 from seeking recovery from the parties insured under the RLI policy, and Encompass had no right to reimbursement as against RLI.

Encompass opposed the motion and filed a cross-motion for summary judgment. Encompass argued that it was entitled to "equitable contribution" from RLI for the "Med-Pay" benefits it erroneously paid to Baxter. Encompass also argued that RLI was required to submit its claim to arbitration pursuant to N.J.S.A. 39:6A-11.

The trial court considered the motions on April 16, 2010, and placed a decision on the record on that date, finding that defendants' motion should be denied and plaintiff's motion granted. The court thereafter filed a written opinion dated May 4, 2010, in which it concluded that Encompass could seek recovery of the "Med-Pay" benefits erroneously paid to Baxter on the basis of unjust enrichment. The court further concluded that RLI was required to arbitrate Encompass's claim pursuant to N.J.S.A. 39:6A-11. The court entered an order dated May 4, 2010, which denied defendants' motion for summary judgment and ordered RLI to submit Encompass's contribution claim to binding arbitration. This appeal followed.

RLI argues that the trial court erred by finding that Encompass's claim should be submitted to inter-company arbitration pursuant to N.J.S.A. 39:6A-11. The statute provides:

If two or more insurers are liable to pay benefits under [N.J.S.A. 39:6A-4 and N.J.S.A. 39:6A-10] under a standard automobile insurance policy for the same bodily injury, or death, of any one person, the maximum amount payable shall be as specified in [N.J.S.A. 39:6A-4 and N.J.S.A. 39:6A-10, N.J.S.A. 39:6A-3.1 and N.J.S.A. 39:6A-3.3], respectively, if additional first party coverage applies and any insurer paying the benefits shall be entitled to recover from each of the other insurers, only by inter-company arbitration or inter-company agreement, an equitable pro-rata share of the benefits paid.

[Ibid.]

Encompass did not include a demand for arbitration in its complaint, never filed a motion seeking leave to amend its complaint to add this claim, and did not raise this issue until it filed its cross-motion for summary judgment. In our view, the issue was not properly raised. A cross-motion must relate "to the subject matter of the original motion[.]" R. 1:6-3(b). Encompass's demand for arbitration did not "relate" to the claims asserted in the complaint, which were the focus of the motion for summary judgment by TWI, Singletary and RLI. Therefore, the trial court should not have considered this issue or ordered RLI to submit Encompass's claim to arbitration.

Furthermore, N.J.S.A. 39:6A-11 does not require arbitration of Encompass's claim. Statutes must be interpreted in accordance with legislative intent and "generally, the best indicator of that intent is the statutory language." DiProspero v. Penn, 183 N.J. 477, 492 (2005) (citing Frugis v. Bracigliano, 177 N.J. 250, 280 (2003)). "We ascribe to the statutory words their ordinary meaning and significance[.]" Ibid. (citing Lane v. Holderman, 23 N.J. 304, 313 (1957)). "'Our duty is to construe and apply [a] statute as enacted.'" Ibid. (quoting In re Closing of Jamesburg High Sch., 83 N.J. 540, 548 (1980)).

According to its plain language, N.J.S.A. 39:6A-11 requires arbitration when two or more insurers pay benefits pursuant to N.J.S.A. 39:6A-4 and N.J.S.A. 39:6A-10 "under a standard automobile insurance policy." As stated previously, RLI's policy is a commercial bus policy, not a "standard auto insurance policy." Moreover, Encompass did not pay Baxter benefits pursuant to N.J.S.A. 39:6A-4 or N.J.S.A. 39:6A-10. Baxter was paid Med-Pay benefits, which are not provided pursuant to New Jersey's Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35 (the No-Fault Law). Med-Pay benefits are paid pursuant to a "regulation promulgated under legislative authority by the Commissioner of Insurance." Ingersoll v. Aetna Cas. & Sur. Co., 138 N.J. 236, 239 (1994). We therefore conclude that the trial court erred by ordering RLI to submit Encompass's claim to arbitration.

TWI, RLI and Singletary also argue that the trial court erred by finding that Encompass could recoup the medical benefits it paid to Baxter under a theory of unjust enrichment. We agree.

Here, Encompass filed its complaint as Baxter's subrogee, and sought recovery from TWI, RLI and Singletary on various grounds. The complaint does not include a claim for recoupment of the benefits paid to Baxter on the basis of unjust enrichment. Moreover, Encompass did not file a motion seeking leave to amend the complaint to add an unjust enrichment claim, and did not raise this issue until it filed its cross-motion for summary judgment. Encompass's cross-motion was not the procedurally appropriate means to raise this issue, just as it was not the procedurally appropriate means to raise the demand for arbitration. R. 1:6-3(b).

Encompass contends, however, that the trial court treated its complaint as having been amended. Rule 4:9-2 allows the court to permit amendments to the pleadings when an issue that was not raised in the pleadings is "tried by consent or without the objection of the parties." By its plain language, Rule 4:9-2 applies to issues that are "tried." The rule does not apply to motions. We are therefore convinced that the court erred by considering Encompass's unjust enrichment claim and finding that Encompass could recover the benefits paid to Baxter on that basis.

Accordingly, we reverse the order granting Encompass's cross-motion for summary judgment and remand the matter to the trial court for further proceedings. Encompass may, if it chooses, file a motion pursuant to Rule 4:9-1 seeking leave to amend its complaint to add a claim for unjust enrichment.

In view of our decision, we need not consider the other issues raised by TWI, RLI and Singletary in their appeal.

Reversed and remanded to the trial court for further proceedings in conformity with this opinion. We do not retain jurisdiction.