On appeal from the Superior Court of New Jersey, Law Division, Cumberland County, whose decision is reported at 229 N.J. Super. 608.
King, Shebell and Keefe. The opinion of the court was delivered by Shebell, J.A.D.
Plaintiff Barbara J. Swydersky is a resident in the household of her son-in-law David Sutton. She was injured on March 27, 1985, when David, driving his car with plaintiff as a passenger, collided with a parked car owned by Leonard Holmes. Plaintiff's medical expenses totaled $3,254.18. At the time of the accident plaintiff neither owned a car nor was she the named insured under any auto insurance policy. Both the Sutton and Holmes cars were insured by defendant Prudential Insurance Company (Prudential). Plaintiff made a claim to defendant for payment of personal injury protection (PIP) benefits under Sutton's policy but was not paid promptly. She then instituted this action in the Law Division seeking payment.
Under the options required to be offered to car owners under New Jersey's no-fault insurance system, Sutton chose a policy with a medical expense deductible of $2,500, N.J.S.A. 39:6A-4.-3(a),
and a "setoff" mechanism, N.J.S.A. 39:6A-4.3(c),*fn1 which entitled Prudential to reimbursement from any recovery for non-economic loss, by judgment or settlement, for the defendant's prior payment of medical expenses, not to exceed 20% of the award. Defendant subsequently paid all of plaintiff's and Sutton's medical expenses over the deductible $1,250 for each; that is, the amount of the deductible applicable to each after it was divided between them as required by N.J.S.A. 39:6A-4.3.
Plaintiff instituted a tort action against Sutton and Holmes and settled her claims with their insurer Prudential for non-economic losses for $11,500. In paying the settlement, Prudential sought to reimburse itself under the "setoff" provision of Sutton's policy. Thus, Prudential setoff $1,339.31 for the entire amount of prior medical expense payments made to plaintiff under Sutton's policy, which was well within the 20% settlement limitation of N.J.S.A. 39:6A-4.3. Plaintiff, objecting to Prudential's reimbursement, amended her complaint in the suit for PIP benefits against Prudential by adding two counts. The first added count sought to invalidate defendant's allocation to plaintiff of half of Sutton's $2,500 medical expenses deductible, and the other added count sought to prevent the application of the "setoff" condition of Sutton's policy to her settlement amount.
In his written opinion of October 27, 1988, Judge Kleiner granted plaintiff's motion for summary judgment and denied defendant's cross-motion for summary judgment. See Swydersky v. Prudential Com. Ins., 229 N.J. Super. 608, 616, 552 A.2d 240 (Law Div.1989). He explained that the deductible and "setoff" provisions of Sutton's policy did not apply to plaintiff because plaintiff was not a "resident relative" in Sutton's household within the meaning of N.J.S.A. 39:6A-4.3. Id. at 612-15, 552 A.2d 240. The judge compared "resident relative" with the term "immediate family member" as defined by N.J.S.A.
[to] bind an economically independent family member residing in the home of an insured to those options elected pursuant to N.J.S.A. 39:6A-4.3 would defeat the purpose of providing such cost containment options.
The more appropriate interpretation would exempt resident relatives who are not members of the immediate family from less comprehensive insurance coverage resulting from option selections over which they are given no choice and the result of which do not benefit them, directly or indirectly, from reduced insurance premiums. [ Id. at 615, 552 A.2d 240].
The judge reasoned that plaintiff was "economically independent" and therefore was not bound by Sutton's choices of options for his auto insurance coverage because she did not benefit from any premium savings as an economically dependent relative. Id. at 614-15, 552 A.2d 240. Upon entry of a final ...