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Kough v. New Jersey Automobile Full Insurance Underwriting Association

Decided: January 3, 1990.

LAUREN KOUGH, PLAINTIFF-APPELLANT,
v.
NEW JERSEY AUTOMOBILE FULL INSURANCE UNDERWRITING ASSOCIATION, DEFENDANT-RESPONDENT



Petrella, O'Brien and Stern. The opinion of the court was delivered by Petrella, P.J.A.D.

Petrella

The novel issue in this case is whether a passenger injured by the negligence of an uninsured driver can recover uninsured motorist (UM) benefits where the driver is a fellow employee and the passenger receives workers' compensation benefits. Defendant, New Jersey Automobile Full Insurance Underwriting Association (JUA), declined coverage, reasoning that UM benefits were payable only when the insured is "legally entitled to recover" from the owner or operator of an uninsured motor vehicle. It considered plaintiff's receipt of workers' compensation benefits as confirmation that she was not "legally entitled to recover" from her coemployee, and it thus followed that plaintiff was not entitled to UM benefits. The motion judge granted defendant's motion for judgment, concluding that a finding of coverage would put plaintiff in a better position than she would have been in if her coemployee had been fully insured.

On November 9, 1988 plaintiff filed a verified complaint against Selective Insurance Company of America (Selective), in which she sought to compel defendant Selective to arbitrate her claim to UM benefits*fn1 and obtained an order to show cause why she should not be granted that relief. Selective filed an answer alleging various defenses, including an assertion that

plaintiff's claim was "barred by the exclusive remedy provision of the Workers' Compensation Act."

On the return day on the order to show cause, the judge pointed out that plaintiff had named the wrong defendant and the case could not proceed unless the "JUA" was named as a defendant. An order was entered December 8, 1988 denying without prejudice plaintiff's application to compel arbitration and authorizing an amendment to the complaint to name JUA as defendant.

At argument of plaintiff's subsequent motion for reconsideration it was made known that defendant had filed a declaratory judgment action requesting resolution of the same legal issue presented by plaintiff's complaint. The record does not contain a copy of that complaint, but the judge indicated he would decide the entire case. He concluded that plaintiff was not entitled to arbitration because her receipt of workers' compensation benefits precluded an action under her uninsured motorist endorsement. Judgment dismissing the complaint was entered on January 18, 1989.

The motion judge premised his opinion on the assumption that plaintiff would have no right of recovery if the driver Andrea Fefferman were insured, and she should not have greater rights because Fefferman was uninsured. He said:

Now, in regard to this the plaintiff is receiving, this being the decision of the Court, the plaintiff is receiving the exact same recovery she would have received if the Fefferman vehicle was insured. Plaintiff seeks here to have her recover over and above that which she would have received if Fefferman was insured. If Fefferman had an insurance policy, any law suit instituted by plaintiff against Fefferman would be dismissed at the appropriate time by reason of the co-employee doctrine that exists both in New York and New Jersey. The purpose of uninsured motorists coverage is not to provide additional coverage to insured parties, but rather to provide them the same recovery up to the limits of their policy that they would have received if the negligent parties were insured. To permit this matter to proceed to arbitration would be to acknowledge the right of plaintiff to receive more monies under UM coverage than she would receive if the wrongful party, that is, Fefferman was insured. Plaintiff will receive her benefits under Worker's Compensation as the exclusive remedy against Fefferman. She also has the right to proceed against the other driver and any other parties involved in this matter. And if

any of the other parties are negligent, she would receive the full amount of her trial award subject to the limits of the other parties' policies or plaintiff's uninsured motorists coverage, whichever is greater.

On plaintiff's appeal the only issue is whether the exclusive remedy provision of the workers' compensation scheme precludes her recovery of uninsured motorist benefits.

The relevant facts are not in dispute. Plaintiff, born November 17, 1968, resides with her parents and is insured under an automobile insurance policy which provides uninsured motorist coverage as required by statute. That policy states, in pertinent part, that the insurer "will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle."

Plaintiff, a passenger in a vehicle being operated by Fefferman was injured on January 14, 1988 in an accident in Secaucus, New Jersey. Fefferman, a New York resident, was uninsured at the time because her policy had been cancelled due to nonpayment of the premium due. Their New York employer had some automobile coverage, but it did not provide benefits to Kough for the accident in question.

Kough was eligible for, and in fact received $85,000 in benefits, under New York's Workers' Compensation Law. She also filed a separate law suit, which apparently remains unresolved, against other potentially culpable parties, including the driver of the other vehicle.

According to Kough, the judge erred in concluding that she was not entitled to UM benefits. She frames the issue as whether the "Legislature intended for the defendant to benefit from the exclusive remedy provision of workers' compensation at plaintiff's expense." Kough argues that allowing recovery would be consistent with New Jersey's policy to protect automobile accident victims to the fullest extent possible. She stresses the first-party nature of UM coverage and contends that under the insurance policy defendant promised to compensate her for the losses she sustained as a result of an accident involving an uninsured vehicle.

JUA relies on the language of the insurance contract which it asserts bars recovery. Under that language it promised to pay damages only when an insured is "legally entitled to recover" from the owner or operator of an uninsured motor vehicle. Since Fefferman was a coemployee and plaintiff was entitled to workers' compensation benefits as a result of the accident, it asserts that plaintiff was never legally entitled to recover damages from Fefferman and, therefore, cannot collect UM benefits. Defendant reasons that the ...


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