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Selected Risks Insurance Co. v. Dierolf

Decided: December 19, 1975.

SELECTED RISKS INSURANCE COMPANY, PLAINTIFF,
v.
HARRY DIEROLF, DEFENDANT



Peel, J.s.c.

Peel

[138 NJSuper Page 289] This is an action for declaratory and injunctive relief in which plaintiff Selected Risks Insurance Company seeks to prevent arbitration of an uninsured motorist claim by its insured, defendant Harry Dierolf. The question

presented is whether the two-year tort or the six-year contract statute of limitations governs a demand for arbitration under an uninsured motorist endorsement.

The facts are not in dispute. Defendant Dierolf, a resident of New Jersey, sustained personal injuries when involved in an auto accident with an uninsured driver in Pennsylvania on June 13, 1969. At that time Dierolf had automobile liability insurance with uninsured motorist coverage for out-of-state accidents under a policy issued by plaintiff Selected Risks covering the period from October 16, 1968 to October 16, 1969. Dierolf, through his attorney wrote to Selected Risks on July 8, August 8 and October 15, 1969, advising his insurer of the accident. These letters included the date, place and time of the accident, the claim that defendant sustained physical injury and property damage, that efforts to contact the other driver had failed, and the assertion that Dierolf might be forced to make a claim under the policy's uninsured motorist endorsement. By letters of April 14 and May 14, 1971 defendant's attorney informed Selected Risks of defendant's medical costs. On April 19, 1971 defendant filed an action in the Pennsylvania courts against the uninsured motorist. The only correspondence between the parties from May 14, 1971 to February 16, 1972 was plaintiff's letter acknowledging receipt of defendant's listing of medical costs and other correspondence directed at clarifying who was representing defendant. On February 16, 1972 some two years and eight months after the accident, Dierolf, by letter, made his formal demand for arbitration of his uninsured motorist claim. Thereafter plaintiff instituted this action for a declaration that the claim is barred by the statute of limitations and for a restraint upon arbitration of that claim. Pending the outcome of this action the arbitrable issues remain unresolved.

Selected Risks contends that N.J.S.A. 2A:14-2, the two-year statute of limitations, governs defendant's claim. Plaintiff argues that its endorsement allows recovery only for sums that the insured is "legally entitled to recover"; that

a claimant under that endorsement must establish all of the elements of a tort action to obtain recovery, and in such an action failure to comply with the tort statute of limitations would be a bar to recovery; that therefore a claimant who fails to comply with the statute is not "legally entitled to recover" under the endorsement. Plaintiff further argues that once the statute has been permitted to run, as here, plaintiff's subrogation rights under the endorsement may be prejudiced.

Defendant's argument that N.J.S.A. 2A:14-1, the six-year statute of limitations, governs his claim, is premised upon the view that an insurer's liability for the tort of another is created by contract; that the arbitration procedure is a term of that contract, and a demand for arbitration is an action in contract governed by the statute of limitations applicable to contracts.

Selected Risks' policy provision regarding arbitration of claims under the uninsured motorist endorsement is silent with respect to the issue of when demand for arbitration is to be made. That provision in its entirety provides:

8. Arbitration. If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured, or do not agree as to the amount of payment which may be owing under this endorsement, then, upon written demand of either, the matter or matters upon which such person and the company do not agree shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such person and the company each agree to consider itself bound and to be bound by any award made by the arbitrators pursuant to this endorsement.

Similarly, N.J.S.A. 17:28-1.1, the statutory foundation for uninsured motorist coverage,*fn1 is silent as to that issue.

The litigants, being unable to cite any New Jersey case law dispositive of the issue as to which statute governs, are in agreement that this is an issue of ...


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