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Prudential Property & Casualty Insurance Co. v. New Hampshire Insurance Co.

Decided: April 6, 1979.

PRUDENTIAL PROPERTY & CASUALTY INSURANCE COMPANY, AS SUBROGEES OF LEOLA NIXON AND WARREN NIXON, PLAINTIFF,
v.
NEW HAMPSHIRE INSURANCE COMPANY AND FIREMAN'S FUND INSURANCE COMPANIES, DEFENDANTS



Gibson, J.s.c.

Gibson

This motion for summary judgment involves a determination of the subrogation rights of an insurance carrier under ยง 9 of the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-9. Reimbursement is being sought for personal injury protection (PIP) benefits paid and to be paid as a result of an accident involving plaintiff's insured which occurred prior to January 1, 1975 but where benefits accrued both before and after that date. Since the statute has been held to terminate subrogation rights after December 31, 1974,*fn1 the question thus raised is whether the benefits accruing thereafter may properly be included in this claim. For the reasons to be stated, it is the opinion of this court that they cannot.

The material facts are not in dispute and for the present purposes*fn2 may be briefly stated as follows: Plaintiff's insured was involved in a two-car accident on September 30, 1973, as a result of which the driver died and her two passengers

were seriously injured. The insurance which plaintiff provided for the vehicle being driven included New Jersey no-fault benefits pursuant to N.J.S.A. 39:6A-1, et seq. Substantial PIP benefits were paid commencing in about December 1973 and continuing up to the present, the current total of which has been estimated to exceed $125,000. Based on the above, plaintiff seeks reimbursement from defendants. Although neither has contested liability, both carriers contend that plaintiff is entitled to recover only those benefits paid up to and including December 31, 1974. Plaintiff, on the other hand, asserts that the date of the accident alone determines eligibility for recovery under N.J.S.A. 39:6A-9 and that therefore all benefits, regardless of when paid, are properly the subject of subrogation.

The subrogation provisions of the No-Fault statute are contained at N.J.S.A. 39:6A-9.

Any insurer paying benefits in accordance with the provisions of section 4 and section 10, personal injury protection coverage, regardless of fault, shall be subrogated to the rights of any party to whom it makes such payments, to the extent of such payments. Such subrogated insurer may only by intercompany arbitration or by intercompany agreement exercise its subrogation rights against only the insurer of any person liable for such damages in tort provided, however, that such insurer may exercise its subrogation rights directly against any person required to have in effect the coverage required by this act and who failed to have such coverage in effect at the time of the accident. The exemption from tort liability provided in section 8 does not apply to the insurers' subrogation rights. On and after 2 years from the effective date of this act the provisions of this section shall be inoperative.

The last sentence of the above section was not included when the statute was originally passed but was added on May 4, 1972*fn3 at the behest of the insurance industry. In persuading the Legislature to insert a cut-off date the industry "expressed reluctance as to the economic benefit of subrogation

in that it resulted in the shifting of dollars and papers among insurers with little to be gained." Iavicoli, No-Fault and Comparative Negligence in New Jersey , at 117 (1973). The two-year period which was retained was solely for the purpose of compiling statistics for the insurance rate-making process. Ibid. Although it has been pointed out that a corollary of the subrogation right is the statutory mandate against double recovery by the injured person*fn4 and also that different principles may apply when out-of-state vehicles are involved, Cirelli v. Ohio Cas. Ins. Co. , 133 N.J. Super. 492 (Law Div. 1975); aff'd as mod. 72 N.J. 380, 387 (1977), these principles do not appear to have played a part in the imposition of the two-year cut-off. The apparent thinking of the insurance industry and the Legislature was that losses incurred due to PIP payments would eventually equal out among insurers and that by extinguishing the subrogation remedy, costs of litigation would decrease and the saving be passed on to the consumer in the form of lower premiums. Marriner v. Koenig , 148 N.J. Super. 363, 365 (Law Div. 1977).

Unfortunately, the subrogation provision of the no-fault law has received little attention by our courts. What case law does exist does not resolve the question raised by the facts presented here. The closest holding factually is found in Marriner v. Koenig, supra , where, as here, there was a pre-January 1, 1975 accident with PIP benefits accruing both before and after that date. In that case, however, the defendant was a railroad. The court saw that as a critical difference and denied defendant's motion for summary judgment, ruling that since the railroad was self-insured, it was not entitled to the cut-off benefits of N.J.S.A. 39:6A-9.*fn5 The

issue presented here was therefore never reached. Accord, Newsome v. Hertz Corp. , 164 N.J. ...


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