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Federal Insurance Co. v. Liberty Mutual Insurance Co.

Decided: August 3, 1983.


On appeal from Superior Court, Law Division, Bergen County.

Botter, Polow and Brody. The opinion of the court was delivered by Botter, P.J.A.D.


[190 NJSuper Page 606] This appeal involves a dispute between two insurance companies over the obligation for PIP (personal injury protection) benefits claimed by plaintiff, Dr. Ellmers, who was injured in a one-car accident. At the time, Dr. Ellmers was driving a leased car insured by Liberty Mutual Insurance Company (Liberty). By operation of law, N.J.S.A. 39:6A-2(g), he was also a named insured under the Federal Insurance Company (Federal) policy covering a car owned by his wife. The main issue on this appeal is whether Federal has the primary obligation for PIP benefits owed to Dr. Ellmers under the no-fault law (N.J.S.A. 39:6A-1 et seq.), or whether N.J.S.A. 39:6A-11 requires that the obligation

be shared between Federal and Liberty. On cross-motions for summary judgment brought by the third-party plaintiff and third-party defendant, the trial judge held that the PIP coverage provided under the Federal policy was "primary coverage" and that the PIP coverage under the Liberty policy was "secondary coverage." This appeal followed,*fn1 and we now reverse.

The facts in this case are not in dispute. On January 8, 1978, Dr. Ellmers was driving a car which he had leased from Mullane Ford (Mullane) of Bergenfield, New Jersey. The car was covered by Liberty's insurance policy issued to The Ford Motor Company and other insureds, probably including the lessor, Mullane. The record is unclear as to the other named insureds on the Liberty policy but the case was decided on the premise that Dr. Ellmers was not a named insured on that policy. The Liberty policy did contain the "basic" New Jersey PIP endorsement. Dr. Ellmers was a named insured on Federal's policy issued to his wife. N.J.S.A. 39:6A-2(g) defines the term "named insured" to include the person identified in the policy as the insured and "if an individual, his or her spouse."

After the accident, Federal paid Dr. Ellmers approximately $23,000 in PIP benefits and then discontinued payments.*fn2 Dr.

Ellmers sued Federal for unpaid benefits which he claimed were due him, and Federal asserted a claim against third-party defendant Liberty. By amended complaint, plaintiff made claim against both insurance companies. The Federal policy contained optional additional PIP coverage made available pursuant to N.J.S.A. 39:6A-10. The Liberty policy did not contain such expanded coverage, but as noted above, it did contain the "basic" coverage required by N.J.S.A. 39:6A-4. The effect of the decision below was that Federal's coverage would have to be exhausted before Liberty became obligated to pay any additional unpaid PIP benefits to plaintiff.

Under N.J.S.A. 39:6A-4, every automobile liability insurance policy issued in this state for liability arising out of the ownership, operation, maintenance or use of an automobile must provide for payment of PIP benefits without regard to fault. Coverage is afforded to the named insured and family members residing in his household who are injured in an accident involving any automobile. Also covered are other persons who are injured while occupying or using the named insured's automobile with his permission as well as pedestrians injured by the named insured's automobile or struck by an object propelled by or from that automobile. Thus, under the no-fault law, as the driver of the rented car which was registered in New Jersey, Dr. Ellmers was covered for PIP benefits by Liberty. As a named insured he was also covered by the Federal policy. Nothing in the no-fault law expresses a priority in the order of payment from one insurer or another.*fn3 On the contrary, N.J.S.A. 39:6A-11 (section 11) provides for a sharing of the obligation for PIP

benefits among "two or more insurers who are liable to pay" such benefits.*fn4 N.J.S.A. 39:6A-11 provides in full as follows:

39:6A-11. Contribution among insurers.

If two or more insurers are liable to pay benefits under sections 4 and 10 of this act for the same bodily injury, or death, of any one person, the maximum amount payable shall be as specified in sections 4 and 10 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 ...

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