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Riccio v. Prudential Property & Casualty Insurance Co.

Decided: September 30, 1987.


On certification to the Superior Court, Appellate Division, whose opinion is reported at 195 N.J. Super. 167 (1984).

For affirmance -- Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. For reversal.

Per Curiam

On plaintiff's petition we granted certification, 99 N.J. 221 (1985), to review the Appellate Division's affirmance of a judgment awarding plaintiff $4500 against defendant, Prudential Property & Casualty Insurance Company (Prudential), under the uninsured motorist (UM) provisions of its policy covering plaintiff's automobile. Plaintiff's claim for UM benefits went to arbitration. The arbitrator found liability on the part of the "phantom" uninsured motorist, and calculated plaintiff's damages. The trial court applied against that damage award a pro tanto credit for payments previously made to plaintiff by an insured defendant's liability carrier in settlement of her liability claim. The Appellate Division affirmed. Riccio v. Prudential Property & Casualty Ins. Co., 195 N.J. Super. 167 (1984). Plaintiff argues for a pro rata application of the liability settlement amount in the calculation of the damages to which her UM benefits apply. We affirm.


The record contains a Settled Statement of Proceedings in Lieu of Transcript, submitted to the Appellate Division pursuant to Rule 2:5-3(e). The Stipulation of Facts in that Statement informs us that plaintiff's decedent, Donna Riccio, lost her life as the result of an automobile accident on August 31, 1979, when she was a passenger in a vehicle operated by Norbert Cardenas. An unidentified vehicle forced the Cardenas automobile off the road, causing it to strike a tree. Two other passengers were injured in the accident.

The Cardenas vehicle was insured by Aetna Insurance Company, with a per person bodily injury liability insurance limit of $50,000, a per accident limit of $100,000, and per person UM coverage of $15,000. In addition, because Donna was a full-time resident of her mother's household, there was additional UM coverage of $15,000 under Prudential's automobile insurance policy covering the vehicle of plaintiff, Isabelle Riccio.

Plaintiff sued Cardenas in the Law Division, where she asserted claims arising out of her daughter's death. That case was settled for a total of $41,500, paid out of the liability policy of Aetna, Cardenas's insurer.

Thereafter plaintiff filed a Demand for Arbitration against both Aetna and Prudential under the UM provisions of the respective policies. The arbitrator evaluated the claims at $61,000. Against that amount he credited the $41,500 previously paid by Aetna on the Cardenas liability policy, leaving a balance of $19,500 to be assessed against the two UM endorsements. The parties were apparently content to treat the Aetna policy, which covered the "host" vehicle, as primary. (The question of which UM carrier has the primary coverage has of course been obviated by the "anti-stacking" amendment to N.J.S.A. 17:28-1.1, which limits the recovery to "the higher of the applicable limits of the respective coverages" and "prorate[s] recovery between the applicable coverages as the limits of each coverage bear to the total of the limits." Although for pre-amendment cases, such as the one before us, the question of whether the "host" vehicle's UM carrier had the primary coverage was left without a definitive ruling in Ciecka v. Transamerica Insurance Group, 81 N.J. 421, 429 (1979), the issue is not presented in this appeal.) Therefore, because Aetna assumed primary UM coverage, its share of the $19,500 was acknowledged to be $15,000, the full amount of its UM coverage, and Prudential conceded its responsibility for the remaining $4,500.

Although ordinarily the arbitrator's function in arbitrations arising under the standard UM endorsement is limited to a determination of the uninsured's liability and the injured claimant's total damages, see, e.g., In re Arbitration Between Grover and Universal Underwriters Ins. Co., 80 N.J. 221, 229 (1979); Government Employees Ins. Co. v. Bovit, 142 N.J. Super. 268, 373 (App.Div.), certif. den., 71 N.J. 502 (1976), here the arbitrator went further and decided "all of the issues in the case," although "it was not agreed that [his] decision on legal

issues would be binding." (Letter accompanying Award of Arbitrator.) He therefore determined that responsibility for the accident lay fifty percent with each driver, Cardenas and the "phantom" uninsured, of which determination more herebelow.

Plaintiff then moved in the Law Division (1) to vacate so much of the arbitrator's award as granted Aetna and Prudential a pro tanto credit for the amount paid, $41,500, in settlement of plaintiff's liability claim against Cardenas, and (2) for an Order compelling Prudential to pay the full amount of coverage available under its UM endorsement, namely, $15,000. She argued that because the arbitrator had found the uninsured motorist to be fifty percent at fault, the UM carriers should be responsible for one-half of the arbitrator's $61,000 award, or $30,500 (or so much thereof as is within their coverage, here a total of $30,000), and that because Aetna had already paid the full amount of its $15,000 UM coverage, Prudential should be held responsible for its entire $15,000 UM coverage. Plaintiff argued, in short, for a pro rata credit against the arbitrator's $61,000 award rather than a pro tanto reduction. The trial court, relying on Ciecka v. Transamerica Insurance Group, supra, 81 N.J. 421, rejected the claim and held Prudential responsible for $4500 -- $61,000 minus the $41,500 paid under Cardenas's liability policy with Aetna, minus the $15,000 paid under Aetna's UM coverage. The Appellate Division affirmed.


We address first a subsidiary issue but one that is inextricably connected to the main question of how the liability settlement affects the extent of UM liability. As noted above, the arbitrator determined that the drivers -- Cardenas, who had liability coverage with Aetna, and the "phantom" uninsured -- shared responsibility for the accident on an equal basis. Whatever may be the ...

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