Rutgers Casualty Insurance Company v. The Ohio Casualty Insurance Company

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).

Rutgers Casualty Insurance Company v. The Ohio Casualty Insurance Company et als. (A-89-97)

 
Argued February 3, 1998 -- Decided April 20, 1998

PER CURIAM

The issue in this automobile insurance appeal is whether an insurance carrier that pays personal injury protection (PIP) benefits to claimants injured in an automobile accident is entitled to contribution from other insurance carriers that are required by N.J.S.A. 39:6A-4 to provide coverage.

This appeal is based on ten consolidated declaratory judgment cases that arise from similar factual patterns. In each case, the person injured in an automobile accident was either the named insured on a Rutgers policy or was the resident relative of a named insured on a Rutgers policy. In addition, each victim was injured while he or she was either a pedestrian or a passenger in a car that he or she did not own. Therefore, each victim was eligible to receive PIP benefits from the company that insured the automobile. Rutgers paid PIP benefits to each victim because, as named insureds and resident relatives, the claimants were entitled to receive primary coverage from the named insured's carriers.

Rutgers then sought contribution from the carriers that insured the automobile involved in each accident. The carriers refused to pay and Rutgers instituted suit against them seeking a declaratory judgment of entitlement to contribution. The parties filed cross-motions for summary judgment. Rutgers maintained that it was entitled to contribution under N.J.S.A. 39:6A-11, which provides that, when two or more insurance companies are liable to pay benefits under N.J.S.A. 39:6A-4, the company that pays the victim is entitled to recover from each of the other insurers an equitable pro rata share of the benefits paid. The carriers contended that their policies contained a follow-the-family exclusion under which they were not liable for the payment of PIP benefits to anyone other than its named insured and his otherwise uninsured resident relatives. In addition, they contended that Rutgers was primarily and exclusively liable for payment to its named insured. The Law Division ruled in favor of Rutgers and ordered pro rata contribution from the various carriers. The carriers appealed.

In a reported decision, the Appellate Division reversed, finding the follow-the-family exclusion to be entirely consistent with the text of the No-Fault statute and the legislative purpose of allowing insurance companies to avoid the cumbersome and uneconomic shifting of dollars that results from contribution claims. In addition, the Appellate Division specifically found that, once the injured party is paid under the primacy of coverage section (N.J.S.A. 39:6A-4.2), the follow-the-family provision operates to exclude contribution under N.J.S.A. 39:6A-11.

The Supreme Court granted Rutgers' petition for certification.

HELD: Once an injured party is paid PIP benefits under N.J.S.A. 39:6A-4.2, a follow-the-family exclusion operates to preclude contribution among insurers under N.J.S.A. 39:6A-11.

1. The follow-the-family exclusion does not violate N.J.S.A. 39:6A-11 because that section applies only when two or more insurers are liable to pay benefits. (p.7)

2. Once the injured party is paid under the primacy of coverage section, the "follow-the-family" provision operates to exclude contribution under N.J.S.A. 39:6A-11. (p. 7)

3. The follow-the-family provision was meant to act as a bar to contribution after the primary carrier had already paid out benefits to the claimant. (pp. 7-8)

4. Neither the follow-the-family exclusion nor the exclusion set forth in N.J.S.A. 39:6A-7 may be relied on to deny payment to an uncompensated claimant.

Judgment of the Appellate Division is AFFIRMED.
 
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in this opinion.

SUPREME COURT OF NEW JERSEY
A- 89 September Term 1997
 

RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

THE OHIO CASUALTY INSURANCE COMPANY,

Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

HCM CLAIM MANAGEMENT CORP., servicing
carrier for THE MARKET TRANSITION FACILITY,

Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff,

v.

NEW JERSEY MANUFACTURERS INSURANCE COMPANY,

Defendant.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

THE WEST AMERICAN INSURANCE COMPANY,

Defendant-Respondent.
 

RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

ALLSTATE INSURANCE COMPANY,

Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

PRUDENTIAL PROPERTY & CASUALTY
INSURANCE COMPANY,

Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

COMPUTER SCIENCES CORPORATION, as
servicing carrier for THE MARKET
TRANSITION FACILITY or THE NEW
JERSEY FAIR AUTOMOBILE UNDERWRITING
ASSOCIATION,

Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

KEYSTONE INSURANCE COMPANY,

Defendant-Respondent.
 

RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

LION INSURANCE COMPANY, MARYLAND
CASUALTY INSURANCE COMPANY, and
STATE FARM INSURANCE COMPANY,

Defendants,

and

KEYSTONE INSURANCE COMPANY,

Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,
as insurer of JOSEPH JANIK,

Plaintiff-Appellant,

v.

OHIO CASUALTY INSURANCE COMPANY,
 
Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,
as insurer of MARIE & FRANK SCARAFILE,

Plaintiff-Appellant,

v.

KEYSTONE INSURANCE COMPANY,
 
Defendant-Respondent.
 
RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

ALLSTATE INSURANCE COMPANY,

Defendant-Respondent.
 

RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

COMPUTER SCIENCES CORPORATION, as
servicing carrier for THE MARKET
TRANSITION FACILITY OF NEW JERSEY
(MTF) and/or the NEW JERSEY FULL
INSURANCE UNDERWRITING ASSOCIATION
(JUA),

Defendants-Respondents.

Argued February 3, 1998 -- Decided April 20, 1998

On certification to the Superior Court, Appellate Division, whose opinion is reported at 299 N.J. Super. 249 (1997).

Susan L. Moreinis argued the cause for appellant.

John R. Gercke argued the cause for respondents The Ohio Casualty Insurance Company, Keystone Insurance Company and The West American Insurance Company (Gercke,Dumser & Feld, attorneys).

Francis X. Ryan argued the cause for respondents Allstate Insurance Company and CSC Insurance Services, servicing carrier for New Jersey Automobile Full Insurance Underwriting Association (Green, Lundgren & Ryan, attorneys for Allstate Insurance Company and CSC Insurance Services, servicing carrier for the New Jersey Automobile Full Insurance Underwriting Association and Robert L. Messick, attorney for HCM Claim Management Corp., servicing carrier for The Market Transition Facility of New Jersey; Mr. Ryan and Mr. Messick, on the joint brief).

Randi S. Greenberg submitted a letter in lieu of brief on behalf of respondent Prudential Property & Casualty Insurance Company (Robert A. Auerbach, attorney).

PER CURIAM

The issue in this automobile insurance appeal is whether an insurance carrier that pays personal injury protection (PIP) benefits to claimants injured in an automobile accident is entitled to contribution from other insurance carriers that are required by N.J.S.A. 39:6A-4 to provide coverage. The appeal is based on ten consolidated declaratory judgment cases that arise from similar factual patterns. The plaintiff insurance carrier in each case is the Rutgers Casualty Insurance Company (Rutgers).
In each case, the person injured in an automobile accident was either the named insured on a Rutgers policy or was the resident relative of a named insured on a Rutgers policy. Each injured person was eligible to receive PIP benefits from Rutgers. See N.J.S.A. 39:6A-4. In addition, because each victim was injured while he or she was either a pedestrian or a passenger in a car that he or she did not own, each victim was eligible to receive PIP benefits from the company that insured the automobile. N.J.S.A. 39:6A-4. Because named insureds and their resident relatives, i.e., the claimants in these cases, are entitled to receive "primary coverage" from the named insured's carrier, N.J.S.A. 39:6A-4.2, Rutgers paid PIP benefits to each victim.
Rutgers then sought contribution from the carriers that insured the automobile involved in each accident. When these carriers (defendants) refused to pay, Rutgers instituted suit against them seeking a declaratory judgment of entitlement to

contribution. On cross-motions for summary judgement, the Law Division ruled in favor of Rutgers and ordered pro rata contribution from defendants. Defendants appealed. The Appellate Division reversed. 299 N.J. Super. 249 (1997).
We affirm the judgment in favor of defendants substantially for the reasons set forth in the Appellate Division opinion of Judge King.
Rutgers relied on N.J.S.A. 39:6A-11, which provides that when two or more insurance companies "are liable to pay benefits" under N.J.S.A. 39:6A-4, the company that pays the victim is entitled to recover from each of the other insurers "an equitable pro rata share of the benefits paid." The defendant carriers contended that because their policies contained a "follow-the-family exclusion," they were not "liable to pay benefits" within the intendment of N.J.S.A. 39:6A-11. They also contended that, under N.J.S.A. 39:6A-4.2, Rutgers was primarily and exclusively liable for payment to its named insured. Finally, they referred to an understanding or practice in the insurance industry not to seek contribution in such cases.
The follow-the-family exclusion provides:
The insurance under this endorsement does not apply to bodily injury to:

. . . . .
 

any person other than the named insured or relative if that person is entitled to New Jersey personal injury protection coverage as a named insured or relative under the terms of another policy;

any relative if that person is entitled to New Jersey personal injury protection coverage as a named insured under the terms of another policy.

The Appellate Division found the follow-the-family exclusion to be "entirely consistent with the text of the [No-Fault] statute and the legislative purpose" behind it. 299 N.J. Super. at 263. The follow-the-family provision "realizes and coordinates the primacy policy of 4.2 [and] the equitable contribution policy of 11 when two or more PIP coverages inexorably apply. . . ." Ibid. The follow-the-family exclusion "does not textually violate" N.J.S.A. 39:6A-11, because the latter applies only when two or more insurers are "liable" to pay benefits. Id. at 262. Under the follow-the-family exclusion, a carrier is not "liable" for the payment of PIP benefits to anyone other than its named insured and his otherwise uninsured resident relatives. Ibid.
The Appellate Division also found that the follow-the-family provision effectuates the legislative goal of "transactional efficiency" by allowing insurance companies to avoid the "cumbersome and uneconomic shifting of dollars" that results from contribution claims. Id. at 263. "Once the injured party is paid under the 'primacy of coverage' section, N.J.S.A. 39:6A-4.2, the matter is closed"; the follow-the-family provision operates to "exclude" contribution under N.J.S.A. 39:6A-11. Id. at 257.
Even though the follow-the-family provision is titled an "exclusion" and facially purports to exclude from coverage persons who are merely "eligible" to receive benefits under

another policy pursuant to N.J.S.A. 39:6A-4, the provision clearly was meant to act as a bar to contribution after the primary carrier had already paid out benefits to the claimant.
This interpretation is consistent with and is confirmed by L. 1997, c. 270, the recently enacted amendment to N.J.S.A. 39:6A-7. While the amendment provides on its face that an insurance carrier may "exclude" from coverage any person who is "entitled to coverage" as a named insured or resident relative under the terms of another policy, the explanatory statement beneath the amendment notes that this "bill eliminates PIP contribution." N.J.S.A. 39:6A-7b(3). Both the policy exclusion and the statutory exclusion thus prohibit an insurance carrier that has paid out PIP benefits pursuant to N.J.S.A. 39:6A-4.2 from receiving contribution from other carriers potentially liable under N.J.S.A. 39:6A-4, -11. Thus, neither exclusion may be relied upon to deny payment to an uncompensated claimant. Our holding is therefore limited to those cases where the injured claimant has already been compensated or is clearly entitled to be compensated and the primary carrier is seeking contribution under N.J.S.A. 39:6A-11 from other potentially liable carriers.
The judgment of the Appellate Division is affirmed.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN and COLEMAN join in this opinion.

SUPREME COURT OF NEW JERSEY
 

NO. A-89

SEPTEMBER TERM 1997
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court

RUTGERS CASUALTY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

THE OHIO CASUALTY INSURANCE COMPANY,

Defendant-Respondent.
 

(and other related matters)

DECIDED

April 20, 1998
Chief Justice Poritz PRESIDING
OPINION BY PER CURIAM
CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST
AFFIRM CHIEF JUSTICE PORITZ X JUSTICE HANDLER X JUSTICE POLLOCK X JUSTICE O'HERN X JUSTICE GARIBALDI X JUSTICE STEIN X JUSTICE COLEMAN X TOTALS
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