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Smith v. Motor Club of America Insurance Co.

Decided: January 28, 1959.


Scherer, J.s.c.


[54 NJSuper Page 38] Plaintiffs Sarrak Smith and Frank Smith filed a complaint against the defendants Motor Club of America Insurance Company (hereinafter called "Motor Club") and Jennie Smith on January 3, 1958. The defendant

Jennie Smith was, on February 11, 1955, an insured of Atlantic Casualty Company, the predecessor of defendant Motor Club. Plaintiff Frank Smith, husband of Sarrak Smith, sued for medical expenses paid or incurred on her behalf. The complaint, in its caption, states that the suit is brought not only on behalf of the plaintiffs but also "in the right of all other persons who have been or are entitled to coverage under the medical payments clause of automobile liability policies issued by the defendant, Motor Club of America Insurance Company, and who are similarly situated." The plaintiffs alleged that they were entitled to reimbursement for medical expenses incurred when Sarrak Smith was injured on February 11, 1955, while a passenger in a car owned by the defendant Jennie Smith, and being operated by the latter's husband William Smith. The collision occurred apparently without any negligence on the part of the operator of the car of Jennie Smith.

Sarrak Smith and her husband instituted suit in the Law Division of this court, Passaic County, against Jennie and William Smith and Michael Czaban, the owner and operator of the other vehicle involved in the accident. A settlement of that suit was effected and the defendant Czaban paid to Sarrak Smith and her husband the sum of $8,000. No payment was made by the Motor Club as the insurance carrier of Jennie Smith. It is conceded that defendant Motor Club declined to make any payment solely as liability carrier. A general release, dated August 30, 1957, was given to Czaban by Sarrak and Frank Smith.

The policy which the Motor Club had issued to Jennie Smith provided, under coverage "C," that the company would pay all reasonable expenses incurred within one year of the date of the accident to each person sustaining bodily injury while in the insured's vehicle. The coverage limit was $2,000, as shown by a supplemental document submitted with the policy. The policy, in paragraph 17, under the heading "Conditions," states that upon payment of a medical expense claim under coverage "C" and other coverages the company is entitled to subrogation of all rights of the insured,

or any other person to whom payment is made under such coverage.

It is admitted that in the suit in which the plaintiffs received the $8,000 part of the damages claimed was for medical expenses of Sarrak Smith and for the husband's claim for such expenses and per quod. It is also admitted that the Motor Club "offered to pay the whole of said medical expenses on condition plaintiff Sarrak Smith would execute and deliver a subrogation receipt, and alternatively offered to pay in full settlement of its obligations, both as liability carrier and under the medical payments provisions of said policy, but without subrogation, the sum of $300.00, which offers were rejected by plaintiffs."

In the original complaint in this cause the plaintiffs sought recovery of $1,000 for medical expenses, based on the claim that, although plaintiffs' medical expenses due to the accident were in excess of that sum, $1,000 was attributable to the first year after the accident and therefore payable under coverage "C." The plaintiffs also sought a judgment: (a) reforming the policy so as to eliminate the subrogation clause; (b) declaring the subrogation clause to be illegal, void, against public policy and of no effect; (c) enjoining the defendant from using the clause in any policies until proper steps have been taken to protect the public interest; and (d) requiring the Motor Club to account for premiums paid for such coverage by policy holders upon the theory of unjust enrichment.

A motion was made by the Motor Club to strike the complaint as insufficient in law, for failure to set forth a claim upon which relief could be granted; for failure of the plaintiffs to bring the action in connection with their suit at law for damages arising out of the accident; and on the ground that the claim was barred by laches. Judge Gaulkin granted the motion to strike the complaint, but also granted the plaintiffs leave to amend.

An amended complaint was filed in which the Motor Club's insured, Jennie Smith (previously a defendant), became a coplaintiff with Sarrak Smith and her husband. Plaintiffs

apparently decided this course was necessary in order to properly assert a claim for reformation and for all of the other relief sought, except the recovery of the $1,000, since Jennie Smith was the holder of the contract of insurance. It is worthy of note that the ...

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